International business 7e czinkota moffett ch01

INTERNATIONAL
BUSINESS, 7e
Czinkota
Ronkainen
Moffett

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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.

3

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

4


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

5

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.

6


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
mainly through the linkages of business
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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
Smoot-Hawley 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.

13


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 implementation-oriented perspective.
Part Seven concludes the book with a
focus on the future of the field and the
reader’s career.
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