The international business imperative

THE INTERNATIONAL BUSINESS

IMPERATIVE

CHAPTER 1

Copyright © 2011 John Wiley & Sons

Visit http://wileymanagementupdates.com/ for the latest in business news stories.

Chapter 1

Learning Objectives

1. Understand the history and impact of international business

2. Learn the definition of international business

3. Recognize the growth of global linkages today

4. Understand the U.S. position in world trade and the impact international business has on the United States

5. Appreciate the opportunities and challenges offered by international business

6. To identify the relationships between the text’s structure and the theoretical, political, and strategic aspects of international business.

2 Czinkota: International Business, 8eChapter 1

The Need for International Business

Students are likely to be involved in international business in their careers

International business offers companies more new markets

International business causes the flow of ideas, services, and capital across the world

International business offers consumers, workers, and investors more choices

3Chapter 1 Czinkota: International Business, 8e

Top Ten Global Companies in 2009

Chapter 1

Each year, Fortune publishes a ranking of the world’s largest corporations. The 2009 World’s biggest companies are:

1. Royal Dutch Shell2. Exxon Mobil3. Wal-Mart Stores4. BP5. Chevron6. Total7. ConocoPhillips8. ING Group9. Sinopec10.Toyota Motor

Source: Fortune.com: http://money.cnn.com/magazines/fortune/global500/2009/index.html

Czinkota: International Business, 8e4

Impact on Consumers

Chapter 1 5

As international business continues to grow, consumers benefit from greater choices, higher quality, and lower costs

Czinkota: International Business, 8e

International Business Defined

International business consists of transactions that are devised and carried out across national borders to satisfy the objectives of individuals, companies, and organizations


Types of International

BusinessImport-Export Trade

Direct Foreign

Investment

Licensing

Franchising

Managing Contracts


International Business is an Art and a Science

Success in the art of business depends on a firm grounding in its scientific aspects

An understanding of both aspects is necessary to incorporate international business considerations into thinking and planning


The Roman Empire

International business played a vital role in the formation of the Roman Empire:

Pax Romana – Roman peace guaranteed peaceful travel

Common coinage simplified business transactions

Systematic law and central market locations through the founding of cities

Effective communication system


The Roman Empire

International business played a role in the decline of the Roman Empire as well:

The empire was weakened at its foundations because of infighting and increasing decadence

Pax Romana was no longer enforced

Use and acceptance of the common coinage had declined

Former Roman allies became willing to cooperate with invaders


The Han Empire

While Rome flourished, the Han empire in China provided a similar stability for nearly four centuries Trade expanded with the development of a

system of trade routes to Central Asia that became known as the Silk Road

Trade between the Roman and Chinese empires was not direct and occurred through many intermediaries in India, Arabia, and central Asia


The British Empire

The British Empire grew mainly through its effective international business policy:

Efficient transportation

Intensive trade

An insistence on open markets


The United States

The United States became a world leader by championing market-based transactions, encouraging communication, and promoting the flow of ideas, goods, and services across national borders

Pax Americana –American peace from 1945 - 1990 that led to increased international business transactions

Smoot-Hawley Act of 1930 – Raised import duties to promote domestic production Resulted in a trade war Contributed to the ensuing worldwide depression and

collapse of the world financial system


Recent Growth in Trade and GDP

Growth in World Merchandise Trade & GDP (1998 – 2008)


Global Links Today

International business creates a network of global links that binds all countries, institutions, and individuals together

The following changes have affected the international financial position of countries and the ownership of economic activities:

Enhanced communication on a global scale Global reorientation in production strategies Service firm participation in the international marketplace Recognizing the effects of globalization on the environment


Global Links Today

Shifts in financial flows have a major effect on foreign direct investment, which is the establishment or expansion of operations of a firm in a foreign country.

Technology is increasing the rate of changes in international business.

The composition of trade is changing: 1960s to the 1990s: primary commodities versus

manufactured goods More recently, there has been a shift in manufacturing Increasingly, shifts are occurring in services trade


India’s Economy Grows Despite Recession

Chapter 1

India’s economic growth accelerated as GDP rose 8.6 percent in the three months ended March 31, 2010 from a year earlier. Emerging nations such as India are weathering the global recession better than developed nations, andare a source of strength for the world economy.

Growth in India’s $1.2 trillion economy, Asia’s largest after Japan and China, is accelerating as rising incomes boost demand for cars, mobile phones and air travel. Salaries in India may increase at the fastest pace in the Asia Pacific in 2010, according to Hewitt Associates Inc.

Source: Bloomberg.com: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aw74LJGGrRGw


Over the last 30 years, one of the greatest transformations in daily life has been the global proliferation of chain restaurants and the food choices available to consumers worldwide.

International business has brought diversity of choice, quality food, clean environments, and fast, efficient service to locations around the world.

However, some criticize restaurant franchises for spreading industrialized food processes and junk food to other parts of the world.

Focus on Culture:Make that a Caffé Latte Please


Global Manufacturing Output

Share of Global Manufacturing Output for the United States,Japan, China, and the rest of the World (1995 – 2007)


Current U.S. International Trade Position

The U.S. has gained in prominence as a market for the world, but has lost some of its importance as a supplier

U.S. exports have grown rapidly and successfully

However, there is a decline in global market share of U.S. products

The growth in U.S. exports in recent years pales in comparison to the international trade performance of other nations


Apple iPad Goes International

Chapter 1

Apple's iPad debuted in the U.S. on April 3, 2010. The result of the launch wasa resounding success, as the company is handling iPad shortages by rampingproduction of the new device.

Despite the shortages, the iPad was launched in nine more countries on May 28: Australia, Canada, France, Germany, Italy, Japan, Spain, Switzerland and the U.K.

Before the first day of sales, thousands of customers in these countries lined up outside of Apple stores to be the first to pick up an iPad.

Source: Fortune.com: http://tech.fortune.cnn.com/2010/05/28/ipad-madness-in-munich/


Table 1.3 Export and Import Comparison

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

Exports and Imports of Goods and Services per Capita for Selected Countries


Impact on the United States

U.S. international business outflows are important on the macroeconomic level to balance the trade account

On the microeconomic level, participation in international business can help firms achieve economies of scale and hone their competitive skills

Globalization is the increased mobility, services, labor, technology, and capital throughout the world


Structure of this Book

This book addresses the international concerns of beginning internationalists and multinational corporations

Topics include: International trade and investment Culture and politics International business strategy Operational issues surrounding

international business


In 1997, students at several universities learned that the oversees workers who made university logo merchandise endured long hours, deplorable working conditions, and low and unequal pay.

The students at these institutions formed the Workers Rights Consortium (WRC) to ensure that factories where school apparel was made adopted basic labor standards and fair pay.

As of 2009, 186 colleges and universities had joined the WRC.

Focus on Ethics:Students Against Sweatshops


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The international business imperative

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