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INTERNATIONAL BUSINESS andGLOBALIZATIONDr. Bett MickelsWorldWideTeams ConsultingHsiuping Universityof Science and TechnologyOctober, 2013

International Business andGlobalization Agenda GlobalizationcharacteristicsGlobalization advantagesand disadvantagesGlobalization stagesInternational trade theoriesInternational country riskTaiwan globalizationMNC ”good and the bad”October, 2013worldwideteams.com

DefinitionsInternational BusinessBusiness (firm) that engages in international (cross-border)economic activities or the action of doing business abroad(Peng, 2013)Global BusinessBusiness around the globe including both international(cross-border) activities and domestic business activities(Peng, 2013)October, 2013worldwideteams.com

What is Globalization?Hill defines globalization as "The shift towardsa more integrated and interdependent worldeconomy” (Hill, 2007).Globalization has two main components: Globalization of markets Globalization of productionOctober, 2013worldwideteams.com

What is Globalization?“Economic "globalization" is a historical process, the resultof human innovation and technological progress. It refers tothe increasing integration of economies around the world,particularly through the movement of goods, services, andcapital across borders. The term sometimes also refers to themovement of people (labor) and knowledge (technology)across international borders. There are also broader cultural,political, and environmental dimensions of globalization.”(International Monetary Fund, n.d.)October, 2013worldwideteams.com

GlobalizationGlobalization integrates economies and societies. Theglobalization process includes: Globalization of markets Globalization of production Globalization of technology Globalization of investmentOctober, 2013worldwideteams.com

China – Going Global Videohttp://www.youtube.com/watch?v nnGeSPmPAK4October, 2013worldwideteams.com

Characteristics of Globalization Domestic & foreign market differences disappearExpand business activities worldwideBuying and selling goods to any country in the worldCompanies consider entire world as a marketResources can be obtained from entire worldStrategies are based on global approachRapid increase in interdependence between differentcountriesOctober, 2013worldwideteams.com

Characteristics of Globalization Customers tend to get highest value for moneyPromotes formation of trade blocksFocus is shifting from the bureaucrat to business savvyRapid increase in mobility of resourcesRemoves international trade barriers.Drives out inefficient companiesProvides tremendous scope for sound companiesOctober, 2013worldwideteams.com

Advantages of Globalization (Lambin, 2001)Customers hold more powerLess developed countries access international marketsBrands grow worldwideEmergence of transnational market segmentsGrowing power of large international distributorsAdoption of socio-ecological view of consumptionEmergence of a global economyDevelopment of good corporate citizenship behaviorOctober, 2013worldwideteams.com

Disadvantages of Globalization Domestic business may be ignoredCould exploit human resourcesMay lead to unemployment and under-employmentDecline in demand for domestic productsMay result into decrease in domestic incomeMay result into exploitation of natural resources inunder-developed countriesUnethical business tactics – briberyMay result into commercial and political colonizationOctober, 2013worldwideteams.com

Doing Business in Taiwan Videohttp://www.youtube.com/watch?v rSApRs5NqmwOctober, 2013worldwideteams.com

Group Discussion What globalization advantages are seen inTaiwan? What globalization disadvantages are seen inTaiwan?October, 2013worldwideteams.com

Globalization StagesStage 1 – Domestic CompanyStage 2 – International CompanyStage 3 – Multinational Company(MNC)Stage 4 – Global Company (globalstrategy and approach)Stage 5 – Transnational Company (globalresources serve global markets)October, 2013worldwideteams.com

International Business Theories Adam Smith's Theory of International Trade Ricardian Theory of International Trade Hecksher Ohlin Theory of International TradeOctober, 2013worldwideteams.com

Adam Smith TheoryAdam Smith favored free trade which has theadvantages of division of labor and specializationboth at the national and international levelsOctober, 2013worldwideteams.com

Ricardian TheoryThe economist David Ricardo in his book" Principles ofPolitical Economy and Taxation" systematicallyrepresented the Comparative Cost Theory.Countries can gain from trade if they had an absoluteadvantage as put forward by Adam Smith but also if they hada comparative advantage in production. (Ricardo, 2006)October, 2013worldwideteams.com

Hecksher Ohlin TheoryHecksher Ohlin’s International Trade Theoryessentially says that countries will export productsthat use their abundant and cheap factor(s) ofproduction and import products that use thecountries' scarce factor(s).October, 2013worldwideteams.com

Country Risk Analysis (Bhalla, 2008)Political FactorsSocial – Cultural FactorsEconomical FactorsEthical practicesHofstede ModelOctober, 2013worldwideteams.com

Political Risk Factors Political party in powerOpposition partiesThe government systemConflict arising from outside the country due to country'sown problems or due to treaty or other complicationsRelations with major trading partnersRelations of the company's home countryOctober, 2013worldwideteams.com

Socio-Cultural Risk Factors Social groups, history of class structureEthnic, religious, linguisticExtent of cohesiveness or divisivenessGeneral psychology of population.Unemployment, recession, strikes, lockoutsExtent of social unrestCross border ties, cross border threatsRapid increase in costs of productionOctober, 2013worldwideteams.com

Economic Risk Factors Growth of economy, foreign trade in GDP.Trends of investments and savingsFrequency of business cyclesExtent of economic diversification, diversity of exportsInflation, monetary policy, fiscal policyStrength of local financial marketBalance of payments, international tradeStability of trade earningsElasticity of export and import demandOctober, 2013worldwideteams.com

Economic Risk Factors continuedCurrency: (a) strength, (b) stability, (c) quality of exchangemarkets, (d) depth of exchange markets, (e) extent ofcontrols over exchange markets.Debt: (a) total, (b) short-term as percentage of total debt, (c)debt service ratio,(d) debt-service schedule.International Financial Resources: (a) revenues, (b)borrowing capacity, (c) history of depth repayment, (d) creditrating.October, 2013worldwideteams.com

Hofstede ModelFive Cultural Dimensions: Power distanceIndividualism versus collectivismMasculinity versus femininityUncertainty avoidance.Long-term versus Short-term orientationOctober, 2013worldwideteams.com

Discussion GroupWhich country risk factors arepredominant in Taiwan?October, 2013worldwideteams.com

Doing Business in Taiwan, ChinaDoing Business 2013 data for Taiwan (China).Table lists the overall "Ease of Doing Business"rank (out of 185 economies) and rankings by topics.Lists the economy's distance to frontier (DTF)**measure. Tables summarize key indicators for eachtopic and benchmark against regional and highincome economy (OECD) averages.Retrieved September 17, 2013 omies/taiwan,-china/October, 2013worldwideteams.com

Doing Business in Taiwan, ChinaINCOME CATEGORY: High incomePOPULATION:23,180,000GNI PER CAPITA (US ): 20,200Retrieved September 17, 2013 omies/taiwan,-china/October, 2013worldwideteams.com

Group DiscussionHow do you think Taiwan ranks in “Ease of DoingBusiness” in these business factors?(1 is good, 185 is bad)Protecting InvestorsPaying TaxesTrading Across BordersEnforcing ContractsResolving InsolvencyOctober, 2013Starting a BusinessConstruction PermitsGetting ElectricityRegistering PropertyGetting Creditworldwideteams.com

Doing Business in TaiwanOUT OF 185 ECONOMIES:DOING BUSINESS 2013 RANK: 16DOING BUSINESS 2012 RANK: 25CHANGE IN RANK: 9October, 2013worldwideteams.com

Doing Business In TaiwanTOPIC RANKINGSStarting a BusinessConstruction PermitsGetting ElectricityRegistering PropertyGetting CreditOctober, 20132013201216963270157653167Change in Rank-167-1-1-3worldwideteams.com

Doing Business In TaiwanTOPIC RANKINGSProtecting InvestorsPaying TaxesTrading Across BordersEnforcing ContractsResolving InsolvencyOctober, 20132013201232542390157964278914Change in Rank47104-1-1worldwideteams.com

DTF (Distance to Frontier)DTF measure shows the distance of each economy to the“frontier,” which represents the highest performanceobserved on each of the indicators across all economiesincluded in Doing Business since each indicator wasincluded in Doing Business. An economy’s distance tofrontier is indicated on a scale from 0 to 100, where 0represents the lowest performance and 100 the frontier.(Doing Business, 2013)Retrieved September 17, 2013 omies/taiwan,-china/October, 2013worldwideteams.com

Taiwan - Distance to FrontierDOING BUSINESS 2013 DTF (76.8% POINTS)DOING BUSINESS 2012 DTF ( 72.8% POINTSIMPROVEMENT IN DTF (4% POINTS)Retrieved September 17, 2013 omies/taiwan,-china/October, 2013worldwideteams.com

Need for Country Risk Analysis Anticipate the behavior of a countryEstimating future of country prospectUtilize the opportunity available in the countryPolicy makers need risk informationAttract foreign investmentNeeded to secure lendingConsultant firms provide rating to the countryOctober, 2013worldwideteams.com

Proper Assessment ofCountry Risk Analysis Conceptual awareness of factors that have a bearing oncountry riskAnalytical ability to access how these factors workDetailed knowledge of the countrySpecialized expertise to predict political variablesExpertise in using economic forecasting techniques tomake short-term and long-term projectionsSkill and experience to draw conclusions about debtservicingOctober, 2013worldwideteams.com

Importance of MultinationalCorporations Transfer of capitalTransfer of technologyEffect on balance ofpaymentLinkage effectsDevelopment of humanresources capitalEmployment opportunitiesDevelopment of theeconomyOctober, 2013worldwideteams.com

Problems with MultinationalCorporations Transfer of technology iscostly (and pirated)Profit orientedProduction of non-essentialgoodsPromote regional disparitiesCorrupt practicesExploitation of laborExploitation of naturalresourcesOctober, 2013worldwideteams.com

International Business andGlobalization Review GlobalizationcharacteristicsGlobalization advantagesand disadvantagesGlobalization stagesInternational trade theoriesInternational country riskTaiwan GlobalizationMNC “good and the bad”October, 2013worldwideteams.com

Article ReviewTaiwan Revives itsManufacturing SectorChina’s rising production costs create anopportunity for neighboring TaiwanArticle retrieved September 17, 2013 r, 2013worldwideteams.com

Group DiscussionArticle Review:What were the major pointsfrom the article about internationalbusiness in Taiwan?October, 2013worldwideteams.com

WorldWideTeams Consulting specializes in business expansionand global team performance toincrease sales and profits, solveproblems, and capture opportunitiesDr. Bett Mickels, MBA, s.comOctober, 2013

BibliographyBhalla, V.K. (2008): International Business Environment and Management, 12thEd. Anmol Publications Pvt. Ltd.Hill, Charles W.L (2007): International Business. Competing in the GlobalMarketplace International, 6th Ed., New York: McGraw-Hill.Lambin, Jean-Jacques, (Summer, 2001); Advantages of Globalisation; EuropeanBusiness Forum, No. 6.International Monetary Fund (n.d.); What is Globalization? Retrieved September27, 2013 from htmPeng, Mike (2013): Global Business, 3rd Ed. Madison, Ohio Cengage LearningSouth-Western.Ricardo, David (2006): Principles of Political Economy and Taxation. NewYork, NY; Promethus Books.Sundaram, Anant Kumar & Black, J. Stewart (1995): International BusinessEnvironment Text and Cases. Prentice Publishing, Upper Saddle River, New Jersey.The World Bank, Doing Business: Measuring Business Régulations (n.d.):Retrieved September 17, 2013 omies/taiwan,-china

International Business Business (firm) that engages in international (cross-border) economic activities or the action of doing business abroad (Peng, 2013) Global Business Business around the globe including both international (cross-border) activities and domestic business