Page 98 - Business Principles and Management

Chapter 4 • International Environment of Business

FIGURE 4-4 Leading Investment Countries, 2004

Top Five Countries Investing Top Five Foreign Countries
in the United States for American Investors
UNITED KINGDOM UNITED KINGDOM

JAPAN THE NETHERLANDS

THE NETHERLANDS SWITZERLAND

GERMANY BERMUDA

FRANCE JAPAN

in the United States and the top countries where American businesses have
invested.

CHECKPOINT

Explain why international trade is important to the United States.

Reasons for Growth in International Business

Why would McDonald’s want to open a restaurant in Beijing, or Nokia sell
mobile telephones in the United States, or Volkswagen build its Beetles in Mexico?
For that matter, why would Macy’s buy the jeans it sells from a garment maker in
Hong Kong? Firms enter international business for many good reasons. facts
The main reason is profit. Businesses may be able to earn more profit from &
selling abroad or may be able to charge higher prices abroad than at home, where
competition could be more intense. When the cost of making goods is lower in figures
foreign countries than at home, it becomes cost effective for companies to buy
goods made abroad or even set up their own factories abroad. The potential for
sales abroad, when combined with the size of the domestic market, increases the Japanese officials want to
overall size of the market. Using mass-production techniques, production costs launch a national campaign to
should drop and profits should rise. establish English as Japan’s sec-
In many cases, a company goes international in reaction to what other compa- ond official language. Too few
nies are doing or because of changes in the domestic market. If some firms are Japanese speak the language of
making large profits by selling abroad, other companies may be encouraged to the Internet and international
do the same. When a large foreign market opens up, as in China in recent years, finance—which is English. Some
an American company may lose the market to firms from other countries if it does Japanese see this as a serious
not act quickly. competitive disadvantage that
Similarly, sales at home may be small, stagnant, or declining, whereas opportu- undermines Japan’s global
nities to sell abroad may be abundant. A company may have overproduced, and influence, particularly in the
the only way to possibly dispose of its surplus goods profitably is to sell them areas of technology, commer-
abroad. It could also be that a company is physically close to foreign customers cial exploitation of the Internet,
and markets. For example, Argentine firms can sell easily to Brazilian firms and finance, where English
because they are neighbors. proficiency is critical.

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