Chapter 1: An Overview of International Business

International Business, 4th Edition Griffin & Pustay

PowerPoint by Shaikh Rafiqul Islam M.Com (DU),MBA (Australia) Associate Professor Department of Marketing Jagannath University
2004 Prentice Hall

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Why do cities compete so hard for the World Cup Cricket?

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The Business of the World Cup Cricket

Intense reflection of international business Competition for hosting Revenue sources for the World Cup Cricket

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Broadcast rights Corporate sponsorships Licensing Tourism

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The Business of the World Cup Cricket

How would the World Cup Cricket look if corporations were not allowed to participate? Would the World Cup Cricket exist without the corporate sponsors?

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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.
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How Does International Business Differ from Domestic? Currency conversions are required Differing legal systems Cultural differences Economic differences Infrastructure differences
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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.
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Can you think of foreign-owned firms that have invested in the US? Why do you think they have invested in the US?

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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
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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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 53% of Boeings aircraft sales are to foreign airlines

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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 2 categories:
Foreign direct investments Portfolio investments

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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
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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
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This Beijing restaurant is one of 430 that McDonalds has built in China
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Variations of Organizations
Multinational Corporation (MNC) Multinational Enterprise (MNE) Multinational Organization (MNO)

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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 Corporations 2002

Rank 1 2 3 4 5 6 7 8 9 10
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Name Wal-Mart Stores General Motors Exxon Mobil Royal Dutch/Shell BP Ford Motor DaimlerChrysler Toyota Motor General Electric Mitsubishi

Country U.S. U.S. U.S. Netherlands Britain U.S. Germany Japan U.S. Japan

Revenues $Mil 246,525 186,763 182,466 179,431 178,721 163,871 141,421 131,754 131,698 109,386
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Multinational Enterprise
Loyads of London, PWC

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Multinational Organization
International Red Cross

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Motives for Globalization

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 Environment Technological Changes

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