Prof.

Farooq Qaisar
 Chapter # 1
Competing in the Global Marketplace

Prof. Farooq Qaisar UCP Fsd.

 Globalization
The worldwide trend of economic integration
across borders allowing businesses to expand
beyond their domestic boundaries.

Prof. Farooq Qaisar UCP Fsd.

 Multinational Company (MNC)
Any company that engages in business function
beyond its domestic borders.

Prof. Farooq Qaisar UCP Fsd.

 International Business

When a company conducts any business

function beyond its domestic borders.

Prof. Farooq Qaisar UCP Fsd.

 Globalization: A Dynamic Context for
International Business
• Globalization is not a simple uniform
evolutionary process. Not all economies of the
world benefit equally or participate equally.
• In the recent past, financial crises, terrorism,
wars, SARS, increased border security, and a
worldwide economic stagnation have limited,
or in some cases even reversed, some of the
aspects of globalization.
• See Exhibit 1.2 from book.
Prof. Farooq Qaisar UCP Fsd.
 Types of Economies in the Global
Marketplace
• Developed economies
– Mature economies with substantial per capita GDPs
and international trade and investments.
• Developing economies
– Economies that have grown extensively over the past
two decades.
• Transition economies
– Countries in the process of changing from government-
controlled economic systems to capitalistic systems.

Prof. Farooq Qaisar UCP Fsd.

 Types of Economies in the Global
Marketplace
• Least developed countries (LDCs)
– The poorest nations, often plagued with unstable
political regimes/organization, high
unemployment, and low worker skills.
• Low-Cost countries (LCCs)
– Countries, usually with cheap labor that are
becoming the manufacturing and services
providers for MNCs headquartered in developed
nations such as the United States.

Prof. Farooq Qaisar UCP Fsd.

Prof. Farooq Qaisar UCP Fsd.
 Globalization Drivers
• Several key trends drive the globalization of the world
economy and, in turn, force businesses to consider
international operations to survive and prosper.
• Some of the most important trends include falling
borders, growing cross-border trade and investment,
• the rise of global products and global customers,
• The growing use of the Internet and sophisticated
information technology (IT),
• the role of LCCs in the world market, and the rise of
global standards of quality and production etc.
Prof. Farooq Qaisar UCP Fsd.
 Globalization Drivers
1. Lowering Trade Barriers
2. Rise of Low-Cost Countries
3. Global Products, Services, and Customers
4. Global Standards
5. Information Technology and the Internet
6. Locate and Sell anywhere

Prof. Farooq Qaisar UCP Fsd.

Exhibit 1.4

Prof. Farooq Qaisar UCP Fsd.

 1-Lowering Trade Barriers
• General Agreement on Tariffs and trade (GATT)
– Tariffs negotiations between several nations that reduced the average
worldwide tariffs on manufactured goods.
• World Trade Organization (WTO)
– A formal structure for continued negotiations to reduce trade barriers
and to act as a mechanism for setting trade disputes.
• Regional Trade Agreements
– Agreements among nations in a particular region to reduce tariffs and
developed similar technical and economies standards.
• European Union (EU)
– 27 countries in European Union
• North America Free Trade Agreement (NAFTA)
– A multilateral treaty that links the US, Canada, and Mexico in an
economic bloc that allows freer exchange of goods and services.
Prof. Farooq Qaisar UCP Fsd.
 2-The Rise of Low-Cost Countries:
An increasingly important driver of Globalization
• Rapidly Developing Countries
– LCCs using the benefits of foreign investment to grow rapidly into
world competitors.
• Triad
– The world’s dominant trading partners: European Union, US, and
Japan.
• Outsourcing
– When a company in one country contracts with a company in another
country to perform some business functions.
• Offshoring
– When a company in one country moves a business function such as
manufacturing to another country, usually to take advantage of lower
costs.
Prof. Farooq Qaisar UCP Fsd.
 3-Increasing Global Products, Services,
and Customers
• Multinational management
• the formulation of strategies and the design of
management systems that successfully take advantage of
international opportunities and respond to international
threats
• Global product
• the same product or service regardless of the nationality
of the customer
• Global customers
• global customers search the world for products or
services without regard for national boundaries
Prof. Farooq Qaisar UCP Fsd.
4-Can I Buy it in Germany and Use it in Japan? The Need
for Global Standards
• Increasingly, especially for technical products, global design standards are
common. That is, for example, you can buy a pin drive for your computer in Paris
and use it in Nebraska. Why is this so? Probably the most important reason is
that, once a product standard is accepted globally or regionally, manufacturers
need only produce one or a few versions of a product and still can sell
worldwide.
• Because this is cheaper than making dozens of different versions, one for each
country, everyone benefits with a lower-cost product and companies face fewer
obstacles to selling outside of their own country.
• Component makers also become more efficient with fewer product designs. The
competitive pressure to save money by developing one product for everyone
will likely increase as products are introduced into the world market.
• A tremendous strategic advantage exists for those companies that can establish
their standards as dominant either regionally or worldwide. For example, the
company that develops and deploys the next generation standards for video
downloads on cell phones will have a dominant position in the market.
Prof. Farooq Qaisar UCP Fsd.
 5-Information Technology and the Internet: A Necessary
Tool for Globally Dispersed Companies

• The explosive growth in the capabilities of information

technology and the Internet increases the MNC’s
ability to reach customers in a global economy and to
manage operations throughout the world.
• Since any website can be accessed by anyone with
access to a computer, the Internet makes it easy for
companies to go global.
• That is, with a global online population exceeding 600
million, individuals can shop anywhere and companies
can sell anywhere.
Prof. Farooq Qaisar UCP Fsd.
6-Locate and Sell Anywhere to Anybody: It’s No Longer
Only For Manufacturing but Services as Well

Prof. Farooq Qaisar UCP Fsd.

 Foreign Direct Investment (FDI)
• FDI occurs when an MNC from one country owns
an organizational unit located in another country.
• Multinationals often build their own units in
foreign countries but they also use cross-border
mergers and acquisitions.
• Such as the acquisition of the European company
Arcelor for 32$ billions by the Indian Company
Millat Steel.
• This was also the largest acquisition ever by a
company from a developing nation.
Prof. Farooq Qaisar UCP Fsd.
 Foreign Direct Investment (FDI)
• Exhibit 1.6 on Book
Details of companies with largest stake in
foreign counties .

Prof. Farooq Qaisar UCP Fsd.