International Business Chapter 1

FDI facts

1. FDI is especially common in large companies with substantial international operations 2.Companies usually undertake FDI for he long term and retain partial or complete ownership of the assets they acquire 3. FDI inflows were interrupted after the 911 terrorist attacks

Three factors that have explained why trade growth has long outpaced GDP growth

1. The rise of emerging markets during the past three decades 2. Advanced/ developed economies (such as the US) are now sourcing many of the products they consume from low manufacturing locations (such as China, India, and Mexico). 3. Advances in information and transportation tech., decline of trade barriers, and liberalization of markets

The six elements/ dimensions of int'l business

Globalization of markets, International trade, International investment, International business risks, Participants, and Foreign market entry strategies

The most active international service industries

International banking and financial services. In developing countries, banks and other financial financial institutions have fostered economic activity by increasing the availability of local investment capital, which stimulates the development of financial markets and encourages locals to save money. International banking is flourishing in the Middle East.

Two essential types of cross-border investment are international portfolio investment and foreign direct investment.

International portfolio investment refers to the passive ownership of foreign securities such as stocks and bonds to gain financial returns. Foreign direct investment is an internationalization strategy in which the firm establishes a physical presence abroad through acquisition of productive assets such as land, plant, equipment, capital, and technology.

Service trade trade

International trade in services accounts for about 25% of all international trade and is growing rapidly. Ireland has emerged as the leader in world services trade as a percentage of GDP.

Globalization of markets

Ongoing economic integration and growing interdependency of countries worldwide. (Amazon, FB, Instagram, etc...)

China is the world's largest exporter in total dollar terms

Trade accounts for about 45% of China's GDP as opposed to 23% for the US.

International trade

describes the exchange of products and services across international borders.

International Business

refers to firms' performance of trade and investment activities across national borders. (aka. cross-border business) Although international business is mainly performed by individual firms, governments and international agencies also conduct international business activities.

Globalization

refers to intense economic, political, and personal interconnectedness among countries, companies, and consumers. (Facebook exemplifies the globalization of business and converging lifestyles worldwide. 1.3 billion people have Facebook accounts and 70% of users live outside of the US.)

Internationalization

refers to the tendency of companies to deepen their international business activities systematically. It has led to widespread diffusion of products, technology, and knowledge worldwide.

International Investment

refers to the transfer of assets to another country or the acquisition of assets in that country. Economists refer to such assets as factors of production (they include capital, technology, managerial talent, and manufacturing infrastructure)