The Rapid Change of The Rapid Change of International BusinessInternational Business

Chapter 1Chapter 1

Terms to KnowTerms to Know

International Business International Business Foreign BusinessForeign Business Multidomestic companyMultidomestic company Global companyGlobal company Transnational company?Transnational company?

International companyInternational company

History of International History of International TradeTrade

BCBC 1500’s and 1600’s1500’s and 1600’s Late 1800’sLate 1800’s Early 1900’sEarly 1900’s Present DayPresent Day

What is Globalization?What is Globalization?

““The international integration of The international integration of goods, technology, labor, and goods, technology, labor, and capital.”capital.”

Forces for GlobalizationForces for Globalization PoliticalPolitical

Trading agreementsTrading agreements Decreasing barriersDecreasing barriers PrivatizationPrivatization

TechnologicalTechnological InformationInformation MarketsMarkets

MarketMarket ““Pull” companies over with youPull” companies over with you

CostCost CompetitiveCompetitive

IncreasingIncreasing Counter maneuverCounter maneuver

Explosive GrowthExplosive Growth

Foreign Direct InvestmentForeign Direct Investment US= 10%US= 10% Total assets in 2002: $26.5 trill. (grew 8.3%)Total assets in 2002: $26.5 trill. (grew 8.3%) 53.1 million jobs53.1 million jobs

ExportingExporting ImportingImporting International CompaniesInternational Companies

63,800 companies in 2002, 866,000 affiliates63,800 companies in 2002, 866,000 affiliates 25% of global output, 2/3 of trade25% of global output, 2/3 of trade

The Debate over The Debate over GlobalizationGlobalization

For:For: Raises standard of livingRaises standard of living Creates jobsCreates jobs

Against:Against: Uneven results across nationsUneven results across nations Deleterious effects in labor and labor Deleterious effects in labor and labor

standardsstandards Decline in environment and health Decline in environment and health

standardsstandards

International EnvironmentInternational Environment

EnvironmentEnvironment Three environmentsThree environments

DomesticDomestic ForeignForeign InternationalInternational

Two classificationsTwo classifications UncontrollableUncontrollable ControllableControllable

Uncontrollable FactorsUncontrollable Factors

CompetitiveCompetitive DistributiveDistributive EconomicEconomic SocioeconomicSocioeconomic FinancialFinancial LegalLegal PhysicalPhysical PoliticalPolitical SocioculturalSociocultural LaborLabor TechnologicalTechnological

Controllable FactorsControllable Factors

Factors of ProductionFactors of Production CapitalCapital Raw materialsRaw materials PeoplePeople

Activities of the OrganizationActivities of the Organization PersonnelPersonnel FinanceFinance ProductionProduction MarketingMarketing

Three EnvironmentsThree Environments

DomesticDomestic Most familiarMost familiar Affect overseas operationsAffect overseas operations

ForeignForeign Different face valuesDifferent face values Changes difficult to assessChanges difficult to assess Forces interrelatedForces interrelated

International International More complexMore complex Self-reference criteriaSelf-reference criteria