INTERNATIONAL

BUSINESS, 7e
Czinkota
Ronkainen
Moffett

Chapter 1
The International
Business Imperative

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.

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

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

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

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?

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.
10

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
11

The Smoot-Hawley Act

The the 1930s, 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.
12

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.

14

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 1960s and the 1990s
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.
16

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 readers
career.
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