©2004 Prentice Hall1-1 Chapter 1: An Overview of International Business International Business, 4 th Edition Griffin & Pustay

©2004 Prentice Hall1-2 Chapter Objectives  Discuss the meaning of international business  Explain the importance of understanding international business  Identify and describe the basic forms of international business activities  Discuss the causes of globalization

©2004 Prentice Hall1-3 The Business of the Olympics  Intense reflection of international business  Government of games by IOC  Competition for hosting  Revenue sources for the Olympics –Broadcast rights –Corporate sponsorships

©2004 Prentice Hall1-4 What is International Business?  Business transactions between parties from more than one country  Parties may include –Private individuals –Individual companies –Groups of companies –Governmental agencies

©2004 Prentice Hall1-5 How Does International Business Differ from Domestic?  Currency conversion  Legal systems  Culture  Availability of resources

©2004 Prentice Hall1-6 Why Study International Business?  Large organizations  Foreign-owned subsidiaries  Small businesses  Competitors  Business techniques and tools  Cultural literacy

©2004 Prentice Hall1-7 International Business Activities  Exporting and Importing  International Investments  Licensing, Franchising, and Management Contracts

©2004 Prentice Hall1-8 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

©2004 Prentice Hall1-9  53% of Boeing’s aircraft sales are to foreign airlines

©2004 Prentice Hall1-10 Visible and Invisible Trade  Trade in Goods –Merchandise exports and imports –Visible trade  Trade in Services –Service exports and imports –Invisible trade

©2004 Prentice Hall1-11 International Investments  Capital supplied by residents of one country to residents of another  2 categories: –Foreign direct investments –Portfolio investments

©2004 Prentice Hall1-12 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

©2004 Prentice Hall1-13 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

©2004 Prentice Hall1-14 This Beijing restaurant is one of 430 that McDonald’s has built in China

©2004 Prentice Hall1-15 Variations of Organizations  Multinational Corporation (MNC)  Multinational Enterprise (MNE)  Multinational Organization (MNO)

©2004 Prentice Hall1-16 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

©2004 Prentice Hall1-17 Table 1.1 The World’s Largest Corporations – 2002 RankNameCountryRevenues $Mil 1Wal-Mart StoresU.S.246,525 2General MotorsU.S.186,763 3Exxon MobilU.S.182,466 4Royal Dutch/ShellNetherlands179,431 5BPBritain178,721 6Ford MotorU.S.163,871 7DaimlerChryslerGermany141,421 8Toyota MotorJapan131,754 9General ElectricU.S.131,698 10MitsubishiJapan109,386

©2004 Prentice Hall1-18 Globalization  Trade and investment barriers are disappearing.  Perceived distances are shrinking due to advances in transportation and telecommunications.  Material culture is beginning to look similar.  National economies merging into an interdependent global economic system.

©2004 Prentice Hall1-19 Motives for Globalization  To leverage core competencies  To acquire resources and supplies  To seek new markets  To better compete with rivals

©2004 Prentice Hall1-20 Environmental Change and Globalization  Changes in Political Environment  Technological Changes

©2004 Prentice Hall1-21 Framework of Book  The World’s Marketplaces  International Environment  Managing International Business  Managing International Business Operations