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  1. 1. INTERNATIONAL BUSINESS, 7e Czinkota Ronkainen Moffett 1
  2. 2. Chapter 1The International Business Imperative 2
  3. 3. Learning ObjectivesTo understand the history and impact ofinternational business.To learn the definition of internationalbusiness.To recognize the growth of global linkagestoday.To understand the U.S. position in worldtrade and the impact international businesshas on the United States.To appreciate the opportunities andchallenges offered by international business. 3
  4. 4. Need for International Business More and more firms around the world are going global, including: Manufacturing firms Service companies (i.e. banks, insurance, consulting firms) Art, film, and music companies 4
  5. 5. Need for International Business International business: causes the flow of ideas, services, and capital across the world offers consumers new choices permits the acquisition of a wider variety of products facilitates the mobility of labor, capital, and technology provides challenging employment opportunities reallocates resources, makes preferential choices, and shifts activities to a global level 5
  6. 6. What is International Business?International business consists oftransactions that are devised andcarried out across national bordersto satisfy the objectives ofindividuals, companies, andorganizations. 6
  7. 7. Types of International Business Export-import trade Foreign direct investment Licensing Franchising Management contracts 7
  8. 8. International Business Questions How will an idea, good, or service fit into the international market? Should trade or investment be used to enter a foreign market? Should supplies be obtained domestically or abroad? What product adjustments are necessary to be responsive to local conditions? What are the threats from global competitors, and how can these threats be counteracted? 8
  9. 9. International Business and the Roman EmpirePax Romana, or Roman Peace ensuredthat merchants were able to travel safelyand rapidly.Common coinage simplified businesstransactions.Rome developed a systematic law, centralmarket locations, and an effectivecommunication system; all of whichenabled international business to flourishin the Roman Empire.The growth of the Roman Empire occurred 9mainly through the linkages of business
  10. 10. International Business and the Roman Empire (cont.)The decline of the Roman Empire canbe attributed in part to: infighting and increasing decadence the Pax Romana being no longer enforced the decline of use and acceptance of the common coinage declining levels of communicationAs a result, former Roman alliescooperated with invaders. 10
  11. 11. United States: A Global Leader The United States has developed a world leadership position due to: its use of market-based transactions in the Western world a broad flow of ideas, goods, and services across national borders an encouragement of international communication and transportation Pax Americana, an American sponsored and enforced peace 11
  12. 12. The Smoot-Hawley ActThe the 1930’s, the U.S. passed the Smoot-Hawley Act, which raised import duties toreduce the volume of goods coming into theU.S.The act was passed in the hope that it wouldrestore domestic employment.The result was a worldwide depression andthe collapse of the world financial system. 12
  13. 13. Expansion of International TradeIn the past 30 years, the volume ofinternational trade has expanded from$200 billion to over $7.5 trillion.The sales of foreign affiliates ofmultinational corporations are nowtwice as high as global exports. 13
  14. 14. Global Links TodayInternational business has created a networkof global links that bind countries,institutions, and individuals with trade,financial markets, technology, and livingstandards. For example, a reduction in coffee production in Brazil would affect individuals and economies worldwide. 14
  15. 15. Recent Changes in International BusinessTotal world trade declined dramaticallyafter 2000, but is again on the rise.The rate of globalization isaccelerating.Regionalization is taking place,resulting in trading blocs.The participation of countries in worldtrade is shifting. 15
  16. 16. The Composition of TradeBetween the 1960’s and the 1990’s theimportance of manufactured goodsincreased while the role of primarycommodities (i.e. rubber or mining)had decreased.More recently, there has been a shiftof manufacturing to countries withemerging economies.There has been an increase in thearea of services trade in recent years. 16
  17. 17. The Current U.S. International Trade PositionExports and Imports of Goods and Services per Capita for Selected Countries Country Exports per Capita Imports per Capita Australia $4,296 $4,525 Brazil 379 428 China 222 199 Japan 4,165 3,622 Kenya 91 125 United Kingdom 4,767 5,500 United States 3,472 4,962 17
  18. 18. The Impact of InternationalBusiness on the United StatesU.S. international business outflows areimportant on the macroeconomic level interms of balancing the trade account.On the microeconomic level, participationin international business can help firmsachieve economies of scale that cannot beachieved in domestic markets. 18
  19. 19. Average Plant Salary and Wages (per worker, dollars per hour) 30 25 20$ per hour 15 10 5 0 All Plants Small Plants Large Plants Non-Exporters Exporters 19
  20. 20. GlobalizationBecause of globalization, for the firsttime in history, the availability ofinternational products and services canbe accessed by individuals in manycountries, from diverse economicbackgrounds. 20
  21. 21. The Structure of this BookPart One introduces the importance of internationalbusiness and its global linkages.Part Two presents the environment of internationalbusiness, addressing culture, policies, politics, andlaw.Part Three provides coverage of the theory ofinternational trade and investment and presentsbalance of payments issues.Part Four discusses markets, financial systems,economic integration, and emerging marketconcerns. 21
  22. 22. The Structure of this Book (cont.)Part Five presents the strategy considerationssurrounding international business.Part Six targets the operational issues surroundinginternational business, using an implementation-oriented perspective.Part Seven concludes the book with a focus on thefuture of the field and the reader’s career. 22