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Title: INTERNATIONAL BUSINESS, 7e


1
INTERNATIONAL BUSINESS, 7e
  • Czinkota
  • Ronkainen
  • Moffett

2
Chapter 1
  • The International Business Imperative

3
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.

4
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

5
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

6
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.

7
Types of International Business
Export-import trade
Foreign direct investment
Licensing
Franchising
Management contracts
8
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?

9
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

10
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.

11
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

12
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.

13
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.

14
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.

15
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.

16
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.

17
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
18
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.

19
Average Plant Salary and Wages (per worker,
dollars per hour)
20
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.

21
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.

22
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.
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