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 company, 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.

Understand the five kinds of drivers, all based on change, that are leading international firms to the globalization of their operations.

Following are the five change-based drivers that are leading international firms to globalize their operations, with an example for each kind: (1) political—preferential trading agreements, (2) technological—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 influence the firm's life and development. The foreign environment is composed of all the forces originating outside the home country that influence the firm. The international environment is the interaction between the domestic and foreign environment forces or between sets of foreign environmental forces.