Introduction

Chapter 1
 Objectives
 Define international business
 Discuss its importance
 Know who has an interest in international business
 Understand the forms international businesses take
 Identify differences between domestic & international
business
 Define globalization
 Identify the five drivers of globalization
 What is the relationship between international business
and ethics?
 International Business

• Entrepreneurs, managers, employees, governments --->

Understanding & Shaping global business practices
 Firms are increasingly involved in IB
 CEOs want employees to have a global business perspective
 IB skills are important for both senior executive and entry level
positions
• Coca-Cola, McDonalds, Kellogs ----> appointed Leaders with International
experience.
• According to Fortune 500; 52/162 CEOs
– International business orientation ----> part of a college education
– International skills, knowledge necessary for promotion at all levels
 What is International Business?
• International Business
– Cross border exchange of goods, services, resources with
2 or more countries
• Foreign Business –
– the operations of a company outside the home or
domestic market
• Multidomestic/multinational Company (MDC)
– an organization with multi-country affiliates, each of
which formulates its own business strategy based on
perceived market differences
– Localize products and services
 What is International Business?

• Global Company (GC)

– an organization that attempts to standardize and
integrate operations worldwide in most or all
functional areas
– Product does not change across markets
• International Company (IC)
– either a global or multinational company
 International Organizations Do
• International Businesses
• Importer
 Buys products overseas made in foreign countries
• Export
 Sells products & Services made at home in foreign
countries
 Foreign Direct Investment
 Buying, building subsidiaries in foreign countries
Firms Choices about Foreign Operations include:
 Adapting to national/local market- Adaptation
 Standardization
International vs. Domestic Business
Influence of External & Internal Environmental Forces

Environment
• all forces surrounding and influencing the life and
development of the firm.
– Uncontrollable Forces
• external forces over which management has no direct
control, although it can exert an influence.
– Controllable Forces
• internal forces that management administers to adapt
to changes in the uncontrollable forces.
External & Internal Forces
 Environments
• Domestic Environment
 uncontrollable forces originating in the home country that surround and
influence the firm’s life and development.

• Foreign Environment
 all uncontrollable forces originating outside the home country that
surround and influence the firm.
 Same as domestic forces
 Forces have different values- Laws
 Forces can be difficult to assess- Foreign Ownership abroad
 Forces are interrelated- distinct cultures

• International Environment
 interaction between domestic and foreign environmental forces
 or between sets of foreign environmental forces.
 International Business??

• Enhancing Understanding of International Business ---->Need

to understand
• Strategic Management & Entrepreneurship
• Strategy--> plan of how to achieve a company’s objectives
 Tool S.W.O.T Analysis
• Strategic Management ---> planning, monitoring, analysis, assessment
of resources needed for a company to meet objectives
• Entrepreneurship
 Recognition of market opportunities
• Entrepreneur
 Person engaging in entrepreneurship
Intrapreneur
 Who Is Interested in IB?
• Stakeholders
 Individuals or organizations whose interests may be affected by the
actions of firms or individuals
 How do you become a stakeholder?
Labor

Suppliers Banks

Company

Government Owners

Managers
 Who is Interested in IB?
• Stakeholder Analysis
Technique used to identify & assess importance of
People, group of people, organizations to enhance success
of firms
Ex: Industry associations, suppliers, labor
Google?? If the company is purely domestic, would
international business still be relevant?
Foreign suppliers, competitors, price changes
 International Business Forms
• Variety of Forms
Government (nationalize) & Non-government (NGO)
& Private Organizations
For profit & Non-profit
Primary goal of a business? Ex: Apple
International Part of a firm’s business vary: Imports,
exports, FDI
 International Forms of Governments

• Governments- Diff. International Forms

• Organization or agency ---> political unit exercises
authority, set, administer public policies, executive
sovereign power through:
Customs, institutions, laws within a nation
Maintain embassies, consulates in foreign countries
Participate in bilateral treaties- NAFTA, Kyoto Protocol
 International Business

• National Nongovernmental Organizations (NGO)

Nonprofits, voluntary citizens’ groups organized at a
local, national, international level
Emphasize humanitarian issues, developmental aid,
sustainable development
Ex: World Economic Forum
WTO
UN
 International Business Environment

• International Organizations Affect International

Environment
Worldwide Bodies – World Bank, WTO
Regional Economic Groupings – NAFTA, EU
Organizations Bound by Industry Agreements - OPEC
 Globalization?
• Globalization
 Interdependent & integrated global economy; through the use of
goods, technology, Information and the process of making
integration happen.
• Fueled by
1. Declining trade and investment barriers
2. New technologies

How does internationalization of firms affect culture, consumer & national

identify?

• In today’s global economy

– Everyone buys good from foreign countries
 For example: Clothes from China, Vegetables from Mexico, Car-Korea
 Drivers of Globalization
• Political Drivers
– unification of global community, trading agreement
• Technological Drivers
– Innovation-communication & computers
• Market Drivers
– Global companies become global customers
• Cost Drivers
– Reduce development, production, etc.
• Competitive Drivers
 Flat or Multidomestic World?

• According to Pankaj Ghemawat in a

Semiglobalized & multi-domestic world
Understand “national differences”

• To study barriers to engage in cross border

economic activity
– Use the CAGE Analysis Model
 CAGE Analysis Framework
• Framework Covers four areas
1. Culture
Norms, common beliefs & practices
Differences in language, ethnicity, norms, nationality, levels of
trust, tolerance, respect, social networks

2. Administration
Bilateral trade flow with administratively similar countries
Administrative distance ----> governmental ties, similar laws,
regulations, institutions, members of same trading blocks
 CAGE Analysis Framework

3. Geography
Time zones, climate, topography, share borders,
inland waterways
4. Economics
Economic distance
Differences in demographical & social conditions
Ex: Gross Domestic Product (GDP)
 Ethics and International Business

• Ethics
Deals with morality about ‘right and wrong’
behavior for people in various situations
Ethics vary by country and regions
• International Business Ethics
Examines business activity by asking
Is the business conduct ethically right or wrong?
 Ethics and International Business
Ethical decision making complex in international business

• Makkula Center for Applied Ethics at Santa Clara

University—Framework
1. Is it an ethical issue?
 Something is possible, not ethical
 Listen to instinct
2. Get the facts!
 What do/not know? Who is affected?
3. Evaluate alternative options?
 Ethics and International Business

4. Test your decision

Could you explain it to your mother
5. Just do it
Implement your decision

 Ethics is NOT!
Not the same as feelings
Not religion
Not following ethically accepted norms
No science
 Ownership of Companies
• 1. 7-Eleven Stores
• 2. Traders Jo
• 3. Meybelline costmetics
• 4. Panasonic TV
• 5. Aquafresh toothpaste
• 6. Baby Ruth candy bars
• 7. Holiday Inn motels
• 8. Vitamin water
• 9. Columbia Pictures
• 10. BP Gasoline
• 11. Giant Grocery Store
• 12. Popsicle frozen
• 13. Ikea
• 14. Ralston Purina pet foods
• 5. Aldi Grocery Stores
• 16. Colgate
• 17. Ban deodorant
• 18. RCA Records
• 19. Thinkpad laptop computers
• 20. Norelco electric shavers
•