I. The Need for International BusinessA. Successful participation in international business improves quality of life for society and a more peaceful worldB. Students are likely to be involved in international business in their careersCHAPTER 1THE INTERNATIONAL BUSINESS IMPERATIVEChapter Objectives- To understand the history and impact of international business- To learn the definition of international business- To recognize the growth of global linkages today- To understand the U.S. position in world trade and the impact international business has on the United States- To appreciate the opportunities and challenges offered by international businessOpening CaseGlobalization: Opportunity or ThreatSummary:This vignette presents first the benefits of global business development as being improved infrastructure, better environmental protection, and improved financial markets. The criticisms of globalization include corporations becoming wealthy at the expense of the poor, supporting dictators, spoiling the environment, increased debt, encouragement of terrorism, labor exploitation, and export of jobs. This vignette allows the instructor to position the issue of globalization with the students.Chapter OutlineI. THE NEED FOR INTERNATIONAL BUSINESSA. SUCCESSFUL PARTICIPATION IN INTERNATIONAL BUSINESS IMPROVES QUALITY OF LIFE FOR SOCIETY AND A MORE PEACEFUL WORLDB. STUDENTS ARE LIKELY TO BE INVOLVED IN INTERNATIONAL BUSINESS IN THEIR CAREERSC. International business offers companies more new marketsD. International business offers consumers, workers, and investors more choicesII. A Definition of International BusinessA. Transactions that are devised and carried out across national borders to satisfy the objectives of individuals, companies, and organizations1. Types of Transactionsa. Export-import tradeb. Direct foreign investmentc. Licensingd. Franchisinge. Management contracts2. Satisfaction of all participants3. International business is as much an art as a scienceIII. A Brief HistoryA. Roman Empire1. Pax Romana – Roman peace guaranteed peaceful travel 2. Common coinage simplified business transactions3. Centralized law4. Effective communicationsB. British EmpireC. United States1. Smoot-Hawley Act raised imports to reduce volume of imports and restore domestic employmenta. Resulted in a trade warb. Worldwide depression and collapse of world financial systemD. Multinational corporations and increased international trade in last 30 years (Figure 1.1, page 8)IV. Global Links TodayA. CommunicationsB. EntertainmentC. TransportationD. Global production and service strategiesE. Economic interdependence among nations is stronger but not stableF. Technology has increased the rate of changes in international businessV. The Current U.S. International Trade PositionA. Gained in prominence as a marketB. Lost some importance as supplier1. U.S. market share has declined2. Exports have continued to growC. The Impact of International Business on the United States1. U.S. international business outflows are important on the macroeconomic level to balance the trade account2. On the microeconomic level, participation in international business can help firms achieve economies of scale and hone their competitive skills3. It continues to be a political issueETHICSStudents Against SweatshopsSummary:1. The story is told of the development of the Workers Rights Consortium (WRC) at Georgetown andother universities to insure that factories where school apparel was made adopted basic labor standards and fair pay. Through student activism some university administrations have adopted these principles. As of 2003, 112 colleges and universities had joined WRC.Questions for Discussion1. Will future expansion of international business be similar to that in the past?Increasingly, companies are becoming aware that the only way to maintain high growth rates and remain competitive is to enter the international marketplace. Coupled with continually advancing communicationstechnology and the expansion of opportunities abroad, international business is likely to continue growing rapidly. Governmental actions and market driven changes, e.g. in exchange rate relationships, may produce increasingly rapid shifts in the marketplace. New players have also entered the global marketplace, e.g. Central and Eastern Europe - which will lead to new and redirected trade and investment flows. 2. Does increased international business mean increased risk?Increased international business leads to increased risk because the international environment is often politically and economically unstable. Global transactions are more complex and therefore riskier. However, the nature of the transaction has to be taken into consideration and seen in the context of returns on investment. Often the potential revenue from international markets offsets the risks involved. In addition, risks may be minimized or managed by taking appropriate measures such as buying insurance andusing confirmed letters of credit.All businesses are affected by increased international business. Even though a business may opt not to takeadvantage of foreign opportunities, it is still at risk as foreign competitors may threaten the domestic market share. 3. Is it beneficial for nations to become dependent on one another?Dependency between nations which results from international business is beneficial in that it leads to greater cooperation, hopefully leading to more peaceful economic and political relations as well as higher standards of living. However, dependency also increases risk because political and economic changes in one country can affect all of its trading partners, possibly affecting their economic and national security.4. Discuss the reasons for the increase in the Chinese world trade market share.Chinese industrialization started to take-off in the 1970s with the development of more capital-intensive industries. In addition, China adapted new, more open import policies which led to the acquisition of new technology. As a result, Chinese industries are more productive and efficient. Third, China has been able to use its comparative advantage—cheap labor—to offer competitive products in the world market. The greater openness of China to the world has also resulted in substantial inflow of foreign direct investment from both ethnic Chinese and unrelated parties abroad. Finally, over the past fifteen years, China has become more