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International Business
Environments and Operations, 13/e
Global Edition
Part One
Background For International Business
Copyright © 2011 Pearson Education

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Chapter 1
Globalization
and International
Business
Copyright © 2011 Pearson Education

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Chapter Objectives
•To define globalization and international
business and show how they affect each other
•To understand why companies engage in
international business and why international
business growth has accelerated
•To discuss globalization’s future and the major
criticisms of globalization
•To become familiar with different ways in which
a company can accomplish its global objectives
•To apply social science disciplines to
understanding the differences between
international and domestic business
Copyright © 2011 Pearson Education

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Introduction
Globalization is the ongoing process
that deepens and broadens the
relationships and interdependence
among countries. International
Business is a mechanism to bring
about globalization.
Copyright © 2011 Pearson Education

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International Business
International business consists of all
commercial transactions—including
sales, investments, and
transportation—that take place
between two or more countries
Increasingly foreign countries are a
source of both production and sales for
domestic companies
Copyright © 2011 Pearson Education

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Studying International Business is
Important
•Most companies are either international or
compete with international companies
•Modes of operations may differ from those used
domestically
•The best way of conducting business may differ
by country
•An understanding helps you make better career
decisions
•An understanding helps you decide what
government policies to support
Copyright © 2011 Pearson Education

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International Business:
Operations and Influences
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Measuring Globalization
•A.T. Kearney/Foreign Policy Globalization Index
Economic
Technological
Personal Contact
Political
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Factors Contributing to Rapid Growth of
International Business
1.Increase in and expansion of technology
2.Liberalization of cross-border trade and
resource movements
3.Development of services that support
international business
4.Growing consumer pressures
5.Increased global competition
6.Changing political situations
7.Expanded cross-national cooperation
Copyright © 2011 Pearson Education

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What’s Wrong with Globalization
•Threats to national sovereignty
•Economic growth and environmental stress
•Growing income inequality and personal stress
•Offshoring –the transferring of production
abroad –is controversial in terms of who
benefits when costs are reduced and whether
the process exchanges good jobs for bad ones.
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Companies Engage in International
Business
•To Expand Sales: pursuing international sales
increases the potential market and potential
profits
•To Acquire Resources: may give companies
lower costs, new and better products, additional
operating knowledge
•To Diversify or Reduce Risks: international
operations may reduce operating risk by
smoothing sales and profits, preventing
competitors from gaining advantage
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Modes of Operation in International
Business
•Merchandise exports and imports
•Service exports and imports
Tourism and Transportation
Service Performance
Asset Use
•Investments
Foreign Direct Investment (FDI)
Portfolio Investment
Copyright © 2011 Pearson Education

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Multinational Enterprises
Multinational Enterprises (MNEs) take a
global approach to markets and
production. Sometimes they are referred
to as multinational corporations or
companies (MNCs) or transnational
companies (TNCs).
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Difference Between International and
Domestic Operations
When operating abroad companies may
have to adjust their usual methods of
carrying out business.
Foreign conditions often dictate a more
suitable method, and the operating modes
used for international business differ from
those used on a domestic level.
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Physical and Social Factors Affecting
International Business Operations
To operate within a company’s external
environment, its managers must have
knowledge of business operations and a
working knowledge of social sciences,
and how they affect all functional
business fields.
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Physical and Social Factors Affecting
International Business Operations
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Competitive Factors Affecting
International Business
•A company’s competitive strategy
influences how and where it can best
operate.
•A company’s competitive situation may
differ in terms of its relative strength and
which competitors it faces.
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Competitive Factors Affecting
International Business
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Future of International Business and
Globalization
•Further globalization is inevitable.
•International business will grow primarily along
regional rather than global lines.
•Forces working against further globalization and
international business will slow down both
trends.
Copyright © 2011 Pearson Education

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All rights reserved. No part of this publication may
be reproduced, stored in a retrieval system, or
transmitted, in any form or by any means,
electronic, mechanical, photocopying, recording,
or otherwise, without the prior written permission
of the publisher. Printed in the United States of
America.
Copyright © 2011 Pearson Education