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CHAPTER 1 - An Overview of International Business.

International business involves transactions between parties from different countries and differs from domestic business primarily due to currency, legal systems, cultural differences, and resource availability. Key activities include exporting, importing, international investments, licensing, franchising, and management contracts. The rapid expansion of international business is driven by globalization, strategic imperatives, and the need to acquire resources and seek new markets.

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13 views6 pages

CHAPTER 1 - An Overview of International Business.

International business involves transactions between parties from different countries and differs from domestic business primarily due to currency, legal systems, cultural differences, and resource availability. Key activities include exporting, importing, international investments, licensing, franchising, and management contracts. The rapid expansion of international business is driven by globalization, strategic imperatives, and the need to acquire resources and seek new markets.

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Erccage24
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THE WORLD’S

MARKETPLACES

ABYGAILLE TAYLAN
EDELYN YTAC
SHEINA TUBO
CORABIL TINDOY
CINE UBAY
KATHERINE VILLAMIL
An Overview of
International Business

How does international business differ


from domestic business?
What Is International Business?
International business differs from domestic business
primarily because it involves transactions across
national borders, while domestic business stays
International business involves within one country.

transactions between parties from Key differences include:

different countries. These transactions 1. Currency: Countries may use different currencies,
requiring currency exchange.
can include activities such as
2. Legal Systems: Countries have different laws, so
purchasing materials in one country businesses must adjust to comply with local
regulations. Sometimes, these laws may conflict,
and sending them to another for complicating international operations.
processing or assembly, exporting
3. Culture: Cultural differences may require
finished goods for sale in other businesses to adapt their behavior to align with local
customs and expectations.
countries, establishing manufacturing
4. Resources: The availability of resources varies by
plants abroad to take advantage of country. For example, one country might have
abundant natural resources but lack skilled labor,
lower labor costs, or obtaining loans while another might have a skilled workforce but few
natural resources. This influences how and what
from banks in one country to fund products are produced in different countries.
International Business Activities
Exporting and Importing
Exporting involves selling products made in one country for
use or resale in another, while importing is buying products
from other countries for use or resale at home. These
activities are divided into two categories: trade in goods
(tangible items like clothing and computers) and trade in
services (intangible products like banking and travel). In the
U.S., trade in goods is often called merchandise trade, while
in the U.K., it's known as visible trade.
International Investments
The second main type of international business activity is
international investment, where capital from one country
is provided to residents of another.
This is split into two types: foreign direct investments
(FDI), which involve actively controlling assets or
companies in another country, and foreign portfolio
investments (FPI), which involve buying foreign financial
assets, like stocks and bonds, without seeking control.
Other Forms of International Business
International business can take various forms, including licensing,
Activity
franchising, and management contracts.

Licensing: A firm in one country allows a firm in another to use its


intellectual property (like patents or trademarks) in exchange for
royalties.
Franchising: A type of licensing where a firm (the franchisor)
permits a firm in another country (the franchisee) to use its brand
and operational systems for a fee (e.g., McDonald’s).
Management contracts: A firm in one country manages facilities or
provides services for a firm in another country for a fee.

Any business engaging in these activities is considered an


international business. A multinational corporation (MNC) is a
company that owns or controls operations in multiple countries
through foreign direct investments (FDI). These companies often
source resources, produce goods, and sell products in various
countries. The term **multinational enterprise (MNE) can refer to
businesses that aren't corporations, while **multinational
organization (MNO) includes both for-profit and not-for-profit
entities like the International Red Cross.
THE CONTEMPORARY CAUSES OF
GLOBALIZATION
International business has expanded so quickly in the past
decade that many experts consider this the era of
globalization. Globalization refers to the increasing
integration of markets, nations, and technologies, allowing
for faster, broader, and cheaper global connections. This
growth is driven by two main factors: strategic imperatives
that motivate globalization and environmental changes that
make it easier.
Strategic imperatives
Driving global expansion include leveraging core competencies,
acquiring resources cost-effectively, seeking new markets, and
competing with rivals.
To Leverage Core Competencies
A key reason for globalization is to leverage a firm's core
competencies—its unique strengths or advantages. By applying
these competencies in new markets, a firm can boost its revenues
and profits.
To Acquire Resources and Supplies
Another reason for going international is to acquire resources like
materials, labor, capital, or technology that may be scarce or
unavailable locally.
To Seek New Markets To Better Compete with
Seeking new markets is also a Rivals
common motive for Businesses may enter foreign
international expansion. When a markets to better compete with
firm’s domestic market matures, rivals. For instance, as Coca-
it becomes increasingly difficult Cola expands globally, Pepsi
to Generate high revenue and must follow to stay
profit growth. competitive. If Pepsi lets Coca-
Cola dominate key markets,
Coca-Cola could use its profits
to challenge Pepsi in other
markets.

REFERENCES:
Studocu. (n.d.). International Business - Chapter 1 An Overview of international business
What is international - Studocu. https://www.studocu.com/ph/document/lebanese-
international-university/marketing-management/international-business/12752638?
shared=u&fbclid=IwZXh0bgNhZW0CMTEAAR2sAup3360qymr_id3G_lCGdSokyQwIwCBu
F6DjLDm88nz7iaTJ1fhQ-M_aem_kAw6C1NfOav2VIA7jOXwhQ

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