International Business

• Direct investment is a mode of entry where a company establishes its own operations in a foreign market, either through setting up a new subsidiary or acquiring an existing company.
• International business involves trade and investment activities across national borders
• Globalization of markets is characterized by international trade and investment
• International trade involves the exchange of products and services across national borders through exporting and importing
• Exporting is selling products or services to customers abroad, while importing is procuring products or services from foreign suppliers
• International investment includes the transfer or acquisition of ownership in assets
• International portfolio investment is passive ownership of foreign securities for financial returns
• Foreign direct investment establishes a physical presence abroad through acquiring productive assets
• International firms face cross-cultural, country, currency, and commercial risks that must be managed
• Key participants in international business include multinational enterprises (MNEs), small and medium-sized enterprises (SMEs), and born global firms
• Key participant in international business: multinational enterprise (MNE)

  • Large company with many resources
  • Business activities performed by a network of subsidiaries in multiple countries
• Small and medium-sized enterprises (SMEs) are active in international business

  • Companies with 500 or fewer employees
• Born global firms: entrepreneurial firms that initiate international business from or near their founding
• Nongovernmental organizations (NGOs): nonprofit organizations pursuing special causes and serving as advocates
• Globalization of markets:

  • Ongoing economic integration and growing interdependency of national economies
• World Trade Organization (WTO):

  • Multilateral governing body regulating international trade and investment
• Value chain:

  • Sequence of value-adding activities the firm performs in developing, producing, marketing, and servicing a product
• Contagion:

  • Tendency of a financial or monetary crisis in one country to spread rapidly to other countries due to ongoing integration of national economies
• Information technology (IT) is the science and process of creating and using information resources
• The Internet opens the global marketplace to small and medium-sized enterprises (SMEs) and other firms
• Globalization involves the integration and interdependence of national economies through trade, investment, and value chain activities
• Regional economic integration blocs, like NAFTA and the European Union, facilitate reduced trade and investment barriers among member countries
• Globalization has led to the convergence of preferences in consumer markets worldwide
• Companies cut costs and selling prices through economies of scale, standardization of finished products, and shifting manufacturing to locations with less expensive labor