Chapter 1
The Rapid Change of International Business
Learning Objectives
L.O. 1 understand the various names given to firms that have substantial operations in more
than one country
L.O. 2 understand the five kinds of drivers, all based on change, that are leading firms to
internationalize their operations
L.O. 3 appreciate the dramatic internationalization of markets
L.O. 4 comprehend why international business differs from domestic business
L.O. 5 describe the three environments—domestic, foreign, and international—in which an
international company operates
Global Competition is continuing to increase at a rapid pace. The huge increase in imports
due to the reduction in trade barriers coupled with increased foreign investment mean that
all firms face competitors from any place in the world. This increasing internationalization
of business requires managers to have a global business perspective gained through
experience and education.
International business differs from its domestic counterpart in that it involves three
environments–domestic, foreign, and international–instead of one. Although the kinds of
forces are the same in the domestic and foreign environments, their values often differ and
changes in the foreign force values are at times more difficult to assess.
International businesspeople must know enough about the differences in the environmental
forces of the markets in which they operate to be able to decide if a concept or a technique
(1) can be transferred to another country as is, (2) must be adapted to local conditions or
(3) cannot be used elsewhere.
Suggestions and Comments
Students find the definitions in this chapter helpful. That they recognize the differences in
the terminology helps them to understand the complexity of international business.
Students tend to be only marginally aware of their consumer-level dependence on
international business. To arouse their early interest in the course, we use one or more of
the student involvement exercises listed in the following section.
,Student Involvement Exercises
1. Hold up a common object such as a lead pencil. Where do the materials come from?
Rubber comes from the Far East, the copper and tin from which the brass ferrule
is made may come from Chile and Malaysia respectively, etc.
2. Ask if anyone in class is involved in international business. The response is usually
negative, except for foreign students. This can open up a discussion to show our
dependence on imports (Computers, VCRs, TVs, cars, etc.), outsourcing, direct
foreign investment. For example, foreign ownership of grocery chains in the U.S.
has grown significantly in the last five years (Trader Joe’s, Stop and Shop).
3. The Are You Really Buying American? feature often works well for a discussion
starter. What does it mean for a company to claim that its product is made in
America?
You can start the class off on an international business project here or wait until the class
begins to study the section on forces. If you start now, here is an example of a handout
(condensed):
International Business Project
Objective: To create a business opportunity for an American consumer product in a foreign
country.
Project Outline
1. Size of market (demographics, socioeconomic state, urban/rural).
2. Sociocultural acceptance of product–adaptation necessary?
3. Legal/bureaucratic environment (imports, local manufacture, taxation).
4. Competition in market.
5. Economic and political climate for foreign business.
6. Methods for marketing and distribution.
7. Managerial and labor climate.
8. Financial viability (profit margin, currency translation, profit repatriation).
Project Report
The report will essentially cover all topics in the outline plus an executive summary,
introduction (country and product) and recommendations. The report will be tword-
processed, about 20 pages (double-spaced) and will have an appendix that contains
exhibits. Examples are maps of the country, tables and charts.
Project Presentation
,The project will be presented to the class in the week prior to the exam week. Fifteen
minutes will be allotted to each team. Each member will participate in the presentation.
Develop appropriate visual supports.
, Guest Lecturers
Any of the following business people could reinforce the rapidly changing aspects of
international business by discussing the pace of change in their own industry:
1. Personnel managers who staff the overseas subsidiaries and international
divisions for a local firm to talk about job possibilities.
2. Retired executives who have worked as expatriates.
3. Bankers from the International Division of a local bank. Often, they can give
you leads to firms in your area that are engaged in international business.
4. People from export or import companies; executives from a local international
or multinational firm.
Lecture Outline
I. Opening Section
The chapter begins with “Why You Need International Business Experience and How to
Get It.” Executives of two Fortune 500 companies are quoted as saying that international
experience is necessary for employees to become executives in their firms. The section
contains some suggestions on how to build towards an international assignment. This is a
good time to encourage students to begin to consider themselves as a potential
international businessperson
II. International Business Terminology
A. Multinational, Global, International, Transnational
1. Some people use the terms world and global interchangeably with multinational
to describe a business with international operations.
2. Others define a global firm as one that attempts to standardize operations in all
functional areas, but that responds to national market differences when necessary.
They define a multinational as a kind of holding company with a number of
overseas operations, each of which is left to adapt its products and marketing
strategy according to the local markets.
3. For decades, the United Nations and governments of most developing nations
have been using transnational instead of multinational to describe a firm doing
business in more than one country.
4. More recently, some writers are using the term transnational for a firm that is
both (1) striving to standardize its functions worldwide and (2) being highly
responsive to local environments. Since this is similar to the common definition
of global, the writers have redefined a global firm as one that responds weakly to
local environments.
The Rapid Change of International Business
Learning Objectives
L.O. 1 understand the various names given to firms that have substantial operations in more
than one country
L.O. 2 understand the five kinds of drivers, all based on change, that are leading firms to
internationalize their operations
L.O. 3 appreciate the dramatic internationalization of markets
L.O. 4 comprehend why international business differs from domestic business
L.O. 5 describe the three environments—domestic, foreign, and international—in which an
international company operates
Global Competition is continuing to increase at a rapid pace. The huge increase in imports
due to the reduction in trade barriers coupled with increased foreign investment mean that
all firms face competitors from any place in the world. This increasing internationalization
of business requires managers to have a global business perspective gained through
experience and education.
International business differs from its domestic counterpart in that it involves three
environments–domestic, foreign, and international–instead of one. Although the kinds of
forces are the same in the domestic and foreign environments, their values often differ and
changes in the foreign force values are at times more difficult to assess.
International businesspeople must know enough about the differences in the environmental
forces of the markets in which they operate to be able to decide if a concept or a technique
(1) can be transferred to another country as is, (2) must be adapted to local conditions or
(3) cannot be used elsewhere.
Suggestions and Comments
Students find the definitions in this chapter helpful. That they recognize the differences in
the terminology helps them to understand the complexity of international business.
Students tend to be only marginally aware of their consumer-level dependence on
international business. To arouse their early interest in the course, we use one or more of
the student involvement exercises listed in the following section.
,Student Involvement Exercises
1. Hold up a common object such as a lead pencil. Where do the materials come from?
Rubber comes from the Far East, the copper and tin from which the brass ferrule
is made may come from Chile and Malaysia respectively, etc.
2. Ask if anyone in class is involved in international business. The response is usually
negative, except for foreign students. This can open up a discussion to show our
dependence on imports (Computers, VCRs, TVs, cars, etc.), outsourcing, direct
foreign investment. For example, foreign ownership of grocery chains in the U.S.
has grown significantly in the last five years (Trader Joe’s, Stop and Shop).
3. The Are You Really Buying American? feature often works well for a discussion
starter. What does it mean for a company to claim that its product is made in
America?
You can start the class off on an international business project here or wait until the class
begins to study the section on forces. If you start now, here is an example of a handout
(condensed):
International Business Project
Objective: To create a business opportunity for an American consumer product in a foreign
country.
Project Outline
1. Size of market (demographics, socioeconomic state, urban/rural).
2. Sociocultural acceptance of product–adaptation necessary?
3. Legal/bureaucratic environment (imports, local manufacture, taxation).
4. Competition in market.
5. Economic and political climate for foreign business.
6. Methods for marketing and distribution.
7. Managerial and labor climate.
8. Financial viability (profit margin, currency translation, profit repatriation).
Project Report
The report will essentially cover all topics in the outline plus an executive summary,
introduction (country and product) and recommendations. The report will be tword-
processed, about 20 pages (double-spaced) and will have an appendix that contains
exhibits. Examples are maps of the country, tables and charts.
Project Presentation
,The project will be presented to the class in the week prior to the exam week. Fifteen
minutes will be allotted to each team. Each member will participate in the presentation.
Develop appropriate visual supports.
, Guest Lecturers
Any of the following business people could reinforce the rapidly changing aspects of
international business by discussing the pace of change in their own industry:
1. Personnel managers who staff the overseas subsidiaries and international
divisions for a local firm to talk about job possibilities.
2. Retired executives who have worked as expatriates.
3. Bankers from the International Division of a local bank. Often, they can give
you leads to firms in your area that are engaged in international business.
4. People from export or import companies; executives from a local international
or multinational firm.
Lecture Outline
I. Opening Section
The chapter begins with “Why You Need International Business Experience and How to
Get It.” Executives of two Fortune 500 companies are quoted as saying that international
experience is necessary for employees to become executives in their firms. The section
contains some suggestions on how to build towards an international assignment. This is a
good time to encourage students to begin to consider themselves as a potential
international businessperson
II. International Business Terminology
A. Multinational, Global, International, Transnational
1. Some people use the terms world and global interchangeably with multinational
to describe a business with international operations.
2. Others define a global firm as one that attempts to standardize operations in all
functional areas, but that responds to national market differences when necessary.
They define a multinational as a kind of holding company with a number of
overseas operations, each of which is left to adapt its products and marketing
strategy according to the local markets.
3. For decades, the United Nations and governments of most developing nations
have been using transnational instead of multinational to describe a firm doing
business in more than one country.
4. More recently, some writers are using the term transnational for a firm that is
both (1) striving to standardize its functions worldwide and (2) being highly
responsive to local environments. Since this is similar to the common definition
of global, the writers have redefined a global firm as one that responds weakly to
local environments.
