Chap 01

Griffin and Pustay Third Edition
INTERNATIONAL
BUSINESS
A MANAGERIAL PERSPECTIVE
Chapter 1
An Overview of International Business
1
Prentice
Prentice
Hall ©Hall
2002©International
2002 International
Business
Business
3e 3e
Chapter Objectives
After studying this chapter you should be able to:
• Discuss the meaning of international

business.
• Explain the importance of understanding
international business.
• Identify and describe the basic forms of
international business activities.
• Discuss the causes of globalization.
2
Prentice Hall © 2002 International Business 3e
The Business of the
Olympics
• Cities compete for the privilege to host the
Olympic games to be in the international
spotlight and to promote economic growth.
• Both the IOC and national Olympic
committees are always on the alert for ways
to generate revenue.
– Television coverage provides one significant
source of revenue.
– Corporate sponsors are another important source
of revenue.
3
International Business
International business
consists of business
transactions between parties
from more than one country.
4
International Business vs.
Domestic Business
International business can differ from domestic
business for a number of reasons, including the
following:
– The countries involved may use different currencies, forcing at
least one party to convert its currency into another.
– The legal systems of the countries may differ, forcing one or more
parties to adjust their practices to comply with local law.
– The cultures of the countries may differ, forcing each party to
adjust its behavior to meet the expectations of the other.
– The availability of resources differs by country; the way products
are produced and the types of products that are produced vary
among countries.
5
Why Study International
Business?
• Almost any large organization you work for will have
international operations or be affected by the global
economy.
• Small businesses also are becoming more involved in
international business.
• Studying international business will help you keep pace
with your future competitors.
• Studying international business will help you stay abreast
of the latest business techniques and tools, many of
which are developed outside North America.
• You need to study international business to obtain
cultural literacy.
6
Activities
• Importing and exporting
• International investments
– Foreign direct investments (FDI)
– Portfolio investments
• Licensing
• Franchising
• Management contracts
7
Importing and Exporting
• Exporting is the selling of products

made in one’s own country for use
or resale in other countries.
• Importing is the buying of products
made in other countries for use or
resale in one’s own country.
8
International Investments
• Foreign direct investments (FDI) are

investments made for the purpose of
actively controlling property, assets, or
companies located in host countries.
• Portfolio investments are purchases of
foreign financial assets (stocks, bonds,
and certificates of deposit) for a purpose
other than control.
9
Licensing
• Licensing is a legal arrangement

whereby a firm in one country licenses
the use of its intellectual property
(patents, trademarks, brand names,
copyrights, or trade secrets) to a firm in
a second country in return for a royalty
payment.
10
Franchising
• Franchising, a specialized form of

licensing, occurs when a firm in one
country (the franchisor) authorizes a
firm in a second country (the franchisee)
to utilize its operating systems as well
as its brand names, trademarks, and
logos, in return for a royalty payment.
11
Management Contracts
• A management contract is an
arrangement wherein 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.
12
Multinational Corporation
A multinational corporation is
a firm “that engages in
foreign direct investment and
owns or controls value-
adding activities in more
than one country.”
13
The Contemporary Causes
of Globalization
• Several basic motives have
compelled firms to become more
global in both their orientation and
actions:
– To leverage core competencies
– To acquire resources and supplies
– To seek new markets
– To better compete with rivals
14
Environmental Change and
Globalization
• Firms would not have been able to expand
their international activities to the extent we
have observed in the post-World War II
period without significant changes in two key
areas:
– The political environment
– The technological environment
15
The World Economy:
1970 and 1995
16
The Internet and
• The growth of the Internet and other
information technologies affect international
business in at least three different ways:
– The Internet and associated technologies facilitate
international trade in services.
– The Internet tends to level the playing field between larger
and smaller enterprises.
– The Internet holds considerable potential as an efficient
networking mechanism among businesses.
17
Chapter Review
• International business encompasses any business
transaction that involves parties from more than one country.
• Studying international business is important for several
reasons.
• International business activity can take various forms.
• An international business is one that engages in commercial
transactions with individuals, private firms, and/or public-
sector organizations that cross national boundaries.
• International business has grown dramatically in recent
years because of strategic imperatives and environmental
changes.
18

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Griffin and Pustay Third Edition

• Discuss the meaning of international

• Exporting is the selling of products

• Foreign direct investments (FDI) are

• Licensing is a legal arrangement

• Franchising, a specialized form of

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