International Business(MB 92)Spring 2003

D.K. MalhotraBeth Mariotz

Introduction to International Business

Meaning of International BusinessInternational Business versus Domestic BusinessWhy Companies Engage in International Business?Modes of International BusinessCourse Sequence

Meaning of International Business

All business activities whether private or governmental that involve cross-border transactions

Why Study International Business?

International business distinguishes itself from domestic business due to

Exchange Rate Cross-border Barriers• Economic barriers• Cultural barriers• Political and Legal barriers• Ethical Issues

Exchange Rate Risk

Changing value of U.S. dollar versus other currencies since 1973Declining dollar good for U.S. exporters, but bad for importsRising dollar good for U.S. imports/outsourcing, but bad for exports

Economic Barriers

Tariffs, Import Duties, Quota RestrictionsRestrictions on remittance of profits and repatriation of capitalRestrictions on foreign equity participationTrading blocks

Cultural Barriers

LanguageExamples of Language Barriers

“Please leave your values at the desk” (France)“The manager has personally passed all the water served here”

(Mexico; to assure safety of drinking water at the hotel)“You are invited to take advantage of the chambermaid” (Japan)“Ladies are requested not to have children in the bar” (Norway)“Because of the impropriety of entertaining guests of the

opposite sex in the bedroom, it is suggested that the lobby be used for this purpose” (Switzerland)

“We will execute customers in strict rotation.” (Greece)

Cultural Barriers Contd…

Hand GesturesReligion

HinduismIslamJudaismChristianityBuddhism

Significance of Religion and ValuesCustoms/Traditions

Political/Legal Barriers

Political IdeologyOpinions of Political LeadershipCivil disorderExternal relationsAttitude towards foreign capitalLegal System

Ethical Barriers

Definition of “Ethics” in your country versus definition of “Ethics” in a foreign countryEthics and the society

Firm’s role in educationFirm’s role in health care

Ethics and the environment

Who should study global business?

A company that engages in global business

A pure domestic company

Why companies go global?

To seek raw material/resourcesTo seek new markets/sales revenueTo minimize cost

Overall goal, shareholder wealth maximization

Modes of International Business

ExportingLicensingFranchisingJoint VenturesDirect Foreign Investment

Sequence of this Course

Global aspects of MarketingGlobal aspects of Production and OperationsGlobal aspects of Human Resource ManagementGlobal aspects of Accounting and Finance