Lecture 1

International Business: A Managerial
Perspective
Ninth Edition
Chapter 1
An Overview of International
Business
Copyright © 2020, 2015, 2013 Pearson Education, Inc. All Rights Reserved
Learning Objectives
1.1 Discuss the meaning of international business.
1.2 Explain the importance of understanding international
business.
1.3 Identify and describe the basic forms of international
business activities.
1.4 Discuss the causes of globalization.
What Is International Business?
• International business consists of business transactions
between parties from more than one country
• International Business vs Domestic Business
– Boundaries
– Currencies
– Legal Systems
– Cultures
– Availability of Resources
Why Study International Business?
• Provides the knowledge and skills that are essential for
your career in the twenty-first century
• Helps you make better career assessments
• Keep pace with future competitors
• Stay abreast of the latest business techniques and tools
• Obtain cultural literacy
International Business Activities
• Exporting & Importing
• International Investments
• International Licensing
• International Franchising
• International Management Contract
International Business Activities:
Exporting and Importing (1 of 2)
• Exporting: selling of products made in one’s own country
for use or resale in other countries.
• Importing: buying of products made in other countries for
use or resale in one’s own country.
• Exporting and importing activities often are divided into
two groups:
– Trade in goods: tangible products
– Trade in services: intangible products
Exporting and Importing (2 of 2)
Figure 1.1 Exports of Goods and Services as a Percentage
of G D P for Some Key Countries (2017 data)
Source: Based on World Trade Organization Trade Profiles 2018.
International Investments
• Foreign Direct Investments (F D I)
• Foreign Portfolio Investments (F P I)
Other Forms
• International licensing
– Intellectual Property
• International franchising
– The Franchisor
– The Franchisee
• International management contract
– Management Services
International Business Activities: An
International Business
• Multinational Corporation (MN C)
• Multinational Enterprise (M N E)
• Multinational Organization (MN O)
The World’s Largest Corporations in
2017 (1 of 2)
Table 1.1 The World’s Largest Corporations
Revenues (in billions of U.S. dollars) Revenues (in billions of U.S. dollars)
Blank
2017 2007
Walmart 500.3 379.0
State Grid 348.9 132.9
Sinopec Group 327.0 159.3
China National 326.0 129.8
Petroleum
Royal Dutch Shell 311.9 355.8
Toyota Motor 265.2 230.2
Volkswagen 260.0 149.1
BP 244.6 291.4
Exxon Mobil 244.4 372.8
Berkshire Hathaway 242.1 118.2
Apple 229.2 24.0
Samsung Electronics 211.9 106.0
McKesson 208.4 101.7
The World’s Largest Corporations in
2017 (2 of 2)
Table 1.1 The World’s Largest Corporations
Revenues (in billions of U.S. Revenues (in billions of U.S.
Blank
dollars) dollars)
2017 2007
Glencore 205.5 142.0
UnitedHealth Group 201.2 75.4
Daimler 185.2 177.2
CV S Health 184.8 76.3
Amazon 177.9 14.8
EXO R Group 161.7 n.a.
A T&T 160.6 118.9
Sources: Based on www.fortune.com ,accessed July 30, 2018; Fortune, July 21, 2008,
pp. 161-171; “Glencore’s turnover soars to $142 billion in 2007,” www.metalbulletin.com

,March 11, 2008, various corporate websites.
Contemporary Causes of
Globalization (1 of 2)
• What is Globalization?
• Manifestation of globalization
– Intensification of the role of international trade in the
economies of the world
– Growing importance of F D I
Figure 1.2
World Exports as a Percentage of World G D P
Source: Based on World Bank statistical database (for GD P data) and the World Trade
Organization database (for exports of goods and exports of services).
Figure 1.3
Stock of Foreign Direct Investment (FD I) Relative to World GD P
Source: Based on World Bank, World Development Indicators data bank, accessed August
1, 2018; United Nations Conference for Trade and Development, World Investment Report,
various issues.
Globalization (2 of 2)
• Causes of Globalization
– Strategic Imperatives
– Environmental Changes
Globalization: Strategic Imperatives
• To leverage core competencies
• To acquire resources and supplies
• To seek new markets
• To better compete with rivals
Globalization: Environmental Causes
• Changes in the Political Environment
– Reduction of trade and investment barriers
▪ General Agreement on Tariffs and Trade (GAT T)
▪ World Trade Organization (WT O)
▪ Regional accords
• Changes in the Technological Environment
– Advances in Transportation
– Changes in Communications Technology
– Improvement in Information Processing
Globalization: Globalization and
Emerging Markets (1 of 2)
• Transformed global marketplace
– The collapse of European Communism
– The ideological and policy changes undertaken by
China and India
– The reduction of trade barriers
Globalization: Globalization and
Emerging Markets (2 of 2)
• Emerging Markets?
– BRI C Countries
– Big Ten
– Non-High Income Countries
Table 1.2 (1 of 2)
Characteristics of Selected Emerging Markets, 2017
BRI
C
Country Total Population Total GD P Per capita GD P
(millions) (billions of U.S. (in U.S. dollars)
dollars)
Brazil 209 2,055 9,821

Russia 144 1,578 10,743
India 1,339 2,597 1,940
China 1,388 12,237 8,827
Total 3,078 18,467 Blank
Table 1.2 (2 of 2)
Characteristics of Selected Emerging Markets, 2017
Big Ten
Country Total Population Total G D P Per capita G D P
(millions) (billions of U.S. (in U.S. dollars)
dollars)
Argentina 44 638 14,401

Brazil 209 2,055 9,821
China 1,386 12,237 8,827
India 1,339 2,597 1,940
Indonesia 264 1,016 3,847
Mexico 129 1,150 8,903
Poland 38 525 13,812
South Africa 57 349 6,161
South Korea 51 1,531 29,743
Turkey 81 851 10,541
Total 3,598 22,984
Blank
World total 7,530 80,068 10,741
Source: Based on World Bank, World Development Indicators data bank.

Map 1.1
China’s Regional Challenges
Source: Based on “China Quietly Releases 2017 Provincial G D P Figures,” Forbes,

February 12, 2018; “Rich province, poor province,” The Economist, October 1, 2016;
“Truckloads of notebooks mark first step of long march inland,” Financial Times, May 24,
2011, p. 17.; “Factory blast roils tech supply chain,” Wall Street Journal, May 24, 2011, p.
B1; “China’s rising wage bill poses risk of relocation,” Financial Times, February 16, 2011, p.
3; Chinese National Statistics Bureau, 2010 Census.
Review Questions
• What is international business? How does it differ from
domestic business?
• Why is it important for you to study international business?
• What are the basic forms of international business
activity?
• How do merchandise exports and imports differ from
service exports and imports?
• What is portfolio investment?
• What are the basic reasons for the recent growth of
international business activity?
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International Business: A Managerial

Source: Based on World Trade Organization Trade Profiles 2018.

pp. 161-171; “Glencore’s turnover soars to $142 billion in 2007,” www.metalbulletin.com

Brazil 209 2,055 9,821

Argentina 44 638 14,401

World total 7,530 80,068 10,741

Source: Based on World Bank, World Development Indicators data bank.

Source: Based on “China Quietly Releases 2017 Provincial G D P Figures,” Forbes,

This work is protected by United States copyright laws and is

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