1. Introduction to International Business David J. Boggs, Ph.D. Introduction

2. America’s Economic Transformation Personal computers Biotechnology Facsimile Voice mail Wireless cable CD-ROM Quick oil changes Internet PC software Computer networking Cellular phones Convenience foods and services Superstores such as Home Depot and Staples

3. Plan for the day To define internal business (IB) and describe how it differs from domestic business To explain why companies engage in IB and why its growth has accelerated To introduce different modes a company can use to accomplish its global objectives To illustrate the role social science disciplines play in understanding the environment of IB To provide an overview of the primary patterns for companies’ international expansion To describe the major countervailing forces that affect IB

4. Questions What is international business? Name five international companies? Are younger companies typically more or less likely to be international than older companies? Are larger companies typically more or less international?

5. Description of IB IB—all commercial transactions between two or more countries Involves modes of business that differ from those at the domestic level Foreign conditions diversify and add complexity to a company’s external environment

6. International Business How is international business different from domestic business?

7. International versus Domestic Business Language Culture Currency Laws Physical environment Economic development Technology Infrastructure

8. International Business In comparison with domestic business, international business is riskier and more difficult, dangerous, and complex. So why not just operate only in the domestic market?

9. Why Companies Engage in IB Expand sales (Wal-Mart, McDonalds) Acquire resources (Exxon, Nike) Technology Labor and capital Natural resources Diversify sources of sales and supplies (General Motors) Minimize competitive risk (Kodak)

10. Reasons for IB Growth? International business has grown rapidly over the past 20 years and continues to grow rapidly. What do you think are possible explanations for this rapid growth?

11. Reasons for Growth of IB Technological advances Communications Transportation Government policy changes Lower taxes Liberalized investment and trade policies Development of supporting institutions such as agencies, banks, consultants Increased global competition

12. International Business Activity Exporting and importing Portfolio and direct investments Strategic alliances and joint ventures Consortia, research, and information exchange Government and international agency contracts

13. 13 Domestic Business The HIGH MEDIUM LOW C Mode of operations Limited foreign functions, usually export/ import Extensive production abroad with FDI and all functions Limited foreign production and multiple functions A Impetus for international business Active search for opportunities Passive response to proposals D One Several Many Number of foreign countries in which a firm does business E Quite similar Very dissimilar Moderately similar Degree of similarity between foreign and domestic countries B Other firms handle external contracts Company handles its own foreign operations Internal versus external handling of foreign operations

14. Modes of IB Modes of international business refers to the ways in which companies carry out their business activities. What are ways that the following companies engage in international business? Boeing Arthur Anderson Nike Ford Disney General Electric

15. Modes of IB Merchandise exports and imports—most common, especially for smaller companies Service exports and imports—nonproduct international earnings Tourism and transportation Performance of services for a fee management contracts Use of assets by others—licensing agreements, royalties, franchising

16. Modes of IB Investments—ownership of foreign property in exchange for financial return Foreign direct investment—investor gains a controlling interest in foreign company joint venture mixed venture Portfolio investment—noncontrolling interest

17. International Companies— terminology Strategic alliance—collaborative arrangement of critical importance to the competitive viability of one or more partners Multinational enterprise (MNE)—company with global approach to foreign markets and production Globally integrated company—integrates operations located in different countries Multidomestic company—foreign-country operations act fairly independently Multinational corporation (MNC)—foreign-country operations act fairly independently or generic term for international company Global company—globally coordinated international activities Transnational company (TNC)—emphasizes learning by companies; UN terminology

18. International Business All companies are affected by their external environment. For example, dot-com companies could raise money, make deals, and hire people when the environment was favorable. When it turned unfavorable, however, even good companies struggled to raise money, go public, or retain good employees. International environments are substantially different in terms of politics, economics, social and cultural practices, and technology.

19. Summary of International Business Has grown rapidly and continues to grow rapidly Activities are diverse and taken for many purposes Different environment and activities than domestic-only competition More difficult, complex, and risky than domestic business In many industries it is no longer possible to be just a domestic competitor

20. Assignment Read chapter 2 Describe USA culture and one foreign country culture