1. Introduction International Business Activities International Trade
includes exports and imports.
Foreign Direct Investment (FDI)
International companies must make FDI to establish and expand their overseas operations.
Foreign Sourcing
is the overseas procurement of raw materials, components, and products.
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2. Volume of Trade
In 1990,
volume of international trade in goods and services surpassed $4 trillion.
In 2003,
international trade in goods and services exceeded $9 trillion.
One-fourth of everything grown or produced in the world is now exported.
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3. Volume of Trade
Increases in exports to developing countries, especially
Latin America
Central and Eastern Europe
Middle East
Asia
Quadrupling of world exports in less than 31 years demonstrates that the opportunity to increase sales by exporting is a viable growth strategy
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4. Direction of Trade
Largest exporters and importers of merchandise are generally developed countries
Among largest 25 exporters emerging economies of
China, Mexico, Malaysia, Thailand, Brazil
Among largest merchandise importers
China, Mexico, Malaysia, Thailand, India, Turkey
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5. Focus on Major Trading Partners
Favorable business climate
Regulations not insurmountable
No strong cultural objections
Transportation facilities already established
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Channel members experienced in handling imports
Foreign exchange is available
Government pressure to buy from countries that are good customers for exports

6. Foreign Investment Two components of foreign investment
Portfolio investment
Purchase of stocks and bonds solely for the purpose of obtaining a return on the funds invested.
Direct investment
Investors participate in the management of the firm in addition to receiving a return on their money.
Applies when investors equity participation ratio is 10 percent or more.
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7. Volume of FDI End of 2002 worldwide nearly $6.9 trillion
Largest investors
United States 1.45 times next largest investor
United Kingdom followed
France third largest investor
Total annual outflow 2002 $647 billion
Much FDI associated with mergers, acquisitions and other investments result of increased global competition
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8. Trade Leads to FDI
Foreign direct investment historically follows trade
Trade less costly and less risky
Can expand business in small increments
Use domestic or foreign agents to export
Hire sales representatives to live in overseas market
Establish own sales company
Today many international firms disperse activities to locations close to available resources
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9. FDI in United States Nearly 82% of stock owned by firms from
United Kingdom
France
Netherlands
Japan
Germany
Switzerland
Canada
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10. Why Enter Foreign Markets?
Obtain Greater Profits
Less competition, better price
Greater sales volume
Lower costs of goods sold
Government inducements
Higher profit margins
Test market
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11. Why Enter Foreign Markets?
To protect domestic market
Follow customers overseas
Attack in competitor’s home market
Use foreign production to lower costs
Protect from lower-priced foreign imports
In-bond plants (maquiladoras)
Caribbean Basin Initiative
Andean Trade Preference Act
Growth Triangles
Export Processing Zones
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12. Why Enter Foreign Markets?
To protect foreign market
Lack of foreign exchange
Local production by competitors
Follow suit or risk losing the market
Downstream markets
Protectionism
Government erects barriers to protect local industry
Guarantee supply of raw materials
Acquire technology and management know-how
Geographic diversification
Satisfy management desire for expansion
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13. Global Dimensions Product Markets Promotion
Where value is added to product
Competitive strategy
Use of non-home-country personnel
Extent of global ownership of firm