AA 4306 Lecture Notes - Lecture 3: Maastricht Treaty, Switching Barriers, Knowledge Management
Interna'onal Business
Copenhagen Business School
Interna'onal Business Environment
1. Globalization
Globalization: The world is growing smaller, the boarders are
disappearing Pros: - Expand revenue by selling all over the world -
Reducing costs by producing in the third world
World Trade Organization: regulates international trade between the
member countries.
International Monetary Fund: loan out money to countries, who trouble
with their exchange balance and balance of payments.
The World Bank: leaning out money to help countries to stability and
growth
United Nations: 1. to maintain international peace and security
2. to develop friendly relations among nations 3. to cooperate in solving
international problems and in promoting respect for human rights 4. to
be a center for harmonizing the actions of nations
Foreign direct investment (FDI): firm invests resources in business
activities outside its home country
Telecommunication, internet and computers to communicate - has been
developed extremely
Transportation technology: improved though jet aircraft, super freighters,
containerization and transshipment (from one mode of transport to
another) = lower costs
Growing "share of world output" by countries: Japan, Thailand,
Malaysia, Taiwan and South Korea. Growing economies: China, India,
Russia and Brazil.
Chinese economy will grow bigger than the US economy. Reasons:
great universities, low labor costs, fluent in English, and they work while
Americans sleep.
Current trend: the world is being more favorable for international
business
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Interna'onal Business
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The third world presses the wages in the developed countries ->
exporting jobs to low-wage nations Argument for outsourcing US clothes
jobs to China: Can buy it cheaper, can use more money on other things,
the Chinese's earn more and can buy other American products.
OECD: gap between poor and rich has become bigger, but everybody
got richer
National differences in Political
Economy + 3: Political Economy and
Economic Development
International Business
What is international business? Trade between to different countries
What is the difference between domestic and international
business? Uppsala Model 1. Get a partner, start sale abroad 2. Sales
and marketing department 3. Either invest in a M&A or build their own
factory Born global: right from the start a company has operated on
different markets
Political economy: political-, economic- and legal system interact with
each other
Political system: government
•Collectivism (socialism -> family) vs. Individuals (Danes)
•Democratic (government chosen by the people) vs. Totalitarian (one
people make all decisions)
Either collectivism lean toward totalitarianism (collective goals, state
ownership, benefit society rather than individual) & individualism tend to
be democratic ( Denmark: socialistic country: government - high taxes,
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Interna'onal Business
Copenhagen Business School
limiting the rights of the individual
Direct democracy: ways of voting
•US: 2 part system
•Germany: vote on parties - and the get seats in the Parliament or
voting direct on a person
Four major forms of totalitarianism exist today
•Communist totalitarianism – found in states where the communist
party monopolizes power
•Theocratic totalitarianism - found in states where political power is
monopolized by a party, group, or individual that governs according
to religious principles
•Iraq
•Tribal totalitarianism - found in states where a political party that
represents the interests of a particular tribe monopolizes power
•Turkey: divided into two parts
•Right-wing totalitarianism - permits some individual economic freedom,
but restricts individual political freedom
•The Philippines; still have the problem in the southern part.
Singapore - health care system, education system, high
incomes, BUT the political rights are very limited
Economical system
•Market economy (demand / supply) vs. Command economy
(government plans good and prices in the country) + Mixed
economies (both free market mechanisms and state ownership)
What is the link between political ideology and economic
systems?
Market system = individualism = democratic = liberalism / capitalism =
low tax level = (US)
Command = collectivism = totalitarianism = Socialism = high tax level =
(Russia before)
Political decisions effects the freedom of the country
•If they give freedom = individualism = Market system
•If they do not = collectivism = Command system
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