International
Business A
Managerial
Perspective, 9e
Ricky Griffin,
Michael Pustay
(Solutions Manual All Chapter)
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CHAPTER 1
An Overview of International Business
Chapter Objectives
After studying this chapter, students should be able to:
1. Discuss the meaning of international business.
2. Explain the importance of understanding international business.
3. Identify and describe the basic forms of international business
activities.
4. Discuss the causes of globalization.
LECTURE OUTLINE
OPENING CASE: The Business of the Olympics
The opening case explores the relationship between international business and the
Olympic Games.
Key Points
• The Olympic Games have come to reflect international business at its most intense.
• The Olympics are governed by the International Olympic Committee (IOC), which
decides where the games will be held, which sports will be represented, and
oversees the selection of judges and referees.
• Each country that wants to participate in the Olympics must establish its own
committee, which then reports to the IOC.
• Host cities are important to the Olympics because they are responsible for providing
facilities, a volunteer workforce, and related organizational support.
• Cities compete aggressively as they bid to be hosts. For cities, the Olympics mean a
boost to tourism that continues long after the games are over, a chance to be in the
international spotlight, and a catalyst for infrastructure improvements.
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• Running the Olympics requires large revenues, and host cities, along with the IOC,
are constantly seeking additional sources of funds, such as television coverage and
corporate sponsors.
Additional Case Application
An exercise that can help students make the connection between the Olympics and
international business is to ask them to imagine the Olympics without the involvement of
corporations. Students can be assigned to play the role of the different players involved
in the games. For example, one student can play the role of an athlete, another the role
of the mayor of the host city/cities, a third the head of the IOC, a fourth the head of the
national committee, a fifth the role of a spectator, and so forth.
CHAPTER SUMMARY
Chapter One introduces the topic of international business by initially asking “what is
international business” and then moving on to ask “why is it important to study
international business?” The chapter then provides an introductory definition and
explanation of some of the basic international business terminology, such as importing,
exporting, and multinational corporation.
The chapter moves on to explore the evolution of international business going back to
2000 B.C. examining major developments that have resulted in the growth and
maturation of international business as we know it today. The chapter concludes with an
overview of the text.
WHAT IS INTERNATIONAL BUSINESS?
• International business involves any business transaction between parties from
more than one country. It includes such activities as buying and selling raw
materials, inputs or finished products across borders, operating plants in other
countries to take advantage of local resources, and borrowing money in one country
to finance operations in a second country.
• International business is different from domestic business in that it necessarily
involves transactions that cross national borders while domestic business does not.
Thus, at least one party will have to adjust to a different legal, economic, and cultural
system; convert its currency into the other party’s currency; and make changes in
how products are produced or the types of products that are produced.
Teaching Note:
Instructors may wish to pause for a moment at this point and ask
students why a particular foreign company chose to invest in the
United States. It is helpful to choose a company that is in the local area; however,
some well-known examples that should also generate good discussion include
Honda, Sony, and Nissan. While students probably won’t pick up on the finer points
of why the investments were made, the question should at least get them to think
about international business, and the question can be raised again later in the
course.
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BRINGING THE WORLD INTO FOCUS
Borders Do Matter
This section points out that, despite previous expert predictions of a
boundaryless world, boundaries and borders do matter. That reality impacts all
aspects of international business, including, legal systems, political systems,
social structures, cultural values, taxes, labor, land and other resources. The
CAGE System developed by Pankaj Ghemawat provides a useful framework for
understanding the operating challenges facing international business because of
these national differences: 1) Cultural distance, 2) Administrative distance,
3) Geographic distance, and 4) Economic distance.
WHY STUDY INTERNATIONAL BUSINESS?
Teaching Note:
It is interesting to ask the question “why study international
business?” before actually discussing the material in the text.
Instructors will probably find that, with a little prompting, students will eventually
come up with all or most of the reasons listed below.
• Students need to study international business for a number of different reasons.
First, students will almost certainly work for a company that is either foreign owned,
domestically owned but has some foreign operations, or domestically owned but is
affected by the global economy. Thus, if students are to be successful and
productive in their careers, it is important that they understand at least the basics
of why companies conduct business across borders. Secondly, since even small
businesses are becoming more active in the international business environment
through activities such as buying and supplying components, students who are
planning to start their own businesses should also be cognizant of international
business.
• Cultural literacy is another reason for studying international business. Because
business today often means international business, it is critical that students
develop the type of cultural literacy that will enable them to be conversant with the
global economy and international marketplaces. Furthermore, students who fail to
develop such skills will find themselves losing ground to their future “competitors”
(students, particularly those from Europe and Japan, who have learned multiple
languages, have had job experiences in other countries and traveled widely).
• Finally, since not all business techniques and tools are developed in the United
States, students need to study international business so that they are aware of
developments taking place in other parts of the globe, such as the use of just-in-
time (JIT) systems.
INTERNATIONAL BUSINESS ACTIVITIES
• International business can take various forms. Exporting involves selling products
made in one’s own country for use or resale in other countries. Importing involves
buying products made in other countries for use or resale in one’s own country.
Many companies begin their international operations with either importing or
exporting since the risk involved is minimal.
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