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Alan M Rugman and Simon Collinson, International Business, 5
th
Edition, Pearson Education Limited 2009
INTERNATIONAL BUSINESS

Slide 1.2
Alan M Rugman and Simon Collinson, International Business, 5
th
Edition, Pearson Education Limited 2009
IB- Course objectives
The course is designed for those students who
have a definite interest in pursuing
a career in international business as well as
those who seek a broadening of their
knowledge in this growing and vital area
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Alan M Rugman and Simon Collinson, International Business, 5
th
Edition, Pearson Education Limited 2009
Course objectives
To introduce students to the contemporary issues in International
Business that illustrate the unique challenges faced by manages in
the international business environment.
To cover a broad range of international business issues from an
interdisciplinary viewpoint and emphasizing the key concerns of the
multinational and global corporation
To assist students to integrate into their thinking the important
societal dimensions of diversity, environmental concerns, ethics,
and technological change.
To develop knowledge and skills to analyze cross cultural variables
and their impact on international business.
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Alan M Rugman and Simon Collinson, International Business, 5
th
Edition, Pearson Education Limited 2009
Table of Contents
PART ONE: THE WORLD OF INTERNATIONAL BUSINESS
1 Regional and Global Strategy
2 The Multinational Enterprise
3 The Triad and International Business


PART TWO: THE ENVIRONMENT OF INTERNATIONAL BUSINESS
4 International Politics
5 International Culture
6 International Trade
7 International Financial Markets and Institutions


PART THREE: INTERNATIONAL BUSINESS STRATEGIES
8 Multinational Strategy
9 Organizing Strategy
10 Production Strategy
11 Marketing Strategy
12 Human Resource Management Strategy
13 Political Risk and Negotiation Strategy
14 International Financial Management

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Alan M Rugman and Simon Collinson, International Business, 5
th
Edition, Pearson Education Limited 2009
INTERNATIONAL BUSINESS
TEXTBOOK
International Business, 5/E
Alan M. Rugman
Simon Collinson

ISBN-10: 0273716549
ISBN-13: 9780273716549
Publisher: Prentice Hall
Copyright: 2009
Format: Paper; 752 pp
Published: 12/19/2008

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Alan M Rugman and Simon Collinson, International Business, 5
th
Edition, Pearson Education Limited 2009
Additional references
International Business, 12/E
John Daniels
Lee Radebaugh
Daniel Sullivan
ISBN-10: 0136029655
ISBN-13: 9780136029656
Publisher: Prentice Hall
Copyright: 2009
Published: 07/30/2008


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Alan M Rugman and Simon Collinson, International Business, 5
th
Edition, Pearson Education Limited 2009
assignments
50% exam (multiple choice questions and/or
short open questions - case)
40% seminar (study cases, individual project,
multiple-chice questions, active participation)
10% for granted

100% total
Extra points (10)
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Alan M Rugman and Simon Collinson, International Business, 5
th
Edition, Pearson Education Limited 2009
Regional and global strategy
Chapter 1
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Alan M Rugman and Simon Collinson, International Business, 5
th
Edition, Pearson Education Limited 2009
Regional and global strategy
Objectives
Introduction
World business: a brief overview
Todays international environment
Globalization and strategic management
The study of international business
Framework for this book
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Alan M Rugman and Simon Collinson, International Business, 5
th
Edition, Pearson Education Limited 2009
Objectives
Define the terms international business and MNE.
Discuss the two primary ways in which international
business occurs: trade and FDI.
Examine the impact of the triad on international trade and
investment.
Describe the current state of world economies and the role
of government and trade regulations in the conduct of
international business.
Discuss the importance of technology and the role of SMEs
in the international business arena.
Examine how MNEs use triad/regional strategies to
compete effectively in the international marketplace.
Discuss the determinants of national competitive
advantage.
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Alan M Rugman and Simon Collinson, International Business, 5
th
Edition, Pearson Education Limited 2009
Study case
Coca-Cola
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Alan M Rugman and Simon Collinson, International Business, 5
th
Edition, Pearson Education Limited 2009
Introduction
International business: the study of transactions
taking place across national borders for the purpose
of satisfying the needs of individuals and
organizations.
Multinational enterprises (MNEs): a company
headquartered in one country but having operations
in other countries.
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Alan M Rugman and Simon Collinson, International Business, 5
th
Edition, Pearson Education Limited 2009
World business: a brief overview
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Alan M Rugman and Simon Collinson, International Business, 5
th
Edition, Pearson Education Limited 2009
Most MNE activity can be classified into two major
categories:
(1) Trade (exports and imports): More than 50% of all
trade is made by the worlds largest 500 MNEs.
(2) Foreign direct investment (FDI): 80% of all
FDI is made by the worlds largest 500 MNEs.
MNE activity
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Alan M Rugman and Simon Collinson, International Business, 5
th
Edition, Pearson Education Limited 2009
Trade and investment
Trade consists of exports and imports:
Exports: goods and services produced in one country
and then sent to another country.
Imports: goods and services produced in one country
and bought in another country.
Foreign Investment: consists of companies investing
funds to start or improve operations in another
country.
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Alan M Rugman and Simon Collinson, International Business, 5
th
Edition, Pearson Education Limited 2009
Table 1.1 World Trade, 2005
Note: Data for European Union include intra-EU trade. Exports are calculated by including freight and insurance while imports do not include freight and insurance.
As a result data might not be consistent with other data in this book
Source: Adapted from International Monetary Fund, Direction of Trade Statistics Yearbook, 2006 (Washington, DC: IMF, 2006), pp. 25
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Alan M Rugman and Simon Collinson, International Business, 5
th
Edition, Pearson Education Limited 2009
Table 1.2 Intra-regional trade in the triad, 19802005
Note: Asia data were calculated using information for exports from Japan, China, India, Indonesia, South Korea, Malaysia, Singapore, Thailand and Australia to the
Asian region and the world. Data for EU are for intra-EU exports in 2000 and 2005 and intra-EEC Exports in 1980
Source: Authors calculations based on the IMF, Direction of Trade Statistics Yearbook, 2006 and 1985
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Alan M Rugman and Simon Collinson, International Business, 5
th
Edition, Pearson Education Limited 2009
Table 1.3a Foreign direct investment in the United States, 2005
Note: Data are on a historical-cost basis. Numbers might not add up due to rounding
Sources: Authors calculations and US Department of Commerce, Survey of Current Business, June 2007, p. D67
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Alan M Rugman and Simon Collinson, International Business, 5
th
Edition, Pearson Education Limited 2009
Table 1.3b Foreign direct investment by the United States, 2005
Note: Data are on a historical-cost basis. Numbers might not add up due to rounding
Sources: Authors calculations and US Department of Commerce, Survey of Current Business, June 2007, p. D65
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Alan M Rugman and Simon Collinson, International Business, 5
th
Edition, Pearson Education Limited 2009
Q1: Why did Coca-Cola engage in FDI in Europe?
Coke make these investments to improve its
market position. This is being done in three
ways. First, the construction of the new
bottling plants is helping the company
produce a low-cost product. Second,
marketing expenditures are helping the firm
gain the product recognition needed for
growth. Third, FDI in facilities closer to the
market are reducing delivery time and
eliminating associated expenses.
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Alan M Rugman and Simon Collinson, International Business, 5
th
Edition, Pearson Education Limited 2009
The triad
Most global transactions take place within and
between three key regions: the United States, the
European Union and Japan; these are referred to as:
the triad.
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Alan M Rugman and Simon Collinson, International Business, 5
th
Edition, Pearson Education Limited 2009
The triad: the United States (US)
The US has the largest economy in the world with a
GDP of over $10 trillion.
The US is part of the North American Free Trade
Agreement (NAFTA) with Canada and Mexico.
The US economy is significantly larger than that of its
two trading partners and is therefore a triad member
on its own.
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Alan M Rugman and Simon Collinson, International Business, 5
th
Edition, Pearson Education Limited 2009
The triad: the European Union (EU)
The EU (or EU27) is composed of the countries in the
EU15 (Austria, Belgium, Denmark, Finland, Germany,
Greece, France, Ireland, Italy, Luxembourg, the
Netherlands, Portugal, Spain, Sweden, and the UK) and
twelve new, mainly Central European, countries that
joined in 2004 and 2007.
The collective GDP of the EU is greater than that of the
US and Japan.
The EU27 is the worlds largest importer and exporter.
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Alan M Rugman and Simon Collinson, International Business, 5
th
Edition, Pearson Education Limited 2009
The triad: Japan
Japan is the largest economy in Asia.
Japan is the 4th largest importer and 4th largest
exporter in the world.
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Alan M Rugman and Simon Collinson, International Business, 5
th
Edition, Pearson Education Limited 2009
Todays international environment
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Alan M Rugman and Simon Collinson, International Business, 5
th
Edition, Pearson Education Limited 2009
The international business environment has changed
rapidly in recent years as a result of:
an overall slowdown of triad economies;
increased trade liberalization through trade
agreements;
improvements in technology;
the emergence of SMEs.
International business environment
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Alan M Rugman and Simon Collinson, International Business, 5
th
Edition, Pearson Education Limited 2009
Slowdown of triad economies
In the late 1990s and early 2000s, the United States,
the EU and Japan all experienced a reduction in
economic activity, which in turn decreased
international business activity.
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Alan M Rugman and Simon Collinson, International Business, 5
th
Edition, Pearson Education Limited 2009
International trade regulation
An important international business trend has been
the emergence of regional and global trade and
investment liberalization and international regulation.
The World Trade Organization (WTO).
General Agreement on Tariffs and Trade (GATT).
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Alan M Rugman and Simon Collinson, International Business, 5
th
Edition, Pearson Education Limited 2009
The world trade organization
Established on January 1, 1995.
An international organization that deals with rules of
trade among member countries.
Enforces the provisions of the General Agreement on
Tariffs and Trade (GATT).
Acts as a dispute-settlement mechanism.
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Alan M Rugman and Simon Collinson, International Business, 5
th
Edition, Pearson Education Limited 2009
The general agreement
on tariffs and trade (GATT)
Established in 1947 to liberalize trade and to negotiate
trade concessions among member countries.
Today, the WTO is enforcing the provisions of the
GATT.
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Alan M Rugman and Simon Collinson, International Business, 5
th
Edition, Pearson Education Limited 2009
Improved technology
More powerful and affordable technology has
promoted fast easy worldwide communication and
improved production capabilities enabling
organizations to operate more effectively in the
international marketplace.
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Alan M Rugman and Simon Collinson, International Business, 5
th
Edition, Pearson Education Limited 2009
Small and medium-sized
enterprises (SMEs)
The definition of SMEs varies according to the nation.
In general, it refers to companies with between 11 and
500 employees with sales of less than $5 million.
MNEs often purchase from SMEs. This is because their
specialized workforces, innovation and technology
allows SMEs to provide goods and services more
efficiently than if the MNE were to source these
internally.
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Alan M Rugman and Simon Collinson, International Business, 5
th
Edition, Pearson Education Limited 2009
Globalization and strategic management
Regional triad strategies
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Alan M Rugman and Simon Collinson, International Business, 5
th
Edition, Pearson Education Limited 2009
Misconceptions about MNEs
Common misconceptions about MNEs:
MNEs have far-flung operations or earn most of their
revenues overseas.
MNEs are globally monolithic and excessively powerful
in political terms.
MNEs produce homogeneous products for the world
market and through their efficient techniques are able
to dominate local markets everywhere.
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Alan M Rugman and Simon Collinson, International Business, 5
th
Edition, Pearson Education Limited 2009
In fact,
MNEs earn most of their revenues in their home
regions.
The largest 500 MNEs are not spread around the world
but clustered around the triad.
These MNEs engage not in global competition but in
triad/regional competition; this rivalry effectively
eliminates enduring political advantage.
MNEs adapt their products for the local market.
Misconceptions about MNEs (Continued)
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Alan M Rugman and Simon Collinson, International Business, 5
th
Edition, Pearson Education Limited 2009
Globalization and strategic
management
Maintaining economic competitiveness
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Alan M Rugman and Simon Collinson, International Business, 5
th
Edition, Pearson Education Limited 2009
Porters determinants of
national competitive advantage
Why are some firms able to innovate consistently
while others are not?
Factor conditions
Demand conditions
Related and supporting industries
Firm strategy, structure, and rivalry.
Each of these determinants depends on the others as
a system.
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Alan M Rugman and Simon Collinson, International Business, 5
th
Edition, Pearson Education Limited 2009
Q2: How did Coke improve its factor conditions in Europe?
Factor conditions include land, labor and
capital. The company is using land and capital
to built new bottling plants that are more
efficient and better suited to meet market
demand. It is working to improve the
effectiveness of the labour force by getting the
personnel to become more market oriented
and to sell the product more vigorously
throughout Europe.
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Alan M Rugman and Simon Collinson, International Business, 5
th
Edition, Pearson Education Limited 2009
Q3: How is local rivalry helping to improve Cokes
competitive advantage?
Coke faces strong comeptition in Europe. European do
not drink as much Coke as do Americans; as a result,
Coke has had to modify its strategy to address this
market. This includes the building of new bottling plants
that can help drive down costs and make the company
more price-competitive, and new marketing campaigns
that are designed to draw customers away from
competing products. Coke is also working to develop
non-carbonated drinks to address local tastes. Finally,
competition from locals who better understand their
market is forcing Coke to think local, act local.
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Alan M Rugman and Simon Collinson, International Business, 5
th
Edition, Pearson Education Limited 2009
Q4: Is the Coca- Cola Company a multinational enterprise?
Is it global? Why?
Coke is an MNE. The firm conducts products and distribution activities
in nations other than its home country. And in terms of strategy and
management orientation, Coca-Cola does three things that illustrate its
multinational nature. First, the company modifies its operations to
meet local needs. The firm markets on a country-by-country basis.
Second, Coke has international partners who help to run the
operations and do not report directly to the company on day-to-day
matters. Third, the MNE relies heavily on teamwork by all involved
parties and, to a large degree, serves more as a coordinator and
cheerleader for the product than as an on-site manager.
Coke is a global company. Together, the US and Canada account for just
a third of its revenues. European and Asian operations are just as
important for the company. No one region absolutely dominates.
Unlike MNEs that depend predominantly on their home market, Coke
has a global view and a global strategy.
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Alan M Rugman and Simon Collinson, International Business, 5
th
Edition, Pearson Education Limited 2009
From general to strategic emphasis
The study of international business
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Alan M Rugman and Simon Collinson, International Business, 5
th
Edition, Pearson Education Limited 2009
Table 1.4 Comparative differences in the study of international business, 19502010
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Alan M Rugman and Simon Collinson, International Business, 5
th
Edition, Pearson Education Limited 2009
Framework for this book
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Alan M Rugman and Simon Collinson, International Business, 5
th
Edition, Pearson Education Limited 2009
Figure 1.1 Model for this book