Learning Objectives

To understand the history and impact of

international business.
To learn the definition of international
business.
To recognize the growth of global linkages
today.
To understand the U.S. position in world trade
and the impact international business has on
the United States.
To appreciate the opportunities and challenges
offered by international business.

1
Need for International Business
More and more firms around the
world are going global, including:
Manufacturing firms
Service companies (i.e. banks, insurance,
consulting firms)
Art, film, and music companies

2
Need for International Business
International business:
causes the flow of ideas, services, and
capital across the world
offers consumers new choices
permits the acquisition of a wider variety
of products
facilitates the mobility of labor,
capital, and technology
provides challenging employment
opportunities
reallocates resources, makes preferential
choices, and shifts activities to a global
level
3
What is International Business?

International business consists of

transactions that are devised and
carried out across national borders
to satisfy the objectives of
individuals, companies, and
organizations.

4
Types of International Business
Export-import trade
Foreign direct
investment

Licensing

Franchising

Management contracts

5
International Business Questions
How will an idea, good, or service fit
into the international market?
Should trade or investment be used
to enter a foreign market?
Should supplies be obtained
domestically or abroad?
What product adjustments are
necessary to be responsive to local
conditions?
What are the threats from global
competitors, and how can these
threats be counteracted?
6
United States: A Global Leader
The United States has developed a
world leadership position due to:
its use of market-based transactions in the
Western world
a broad flow of ideas, goods, and services
across national borders
an encouragement of international
communication and transportation
Pax Americana, an American sponsored and
enforced peace

7
Expansion of International Trade
In the past 30 years, the volume of
international trade has expanded from
$200 billion to over $7.5 trillion.

The sales of foreign affiliates of

multinational corporations are now
twice as high as global exports.

8
 Global Links Today
International business has created a network
of global links that bind countries,
institutions, and individuals with trade,
financial markets, technology, and living
standards.
For example, a reduction in coffee production in
Brazil would affect individuals and economies
worldwide.

9
 Recent Changes in
International Business
Total world trade declined dramatically
after 2000, but is again on the rise.

The rate of globalization is accelerating.

Regionalization is taking place, resulting

in trading blocs.

The participation of countries in world

trade is shifting.
10
 The Composition of Trade
Between the 1960’s and the 1990’s the
importance of manufactured goods
increased while the role of primary
commodities (i.e. rubber or mining) had
decreased.
More recently, there has been a shift of
manufacturing to countries with
emerging economies.
There has been an increase in the area
of services trade in recent years.

11
 The Current U.S. International
Trade Position
Exports and Imports of Goods and Services per Capita
for Selected Countries

Country Exports per Capita Imports per Capita

Australia $4,296 $4,525
Brazil 379 428
China 222 199
Japan 4,165 3,622
Kenya 91 125
United Kingdom 4,767 5,500
United States 3,472 4,962
12
The Impact of International
Business on the United States
U.S. international business outflows are
important on the macroeconomic level in
terms of balancing the trade account.

On the microeconomic level, participation

in international business can help firms
achieve economies of scale that cannot be
achieved in domestic markets.

13
 Average Plant Salary and Wages
(per worker, dollars per hour)
30

25

20
$ per hour

15

10

0
All Plants Small Plants Large Plants

Non-Exporters Exporters
14
 Globalization
Because of globalization, for the first
time in history, the availability of
international products and services can
be accessed by individuals in many
countries, from diverse economic
backgrounds.

15
INTERNATIONAL BUSINESS

Czinkota
Ronkainen
Moffett

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