1-1

chapter 1

An Overview

of

International

Business

Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

International Business, 6th E

dition

Griffin & Pustay

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Chapter Objectives

• Discuss the meaning of international business

• Explain the importance of understanding international business

• Identify and describe the basic forms of international business activities

• Discuss the causes of globalization

• Comprehend the growing role of emerging markets in the global economy

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The Business of the Olympics

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The Business of the Olympics (continued)

• Intense reflection of international business

• Government of games by IOC

• Competition for hosting

• Revenue sources for the Olympics

– Broadcast rights

– Corporate sponsorships

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What Is International Business?

• Business transactions between parties from more than one country

• Parties may include:

– Private individuals

– Individual companies

– Groups of companies

– Governmental agencies

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How Does International BusinessDiffer from Domestic?

• Currency conversion

• Legal systems

• Culture

• Availability of resources

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Why Study International Business?

• Large organizations

• Foreign-owned subsidiaries

• Small businesses

• Competitors

• Business techniques and tools

• Cultural literacy

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International Business Activities

• Exporting and Importing

• International Investments

• Licensing, Franchising, and Management Contracts

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Exporting and Importing

• Exporting: selling of products made in one’s own country for use or resale in other countries

• Importing: buying of products made in other countries for use or resale in one’s own country

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Visible and Invisible Trade

• Trade in Goods

– Merchandise exports and imports

– Visible trade

• Trade in Services

– Service exports and imports

– Invisible trade

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International Investments

• Capital supplied by residents of one country to residents of another

• Two categories:

– Foreign direct investments

– Portfolio investments

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Figure 1.1 Exports as a % of GDP

82.9

39.7

31.828.8

21.417.8

10.8

14.5

27.1

35.7

75

44.1

0

10

20

30

40

50

60

70

80

90

Nether

lands

Thaila

nd

German

y

China

Canad

a

Mex

ico

United

Kin

gdom

France

Indi

a

Japa

nBraz

il

United

State

s

Per

cen

tage

of

GD

P

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Other Forms of International Business Activity

Managementcontracts

FranchisingLicensing

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Variations of Organizations

Multinational Corporation

Multinational Enterprise

Multinational Organization

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Multinational Corporations (MNCs)

• Engage in foreign direct investment

• Own and control foreign assets

• Buy resources in multiple countries

• Create goods and services in multiple countries

• Sell goods and services in multiple countries

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Table 1.1 The World’s Largest MNCs

• Wal-Mart

• Exxon Mobil

• Royal Dutch Shell

• BP

• Toyota Motor

• Chevron

• ING Group

• Total

• General Motors

• ConocoPhillips

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The Era of Globalization

Globalization: the inexorable integration

of markets, nation-states, and

technologies…in a way that is enabling

individuals, corporations and nation-

states to reach around the world farther,

faster, deeper, and cheaper than ever

before

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Figure 1.2 World Exports as a % of World GDP

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Figure 1.3 Foreign Direct Investment Relative to World GDP

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Contemporary Causes of Globalization

Strategic Imperatives

• To leverage core competencies

• To acquire resources and supplies

• To seek new markets

• To better compete with rivals

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Environmental Change and Globalization

Changes in Political

Environments

TechnologicalChanges

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Globalization and Emerging Markets

BRIC• Brazil / Argentina

• Russia

• India

• China

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Globalization and Emerging Markets (continued)

Big Ten

Argentina Brazil China

South Korea Indonesia Mexico

Poland Turkey India

South Africa

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Framework of Book

• The World’s Marketplaces

• International Environment

• Managing International Business

• Managing International Business Operations

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All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in

any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United

States of America.

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall