MBA International Business

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INTERNATIONAL BUSINESS, 7e

• Czinkota
• Ronkainen
• Moffett

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Chapter 1

• The International Business Imperative

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Learning Objectives

• To understand the history and impact of
  international business.
• To learn the definition of international
  business.
• To recognize the growth of global linkages today.
• To understand the U.S. position in world trade
  and the impact international business has on the
  United States.
• To appreciate the opportunities and challenges
  offered by international business.

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Need for International Business

• More and more firms around the world are going
  global, including
• Manufacturing firms
• Service companies (i.e. banks, insurance,
  consulting firms)
• Art, film, and music companies

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Need for International Business

• International business
• causes the flow of ideas, services, and capital
  across the world
• offers consumers new choices
• permits the acquisition of a wider variety of
  products
• facilitates the mobility of labor,
  capital, and technology
• provides challenging employment opportunities
• reallocates resources, makes preferential
  choices, and shifts activities to a global level

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What is International Business?

• International business consists of transactions
  that are devised and carried out across national
  borders to satisfy the objectives of individuals,
  companies, and organizations.

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Types of International Business
Export-import trade
Foreign direct investment
Licensing
Franchising
Management contracts
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International Business Questions

• How will an idea, good, or service fit into the
  international market?
• Should trade or investment be used to enter a
  foreign market?
• Should supplies be obtained domestically or
  abroad?
• What product adjustments are necessary to be
  responsive to local conditions?
• What are the threats from global competitors, and
  how can these threats be counteracted?

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International Business and the Roman Empire

• Pax Romana, or Roman Peace ensured that merchants
  were able to travel safely and rapidly.
• Common coinage simplified business transactions.
• Rome developed a systematic law, central market
  locations, and an effective communication system
  all of which enabled international business to
  flourish in the Roman Empire.
• The growth of the Roman Empire occurred mainly
  through the linkages of business

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International Business and the Roman Empire
(cont.)

• The decline of the Roman Empire can be attributed
  in part to
• infighting and increasing decadence
• the Pax Romana being no longer enforced
• the decline of use and acceptance of the common
  coinage
• declining levels of communication
• As a result, former Roman allies cooperated with
  invaders.

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United States A Global Leader

• The United States has developed a world
  leadership position due to
• its use of market-based transactions in the
  Western world
• a broad flow of ideas, goods, and services across
  national borders
• an encouragement of international communication
  and transportation
• Pax Americana, an American sponsored and enforced
  peace

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The Smoot-Hawley Act

• The the 1930s, the U.S. passed the Smoot-Hawley
  Act, which raised import duties to reduce the
  volume of goods coming into the U.S.
• The act was passed in the hope that it would
  restore domestic employment.
• The result was a worldwide depression and the
  collapse of the world financial system.

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Expansion of International Trade

• In the past 30 years, the volume of international
  trade has expanded from 200 billion to over 7.5
  trillion.
• The sales of foreign affiliates of multinational
  corporations are now twice as high as global
  exports.

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Global Links Today

• International business has created a network of
  global links that bind countries, institutions,
  and individuals with trade, financial markets,
  technology, and living standards.
• For example, a reduction in coffee production in
  Brazil would affect individuals and economies
  worldwide.

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Recent Changes in International Business

• Total world trade declined dramatically after
  2000, but is again on the rise.
• The rate of globalization is accelerating.
• Regionalization is taking place, resulting in
  trading blocs.
• The participation of countries in world trade is
  shifting.

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The Composition of Trade

• Between the 1960s and the 1990s the importance
  of manufactured goods increased while the role of
  primary commodities (i.e. rubber or mining) had
  decreased.
• More recently, there has been a shift of
  manufacturing to countries with emerging
  economies.
• There has been an increase in the area of
  services trade in recent years.

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The Current U.S. International Trade Position
Exports and Imports of Goods and Services per
Capita for Selected Countries
Country
Exports per Capita
Imports per Capita
Australia Brazil China Japan Kenya United
Kingdom United States
4,296 379 222 4,165 91
4,767 3,472
4,525 428 199 3,622 125
5,500 4,962
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The Impact of International Business on the
United States

• U.S. international business outflows are
  important on the macroeconomic level in terms of
  balancing the trade account.
• On the microeconomic level, participation in
  international business can help firms achieve
  economies of scale that cannot be achieved in
  domestic markets.

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Average Plant Salary and Wages (per worker,
dollars per hour)
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Globalization

• Because of globalization, for the first time in
  history, the availability of international
  products and services can be accessed by
  individuals in many countries, from diverse
  economic backgrounds.

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The Structure of this Book

• Part One introduces the importance of
  international business and its global linkages.
• Part Two presents the environment of
  international business, addressing culture,
  policies, politics, and law.
• Part Three provides coverage of the theory of
  international trade and investment and presents
  balance of payments issues.
• Part Four discusses markets, financial systems,
  economic integration, and emerging market
  concerns.

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The Structure of this Book (cont.)

• Part Five presents the strategy considerations
  surrounding international business.
• Part Six targets the operational issues
  surrounding international business, using an
  implementation-oriented perspective.
• Part Seven concludes the book with a focus on the
  future of the field and the readers career.