978-0134324838 Chapter 1 Lecture Notes

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PART 1

FOUNDATION CONCEPTS

CHAPTER 1

INTRODUCTION: WHAT IS INTERNATIONAL BUSINESS?

Instructor’s Manual by Marta Szabo White, Ph.D.

I. LECTURE STARTER/LAUNCHER

■ Consider having everyone in class introduce themselves. One way to initiate

introductions is distribute random pages torn from business magazines, in which each

person receives one page. Next each student circles words on the page that describe

him/her. In groups of two or three, each student shares the rationale behind each word

that he/she circled. Finally, one of the group members introduces another group member

to the class. This process enables students to immediately know at least one other

student in the class. The circled words and explanations are often humorous, which

serve as icebreakers during your first classroom encounter.

■ globalEDGE™ (globaledge.msu.edu) assembles a collection of tools and games that

will allow you to compare countries on a variety of statistical indicators, rank countries

based on these indicators, and test your knowledge of country capitals from around the

world.

Get Insights By Country:

http://globaledge.msu.edu/Global-Insights/By/country

Currency Converter:

http://www.xe.com/

Country Comparator:

http://globaledge.msu.edu/comparator

Ranking Countries:

http://globaledge.msu.edu/global-resources/resource/5128

Country Tools and Data:

http://globaledge.msu.edu/tools-and-data

Global Resource Directory:

http://globaledge.msu.edu/global-resources/

■ Under Country Insights click on a region, then select a country, Zimbabwe for example.

http://globaledge.msu.edu/Countries/Zimbabwe

Everyone in the class should be assigned a different country. Each student is then

responsible for becoming an expert on that country. Twice during the term, each student

could report on their country, and summarize a newspaper article published in their

country, i.e. an International Newspaper Memorandum assignment.

[1] An exciting way to introduce your students to International Business is the CIA Maps,

from the CIA World Factbook, which provides an interactive and fun tool to introduce to

international business:

https://www.cia.gov/library/publications/the-world-factbook/

[2] Another great way to introduce student to the world of international business is to

direct them to the BBC website:

http://news.bbc.co.uk/1/hi/country_profiles/default.stm

[3] Comic relief- Humorous (possibly offensive) introduction to IB 2:09 minutes

Catherine Tate- Translator:

http://www.youtube.com/watch?v=ma8Vwkpx5y8

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INTERNATIONALIZATION AT HARLEY-DAVIDSON [CLOSING CASE]

■ Harley Davidson is the chapter Closing Case. These questions serve as hooks for

students to familiarize themselves with the chapter concepts

■ 1908- Harley Davidson sold the first Harley police motorcycle to which police

department?

ANSWER: Detroit; Nearly every large U.S. police department employed Harley

motorcycles

■ 1988- Harley Davidson opened up its first foreign production facility. Which country

was it in?

ANSWER: Brazil (Manaus)… Why is Brazil an important foray into the international

arena? It represents a key emerging market country.

II. LEARNING OBJECTIVES AND THE OPENING VIGNETTE

LEARNING OBJECTIVES

After studying this chapter, students should be able to:

1.1 Describe the key concepts in international business

1.2 Understand how international business differs from domestic business

1.3 Identify major participants in international business

1.4 Describe why firms internationalize

1.5 Appreciate why you should study international business

Key Themes

■ In this chapter, there are five themes:

[1] Key concepts in international business

[2] How international business differs from domestic business

[3] Who participates in international business

[4] Why firms internationalize

[5] Why you should study international business

■ This chapter is the introduction to the text, as well as to the foundation concepts. The

first part of this text (chapters 1 – 8) explores globalization from a macro, environmental

level, while the second part (chapters 9 -17) examines international business from a

more micro, organizational level. The fundamental concepts introduced in Chapter 1 are

central to both macro and micro perspectives for understanding international business.

Thus, these basic concepts permeate the entire text, and students should be

well-acquainted them.

■ In this chapter, use a macro lens to introduce students to some of the fundamental

international business concepts.

■ Cross-border trading has been around for centuries; contemporary international

business has gained considerable momentum/complexity over the past four decades.

■ International business refers to the trade and investment activities by companies

across national borders. Globalization of markets refers to ongoing economic

integration and growing interdependency of countries worldwide. Stress the dramatic

growth in world trade, which now exceeds some $18 trillion annually.

■ There are two ways to invest internationally- passively (portfolio investment -financial

assets) or actively (foreign direct investment– capital, technology, labor, land, plant and

equipment).

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■ Also important are importing (global sourcing)-buying products/services from abroad

and bringing them back to the home country. Exporting- manufacturing a product or

service in one country and selling it to another.

■ Address the broader questions of:

◘ Why firms go international? – Primarily to increase sales and profits!

◘ What is the difference between internationalization and globalization?

Former- Expansion of international business activities vs, Latter- Integration,

interdependency & interconnectedness of internationalization (the 4 I’s) Example:

Increasing exports vs. Sourcing value-chain activities strategically around the

globe to leverage factor efficiencies

◘ How international business is different from domestic business:

Complexity and Risks (4)

◘ Who participates in international business-

Multinational Enterprise (MNE)

Small and Medium-sized Enterprise (SME)

Born Global – entrepreneurial firm that is international from almost inception

◘ Why you should study international business– Competitive advantage- for

you and your firm!

■ Note that international business is both a cause and a result of increasing national

prosperity.

Teaching Tips

■ In this chapter, use a broad brush approach in generating excitement about the

importance of international business activity. Ask students to examine their clothing,

watches, iPhones, iPods and report where in the world each item was manufactured.

This discussion underscores the profound and pervasive impact that globalization has

had on all of us.

■ Next, ask students what they would like to do professionally, after they graduate. Once

they respond, ask if they can accomplish that successfully without understanding

international business, and the impact of global trends on their industry and business?

The answer is, of course, a resounding NO!!!

Commentary on the Opening Vignette:

FACEBOOK: A GLOBAL PHENOMENON

Key message

Facebook, a social networking platform, serves both personal and professional needs.

Founded in 2004, by Mark Zuckerberg and his Harvard University classmates, Facebook

underscores the economic, political and personal interconnectedness among countries,

companies, and consumers.

Uniqueness of the situation described

■ What is striking about this vignette is that by the time the reader finishes this vignette,

Facebook usage will have again jumped exponentially- globally, users spend more than

700 billion minutes every month on Facebook; one of every six people on the planet-

about 1.3 billion users– has a Facebook account.

■ Half of all U.S. residents have a Facebook account; some 70% of Facebook users live

outside the United States and speak over 75 languages.

■ There are 100 million users in each of Africa and India.

Classroom discussion

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■ This example illustrates how the global economy has permeated our everyday lives.

■ International business activity is increasingly complex and impacts our everyday lives

– shopping, listening to music, watching a movie, or surfing the Internet- involve

international business transactions that connect us to the global economy, and influence

quality of life, standard of living, and economic well-being.

■ Facebook’s vision mirrors this activity by empowering individuals, mapping the social

relationships among them, and creating a new system for exchanging information that

many find indispensable.

■ Mode of Entry:

◘ FDI- foreign direct investment establishing offices around the world.

■ Which countries is it especially popular in?

◘ France, Italy, Japan, and the United Kingdom. It is the fastest growing social

networking site in Indonesia, and is establishing a loyal user base throughout Africa.

■ Which countries have banned Facebook at one time or another:

◘ China, Egypt, Iran, Pakistan, Saudi Arabia

■ Primary revenue generation:

◘ Advertising- Brand awareness- Key

■ Who are Facebook’s competitors?

◘ Google and Microsoft

■ Competitive Advantage:

◘ Precise information on user interests, which is priceless to brand managers in a

world of targeted advertising.

■ Specific country examples (India, France, Sweden, Japan, Australia, & Poland) enrich

the overall theme: the Facebook phenomenon illustrates how converging lifestyles,

modern communications technology, and imaginative entrepreneurship are facilitating

the emergence of global enterprises.

■ Use this vignette as a springboard for the first teaching tip offered above.

■ Also ask students to update the Facebook saga since its Initial Public Offering (IPO) on

May 18, 2012.

Break students into small groups to work on the following questions, with each group

providing a brief presentation of their answers.

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