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1-*International BusinessEnvironments and Operations, 13/e

Global Edition

Part One Background For International BusinessCopyright 2011 Pearson Education

Copyright 2011 Pearson Education

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Chapter 1Globalization and International Business



1-*Chapter ObjectivesTo define globalization and international business and show how they affect each otherTo understand why companies engage in international business and why international business growth has acceleratedTo discuss globalizations future and the major criticisms of globalizationTo become familiar with different ways in which a company can accomplish its global objectivesTo apply social science disciplines to understanding the differences between international and domestic businessCopyright 2011 Pearson Education


1-*IntroductionGlobalization is the ongoing process that deepens and broadens the relationships and interdependence among countries. International Business is a mechanism to bring about globalization. Copyright 2011 Pearson Education


1-*International BusinessInternational business consists of all commercial transactionsincluding sales, investments, and transportationthat take place between two or more countries

Increasingly foreign countries are a source of both production and sales for domestic companiesCopyright 2011 Pearson Education


1-*1-*Studying International Business is ImportantMost companies are either international or compete with international companiesModes of operations may differ from those used domesticallyThe best way of conducting business may differ by countryAn understanding helps you make better career decisionsAn understanding helps you decide what government policies to supportCopyright 2011 Pearson Education


1-*Factors Contributing to Rapid Growth of International BusinessIncrease in and expansion of technologyLiberalization of cross-border trade and resource movementsDevelopment of services that support international businessGrowing consumer pressuresIncreased global competitionChanging political situationsExpanded cross-national cooperationCopyright 2011 Pearson Education


1-*Whats Wrong with GlobalizationThreats to national sovereigntyEconomic growth and environmental stressGrowing income inequality and personal stressOffshoring the transferring of production abroad is controversial in terms of who benefits when costs are reduced and whether the process exchanges good jobs for bad ones. Copyright 2011 Pearson Education


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Companies Engage in International BusinessTo Expand Sales: pursuing international sales increases the potential market and potential profitsTo Acquire Resources: may give companies lower costs, new and better products, additional operating knowledgeTo Diversify or Reduce Risks: international operations may reduce operating risk by smoothing sales and profits, preventing competitors from gaining advantage Copyright 2011 Pearson Education


1-*Modes of Operation in International BusinessMerchandise exports and importsService exports and importsTourism and TransportationService PerformanceAsset UseInvestments Foreign Direct Investment (FDI)Portfolio InvestmentCopyright 2011 Pearson Education


1-*Multinational EnterprisesMultinational Enterprises (MNEs) take a global approach to markets and production. Sometimes they are referred to as multinational corporations or companies (MNCs) or transnational companies (TNCs). Copyright 2011 Pearson Education


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Difference Between International and Domestic Operations

When operating abroad companies may have to adjust their usual methods of carrying out business.

Foreign conditions often dictate a more suitable method, and the operating modes used for international business differ from those used on a domestic level.



1-*Physical and Social Factors Affecting International Business OperationsTo operate within a companys external environment, its managers must have knowledge of business operations and a working knowledge of social sciences, and how they affect all functional business fields.Copyright 2011 Pearson Education


1-*Competitive Factors Affecting International Business

A companys competitive strategy influences how and where it can best operate.

A companys competitive situation may differ in terms of its relative strength and which competitors it faces.Copyright 2011 Pearson Education


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Future of International Business and Globalization

Further globalization is inevitable.International business will grow primarily along regional rather than global lines.Forces working against further globalization and international business will slow down both trends.Copyright 2011 Pearson Education


1-*All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.



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Daniels Ib13 01