MNG 4102: INTERNATIONAL
BUSINESS
LECTURER: HECTOR EDWARDS
DEPARTMENT OF BUSINESS &
MANAGEMENT STUDIES
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INTERNATIONAL BUSINESS
TERMINOLOGY
The United Nations
– uses transnational instead of multinational to
describe a firm doing business in more than one
country.
Business People
– Define a transnational as a company formed by a
merger of two firms of approximately the same size
that are from two different countries.
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INTERNATIONAL BUSINESS
DEFINITIONS
International Business
– is a business whose activities are carried out across
national borders.
It includes international trade, foreign manufacturing,
transportation, tourism, advertising, construction,
retailing, wholesaling and mass communication.
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DEFINITIONS (Cont’d).
A MULTIDOMESTIC COMPANY
– has multicountry affiliates, each of which formulates
its own business strategy based on perceived
market differences.
A GLOBAL COMPANY
– attempts to standardize and integrate operations
worldwide in all functional areas.
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GLOBALIZATION
ECONOMIC GLOBALIZATION
– is the international integration of goods, technology,
labour and capital.
It refers to the implementation of global strategies
which link and coordinate a firm’s international
activities on a worldwide basis.
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GLOBALIZATION FORCES
There are five major kinds of drivers that are leading
international firms to the globalization of their
operations.
Political
Technology
Market
Cost
Competitive
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GLOBALIZATION FORCES
(Cont’d)
POLITICAL
There is a trend toward the unification and
socialization of the global community.
NAFTA and the European Union present
significant marketing opportunities for
companies.
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GLOBALIZATION FORCES
(Cont’d)
POLITICAL
Other aspects contributing to the globalization of
business operations includethe progressive reduction of barriers to trade
and foreign investment by most governments.
the privatization of much of the industry in
formerly communist nations.
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GLOBALIZATION FORCES (Cont’d)
TECHNOLOGY
Advancements in computers and communications
technology are permitting an increased flow of ideas
and information across borders.
The Internet and network computing enables small
companies to compete globally.
Business to business commerce is experiencing
significant savings by using the Internet for business
exchanges. For example: $9 billion annual savings at
Ford Motor Company.
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GLOBALIZATION FORCES
(Cont’d)
MARKET
As companies globalize, they also become global
customers.
Companies follow customers abroad in order to avoid
a competitor stealing the account.
The saturation of the home market also sends
companies into foreign markets.
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GLOBALIZATION FORCES
(Cont’d)
COST.
Economies of scale to reduce unit cost are
always a management goal.
Globalizing product lines to reduce
development, production, and inventory costs
can help achieve economies of scale.
Companies can also locate production in
countries where production costs are lower.
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GLOBALIZATION FORCES
(Cont’d)
COMPETITIVE.
Competition continues to increase intensity.
Companies are defending their home markets from
competitors by entering the competitors’ home
markets to distract them.
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EXPLOSIVE GROWTH
FOREIGN DIRECT INVESTMENT
World stock of FDI rose from $519 billion in 1980 to
$4.117 trillion in 1998.
The United States, the nation with the highest sales of
companies in 1999, was replaced by the United
Kingdom as the largest acquirer of foreign companies.
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NUMBER OF INTERNATIONAL
COMPANIES
In 1998, only 23 nations had gross national products
greater than the total annual sales of General Motors,
the world’ largest international company.
Also in 1998, the total amount of money spent in WalMart worldwide was greater than the sum of the GNPs
of over 100 nations.
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LESSENING OF AMERICAN
DOMINANCE?
Fortune list of top 100 industrial firms in the world
according to sales.
Country
1980
1996
United States
45
Western Europe 42
Japan
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32
38
23
1999
35
45
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FORCES IN THE ENVIRONMENT
ENVIRONMENT
The Sum of all forces surrounding and
influencing the life and development of the firm.
Forces can be classified as external or internal.
External forces are uncontrollable
Internal forces are controllable
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EXTERNAL ENVIRONMENTAL
FORCES
Competitive
Physical
Distributive
Political
Economic
Sociocultural
Socioeconomic
Labour
Financial
Technological
Legal
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INTERNAL ENVIRONMENTAL
FORCES
FACTORS OF PRODUCTION
Capital, raw material and people.
ACTIVITIES OF THE ORGANIZATION
Personnel, finance, production and market.
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DOMESTIC ENVIRONMENT
Composed of all the uncontrollable forces originating
in the home country that surrounds and influences the
life and development of the firm.
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FOREIGN ENVIRONMENT
Operates differently than the domestic environment for
the following reasons.
Different forces values.
Changes difficult to assess.
Forces interrelated.
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INTERNATIONAL ENVIRONMENT
THE INTERNATIONAL ENVIRONMENT IS.
The interaction between the domestic
environmental forces and the foreign
environmental forces.
The interaction between the foreign
environmental forces of two countries when an
affiliate in one country does business with
customers in another.
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INTERNATIONAL BUSINESS
MODEL
International business transactions take place
across national borders and may involve three
environments.
Domestic
Foreign
International
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INTERNATIONAL BUSINESS
MODEL
In international business, an international manager
can apply any of the following to a concept or a
technique employed in domestic operations.
Transfer it intact.
Adapt it to local conditions.
Not use it overseas.
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