International Business

Chapter One
International Business: An
Overview

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 Chapter Objectives
 Define international business and how it differs
from domestic business
 Examine the forces that are driving globalization
 Explain why companies engage in international
business
 Introduce different international business modes
companies use
 Provide an overview of patterns for international
expansion
 Describe the differences between international
business and domestic business
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 What is Globalization?
What is International Business?

 Globalization:
The deepening relationship and broadening interdependence
among people from different parts of the world, and
especially among different countries.
 International Business:
All commercial transactions between two or more countries, whether
they involve private or public parties.

 The International environment is more complex and

diverse than a firm’s domestic environment.

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 Management in International
Business
 In additional to domestic
business management skills,
international business
management requires
• Social science understanding
• Political science appreciation
• Legal awareness
• And an innate ability in:
 Anthropology
 Sociology
 Psychology
 Economics
 Geography

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 Why Engage in International
Business
 Expand sales
• Volkswagen (Germany)
• Ericsson (Sweden)
• IBM (United States)
 Acquire resources
• Better components, services, products
• Foreign capital
• Technologies
• information
 Minimize risk
• Take advantage of the business cycle for
products/services
• Diversify among international markets

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Reasons for Growth in International
Business
 Rapid increase in and expansion of
technology
 Transportation is quicker while costs are
lower
 Communication enables control from afar
 Liberal government policies on trade and
resources
 Development of institutions that support
international trade
 Consumer pressures
 Increased global competition

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 Criticisms of Globalization
Economic Growth:


Economic growth can result in both: positive and negative

consequences.

 Negative Consequences:
- Using more nonrenewable natural resources.
- Environmental pollution through toxic and pesticide waste, factory
and vehicle emissions, and deforestation.

 Positive Consequences:
- Global cooperation to develop uniform standards to solve
environmental problems.
- Efficiency in the use of resources because of openness.
- Access to technological developments, which reduce pollution and
inefficient use of resources.
Modes of International Business
 Importing and exporting
 Tourism and transportation
 Licensing and franchising
 Turnkey operations
 Management contracts
 Direct and portfolio investment

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 Levels/Terms of International
Companies
 Multinational Enterprise (MNE): global
approach to markets and production
• Multinational Corporation (MNC)
• Transnational Company (TNC)
 Globally integrated company: integrated
operations located in different countries
 Multidomestic company: multinational
companies that allow local responsiveness

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 National Operations for
International Companies
 Multidomestic strategy: countries
operate autonomously
 Global strategy: integrate various
country operations into an
international headquarters control
 Transnational strategy: integrate
various country operations while
dispersing the location of control

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Operations and Influences

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 Influences on International
Business
 External Influences  Operations
• Physical/Societal • Objectives
factors • Strategy
Political policies and

• Means
legal practices
 Cultural factors
 Economic factors
 Geographical
influences
• Competitive
environment

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Influences on International Business

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