IntlBiz_Midterm_Studyguide - Chapter 1 Summary What is...

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Chapter 1 Summary What is International business? International business refers to the performance of trade and investment activities by firms across national borders. Globalization of markets is the ongoing economic integration and growing interdependency of countries worldwide. International business is characterized by international trade and investment. What are the key concepts in international trade and investment? International trade refers to exchange of products and services across national borders, typically through exporting and Importing. Exporting is the sale of products or services to customers located abroad, from a base in the home country or a third country. Importing or global sourcing refers to procurement of products or services from foreign suppliers for consumption in the home country or a third country. International investment refers to international transfer or acquisition of ownership in assets. International portfolio investment is passive ownership of foreign securities such as stocks and bonds for the purpose of generating financial returns. Foreign Direct Investment (FDI) is an internationalization strategy in which the firm establishes a physical presence abroad through acquisition of productive assets such as capital, technology, labor, land, plant, and equipment. How does international business differ from domestic business? International firms are constantly exposed to f our major categories of risk that must be managed. Cross-cultural risk refers to a situation or event where some human value has been put at stake due to a cultural miscommunication. Country ris k refers to the potentially adverse affects on company operations and profitability caused by developments in the political, legal, and economic environment in a foreign country. Currency risk refers to the risk of adverse fluctuations in exchange rates. Commercial risk arises from poorly developed or executed business strategies tactics, or procedures. The risks are ever-present in international business and firms take proactive steps to reduce their effects. Who participates in international business? A key participant in international business is the Multinational Enterprise (MNE) – a large company with many resources whose business activities are performed by a network of subsidiaries located in multiple countries. Also very active in international business are Small and Medium-sized Enterprises (SMEs) – companies with 500 or fewer employees. Born Globals are entrepreneurial firms that initiate international business from or near their founding. Non-governmental organizations (NGOs) are non-profit organizations that pursue special causes and serve as an advocate for the arts, education, politics, religion, and research. Why do firms pursue internationalization strategies?
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This note was uploaded on 09/08/2010 for the course BUS 187 at San Jose State University .

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IntlBiz_Midterm_Studyguide - Chapter 1 Summary What is...

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