International Business (MB 92) Spring 2003 D.K. Malhotra Beth Mariotz

Introduction to International Business Meaning of International Business International Business versus Domestic Business Why Companies Engage in International Business? Modes of International Business Course Sequence

Meaning of International Business All business activities whether private or governmental that involve cross-border transactions

Why Study International Business? International business distinguishes itself from domestic business due to Exchange Rate Cross-border Barriers Economic barriers Cultural barriers Political and Legal barriers Ethical Issues

Exchange Rate Risk Changing value of U.S. dollar versus other currencies since 1973 Declining dollar good for U.S. exporters, but bad for imports Rising dollar good for U.S. imports/outsourcing, but bad for exports

Economic Barriers Tariffs, Import Duties, Quota Restrictions Restrictions on remittance of profits and repatriation of capital Restrictions on foreign equity participation Trading blocks

Cultural Barriers Language Examples of Language Barriers “Please leave your values at the desk” (France) “The manager has personally passed all the water served here” (Mexico; to assure safety of drinking water at the hotel) “You are invited to take advantage of the chambermaid” (Japan) “Ladies are requested not to have children in the bar” (Norway) “Because of the impropriety of entertaining guests of the opposite sex in the bedroom, it is suggested that the lobby be used for this purpose” (Switzerland) “We will execute customers in strict rotation.” (Greece)

Cultural Barriers Contd… Hand Gestures Religion Hinduism Islam Judaism Christianity Buddhism Significance of Religion and Values Customs/Traditions

Political/Legal Barriers Political Ideology Opinions of Political Leadership Civil disorder External relations Attitude towards foreign capital Legal System

Ethical Barriers Definition of “Ethics” in your country versus definition of “Ethics” in a foreign country Ethics and the society Firm’s role in education Firm’s role in health care Ethics and the environment

Who should study global business? A company that engages in global business A pure domestic company

Why companies go global? To seek raw material/resources To seek new markets/sales revenue To minimize cost Overall goal, shareholder wealth maximization

Modes of International Business Exporting Licensing Franchising Joint Ventures Direct Foreign Investment

Sequence of this Course Global aspects of Marketing Global aspects of Production and Operations Global aspects of Human Resource Management Global aspects of Accounting and Finance