Appreciate the dramatic internationalization of markets. Global competition is mounting. The huge increase in import penetration, plus
the massive amounts of overseas investment, means that firms of all sizes face
competitors from everywhere in the world. This increasing internationalization
of business is requiring managers to have a global business perspective gained
through experience, education, or both. Understand the various names given to firms that have substantial operations
in more than one country. The following definitions are used in this text. A global company is an organization
that attempts to standardize operations worldwide in all functional areas. A
multidomestic firm, by contrast, is an organization with multicountry affiliates,
each of which formulates its own business strategy based on perceived market
differences. The term international company is often used to refer to both global
and multidomestic firms. Appreciate the profound effect of the Internet on many international
business firms. The Internet enables small firms to compete globally because they can contact
foreign customers without expensive and time-consuming travel. Sellers can demonstrate
their products to prospects inexpensively and rapidly with video teleconferencing.
Home office managers have closer, more rapid, and less expensive contact with
their overseas operations by using E-mail on the Internet. By means of Web sites
on the Internet, firms advertise, recruit personnel, and provide customer support
with a minimum of expense and effort. Understand the five kinds of drivers, all based on change, that are leading
international firms to the globalization of their operations. There are five kinds of drivers, all based on change, that are leading international
firms to the globalization of their operations. Following are the five drivers
with an example for each kind: (1) political--preferential trading agreements,
(2) technology--advances in communications technology, (3) market--global
firms become global customers, (4) cost--globalization of product lines
and production helps reduce costs by achieving economies of scale, and (5) competitive--firms
are defending their home markets from foreign competitors by entering the foreign
competitors' markets. Comprehend why international business differs from domestic business. 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 values of foreign forces are at times
more difficult to assess. The international environment is defined as the interactions
(1) between the domestic environmental forces and the foreign environmental
forces and (2) between the foreign environmental forces of two countries
when an affiliate in one country does business with customers in another. An
international business model helps explain this relationship. Describe the three environments--domestic, foreign, and international--in which
an international company operates. The domestic environment is composed of all the uncontrollable forces originating
in the home country that surround and influence the firm's life and development.
The foreign environment is composed of all the forces originating outside the
home country that surround and influence the firm. The international environment
is the interaction between the domestic and foreign environment forces or between
sets of foreign environmental forces. |