1
SolutionVManualVInternationalVBusinessVAVManagerialVPe
rspective
AnVOverviewVofVInternationalVBusiness
1-1 WhatVisVinternationalVbusiness?V HowVdoesVitVdifferVfromVdomesticVbusiness?
InternationalVbusinessVinvolvesVanyVbusinessVtransactionVbetweenVpartiesVfromVmoreVthan
VoneVcountry.V ItVdiffersVfromVdomesticVbusinessVinVthatVinternationalVbusinessVtransactio
nsVcrossVnationalVbordersVwhileVdomesticVtransactionsVdoVnot.V MoreVspecifically,Vinternati
onalVbusinessVinvolvesVforeignVcurrencyVtransactionsVforVatVleastVoneVparty,VitVmayVrequire
VaVcompanyVtoVadjustVtoVaVforeignVlegalVsystemVand/orVculture,VandVtheVwayVproductsVa
reVproducedVorVtheVtypesVofVproductsVthatVareVproducedVmayVvaryVaccordingVtoVtheVava
ilabilityVofVresourcesVinVdifferentVcountries.V(LOV1.1,VAACSB:VCommunicationVSkills,VLear
ningVOutcomes:VDefineVtheVfundamentalVconceptsVofVinternationalVbusiness)
1-2 WhyVisVitVimportantVforVyouVtoVstudyVinternationalVbusiness?
ThereVareVatVleastVfiveVreasonsVwhyVitVisVimportantVtoVstudyVinternationalVbusiness.V Firs
t,VstudentsVwillVprobablyVworkVforVaVcompanyVwithVinternationalVoperationsVorVoneVthatVis
VaffectedVbyVtheVglobalVeconomy.V Second,VstudentsVmayVactuallyVworkVforVaVfirmVthatVi
sVownedVbyVaVcorporationVbasedVinVanotherVcountry.VThird,VitVisVimportantVtoVkeepVpace
VwithVfutureV“competitors”V(otherVjobVseekers)VwhoVareVwellVversedVinVinternationalVbusin
ess.V Fourth,VitVisVimportantVtoVstayVabreastVofVtheVlatestVbusinessVtechniquesVandVtools,
VwhichVmayVactuallyVbeVdevelopedVoutsideVofVtheVUnitedVStates.V Finally,VitVisVimportant
VtoVavoidVculturalVilliteracy,VaVlabelVgivenVtoVthoseVwhoVareVnotVconversantVwithVtheVglo
balVeconomyVandVinternationalVmarketplaces.V (LOV1.2,VAACSB:VCommunicationVSkills,VL
earningVOutcomes:VDefineVtheVfundamentalVconceptsVofVinternationalVbusiness)
1-3 WhatVareVtheVbasicVformsVofVinternationalVbusinessVactivity?
TheVbasicVformsVofVinternationalVbusinessVactivityVareVimportingVandVexporting,Vinternati
onalVinvestments,Vlicensing,Vfranchising,VandVmanagementVcontracts.V ExportingVinvolves
Vselling
CopyrightV©V2015VPearsonVEducation,VI
nc.
, 2
productsVmadeVinVone’sVownVcountryVforVuseVorVresaleVinVotherVcountries,VwhileVimporti
ngVinvolvesVbuyingVproductsVmadeVinVotherVcountriesVforVuseVorVresaleVinVone’sVownVco
untry.VInternationalVinvestmentsVincludeVforeignVdirectVinvestmentVandVportfolioVinvestment
s.V ForeignVdirectVinvestmentsVareVinvestmentsVmadeVforVtheVpurposeVofVactivelyVcontroll
ingVproperty,Vassets,VorVcompaniesVlocatedVinVforeignVhostVcountries,VwhileVportfolioVinve
stmentVinvolvesVtheVpurchaseVofVforeignVfinancialVassets,VsuchVasVstocks,Vbonds,VandVc
ertificatesVofVdepositVforVpurposesVotherVthanVcontrol.V AVlicensingVagreementVallowsVaVfi
rmVinVoneVcountryVtoVuseVallVorVsomeVofVtheVintellectualVpropertyVofVaVfirmVinVanotherVco
untryVinVexchangeVforVaVroyaltyVpayment.VAVfranchiseVagreementVauthorizesVaVfirmVinVon
eVcountryVtoVutilizeVtheVbrandVnames,Vlogos,VandVoperatingVtechniquesVofVaVfirmVinVaVse
condVcountryVinVexchangeVforVaVroyaltyVpayment.VManagementVcontractsVinvolveVanVagr
eementVinVwhichVaVfirmVinVoneVcountryVoperatesVfacilitiesVorVprovidesVotherVmanagement
VservicesVtoVaVfirmVinVanotherVcountryVforVaVfee.V(LOV1.3,VAACSB:VCommunicationVSkills,
VLearningVOutcomes:VDefineVtheVfundamentalVconceptsVofVinternationalVbusiness)
1-4 HowVdoVmerchandiseVexportsVandVimportsVandVserviceVexportsVandVimportsVdiffer?
MerchandiseVexportsVandVimportsVreferVtoVtradeVinVgoodsVwhileVserviceVexportsVandVim
portsVreferVtoVtradeVinVintangibleVproducts.V TheVformerVisVsometimesVreferredVtoVasVvisibl
eVtradeVwhileVtheVlatterVisVsometimesVreferredVtoVasVinvisibleVtrade.V(LOV1.3,VAACSB:VC
ommunicationVSkills,VLearningVOutcomes:VDefineVtheVfundamentalVconceptsVofVinternatio
nalVbusiness)
1-5 WhatVisVportfolioVinvestment?
PortfolioVinvestmentsVinvolveVpurchasingVforeignVfinancialVassetsVsuchVasVstocks,Vbonds,
VandVcertificatesVofVdepositVforVpurposesVotherVthanVcontrol.V(LOV1.3,VAACSB:VCommunic
ationVSkills,VLearningVOutcomes:VDefineVtheVfundamentalVconceptsVofVinternationalVbusin
ess)
1-6 WhatVareVtheVbasicVreasonsVforVtheVrecentVgrowthVofVinternationalVbusinessVactivity?
AVnumberVofVfactorsVhaveVledVtoVtheVrecentVgrowthVofVinternationalVbusiness.VTheVmore
VimportantVfactorsVincludeVmarketVexpansion,VresourceVacquisition,VcompetitiveVforces,Vte
chnologicalVchange,VandVsocialVchange.V MarketVexpansionVhasVledVtoVgrowthVinVinternati
onalVbusinessVasVfirms,VfacingVsaturatedVdomesticVmarkets,VseekVnewVmarketVopportuniti
esVinVotherVcountries.V InVsomeVcases,VfirmsVwillValsoVexpandVintoVotherVmarketsVasVthe
yVseekVresourcesVsuchVasVmaterials,Vlabor,Vand/orVcapital.V SuchVresourcesVmayVeitherV
beVscarceVorVunavailableVdomestically.V TheV competitiveV forcesV thatV existV inV today’sV m
CopyrightV©V2015VPearsonVEducation,VI
nc.
, 3
arketplaceV alsoV encourageV the
CopyrightV©V2015VPearsonVEducation,VI
nc.
, 4
internationalizationVofVbusiness.VWhenVaVfirm’sVcompetitorsVexpandVintoVnewVmarkets,Vtha
tVfirmVmustValsoVinternationalize.V ChangesVinVtechnology,VparticularlyVinVareasVsuchVasV
communications,Vtransportation,VandVinformationVprocessing,VareVmakingVitVincreasinglyVe
asierVforVfirmsVtoVcarryVoutVinternationalVtransactions,VthusVaddingVtoVtheVgrowthVofVinter
nationalVbusiness.V SocialVchangeVisVmakingVitVpossibleVforVfirmsVtoVsellVtheirVproductsV
moreVeasilyVinVforeignVmarkets.V ConsumersVtodayVareVmuchVmoreVawareVofVtheVproduct
sVandVservicesVbeingVofferedVinVotherVmarkets,VandVareVthereforeVmoreVlikelyVtoVseekVout
Vforeign-
madeVproductsVthanVinVtheVpast.V Finally,VlooserVgovernmentVtradeVandVinvestmentVpolici
esVhaveVmadeVitVeasierVforVinternationalVbusinessesVtoVcapitalizeVonVgrowthVopportunitie
sVinVtheVglobalVmarketplace.V(LOV1.4,VAACSB:VCommunicationVSkills,VLearningVOutcome
s:VDiscussVtrendsVinVandVtheVdebateVoverVglobalization)
QUESTIONSVFORVDISCUSSION
1-7 WhyVdoVsomeVindustriesVbecomeVglobalVwhileVothersVremainVlocalVorVregional?
ThereVareVaVnumberVofVfactorsVthatVplayVaVroleVinVdeterminingVwhichVindustriesVbecomeV
global,VwhichVbecomeVregional,VandVwhichVremainVlocal.V TheVairlineVindustry,VforVexamp
le,VisVconsideredVaVglobalVindustry.V OneVofVtheVmainVreasonsVforVthisVstatusVisVtheVcostV
ofVdevelopingVandVproducingVlargeVaircraft,VcombinedVwithVmarketVsize.V TheVindustryVisV
“forced”VtoVbeVglobalVbecauseVitVmustVsellVaircraftVtoVaVmarketplaceVthatVisVbigVenoughV
toVjustifyVtheVcostsVofVdevelopingVandVbuildingVnewVjets.V NoVsingleVcountryVhasVaVmark
etVbigVenoughVtoVjustifyVsuchVcosts,VthusVcompaniesVmustVseekVcustomersVaroundVtheVgl
obe.V OnVtheVotherVhand,VtheVbakeryVindustryVtendsVtoVbeVregionalVorVlocalVbecauseVitsV
productsVtendVtoVperishVveryVeasily.V WhileVimprovementsVinVtransportationVandVshipping
VhaveVcreatedVaVlargerVmarketplace,VforVtheVmostVpart,VfirmsVinVthisVindustryVcaterVtoVlo
calVcustomers.V FromVthisVbriefVdiscussion,VitVisVclearVthatVfactorsVsuchVasVcost,VmarketVs
ize,VandVproductVlifeVallVplayVaVroleVinVdeterminingVwhichVindustriesVwillVbeVglobalVandVwhi
chVwillVnot.V However,VitVisVimportantVtoVrecognizeVthatVmanyVotherVfactorsV(forVexample,V
resourceVavailability,VgovernmentVregulations,VandVsimilarityVofVcustomerVtaste)ValsoVplay
VaVroleVinVthisVdetermination.V (LOV1.4,VAACSB:VAnalyticalVSkills,VLearningVOutcomes:VDi
scussVtrendsVinVandVtheVdebateVoverVglobalization)
1-8 WhatVisVtheVimpactVofVtheVInternetVonVinternationalVbusiness?VWhichVcompaniesVandV
whichVcountriesVwillVgainVasVInternetVusageVincreasesVthroughoutVtheVworld?VWhichVwillVlos
e?
TheVInternetVhasVhadVaVsignificantVimpactVonVinternationalVbusinessVinVatVleastVthreeVw
CopyrightV©V2015VPearsonVEducation,VI
nc.
SolutionVManualVInternationalVBusinessVAVManagerialVPe
rspective
AnVOverviewVofVInternationalVBusiness
1-1 WhatVisVinternationalVbusiness?V HowVdoesVitVdifferVfromVdomesticVbusiness?
InternationalVbusinessVinvolvesVanyVbusinessVtransactionVbetweenVpartiesVfromVmoreVthan
VoneVcountry.V ItVdiffersVfromVdomesticVbusinessVinVthatVinternationalVbusinessVtransactio
nsVcrossVnationalVbordersVwhileVdomesticVtransactionsVdoVnot.V MoreVspecifically,Vinternati
onalVbusinessVinvolvesVforeignVcurrencyVtransactionsVforVatVleastVoneVparty,VitVmayVrequire
VaVcompanyVtoVadjustVtoVaVforeignVlegalVsystemVand/orVculture,VandVtheVwayVproductsVa
reVproducedVorVtheVtypesVofVproductsVthatVareVproducedVmayVvaryVaccordingVtoVtheVava
ilabilityVofVresourcesVinVdifferentVcountries.V(LOV1.1,VAACSB:VCommunicationVSkills,VLear
ningVOutcomes:VDefineVtheVfundamentalVconceptsVofVinternationalVbusiness)
1-2 WhyVisVitVimportantVforVyouVtoVstudyVinternationalVbusiness?
ThereVareVatVleastVfiveVreasonsVwhyVitVisVimportantVtoVstudyVinternationalVbusiness.V Firs
t,VstudentsVwillVprobablyVworkVforVaVcompanyVwithVinternationalVoperationsVorVoneVthatVis
VaffectedVbyVtheVglobalVeconomy.V Second,VstudentsVmayVactuallyVworkVforVaVfirmVthatVi
sVownedVbyVaVcorporationVbasedVinVanotherVcountry.VThird,VitVisVimportantVtoVkeepVpace
VwithVfutureV“competitors”V(otherVjobVseekers)VwhoVareVwellVversedVinVinternationalVbusin
ess.V Fourth,VitVisVimportantVtoVstayVabreastVofVtheVlatestVbusinessVtechniquesVandVtools,
VwhichVmayVactuallyVbeVdevelopedVoutsideVofVtheVUnitedVStates.V Finally,VitVisVimportant
VtoVavoidVculturalVilliteracy,VaVlabelVgivenVtoVthoseVwhoVareVnotVconversantVwithVtheVglo
balVeconomyVandVinternationalVmarketplaces.V (LOV1.2,VAACSB:VCommunicationVSkills,VL
earningVOutcomes:VDefineVtheVfundamentalVconceptsVofVinternationalVbusiness)
1-3 WhatVareVtheVbasicVformsVofVinternationalVbusinessVactivity?
TheVbasicVformsVofVinternationalVbusinessVactivityVareVimportingVandVexporting,Vinternati
onalVinvestments,Vlicensing,Vfranchising,VandVmanagementVcontracts.V ExportingVinvolves
Vselling
CopyrightV©V2015VPearsonVEducation,VI
nc.
, 2
productsVmadeVinVone’sVownVcountryVforVuseVorVresaleVinVotherVcountries,VwhileVimporti
ngVinvolvesVbuyingVproductsVmadeVinVotherVcountriesVforVuseVorVresaleVinVone’sVownVco
untry.VInternationalVinvestmentsVincludeVforeignVdirectVinvestmentVandVportfolioVinvestment
s.V ForeignVdirectVinvestmentsVareVinvestmentsVmadeVforVtheVpurposeVofVactivelyVcontroll
ingVproperty,Vassets,VorVcompaniesVlocatedVinVforeignVhostVcountries,VwhileVportfolioVinve
stmentVinvolvesVtheVpurchaseVofVforeignVfinancialVassets,VsuchVasVstocks,Vbonds,VandVc
ertificatesVofVdepositVforVpurposesVotherVthanVcontrol.V AVlicensingVagreementVallowsVaVfi
rmVinVoneVcountryVtoVuseVallVorVsomeVofVtheVintellectualVpropertyVofVaVfirmVinVanotherVco
untryVinVexchangeVforVaVroyaltyVpayment.VAVfranchiseVagreementVauthorizesVaVfirmVinVon
eVcountryVtoVutilizeVtheVbrandVnames,Vlogos,VandVoperatingVtechniquesVofVaVfirmVinVaVse
condVcountryVinVexchangeVforVaVroyaltyVpayment.VManagementVcontractsVinvolveVanVagr
eementVinVwhichVaVfirmVinVoneVcountryVoperatesVfacilitiesVorVprovidesVotherVmanagement
VservicesVtoVaVfirmVinVanotherVcountryVforVaVfee.V(LOV1.3,VAACSB:VCommunicationVSkills,
VLearningVOutcomes:VDefineVtheVfundamentalVconceptsVofVinternationalVbusiness)
1-4 HowVdoVmerchandiseVexportsVandVimportsVandVserviceVexportsVandVimportsVdiffer?
MerchandiseVexportsVandVimportsVreferVtoVtradeVinVgoodsVwhileVserviceVexportsVandVim
portsVreferVtoVtradeVinVintangibleVproducts.V TheVformerVisVsometimesVreferredVtoVasVvisibl
eVtradeVwhileVtheVlatterVisVsometimesVreferredVtoVasVinvisibleVtrade.V(LOV1.3,VAACSB:VC
ommunicationVSkills,VLearningVOutcomes:VDefineVtheVfundamentalVconceptsVofVinternatio
nalVbusiness)
1-5 WhatVisVportfolioVinvestment?
PortfolioVinvestmentsVinvolveVpurchasingVforeignVfinancialVassetsVsuchVasVstocks,Vbonds,
VandVcertificatesVofVdepositVforVpurposesVotherVthanVcontrol.V(LOV1.3,VAACSB:VCommunic
ationVSkills,VLearningVOutcomes:VDefineVtheVfundamentalVconceptsVofVinternationalVbusin
ess)
1-6 WhatVareVtheVbasicVreasonsVforVtheVrecentVgrowthVofVinternationalVbusinessVactivity?
AVnumberVofVfactorsVhaveVledVtoVtheVrecentVgrowthVofVinternationalVbusiness.VTheVmore
VimportantVfactorsVincludeVmarketVexpansion,VresourceVacquisition,VcompetitiveVforces,Vte
chnologicalVchange,VandVsocialVchange.V MarketVexpansionVhasVledVtoVgrowthVinVinternati
onalVbusinessVasVfirms,VfacingVsaturatedVdomesticVmarkets,VseekVnewVmarketVopportuniti
esVinVotherVcountries.V InVsomeVcases,VfirmsVwillValsoVexpandVintoVotherVmarketsVasVthe
yVseekVresourcesVsuchVasVmaterials,Vlabor,Vand/orVcapital.V SuchVresourcesVmayVeitherV
beVscarceVorVunavailableVdomestically.V TheV competitiveV forcesV thatV existV inV today’sV m
CopyrightV©V2015VPearsonVEducation,VI
nc.
, 3
arketplaceV alsoV encourageV the
CopyrightV©V2015VPearsonVEducation,VI
nc.
, 4
internationalizationVofVbusiness.VWhenVaVfirm’sVcompetitorsVexpandVintoVnewVmarkets,Vtha
tVfirmVmustValsoVinternationalize.V ChangesVinVtechnology,VparticularlyVinVareasVsuchVasV
communications,Vtransportation,VandVinformationVprocessing,VareVmakingVitVincreasinglyVe
asierVforVfirmsVtoVcarryVoutVinternationalVtransactions,VthusVaddingVtoVtheVgrowthVofVinter
nationalVbusiness.V SocialVchangeVisVmakingVitVpossibleVforVfirmsVtoVsellVtheirVproductsV
moreVeasilyVinVforeignVmarkets.V ConsumersVtodayVareVmuchVmoreVawareVofVtheVproduct
sVandVservicesVbeingVofferedVinVotherVmarkets,VandVareVthereforeVmoreVlikelyVtoVseekVout
Vforeign-
madeVproductsVthanVinVtheVpast.V Finally,VlooserVgovernmentVtradeVandVinvestmentVpolici
esVhaveVmadeVitVeasierVforVinternationalVbusinessesVtoVcapitalizeVonVgrowthVopportunitie
sVinVtheVglobalVmarketplace.V(LOV1.4,VAACSB:VCommunicationVSkills,VLearningVOutcome
s:VDiscussVtrendsVinVandVtheVdebateVoverVglobalization)
QUESTIONSVFORVDISCUSSION
1-7 WhyVdoVsomeVindustriesVbecomeVglobalVwhileVothersVremainVlocalVorVregional?
ThereVareVaVnumberVofVfactorsVthatVplayVaVroleVinVdeterminingVwhichVindustriesVbecomeV
global,VwhichVbecomeVregional,VandVwhichVremainVlocal.V TheVairlineVindustry,VforVexamp
le,VisVconsideredVaVglobalVindustry.V OneVofVtheVmainVreasonsVforVthisVstatusVisVtheVcostV
ofVdevelopingVandVproducingVlargeVaircraft,VcombinedVwithVmarketVsize.V TheVindustryVisV
“forced”VtoVbeVglobalVbecauseVitVmustVsellVaircraftVtoVaVmarketplaceVthatVisVbigVenoughV
toVjustifyVtheVcostsVofVdevelopingVandVbuildingVnewVjets.V NoVsingleVcountryVhasVaVmark
etVbigVenoughVtoVjustifyVsuchVcosts,VthusVcompaniesVmustVseekVcustomersVaroundVtheVgl
obe.V OnVtheVotherVhand,VtheVbakeryVindustryVtendsVtoVbeVregionalVorVlocalVbecauseVitsV
productsVtendVtoVperishVveryVeasily.V WhileVimprovementsVinVtransportationVandVshipping
VhaveVcreatedVaVlargerVmarketplace,VforVtheVmostVpart,VfirmsVinVthisVindustryVcaterVtoVlo
calVcustomers.V FromVthisVbriefVdiscussion,VitVisVclearVthatVfactorsVsuchVasVcost,VmarketVs
ize,VandVproductVlifeVallVplayVaVroleVinVdeterminingVwhichVindustriesVwillVbeVglobalVandVwhi
chVwillVnot.V However,VitVisVimportantVtoVrecognizeVthatVmanyVotherVfactorsV(forVexample,V
resourceVavailability,VgovernmentVregulations,VandVsimilarityVofVcustomerVtaste)ValsoVplay
VaVroleVinVthisVdetermination.V (LOV1.4,VAACSB:VAnalyticalVSkills,VLearningVOutcomes:VDi
scussVtrendsVinVandVtheVdebateVoverVglobalization)
1-8 WhatVisVtheVimpactVofVtheVInternetVonVinternationalVbusiness?VWhichVcompaniesVandV
whichVcountriesVwillVgainVasVInternetVusageVincreasesVthroughoutVtheVworld?VWhichVwillVlos
e?
TheVInternetVhasVhadVaVsignificantVimpactVonVinternationalVbusinessVinVatVleastVthreeVw
CopyrightV©V2015VPearsonVEducation,VI
nc.
