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The international business imperative
Citation preview
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
6Chapter 1 Czinkota: International Business, 8e
Types of International
BusinessImport-Export Trade
Direct Foreign
Investment
Licensing
Franchising
Managing Contracts
7Chapter 1 Czinkota: International Business, 8e
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
8Chapter 1 Czinkota: International Business, 8e
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
9Chapter 1 Czinkota: International Business, 8e
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
10Chapter 1 Czinkota: International Business, 8e
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
11Chapter 1 Czinkota: International Business, 8e
The British Empire
The British Empire grew mainly through its effective international business policy:
Efficient transportation
Intensive trade
An insistence on open markets
12Chapter 1 Czinkota: International Business, 8e
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
13Chapter 1 Czinkota: International Business, 8e
Recent Growth in Trade and GDP
Growth in World Merchandise Trade & GDP (1998 – 2008)
14Chapter 1 Czinkota: International Business, 8e
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
15Chapter 1 Czinkota: International Business, 8e
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
16Chapter 1 Czinkota: International Business, 8e
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
Czinkota: International Business, 8e17
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
18Chapter 1 Czinkota: International Business, 8e
Global Manufacturing Output
Share of Global Manufacturing Output for the United States,Japan, China, and the rest of the World (1995 – 2007)
19Chapter 1 Czinkota: International Business, 8e
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
20Chapter 1 Czinkota: International Business, 8e
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/
Czinkota: International Business, 8e21
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
22Chapter 1 Czinkota: International Business, 8e
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
23Chapter 1 Czinkota: International Business, 8e
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
24Chapter 1 Czinkota: International Business, 8e
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
25Chapter 1 Czinkota: International Business, 8e