Globazicion

Part One
Background for International Business

CHAPTER ONE
Globalization and International Business


OBJECTIVES

• To define globalization and international business and how they affect each other
• To understand why companies engage in international business and why international business growth has accelerated
• To comprehend criticisms of globalization
• To become familiar withdifferent modes a company can use to accomplish its global objectives
• To grasp the role social science disciplines play in understanding why international business is different from domestic business


CHAPTER OVERVIEW

Globalization has become a major socioeconomic force and topic of debate in the twenty-first century. Chapter One examines the forces that are driving this phenomenon, aswell as the often passionate criticisms of the process. It reviews the objectives that firms pursue when they engage in international business activities and describes the various modes of entry that may be used. It also notes the terminology that has come into existence as new types of organizations have evolved. The chapter concludes with a discussion of the ways in which internationalbusiness differs from domestic business.


CHAPTER OUTLINE


OPENING CASE: THE GLOBALIZATION OF PROFESSIONAL SPORTS

[See Map 1.1]
Although not everyone agrees that the unbridled globalization of professional sports is all for the good, the process and possibilities are definitely far-reaching. Today’s satellite television broadcasts enable fans to watch top players and teams in nearlyany sport from almost anywhere on earth. Professional teams scour the world to find and develop the most talented athletes, and players forsake home country allegiances in their pursuit of the world’s highest salaries. Further, the more people that tournaments can attract through attendance and television, the more money that sponsors and advertisers are willing to pay—and the greater thelikelihood that those sponsors and advertisers will have business operations that span the globe. In addition, sports and nonsports companies alike pay famous athletes and teams generous sums to endorse their products. Successful teams have opened shops both domestically and internationally to sell souvenirs bearing their logos and may make more money on merchandise than from TV rights and sponsorshipscombined. Most recently, as teams and leagues have begun to seek income opportunities outside their home countries, foreign investors have acquired a U.S. baseball team, as well a controlling interest in a British soccer (football) team.


Teaching Tips: Carefully review the PowerPoint slides for Chapter One. Also, review the corresponding video clip, “Debate on Globalization” [15:43].Finally, review the atlas on pp. 32–43 of the text, where you will find maps of the world and its continents, as well as a country index.


I. WHY ARE GLOBALIZATION AND INTERNATIONAL BUSINESS IMPORTANT?
As people, firms, and other organizations have expanded their access to resources, goods, services, and markets across wider geographical areas, they have also become more deeply affected(positively and negatively) by conditions outside their home countries. Globalization refers to the ongoing social, economic, and political process that deepens the relationships and broadens the interdependencies amongst nations—their people, their firms, their organizations, and their governments. International business involves all commercial transactions—private and governmental—between partiesof two or more countries. Global events and competition affect almost all firms—large or small. However, the international environment is more complex and diverse than a firm’s domestic environment. [See Fig. 1.1.]

II. THE FORCES BEHIND GLOBALIZATION
Globalization is a difficult concept to measure. Currently, about 25 percent of world production is sold outside of its country of origin,...