Chapter 1: An Overview of Internation al Business 1-1

The Business of the Olympics Intense reflection of international business Competition for hosting Revenue sources for the Olympics Broadcast rights Corporate sponsorships Licensing Tourism 1-2

The Business of the Olympics How would the Olympics look if corporations were not allowed to participate? Would the Olympics exist without the corporate sponsors? 1-3

What is International Business? Business transactions between parties from more than one country Buying & selling raw materials, finished goods, or services across borders. Operating factories or facilities overseas. Borrowing money in one country to finance operations in another. 1-4

How Does International Business Differ from Domestic? Currency conversions are required Differing legal systems Cultural differences Economic differences Infrastructure differences 1-5

Why Study International Business? Most of us will work for companies that have international connections. To develop cultural literacy. To keep in step with management tools, production techniques, and technology that other countries are developing. 1-6

Why Companies Trade To increase sales & broaden markets To seek cheaper raw materials or to lower production costs To find goods not available in domestic markets, or at a lower price than those available domestically To seek better prices for their products 1-7

International Business Activities Exporting and Importing International Investments Licensing, Franchising, and Management Contracts 1-8

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 1-9

53% of Boeing’s aircraft sales are to foreign airlines 1-10

Visible and Invisible Trade Trade in Goods Merchandise exports and imports Visible trade Trade in Services Service exports and imports Invisible trade 1-11

International Investments Capital supplied by residents of one country to residents of another 2 categories: Foreign direct investments Portfolio investments 1-12

Other Forms of International Business Activity Licensing: firm in one country licenses the use of its intellectual property to a firm in a second country in return for a royalty payment Franchising: firm in one country authorizes a firm in another country to utilize its operating system and intellectual property 1-13

Management Contracts A firm in one country agrees to operate facilities or provide other management services to a firm in another country for an agreed-upon fee Common in upper-end international hotel industry 1-14

This Beijing restaurant is one of 430 that McDonald’s has built in China 1-15

Variations of Organizations Multinational Corporation (MNC) Multinational Enterprise (MNE) Multinational Organization (MNO) 1-16

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 1-17

Table 1.1 The World’s Largest Corporations – 2002 RankNameCountryRevenues $Mil 1Wal-Mart StoresU.S.246,525 2General MotorsU.S.186,763 3Exxon MobileU.S.182,466 4Royal Dutch/ShellNetherlands179,431 5BPBritain178,721 6Ford MotorU.S.163,871 7DaimlerChryslerGermany141,421 8Toyota MotorsJapan131,754 9General ElectricU.S.131,698 10MitsubishiJapan109,

Motives for Globalization To leverage core competencies To acquire resources and supplies To seek new markets To better compete with rivals 1-19

Environmental Change and Globalization Changes in Political Environment Technological Changes 1-20