Daniels/Radebaugh/Sullivan

International Business 10e

International Business
Chapter One
International Business: An
Overview

2004 Prentice Hall, Inc 1-1

 Chapter Objectives
⮚ Define international business and how it differs
from domestic business
⮚ Examine the forces that are driving globalization
⮚ Explain why companies engage in international
business
⮚ Introduce different international business modes
companies use
⮚ Provide an overview of patterns for international
expansion
⮚ Describe the differences between international
business and domestic business

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 What is Globalization?
What is International Business?

■ Globalization:
The deepening relationship and broadening interdependence
among people from different parts of the world, and
especially among different countries.
■ International Business:
All commercial transactions between two or more countries, whether
they involve private or public parties.

■ The International environment is more complex and

diverse than a firm’s domestic environment.

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 Why Engage in International
Business
■ Expand sales
■ Growth the incomes
■ Acquire resources
• Better components, services, products
• Foreign capital
• Technologies
• information
■ Minimize risk
• Take advantage of the business cycle for
products/services
• Diversify among international markets risks

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Reasons for Growth in International
Business
■ Rapid increase in and expansion of
technology
■ Transportation is quicker while costs are
lower
■ Liberal government policies on trade and
resources
■ Development of institutions that support
international trade
■ Consumer pressures
■ Increased global competition

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 Criticisms of Globalization
Economic Growth:
■

Economic growth can result in both: positive and negative

consequences.

⮚ Negative Consequences:
- Using more nonrenewable natural resources.
- Environmental pollution through toxic and pesticide waste, factory
and vehicle emissions, and deforestation.

⮚ Positive Consequences:
- Global cooperation to develop uniform standards to solve
environmental problems.
- Access to technological developments, which reduce pollution and
inefficient use of resources.
Modes of International Business
■ Importing and exporting
■ Tourism and transportation
■ Licensing and franchising
■ Turnkey operations
■ Management contracts
■ Direct and portfolio investment

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 Levels/Terms of International
Companies
■ Multinational Enterprise (MNE): global
approach to markets and production
• Multinational Corporation (MNC)
• Transnational Company (TNC)
■ Globally integrated company: integrated
operations located in different countries
■ Multidomestic company: multinational
companies that allow local responsiveness

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Operations and Influences

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 Influences on International
Business
■ External Influences ■ Operations
• Physical/Societal • Objectives
factors • Strategy
Political policies and
■
• Means
legal practices
■ Cultural factors
■ Economic factors
■ Geographical
influences
• Competitive
environment

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Influences on International Business

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