INTERNATIONAL
BUSINESS, 7e
Czinkota
Ronkainen
Moffett
1
Chapter 1
The International Business
Imperative
2
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.
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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
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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
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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.
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Types of International Business
Export-import trade
Foreign direct
investment
Licensing
Franchising
Management contracts
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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?
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International Business and the
Roman Empire
Pax Romana, or Roman Peace ensured that
merchants were able to travel safely and
rapidly.
Common coinage simplified business
transactions.
Rome developed a systematic law, central
market locations, and an effective
communication system; all of which enabled
international business to flourish in the
Roman Empire.
The growth of the Roman Empire occurred
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mainly through the linkages of business
International Business and the
Roman Empire (cont.)
The decline of the Roman Empire can be
attributed in part to:
infighting and increasing decadence
the Pax Romana being no longer enforced
the decline of use and acceptance of the common
coinage
declining levels of communication
As a result, former Roman allies
cooperated with invaders.
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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
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The Smoot-Hawley Act
The the 1930’s, the U.S. passed the SmootHawley Act, which raised import duties to
reduce the volume of goods coming into the
U.S.
The act was passed in the hope that it would
restore domestic employment.
The result was a worldwide depression and
the collapse of the world financial system.
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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.
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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.
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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.
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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.
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The Current U.S. International
Trade Position
Exports and Imports of Goods and Services per Capita
for Selected Countries
Country
Australia
Brazil
China
Japan
Kenya
United Kingdom
United States
Exports per Capita
$4,296
379
222
4,165
91
4,767
3,472
Imports per Capita
$4,525
428
199
3,622
125
5,500
4,962
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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.
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Average Plant Salary and Wages
(per worker, dollars per hour)
30
$ per hour
25
20
15
10
5
0
All Plants
Small Plants
Non-Exporters
Large Plants
Exporters
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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.
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The Structure of this Book
Part One introduces the importance of international
business and its global linkages.
Part Two presents the environment of international
business, addressing culture, policies, politics, and
law.
Part Three provides coverage of the theory of
international trade and investment and presents
balance of payments issues.
Part Four discusses markets, financial systems,
economic integration, and emerging market
concerns.
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The Structure of this Book
(cont.)
Part Five presents the strategy considerations
surrounding international business.
Part Six targets the operational issues surrounding
international business, using an implementationoriented perspective.
Part Seven concludes the book with a focus on the
future of the field and the reader’s career.
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