Chapter 1: An Overview of International Business

International Business

Business that engages in cross-border commercial transactions with individuals, private firms, and/or public-sector organizations; also refers to cross-border transactions.

Multinational Corporation (MNC)

A firm that owns and controls value adding activities in two or more countries.

A. save money in the production of​ labor-intensive goods

A good argument for moving operations into one of the emerging market countries such as China is that the move will​ ________. A. save money in the production of​ labor-intensive goods B. expose the company to other cultures C. cut back on the number of employees needed to function D. give employees a taste of other​ countries, nationalities,​ languages, and values E. expand operations to other parts of the world

B. the​ manager's lack of knowledge about your​ country's culture and values

A manager from an overseas office with whom you have been dealing with comes across as very arrogant and abrupt. One of the reasons for this behavior might be because of​ ________. A. the​ manager's lack of competence and interest in your company B. the​ manager's lack of knowledge about your​ country's culture and values C. the​ manager's lack of technological skills D. the​ manager's inability to work with others E. the​ manager's inability to see things from another perspective

Importing

Buying of products made in other countries for use or resale in one's own country.

BRIC Countries

Brazil, Russia, India, and China.

International Licensing

A transaction in which a firm in one country (the licensor) sells the right to use its intellectual property to a firm located in a second country (the licensee) for a fee.

Emerging Markets

Countries whose recent growth or prospects for future growth exceed that of traditional markets

Born Global

A company that internationalizes at or near its founding is called a __________ firm.

Multinational Enterprise (MNE)

A business that may or may not be incorporated and has extensive involvement in international business.

500.3

According to the table, what was the revenue (in billions of U.S. dollars) of the world's largest corporation in 2017? (Enter numbers only, e.g. 108.6)

International Management Contract

An arrangement in which a firm from one country agrees to operate facilities or provide other management services in a second country for a fee.

International Franchising

An arrangement in which a firm from one country authorizes a firm in a second country to use its operating systems, brand names, and trademarks in return for a royalty payment.

Multinational Organization (MNO)

Any organization--business or not-for-profit--with extensive international involvement.

Big Ten Countries

Argentina, Brazil, China, India, Indonesia, Mexico, Poland, South Africa, South Korea, and Turkey.

D. 2017

As the graph demonstrates, the importance of FDI in the world's economy has risen significantly over time. By __________, the stock of FDI was 39 percent of the world's GDP. A. 1980 B. 2000 D. 2009 D. 2017

Risen

As the graph indicates, the ratio of international trade to economic activity has __________ (fallen/risen) dramatically.

D. Thailand

As the graph shows, exporting accounts for more than two-thirds of the gross domestic product (GDP) of which country? A. Brazil B. India C. China D. Thailand

B. CAN, FRA, DEU, MEX, and GBR

As the graph shows, exporting accounts for over 25 percent of the GDPs of which countries? A. THA, CAN, CHN, JPN, and USA B. CAN, FRA, DEU, MEX, and GBR C. DEU, CAN, FRA, GBR, and USA D. CAN, FRA, IDN, IND, and JPN

B. A multinational organization

A​ not-for-profit organization that has offices and services in 36 countries can be called​ what? A. An international business B. A multinational organization C. A multinational enterprise D. A multinational franchise E. A multinational corporation

International Investments

Capital supplied by residents of one country to residents of another.

Athens

During the fifth century b.c.e., international commerce was dominated by __________ and its allies. The Peloponnesian War (431-404 b.c.e.) brought an end to it's power and prosperity. Today's visitors to the Acropolis are reminded of the poignant words of Edgar Allan Poe: On desperate seas long wont to roam ... /Thy Naiad airs have brought me home /To the glory that was Greece, /And the grandeur that was Rome.

Learning Objective 1.3 (Identify and describe the basic forms of international business activities.)

International business activity can take various forms. Exporting involves selling products made in one's own country for use or resale in another country. Importing involves buying products made in other countries for use or resale in one's own country. FDIs are investments made for the purpose of controlling property, assets, or companies located in foreign countries. Other common forms of international business activity include licensing, franchising, and management contracts. An international business is one that engages in commercial transactions with individuals, private firms, or public sector organizations that cross national boundaries. Firms with extensive international involvement are called multinational corporations, or MNCs.

Learning Objective 1.1 (Discuss the meaning of international business.)

International business encompasses any business transaction that involves parties from more than one country. These transactions can take various forms and can involve individual companies, groups of companies, or government agencies. International business can differ from domestic business because of differences in currencies, legal systems, cultures, and resource availability.

Learning Objective 1.4 (Discuss the causes of globalization.)

International business has grown dramatically in recent years because of strategic imperatives and environmental changes. Strategic imperatives include the need to leverage core competencies, acquire resources, seek new markets, and match the actions of rivals. Although strategic imperatives indicate why firms wish to internationalize their operations, significant changes in the political and technological environments have no doubt facilitated the explosive growth in international business activity that has occurred since World War II. The growth of the Internet and other information technologies is likely to redefine global competition and ways of doing international business once again.

Foreign Direct Investments (FDI)

Investments made for the purpose of actively controlling property, assets, or companies located in host countries.

Foreign Portfolio Investments (FPI)

Investments made in a host country by foreign investors not for purposes of control.

B. try to keep an international outlook and entrepreneurial orientation

Managers in born global companies typically do which of the following? A. strive to develop a strong local presence before expanding internationally B. try to keep an international outlook and entrepreneurial orientation C. try to acquire other companies through mergers and acquisitions D. view foreign markets as adjuncts to the domestic market

E. countries whose growth exceeds that of established markets

Many companies are finding that their growth is directly attributable to emerging markets. Emerging markets are defined as​ ________. A. countries whose populations are interested in consumer goods B. countries whose citizens are rapidly joining the​ middle-class population of the world C. countries whose population exceeds that of the United States D. countries whose recent growth exceeds that of​ first-world countries E. countries whose growth exceeds that of established markets

D. foreign portfolio investment

Medtronics purchased a controlling interest in competitors and distributors to help solidify its lead in medical electronics. This strategy can be classified as __________. A. international franchising B. international management contract C. foreign direct investment D. foreign portfolio investment

China and India

Regardless of the definition, it is clear that international businesses that ignore the emerging markets do so at their own risk. __________ and __________, together account for more that one-third of the world's population. Their economies are growing significantly faster than that of the world as a whole, as the table indicates.

Exporting

Selling of products made in one's own country for use or resale in other countries.

Strategic Imperatives

Several basic motives have compelled firms to become more global in both their orientation and actions. These __________ include leveraging a firm's core competencies, acquiring resources at low cost, expanding into new markets, and competing with industry rivals.

Learning Objective 1.2 (Explain the importance of understanding international business.)

Studying international business is important for several reasons. First, any organization you work for, even if small, is likely to be affected by the global economy. Second, someday you may work for a foreign-owned firm. Further, you need to keep pace with other managers who are learning to function in international settings. Finally, you need to be culturally literate in today's world.

Just-In-Time (JIT) Systems

Systems in which suppliers are expected to deliver necessary inputs just as they are needed.

C. by creating an advantage for larger multinationals over SMEs

The Internet has reshaped global export activity in all of the following ways EXCEPT: A. by opening new markets B. by supporting new strategies C. by creating an advantage for larger multinationals over SMEs D. by providing new tools

CAGE

The __________ model developed by Pankaj Ghemawat, of IESE Business School in Barcelona, is a useful framework for understanding the operating challenges facing international businesses because of these national differences: - Cultural distance - Administrative distance - Geographic distance - Economic distance

B. international businesspeople must be knowledgeable about​ cultural, legal,​ political, and social differences among people around the world

The complexity of skills and knowledge needed to succeed in international business is far greater than the skills and knowledge needed for domestic business because​ ________. A. international businesspeople must be able to converse in several different languages B. international businesspeople must be knowledgeable about​ cultural, legal,​ political, and social differences among people around the world C. the global economy profoundly affects the lives of all people D. of the emergence of​ e-commerce and because the reduction of trade restrictions affects all the countries of the world E. international market managers must travel extensively

Home Country

The country in which the business has its headquarters.

Host Country

The country other than a firm's home country in which it operates.

Internet and E-Commerce

The growth of the __________ and __________ allows even the smallest business to compete in international markets, as well as to be vulnerable to foreign competition.

Globalization

The increasing integration of the world economy and the world's countries.

A. Thousands

Trade between individuals, tribes, and then nations has occurred for __________ of years. Throughout the centuries, the desire to control trade and trade routes has often been the cause of conflict between countries. A. Thousands B. Millions C. Hundreds D. Tens

Service Exports and Imports

Trade involving intangible products.

Merchandise Exports and Imports

Trade involving tangible products.

E. Foreign direct investments and foreign portfolio investments

What are the two types of international​ investments? A. Foreign portfolio investments and capital investments B. Foreign direct investments and foreign policy investments C. Capital investments and franchising investments D. Licensing and franchising investments E. Foreign direct investments and foreign portfolio investments

A. The integration of markets and technologies to allow expansion​ faster, farther, and cheaper than ever before

What is​ globalization? A. The integration of markets and technologies to allow expansion​ faster, farther, and cheaper than ever before B. International trade with four or more partners C. A shift in the political and technological environment D. An increase in core competencies E. The increase in foreign direct investment

C. size

Which of the following factors is LEAST important in determining a company's potential success in exporting to a global market? A. executive leadership B. core competencies C. size D. marketing techniques

D. A​ well-developed website with multiple language options.

Which of the following is MOST likely to improve​ e-commerce in the world trade​ arena? A. A​ well-developed website that is designed to introduce team players in your company. B. A​ well-developed website allowing small companies to better compete with larger rivals. C. A​ well-developed website showing how international firms can cut costs. D. A​ well-developed website with multiple language options. E. A​ well-developed website allowing company products to be shown without the cost of delivering samples or personal interactions.

D. Flexibility

Which of the following is NOT typical of born global companies? A. Resource rich B. Less bureaucracy C. Entrepreneurial D. Flexibility

Environmental Causes of Globalization

__________ include changes in the political environment and the technological environment. Firms would not have been able to expand their international activities to the extent we have observed during the post-World War II period without significant changes in those two key areas.

Domestic and International

___________ (Domestic/International) business involves transactions occurring within the boundaries of a single country, whereas __________ (domestic/international) business transactions cross national boundaries.