INTERNATIONAL BUSINESS : A NEW

PARADIGM*

( PROF. DR. HAMDY HADY, DEA)**

* General Lecture for STIE IPWIJA. Jakarta JULY 6, 2013

** Professor in International Economics & Finance

DEFINITION OF INTERNATIONAL BUSINESS

International Business is economy activities involve the crossing of national

border that consist not only international trade (export and import

commodities) and foreign direct or indirect investment but also the growing

service and financial industry in such area as transportation, tourism,

banking, education, health care, advertising, contruction, retailing

wholesaling, mass communications etc.

In globalization era, marking by the openess, linkage, dependant and high

competition between countries cause the high demand of theory & practice

more and more for every individue, organization/company and

country/government

The need of theory and practice in International Business is an logics

consequece of the interaction of four main components in globalization

movement :

•Deregulation

•Invention/Innovation/Diffusion

•Competitive Advantage

•Cross Borderless

Globalization and modernisation has its impact to the growth of market

mecanism through International Business. This condition creates the high

competition where the only state or company having “hyper competitive

advantage” could have “sustainable development”. (Porter, 1997; 142 and

D’Aveni, 19992; 53)

The four components metioned above, directly or indirectly are strongly

related to International Business problems. The flow of globalization cause

by the modernisation and technology development in manufacturing,

engineering technology, transportation, and telecomunication etc. forces

every country or company to deregulate in order to create an invention,

innovation and diffusion for having competitive advantage in cross

borderless International Business activity.

Uncontested that “knowledge in International Business” is a necessary

factor determinant for a country or company to having a sustainable

competitive advantage. This statement matching to Nonaka and Takeuchi

(1995) about “ The New Focus on Knowledge as a Competitive Advantage

Resource” as follows :

Knowledge Creation

Continous Innovation

Competitive Advantage

Based on scheme mentioned above we can see how importante the role of

internasional business knowledge in order to create “Knowledge

Creation” for having “Continous Innovation” and finally having “Competitive

Advantage”

GLOBAL OF COMPETITIVE ADVANTAGE

COUNTRY SPECIFIC ADVANTAGE

FIRM SPECIFIC ADVANTAGE

PERSONAL/INDIVIDUAL SPECIFIC ADVANTAGE

(INFORMATION SYSTEM AND TECHNOLOGY)

ACTORS OF INTERNATIONAL BUSINESS :

•Multinational National Company

•International Company

•Domestic Company

•Small and Medium Company

•Personal/Individue

INTERNATIONAL BUSINESS FUNCTION :

1. Function of Human Resource

2. Function of Production/Operation

3. Function of Marketing

4. Function of Finance

5. Function of Accounting

6. Function of Information

7. Function of Research and Development

8. Function of Legal

9. Function of Corporate Social Responsability

10. Function of Community Entrepreneurship

FOUR PILLARS FOR SUCCES IN BUSINESS

1. SUCCES KEY OF BUSINESS : Function of Human Resource

2. SUCCES INDICATOR OF BUSINESS : Function of Production &

Marketing

3. SUCCES CRITERIA OF BUSINESS : Function of Finance &

Accounting

4. MAIN SUPPORTING OF BUSINESS : Function of Information System

(IS) & Information Technology (IT)

VALUE CHAIN OF HUMAN RESOURCE OUTCOME STRATEGY

I. HUMAN RESOURCE OUTCOME :

I. Attitude

II. Behavior

III. Communication

II. ORGANIZATION & MANAGERIAL OUTCOME

I. Productive

II. Efficien

III. Effective

IV. Quality

III. PRODUCTION & MARKETING OUTCOME

I. Consumer Satisfaction

II. Consumer Loyalty

III. Sales Increase

IV. Market Share Increase

IV. FINANCIAL & ACCOUNTING OUTCOME

I. Revenue Increase

II. Expenses Controllable

III. Profit & Benefit Increase

V. MARKET BASED VALUE

I. Company Value Increase

II. Stock Price Increase

NOTE PROBLEMES SOLUTION NOTE

CORRECT

STEP I.

DATA COLLECTION

(FACTS)

FAULT

CORRECT

STEP II.

INFORMATION ANALYSIS

(FACTS STRUCTURED)

FAULT

CORRECT STEP III.

KNOWLEDLE AS POWER

FAULT

CORRECT STEP IV.

DECISION MAKING/POLICY

FAULT

CORRECT STEP V.

ACTIONS

FAULT

PROFITS &

BENEFITS

RESULT LOSS

VALUE CHAIN OF SYSTEM INFORMATION MANAGEMENT (SIM)

& STRATEGY INFORMATION SYSTEM (SIS)

THE PRIME OBJECTIVE OF USING IS/IT IN THE ERAS DIFFERS :

1. DATA PROSSESING (DP) : To improve operasional efficiency by

automating information-based processes

2. MAGEMENT INFORMATION SYSTEM (MIS) : To increase management

effectiveness by satisfying their information requirements for decision

making

3. STRATEGY INFORMATION SYSTEM: To improve competitiveness by

changing the nature or conduct of business (i.e. IS/IT investment can be

a source of competitive advantage)

OBJECTIVES STRATEGY FOR INFORMATION MANAGEMENT TOWARDS

KNOWLEDGE MANAGEMENT

1. Enabling the business to make the right decisions

2. Improving the effectiveness of processes & their outcomes

3. Providing timely & focused performance information

4. The preservation of organizational memory

5. Improving the productivity & effectiveness of managers & staff

RANK CORPORATION COUNTRY REVENUES

2007 2006 $ mil

1. 1. Wal – Mart Stores U.S. 378,799.0

2. 2. Exxon Mobil U.S. 372,824.0

3. 3. Royal Dutch Sheel Netherlands 355,782.0

4. 4. BP Britain 291,438.0

5. 6. Toyota Motor Japan 230,200.8

6. 7. Chevron U.S. 210,783.0

7. 13. Ing Group Netherlands 201,516.0

8. 10. Total France 187,279.5

9. 5. General Motor U.S. 182,347.0

10. 9. Conocophllips U.S. 178,558.0

11. 8. Daimler Germany 177,167.1

12. 11. General Electric U.S. 176,656.0

13. 12. Ford Motor U.S. 172,468.0

14. 20. Fortis Belgium/Netherlands 164,877.0

15. 15. AXA France 162,762.3

16. 17. Sinopex China 159,259.6

17. 14. Citi Group U.S. 159,229.0

18. 16. Volksvagen Germany 149,054.3

19. 36. Dexia Group Belgium 147,648.4

20. 22. HSBC Holding Britain 146,500.0

The World’s Largest Corporations

Source : Fortune Magazine, “The Fortune Global 500”, July 21, 2008 no. 14.

Rank ▾ CompanyRevenues

($ millions)

Profits

($ millions)

1 Royal Dutch Shell 484,489 30,918

2 Exxon Mobil 452,926 41,060

3 Wal-Mart Stores 446,950 15,699

4 BP 386,463 25,700

5 Sinopec Group 375,214 9,453

6 China National Petroleum 352,338 16,317

7 State Grid 259,142 5,678

8 Chevron 245,621 26,895

9 ConocoPhillips 237,272 12,436

10 Toyota Motor 235,364 3,591

11 Total 231,580 17,069

12 Volkswagen 221,551 21,426

13 Japan Post Holdings 211,019 5,939

14 Glencore International 186,152 4,048

15 Gazprom 157,831 44,460

16 E.ON 157,057 -3,085

17 ENI 153,676 9,539

18 ING Group 150,571 6,591

19 General Motors 150,276 9,190

20 Samsung Electronics 148,944 12,059

The World’s Largest Corporations

Source : Fortune Magazine, From the July 23, 2012 issue.

Why Companies Engage in International Business :

•To expand sales

•To acquire resources

•To minimize risk

ROLES AND INFLUENCES OF INTERNATIONAL BUSSINESS :

1. Macro Economics Aspect

Calculation of Gross National Product or Income :

GNP = Y = C + I + (G + Tr) + (X + M)

Note : (X + M ) = International Business

Where : C = Household comsumption

I = Investment or Company comsumption

(G+Tr) = Government consumption that consist

government expenditure and transfer payment

for social purpose

X = Export or Foreign consumption

M = Import or Domestic consumption

There are three possibilities : (X + M ) = 0 or (X – M) ≠ 0

a. If (X – M) = 0 Stability of GNP

b. If (X – M) > 0 X > M Surplus of GNP

c. If (X – M) < 0 X < M Defisit of GNP

DC/IDR DC/IDR PxQ D D PxQ PxQ F F PxQ FC/USD Import Cost TC = P/L = TR Revenue Export FC/JPY Of USA to Japan P/L = = TR – TC (1) ¥ $

Export Import (2) ¥ $

(¥) ($)

Input Production and

operation process Output

2. Micro Economy

Note :

DC = Domestic Market ; FC = Foreign Market ; P = Price ; Q = Quantity ;

F = Foreign ; D = Domestic ;

IDR = Indonesian Rupiah ; USD = US Dollar ; JPY = Japan Yen ;

TC = Total Cost ; TR = Total Revenue ; = P/L = Profit/Loss

R/L = = TR – TC

(X-JPY) (M-USD)

MAYOR CHALLENGES FACING INTERNATIONAL

BUSINESS :

a. Cultural Mis-understanding

b. Political Unrest

c. Barrier in Entering Foreign Market

d. Shifting Economic Conditions

e. Exchange and Ownership Restriction

f. Selection of Patner Local

g. Power of Local Positioning

INTERNATIONAL BUSINESS

PARADIGM

Since GlobalizationBefore Globalization

A B

C

D1<A/B/C< D2

A B

C

AB

BCAC

D1

NEW PARADIGM OF INTERNATIONAL BUSINESS

SINCE GLOBALIZATION ERA

Note :

A = National Business Country A

B = National Business Country B

C = National Business Country C

D1 = International Business before globalization

D2 = International Business after globalization

CONCLUSION :

1. Before globalization era, International Busines is a small part of National

Business.

2. After globalization era, National Business is a small part of Internasional

Business

3. Thats why, NO ONE COUNTRY CAN EXIST ISOLATED

4. Consequence : The role of International Business become more and more

importance for every country in glabalization era actual

5. The Main Supporting Role of IS/IT to Gain Global Competitive Advantage

SOURCES :

1. John D. Daniels, Lee H. Radebaugh, and Daniel P. Sullivan : International

Business, Environment and Operations. 2012. Pearson Prentice Hall.

2. Allan M. Rugman and Richard M. Hodgetts : International Business, A

Strategic Management Approach, 2000, McGraw-Hill.

3. John Ward & Joe Peppard : Strategic Planning for Information Systems,

2002, John Wiley & Son Ltd.

4. Hamdy Hady : Manajemen Bisnis Internasional, 2005, Ghalia Indonesia.

5. Fortune Magazine, “The Fortune Global 500”, July 21, 2008 no. 14.

6. Fortune Magazine, From the July 23, 2012 issue.