International Business Chapter One International Business: An Overview International Business 10e Daniels/Radebaugh/Sullivan 2004 Prentice Hall, Inc 1-1

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 1-2

What is Globalization? What is International Business? Globalization: Globalization: The deepening relationship and broadening interdependence among people from different parts of the world, and especially among different countries. International Business: 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. The International environment is more complex and diverse than a firm ’ s domestic environment. 1-3

Management in International Business In additional to domestic business management skills, international business management requires In additional to domestic business management skills, international business management requires Social science understandingSocial science understanding Political science appreciationPolitical science appreciation Legal awarenessLegal awareness And an innate ability in:And an innate ability in: Anthropology Anthropology Sociology Sociology Psychology Psychology Economics Economics Geography Geography 1-4

Why Engage in International Business Expand sales Expand sales Volkswagen (Germany)Volkswagen (Germany) Ericsson (Sweden)Ericsson (Sweden) IBM (United States)IBM (United States) Acquire resources Acquire resources Better components, services, productsBetter components, services, products Foreign capitalForeign capital TechnologiesTechnologies informationinformation Minimize risk Minimize risk Take advantage of the business cycle for products/servicesTake advantage of the business cycle for products/services Diversify among international marketsDiversify among international markets 1-5

Reasons for Growth in International Business Rapid increase in and expansion of technology Rapid increase in and expansion of technology Transportation is quicker while costs are lower Transportation is quicker while costs are lower Communication enables control from afar Communication enables control from afar Liberal government policies on trade and resources Liberal government policies on trade and resources Development of institutions that support international trade Development of institutions that support international trade Consumer pressures Consumer pressures Increased global competition Increased global competition 1-6

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.

Growing Income Inequality Criticisms of Globalization

Modes of International Business Importing and exporting Importing and exporting Tourism and transportation Tourism and transportation Licensing and franchising Licensing and franchising Turnkey operations Turnkey operations Management contracts Management contracts Direct and portfolio investment Direct and portfolio investment 1-7

Levels/Terms of International Companies Multinational Enterprise (MNE): global approach to markets and production Multinational Enterprise (MNE): global approach to markets and production Multinational Corporation (MNC)Multinational Corporation (MNC) Transnational Company (TNC)Transnational Company (TNC) Globally integrated company: integrated operations located in different countries Globally integrated company: integrated operations located in different countries Multidomestic company: multinational companies that allow local responsiveness Multidomestic company: multinational companies that allow local responsiveness 1-8

National Operations for International Companies Multidomestic strategy: countries operate autonomously Multidomestic strategy: countries operate autonomously Global strategy: integrate various country operations into an international headquarters control Global strategy: integrate various country operations into an international headquarters control Transnational strategy: integrate various country operations while dispersing the location of control Transnational strategy: integrate various country operations while dispersing the location of control 1-9

Operations and Influences 1-10

Influences on International Business External Influences External Influences Physical/Societal factorsPhysical/Societal factors Political policies and legal practices Political policies and legal practices Cultural factors Cultural factors Economic factors Economic factors Geographical influences Geographical influences Competitive environmentCompetitive environment Operations Operations ObjectivesObjectives StrategyStrategy MeansMeans 1-11

Influences on International Business 1-12