Subject: Global Business

Dr. Mahmoud Manaa Textbook: Michael Czinkota, et. al., Global Business

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.

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.

Types of International Business

Export-import trade Foreign direct investment

Licensing

Franchising Management contracts

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

United States: A Global Leader The Smoot-Hawley Act

The the 1930s, 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.

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.

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.

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.

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.

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

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.

Average Plant Salary and Wages

(per worker, dollars per hour)
30 25 $ per hour 20 15 10 5 0 All Plants Small Plants Non-Exporters Exporters

Large Plants

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.