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Chapter 1 of Witt’s book provides a comprehensive overview of the field of international business. In this chapter, Witt examines the importance of international business in the global economy, its historical development, and the different factors that shape international business operations.
Firstly, Witt emphasizes the significance of international business in the global economy. He highlights that international trade and foreign direct investment play a crucial role in economic growth and development. In fact, he notes that international trade accounts for a substantial portion of the world’s gross domestic product (GDP). Furthermore, he argues that international business enables countries to specialize in the production of goods and services in which they have a comparative advantage, leading to increased efficiency and productivity.
Next, Witt delves into the historical development of international business. He traces its origins back to ancient civilizations, such as the Phoenicians and Mesopotamians, who engaged in long-distance trade. Over time, international business has evolved due to advancements in transportation, communication, and technology. Witt also highlights the role of multinational enterprises (MNEs) in shaping the field of international business. These large corporations have expanded their operations globally, capitalizing on opportunities in foreign markets.
Witt further explores the various factors that affect international business operations. He identifies political, economic, and cultural factors as key determinants. Political factors include government regulations, trade policies, and political instability. Economic factors encompass macroeconomic conditions, such as inflation and exchange rates, as well as market access and infrastructure. Cultural factors, on the other hand, involve differences in language, customs, and social norms. These factors influence the decisions and strategies of companies engaged in international business.
In addition to discussing the factors that shape international business, Witt also delves into the different modes of entry into foreign markets. He highlights four primary entry modes: exporting, licensing, franchising, and foreign direct investment. Exporting involves the sale of products or services to foreign markets. Licensing refers to granting the rights to use intellectual property to a foreign company in exchange for royalties. Franchising entails expanding a business by granting individuals or organizations the right to operate under a recognized brand name. Foreign direct investment, however, involves establishing a physical presence in a foreign country through subsidiaries, joint ventures, or mergers and acquisitions.
Witt concludes the chapter by discussing the forces that drive globalization and the challenges it poses to international business. He highlights technological advances, market liberalization, and the interconnectedness of national economies as key drivers of globalization. Despite the benefits of globalization, such as increased market access and economic integration, it also presents challenges. These include managing cultural differences, dealing with political risks, and navigating complex legal and regulatory environments.
Overall, Chapter 1 of Witt’s book provides a comprehensive introduction to the field of international business. It highlights its significance in the global economy, traces its historical development, and explores the factors that shape international business operations. The chapter also addresses the various modes of entry into foreign markets and discusses the forces driving globalization and the challenges it presents. By providing a broad overview of international business, Witt lays the foundation for further exploration of the subject in subsequent chapters.