International Business Chapter 1

1.
1 The Foundation of
International
Business
2nd Semester
Chapter 1
Global Business Chapter 1 1

1.1 FOCUS (8)
Name products that you use that are
produced in other countries.

1.1 Goals
1. Distinguish between domestic business and
international business
2. Discuss the reasons why international
business is important
3. Understand that international trade is not
just a recent event

What Is International Business?
In the early days of the United States, most

families grew the food they ate and made
the clothes they wore.
Then the population increased.
Production and distribution methods
improved. People began to depend on

others for goods and services.

That dependence grew as more people

specialized in the work they did.
Today, the United States has a complex
business system.
The system is based on specialization and
makes a wide variety of goods and services

available.

In the same way that people within a country are

dependent on each other to produce goods and
services, countries also are dependent on each
other.
Nations that have extensive production and
distribution facilitiessuch as the United States,

Canada, Japan, and the western European nations
have some level of economic independence.
However, they are still dependent on other
countries. For example, most of the coffee used in

the United States comes from Brazil, and Japan
depends on other countries for almost all of its oil.

Most business activities take place inside a

country's own borders.
Making, buying, and selling goods and
services within a country is called

domestic business.
If you purchase a soft drink made in your
own country, you are participating in

domestic business.
An example of domestic business is when
local companies only sell in your

community.
On the other hand, if you buy a shirt made in

Thailand while shopping at your favorite store,
you are involved in the global economy.
The purchase was made in the United States
and the garment was made halfway around the
globe.
International business includes all business
activities needed to create, ship, and sell goods
and services across national borders.
International business may also be called global
business, international trade, and foreign trade.

Why is International Business
Important?
International business allows you to
purchase popular items made in other
countries, such as televisions, shoes, and
clothing.
Without global business, life would probably
be different.

Important
People around the world would not the
opportunity to enjoy goods and services
made in other countries
An example of international business is
when products are used by students but

produced in other countries.
Domestic business differs
from international business
Domestic involves one
country
International involves
several countries
Important?
International business is important for many
reasons.
It provides a source of raw materials and parts
and demand for foreign products.
Global business allows for new market and
investment opportunities.
It can even help improve political relations.

Materials, Parts and
Demand
Products made in the United States often
include materials around the world.
Each year, American companies buy oil and
steel from other nations to use in factories.

Nearly every U.S. built car has parts that
were manufactured in Japan, Mexico,

France, Korea, England, and many other
countries.

Materials, Parts and
Demand
Global dependency exists when items
that consumers need and want are created
in other countries.
For example, drought and other weather
conditions in an African country might

cause crop failures.
As a result, the African country must obtain
food from other countries.

Global Opportunities
Companies such as Kellogg sell to
customers in other countries to expand
business opportunities.
Many businesses, large and small, increase
sales and profits with foreign trade.

These companies are involved in the global
economy.

Global Opportunities
Many people invest in businesses to earn
money for themselves.
As companies expand into countries, they
create new investment opportunities.

Investors also provide funds to foreign
companies that are either just getting

started or are growing enterprises.

International Business is
important to companies and
countries:
Obtains raw materials and
products
Provides new business and
career opportunities.
Improves business
relations
17
Improved Political
Relations
An old saying suggests "countries that trade
with one another are less likely to have wars
with each other."
International business activities can help to
improve mutual understanding,
communication, and the level of respect
among people in different nations.
Every business competes against companies
that are either foreign-owned or that sell
foreign-made products.
As a result, even when you may not realize it,
international business is affecting your life.
When did International
Business Start
International business is not a new idea.
Evidence suggests that countries such as China,
India, and Japan were trading products throughout
the world 15,000 years ago.
There is also evidence that Africans traded with
South Americans several thousand years ago.
The Phoenicians developed trade in the
Mediterranean in ancient times.
The conquests of Alexander the Great opened up
trade with India and China.
Later, the Roman Empire dominated trade along the
Mediterranean Sea.

Business Start
The next few centuries had limited foreign trade
activity.
Following the fall of the Roman Empire, the
Vikings traveled as far as Iceland, Greenland, and

Russia to trade.
Islamic empires of the early Middle Ages
connected the Iberian Peninsula, North Africa, the

Arabian Peninsula, and what is now called Iran.
Charlemagne created the Holy Roman Empire out
of most of Europe.
Viking explorers reached Iceland and Greenland.

Business Start
The eleventh century saw renewed interest
in global commerce.
European countries such as England,
France, Spain, and Portugal were shipping

products by water.
By the fifteenth and sixteenth centuries,
explorers such as Columbus and Magellan

sought a shorter water route to India.
Instead of sailing east around Africa, they
ventured west.

Business Start
From about 1500 to 1900, many European
countries established colonies in Africa,
Asia, and North and South America.
These colonies provided European
businesses with low-cost raw materials and

new markets for selling products.

Business start
However, these colonies were often created
at the expense of the native inhabitants.
The space trade, the silk road, trading gold,
silver, gems, salt, coffee and tea are

examples of international business activities
before 1800.
Business Start
Most European countries maintained strong
economic and political control over their
colonies for years.
However, these colonies eventually
achieved independence.
The United States declared independence
from the United Kingdom in 1776.

Almost two hundred years later,
Mozambique gained independence from

Portugal in 1975.

Business Start
Various inventions created between 1769
and 1915 expanded interest in and
opportunities for international business.
These discoveries included the cotton gin,
the steam engine, and the telephone.

The inventions from this period improved
communication, distribution, and

production.
They also helped create new global
industries.

Business Start
Recent world events continue to highlight the
importance of international business.
Expanded trade among companies in different
countries increases independence.
A number of wars in the twentieth century
demonstrated the need for political cooperation.
These military conflicts limited global business
activities.
World peace is important if countries want to
achieve economic benefits from international
trade.

Business Start
The creation of the European Union, started
in the 1950s, is changing the way most
countries do business with one another.
Political freedom among former communist
countries has created new global business

opportunities in these emerging economies.
The international business marketplace is
expanding daily.

Factors that have driven the
development of international
business throughout history:
The need for additional raw

materials and new products
throughout history has created
trade among nations.
28
1.2 International
Business Basics

1.2 FOCUS (14)
Create a list of items that come form other
countries and a list of items we sell to other
countries

1.2 Goals
1. Describe basic international business activities

2. Explain the components of international
business environment
3. Name important skills for international business
and describe the importance of international
business for workers, consumers and citizens

The Fundamentals of International Trade
What happens when a country has too

much of a good thing? Perhaps the country
produces more grain than it can consume,
mines for coal than it needs, or produces
more furniture than it can use.
When a country has an abundance or goods
or services, businesses look for trade

opportunities. That's what happens when
companies in different countries trade
goods or services.

These foreign trades usually are not an

exchange of items for items. Instead, cash
payments are usually made for the items
bought or sold.
For example, a manufacturing company in
Korea can sell radios to an electronics Store

in the United States.
Also, a computer company in the United
Suites might sell its products to a retailer in

Russia.

These trade activities can be viewed from

two sidesthe buyer and the seller. For the
buyer, products bought from businesses in
other countries are called imports.
For example, the United States imports
radios. Russia is imports computers.

The Fundamentals of
International Trade
For the seller, exports are products sold in
other countries. Using the same example,
Korea is exporting radios. The United States
is exporting computer.
Although the process sounds simple,
obstacles can arise. These obstacles are

called trade barriers.
The difference is imports are products
bought from companies in other countries.

Exports are products sold to businesses and
consumers in other countries.
Trade barriers are restrictions that reduce

free trade among countries. These barriers
could appear in several forms.
Import taxes increase the cost of foreign products.
Quotas restrict the number of imports.
Laws prevent certain products from coming into a
country.

The International Business
Environment
Buying and selling goods and services is
similar in most parts of the world.
Consumers try to satisfy their needs and
wants at a fair price.
Businesses try to sell products at a price
that covers costs and provides a fair profit.

So, why is international business any
different from local business?

International Business
Environment Factors
In many parts of Iran, the exchange of goods
and services takes place in an open-air market.
Consumers in Japan buy meals that non-Asians
might not enjoy.
In Cuba, office workers have been required to
work several weeks in the fields to increase the
country's food supply.
These are some examples of factors that make
up the international business operating
environment.

Environment Factors
There are four major categories of the
international business environment. Global
business is influenced by:
geographic conditions
cultural and social factors
political and legal factors
and economic conditions.

Environment Factors
Geographic Conditions - The climate, terrain, seaports,
and natural resources of a country influence business
activities.
Very hot weather limits the types of crops that can be
grown. It also restricts the types of businesses that can
operate in that climate.
A hot, sunny climate is critical for growing tropical fruit,
but not suitable for a ski resort.
Mountainous terrain offers opportunities for mining but
limits the amount of land available for crops.
A nation with many rivers or seaports is able to easily
ship products for foreign trade.
Countries with few natural resources must depend on
imports.
Environment Factors
Cultural and Social - In some societies, hugging is an
appropriate business greeting. In other societies, a
handshake is the custom. These differences represent
different cultures.
Culture is the accepted behaviors, customs, and values of
a society. A society's culture has a strong influence on

business activities. For example, in Spain and parts of Latin
America, businesses traditionally were closed for several
hours in the middle of the day for a long lunch or a period
of rest.
The main cultural and social factors that affect international
business are language, education, religion, values,

customs, and social relationships. These relationships
include interactions among families, labor unions, and
other organizations.
Environment Factors
Political and Legal Factors Each day, we encounter
examples of government influence on business.
Regulation of fair advertising, enforcement of contracts,
and safety inspections of foods and medications are a few

examples.
In general, however, people in the United States have a
great deal of freedom when it comes to business activities.

However, not all countries are like the United States. In
many places, government restricts the activities of

consumers and business operators.
The most common political and legal factors that affect
international business activities include the type of

government, the stability of the government, and
government policies toward business.

Environment Factors
Economic Conditions Everyone faces the
problem of limited resources to satisfy
numerous needs and wants.
This basic economic problem is present for
all of us. We continually make decisions

about the use of our time, money, and
energy.
Similarly, every country plans the use of its
land, natural resources, workers, and wealth

to best serve the needs of its people.

Environment Factors
Factors that influence the economic situation
of a country include the type of economic
system, the availability of natural resources,
and the general education level of the
country's population.
Other economic factors include the types of
industries and jobs in the country and the
stability of the country s money supply.
Available technology for producing and
distributing goods and services also influences
a nation's economic situation.

The Global Business World
Knowledge of history, geography, and
foreign languages; cultural awareness; and
study skills.
International business affects you as a
consumer and worker because:

consumers have more buying choices.
workers are likely to have different types of career
opportunities
The Global Business
World
International business is an important field of
study. Certain basic skills and knowledge are
needed in our global economy.

Skills
Some skills are needed in every type of job.
For example, you must be able to read work
manuals, do calculations, and write reports.
These skills will continue to be important as
business activities among countries

increase.
In addition, knowledge of specific subjects is
important for success in global business.

Skills
History - Your awareness of the past can help you
better understand todays international business
relations.
Geography is more than names on a map.
Knowledge of geography will help you understand

how the climate and terrain of a country can affect
transportation, housing, and other business
activities.
Language - As countries increasingly participate in
foreign trade activities, your ability to

communicate effectively with people from other
societies increases in importance,

Skills
Cultural Awareness - Understanding that
cultures vary from nation to nation allows
people to be more sensitive to customs and
traditions of all societies.
Study Skills - Asking questions, taking
notes, and doing research are the necessary

to keep up to date on changes in
international business.

The Global Citizen
As a country becomes more involved in
international business, the lives of its
change.
Consumers have more choices because the
selection of goods and services is no longer

limited to items produced in their own
country. There might be more products,
different products, or products that cost
less.
Career opportunities expand for workers as
international business creates for additional

workers and different kinds of jobs.
The Global Citizen
Some business owners benefit from
international trade by expanding an existing
business or starting a new one. Other business
owners might see new or stronger competition.
As a consumer and worker involved in
international business you have an obligation
to act responsibly.
For example you might want to make sure that
companies you buy from and work for follow
ethical business practices. The decisions you
make are likely to have an impact locally and
around the world.
domestic business and
international business.
Checkpoint
2.List ways that(9/10/12)
international business
is important to
companies and
countries.
3.What factors have
driven the development
of international
business throughout
history
1.1 Review Global Business
Terms (13)
1. Domestic Business
2. International Business
3. Global Dependency

Concepts (13)
1. How does domestic business differ from
international business?
2. Why is International Business Important?
3. What are some examples of International
business activities that occurred before
1800?

1.1 Solve Global Business
Problems (13)
McDonalds has 30,000 restaurants in 120
countries, adapting its menu to various
tastes.
In Hong Kong burgers are served between
two rice patties, while in Norway the

McLakes is a grilled salmon sandwich.
Started in 1955, the company opened its
first restaurants outside the United States in

1967.
Today in some countries, such as Brazil and
Egypt, McDonalds offers delivery.

Problems (13)
1. What factors may have influenced McDonalds to
open restaurants outside the United States?
2. How have the social and cultural factors affected
the companys international business activities?
3. What risks might a company encounter when
doing business in other countries?
4. Go to McDonalds website or other websites to
prepare a map showing the location of the
companys international business operations.
1. Obtain complete information
2. Be creative in your map making
3. Include photos and other graphics

1.2 Checkpoint
(15/18/19)
1. How do imports differ from exports

2. What are the four components of the international
business environment?
3. Other than business skills, what knowledge is
important for working in international business?
4. How does international business affect you as a
consumer and worker?

Terms (21)
1. Imports
2. Exports
3. Trade barriers
4. Culture

Concepts (21)
1. What are the four parts of the international
business environment?
2. What cultural factors affect international business
activities?
3. Name four factors that influence a countrys
economic conditions.
4. What skills are important for success in an
international business?
5. How does international business effect you as
a. A consumer
b. A worker
c. A citizen

Problems(21)
A US Company plans to sell farm equipment in
a country in Asia. This country traditionally
has
not conducted business with companies
outside
its own geographic region. Answer the
Following questions or the US company.

Problems(21)
1. What geographic factors might influence
the companys international business
activities?
2. How might economic conditions affect
business decisions?
3. What social and cultural influences could
affect this business?
4. How could politics and laws affect the
companys exporting activity?

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1.

Global Business Chapter 1 1

Global Business Chapter 1 2

Global Business Chapter 1 3

In the early days of the United States, most

improved. People began to depend on

Global Business Chapter 1 4

That dependence grew as more people

makes a wide variety of goods and services

Global Business Chapter 1 5

In the same way that people within a country are

distribution facilitiessuch as the United States,

countries. For example, most of the coffee used in

Global Business Chapter 1 6

Most business activities take place inside a

services within a country is called

own country, you are participating in

local companies only sell in your

On the other hand, if you buy a shirt made in

Global Business Chapter 1 8

Global Business Chapter 1 9

when products are used by students but

Global Business Chapter 1 12

steel from other nations to use in factories.

were manufactured in Japan, Mexico,

Global Business Chapter 1 13

conditions in an African country might

food from other countries.

Global Business Chapter 1 14

sales and profits with foreign trade.

Global Business Chapter 1 15

create new investment opportunities.

companies that are either just getting

Global Business Chapter 1 16

Global Business Chapter 1 19

Vikings traveled as far as Iceland, Greenland, and

connected the Iberian Peninsula, North Africa, the

Global Business Chapter 1 20

France, Spain, and Portugal were shipping

explorers such as Columbus and Magellan

Global Business Chapter 1 21

businesses with low-cost raw materials and

Global Business Chapter 1 22

silver, gems, salt, coffee and tea are

from the United Kingdom in 1776.

Mozambique gained independence from

Global Business Chapter 1 24

the steam engine, and the telephone.

communication, distribution, and

Global Business Chapter 1 25

Global Business Chapter 1 26

countries has created new global business

Global Business Chapter 1 27

The need for additional raw

Global Business Chapter 1 29

Global Business Chapter 1 30

1. Describe basic international business activities

Global Business Chapter 1 31

What happens when a country has too

or services, businesses look for trade

Global Business Chapter 1 32

These foreign trades usually are not an

Korea can sell radios to an electronics Store