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Chapter 1: An Overview of International Business

Chapter 1: An Overview of International Business. International Business, 4 th Edition Griffin & Pustay. Salt Lake Athens Sydney Toronto China. Why do cities compete so hard for the Olympic Games?. The Business of the Olympics. Intense reflection of international business

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Chapter 1: An Overview of International Business

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  1. Chapter 1:An Overview ofInternationalBusiness International Business, 4th Edition Griffin & Pustay ©2004 Prentice Hall

  2. Salt LakeAthensSydneyTorontoChina Why do cities compete so hard for the Olympic Games? ©2004 Prentice Hall

  3. The Business of the Olympics • Intense reflection of international business • Competition for hosting • Revenue sources for the Olympics • Broadcast rights • Corporate sponsorships • Licensing • Tourism ©2004 Prentice Hall

  4. The Business of the Olympics • How would the Olympics look if corporations were not allowed to participate? • Would the Olympics exist without the corporate sponsors? ©2004 Prentice Hall

  5. What is International Business? • Business transactions between parties from more than one country • Buying & selling raw materials, finished goods, or services across borders. • Operating factories or facilities overseas. • Borrowing money in one country to finance operations in another. ©2004 Prentice Hall

  6. How Does International BusinessDiffer from Domestic? • Currency conversions are required • Differing legal systems • Cultural differences • Economic differences • Infrastructure differences ©2004 Prentice Hall

  7. Why Study International Business? • Most of us will work for companies that have international connections. • To develop cultural literacy. • To keep in step with management tools, production techniques, and technology that other countries are developing. ©2004 Prentice Hall

  8. Can you think of foreign-owned firms that have invested in the US? • Why do you think they have invested in the US? ©2004 Prentice Hall

  9. Why Companies Trade • To increase sales & broaden markets • To seek cheaper raw materials or to lower production costs • To find goods not available in domestic markets, or at a lower price than those available domestically • To seek better prices for their products ©2004 Prentice Hall

  10. International Business Activities • Exporting and Importing • International Investments • Licensing, Franchising, and Management Contracts ©2004 Prentice Hall

  11. Exporting and Importing • Exporting: selling of products made in one’s own country for use or resale in other countries • Importing: buying of products made in other countries for use or resale in one’s own country ©2004 Prentice Hall

  12. 53% of Boeing’s aircraft sales are to foreign airlines ©2004 Prentice Hall

  13. Visible and Invisible Trade • Trade in Goods • Merchandise exports and imports • Visible trade • Trade in Services • Service exports and imports • Invisible trade ©2004 Prentice Hall

  14. International Investments • Capital supplied by residents of one country to residents of another • 2 categories: • Foreign direct investments • Portfolio investments ©2004 Prentice Hall

  15. Other Forms of International Business Activity • Licensing: firm in one country licenses the use of its intellectual property to a firm in a second country in return for a royalty payment • Franchising: firm in one country authorizes a firm in another country to utilize its operating system and intellectual property ©2004 Prentice Hall

  16. Management Contracts • A firm in one country agrees to operate facilities or provide other management services to a firm in another country for an agreed-upon fee • Common in upper-end international hotel industry ©2004 Prentice Hall

  17. This Beijing restaurant is one of 430 that McDonald’s has built in China ©2004 Prentice Hall

  18. Variations of Organizations • Multinational Corporation (MNC) • Multinational Enterprise (MNE) • Multinational Organization (MNO) ©2004 Prentice Hall

  19. 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 ©2004 Prentice Hall

  20. Table 1.1 The World’s Largest Corporations – 2002 ©2004 Prentice Hall

  21. Motives for Globalization • To leverage core competencies • To acquire resources and supplies • To seek new markets • To better compete with rivals ©2004 Prentice Hall

  22. Environmental Change and Globalization • Changes in Political Environment • Technological Changes ©2004 Prentice Hall

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