GLOBALIZATION AND INTERNATIONAL BUSINESS
“The world isn’t just for travelers”
• What is the nature of international business?
• What are multinational corporations and how do they work?
GLOBALIZATION AND INTERNATIONAL BUSINESS
The Nature of International Business
• Globalization creates international business
opportunities.
• International business is done by global sourcing,
import/export, licensing, and franchising.
• International business is done by joint ventures and
wholly owned subsidiaries.
• International business is complicated by different
legal and political systems.
Multinationals and LDC’s- perhaps??
THE NATURE OF INTERNATIONAL BUSINESS
Globalization
• International Business
– Conducting commercial transactions across national
boundaries
• Five Reasons to Pursue International Business
1. Expanded profit potential
2. More customers
3. More capital
4. Lower cost suppliers
5. Lower costs of labor
GLOBALIZATION
International Business
• Exporting
– Local products are sold abroad
• Importing
– The process of acquiring products abroad and selling them in
domestic markets.
• Licensing
– one firm pays a fee for rights to make or sell another company’s
products.
• Franchising
– a firm pays a fee for rights to use another company’s name and
operating methods.
GLOBALIZATION
International Business
• Joint Venture
– A firm operates in a foreign country through co-ownership with
local parties.
• Strategic Alliance
– each partner hopes to achieve through cooperation things they
couldn’t do alone.
• Foreign Subsidiary
– a local operation completely owned by a foreign firm.
GLOBALIZATION AND INTERNATIONAL BUSINESS
Multinational Corporations
• Multinational corporations do substantial business in several
countries.
• Multinational corporations can be controversial at home and
abroad.
• Multinational corporations face a variety of ethical challenges.
• Planning and Controlling are complicated in multinational
corporations.
• Organizing is complicated in multinational corporations.
• Leading is complicated in multinational corporations.
GLOBALIZATION AND INTERNATIONAL BUSINESS
Multinational Corporations
• Multinational Corporation (MNC)
– A business with extensive foreign operations in more than one
county.
• Transnational Corporation
– A MNC that operates worldwide on a borderless basis.
“Fortune’s” Top 10 Multinational Corporations
1. Wal-Mart Stores
2. BP
3. Exxon Mobil
4. Royal Dutch Shell Group
5. General Motors
6. DaimlerChrysler
7. Toyota Motor
8. General Electric
9. Total
10. Chevron
Acceleration Quiz
Q: Of the 100 top economies in the world, how
many are multinational corporations and how
many are nation states?
Los Angeles
Palo Alto
Acceleration Quiz
Q: Of the 100 top economies in the world, how
many are multinational corporations and how
many are nation states?
51 MNC’s and 49 Nations.
July 2011
Rank
Company
Country
Field
1
Wal-Mart Stores
United States
Retail
2
Royal Dutch Shell
Netherlands†
Petroleum
3
Exxon Mobil
United States
Petroleum
4
BP
United Kingdom
Petroleum
5
Sinopec
China
Petroleum
6
China National
Petroleum
China
Petroleum
7
State Grid
China
Power
8
Toyota Motor
Japan
Automobiles
9
Japan Post
Holdings
Japan
Diversified
10
Chevron
United States
Petroleum
2
Acceleration Quiz
Q: Disney and Sony (respectively) produce and
launch one new product every _________?
© 2005 Accelerating.org
Acceleration Quiz
Q: Disney and Sony (respectively) produce and
launch one new product every _________?
Once every three minutes for Disney.
Once every twenty minutes for Sony.
MULTINATIONAL ORGANIZATIONS
MNC Issues
Acceleration Quiz
Q: How much of Hewlett Packard’s revenue
comes from products launched in the last
year?
Acceleration Quiz
Q: How much of Hewlett Packard’s revenue
comes from products launched in the last
year?
70%
Toyota
McDonalds
MULTINATIONAL ORGANIZATIONS
MNC Issues
 Protectionism
 A call for tariffs and special treatment to protect
domestic firms from foreign competition.
 Corruption
 Illegal practices to further one’s business interests.
Transparency International gives these countries its
poorest corruption scores:
• Indonesia
• Nigeria
• Tajikistan
• Bangladesh
• Haiti
• Paraguay
• Myanmar
MULTINATIONAL ORGANIZATIONS
MNC Issues
 Sweatshops
 Employ workers at very low wages, for long hours, and in poor
working conditions.
 Child labor
 The full-time employment of children for work otherwise done
by adults.
 Sustainable Development
 Development that meets the needs of the present without
hurting future generations.
MULTINATIONAL ORGANIZATIONS
MNC Issues
Currency Risk
The possible loss of profits because of
fluctuating exchange rates.
Understanding Currency Risk in International Business
U.S. exporter makes a sale in France for Euro 100,000.
Scenario 1: Weak dollar
.95 Euros = 1 $US
Take home revenue = $105,263
Scenario 2: Strong dollar
1.25 Euros = 1 $US
Take home revenue = $80,000
MULTINATIONAL ORGANIZATIONS
MNC Organizations
MULTINATIONAL ORGANIZATIONS
MNC Organizations
 Expatriate
 An employee who lives and works in a foreign country.
 Global Manager
 A person who is culturally aware and informed on international
affairs.
 Personal Attributes for Expatriate Success
 High degree of self-awareness
 Cultural sensitivity
 Desire to live and work abroad
 Family flexibility and support
 Technical job competence
 Are you willing to admit that the world isn’t just for traveling anymore,
and to embrace it as a career opportunity? Is it possible that you might
stand out to a potential employer as someone with the skills to excel as a
global manager?
Management Tips
Criteria for choosing a partner for
successful joint ventures
• Familiar with your firm’s major business
• Employs a strong local workforce
• Values its customers
• Has potential for future expansion
• Has strong local market for its own products
• Has good profit potential
• Has sound financial standing
Acceleration Quiz
Q: How many of the lowest net-worth
Americans would it take to approximate Bill
Gate’s net worth?
Acceleration Quiz
Q: How many of the lowest net-worth Americans
would it take to approximate Bill Gate’s net
worth?
Roughly 110 million Americans in 1997, when his
net worth was $40 billion. At $30 billion presently
(2005), Mr. Gates ranks roughly as the 60th largest
country (of 280) and the 55th largest business.
When MSFT went public in 1986, Bill was worth
$230 million.
© 2005 Accelerating.org
NYU economist
Edward Wolff, Top Heavy, 2002
Something Curious Is Going On
Unexplained.
(Don’t look for this in your physics or information theory texts…)
© 2005 Accelerating.org