International Business, 6th Edition

chapter 1
An Overview
of International Business

Griffin & Pustay

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Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

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

Comprehend the growing role of emerging markets in the global economy
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The Business of the Olympics

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The Business of the Olympics (continued)

Intense reflection of international business
Government of games by IOC Competition for hosting Revenue sources for the Olympics
Broadcast rights Corporate sponsorships
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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
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How Does International Business Differ from Domestic? Currency conversion

Legal systems

Culture
Availability of resources

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Why Study International Business?

Large organizations
Foreign-owned subsidiaries

Small businesses
Competitors Business techniques and tools Cultural literacy
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International Business Activities

Exporting and Importing
International Investments

Licensing, Franchising, and Management Contracts

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Exporting and Importing

Exporting: selling of products made in ones own country for use or resale in other countries
Importing: buying of products made in other countries for use or resale in ones own country

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Visible and Invisible Trade

Trade in Goods
Merchandise exports and imports

Visible trade

Trade in Services
Service exports and imports
Invisible trade
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International Investments
Capital supplied by residents of one country to residents of another Two categories:
Foreign direct investments

Portfolio investments

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Figure 1.1 Exports as a % of GDP

90 80 70

82.9 75

Percentage of GDP

60 50 40 30 20 10 0 44.1

39.7

35.7 31.8 28.8 27.1 21.4 17.8 14.5 10.8

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Other Forms of International Business Activity

Management contracts Licensing Franchising

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Licensing

Licensing is a contractual arrangement in which a firm in one country licenses the use of its intellectual property to a firm in another country in exchange for a royalty payment.
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Franchising
Franchising is a specialized form of licensing which occurs when a firm in one country authorizes a firm in another to utilize its operating systems as well as its brand names, trademarks, and logos for a royalty payment.

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Management Contract
A management contract is an arrangement wherein a firm in one country agrees to operate facilities or provide other management services to a firm in another country for an agreedupon fee. Examples include Marriott and Hilton which do not own all of the hotels that bear their brand names.
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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
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Table 1.1 The Worlds Largest MNCs

Wal-Mart
Exxon Mobil

Chevron
ING Group

Royal Dutch Shell

BP

Total
General Motors

Toyota Motor

ConocoPhillips

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The Era of Globalization

Globalization: the inexorable integration
of markets, nation-states, and technologiesin a way that is enabling individuals, corporations and nationstates to reach around the world farther, faster, deeper, and cheaper than ever before

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Figure 1.2 World Exports as a % of World GDP

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Figure 1.3 Foreign Direct Investment Relative to World GDP

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Contemporary Causes of Globalization Strategic Imperatives

To leverage core competencies

To acquire resources and supplies

To seek new markets To better compete with rivals

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Environmental Change and Globalization

Changes in Political Environments

Technological Changes

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Globalization and Emerging Markets

BRIC
Brazil / Argentina

Russia
India China

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Globalization and Emerging Markets (continued) Big Ten

Argentina Brazil China

South Korea Indonesia Mexico Poland Turkey India South Africa

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Framework of Book
The Worlds Marketplaces
International Environment

Managing International Business

Managing International Business Operations

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All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.

Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

 http://images.businessweek.com/sli deshows/europe/

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