MNG 4102: INTERNATIONAL BUSINESS

1. MNG 4102: INTERNATIONAL BUSINESS LECTURER: HECTOR EDWARDS DEPARTMENT OF BUSINESS & MANAGEMENT STUDIES

2. 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.

3. 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.

4. 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.

5. 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.

6. 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

7. 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.

8. GLOBALIZATION FORCES (Cont’d) • POLITICAL • Other aspects contributing to the globalization of business operations include- • the progressive reduction of barriers to trade and foreign investment by most governments. • the privatization of much of the industry in formerly communist nations.

9. 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.

10. 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.

11. 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.

12. 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.

13. 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.

14. 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 Wal-Mart worldwide was greater than the sum of the GNPs of over 100 nations.

15. LESSENING OF AMERICAN DOMINANCE? • Fortune list of top 100 industrial firms in the world according to sales. • Country 1980 1996 1999 • United States 45 32 35 • Western Europe 42 38 45 • Japan 8 23 20

16. 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

17. EXTERNAL ENVIRONMENTAL FORCES • Competitive Physical • Distributive Political • Economic Sociocultural • Socioeconomic Labour • Financial Technological • Legal

18. INTERNAL ENVIRONMENTAL FORCES • FACTORS OF PRODUCTION • Capital, raw material and people. • ACTIVITIES OF THE ORGANIZATION • Personnel, finance, production and market.

19. DOMESTIC ENVIRONMENT • Composed of all the uncontrollable forces originating in the home country that surrounds and influences the life and development of the firm.

20. FOREIGN ENVIRONMENT • Operates differently than the domestic environment for the following reasons. • Different forces values. • Changes difficult to assess. • Forces interrelated.

21. 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.

22. INTERNATIONAL BUSINESS MODEL • International business transactions take place across national borders and may involve three environments. • Domestic • Foreign • International

23. 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.