Introduction to the course
-
Upload
luispachon -
Category
Business
-
view
3.199 -
download
3
Transcript of Introduction to the course
© Luis Pachon
International Business II
Introduction to the course
© Luis Pachon
The Importance of International Business
• What is International Business?• International business is all commercial
transactions—private and governmental—between two or more countries. Private companies undertake such transactions for profit; governments may or may not do the same in their transactions.
© Luis Pachon
The Importance of International Business
• Why should we study international business?1. International business comprises a large and
growing portion of the world’s total business. Today, global events and competition affect almost all companies—large or small—because most sell output to and secure supplies from foreign countries. Many companies also compete against products and services that come from abroad.
© Luis Pachon
The Importance of International Business
• Why should we study international business?2. A company operating in the international
business field will engage in modes of business, such as exporting and importing, that differ from those it is accustomed to on a domestic level.
© Luis Pachon
Growth of International Business
• What does shape the profit-related activities across national boundaries?
• .
– Globalization– Regional Trading Blocs
• EU• NAFTA• CIS
– Information Technology– Workforce diversity– Emerging Economies– Political Instability
© Luis Pachon
Growth of International Business
• The paradigm of the “Global Village”– Countries differ• Culture• Political Systems• Economic Systems• Legal Systems• Economic Development
© Luis Pachon
International Business Vs Domestic Business.
• Systems are different.• Issues are more complex.• Conversion of Money into different currencies.• Constraints and limitations from foreign
governments.
© Luis Pachon
Why do companies go international?
• First consider:
Mission
• What is the purpose of the company’s existence?
Objectives
• What is the company trying to accomplish?
Strategies
• Means to achieve the objectives.
© Luis Pachon
Why do companies go international?
Minimize Competitive
Risk.
Acquire Resources.
Expand Sales.
Diversify sources of sales and supplies.
© Luis Pachon
Minimize Competitive Risk
• It’s a defensive reason.• Protection against domestic companies that
might gain advantages abroad.• That rival company could use those
advantages to improve the domestic operations later.
• Prevent a competitor to gain advantages.
© Luis Pachon
Acquire Resources
• Products, services, and components produced in foreign countries.
• Foreign capital, technologies, and information they can use at home.
• Cost reduction sweatshops.
© Luis Pachon
Expand Sales
• By reaching international markets, companies increase their sales faster than when they focus on a single market.
• These sales depend on the consumers’:– interest in the product– their ability to purchase the product.
Higher Sales Higher Profit Go International !
© Luis Pachon
Diversify Sources Of Sales And Supplies
• Minimize fluctuations in sales and profits• Sales increase in a country that is expanding
economically and decrease in another that is in recession.
• Avoid the full impact of price fluctuations or shortages in any one country.
© Luis Pachon
Additional Factors
• Increase in Global Competition.• Development and Expansion of Technology.• Liberalization of Cross-Border Movements.• Development of Supporting Services.• Consumer pressures.
© Luis Pachon
Increase in Global Competition
• New products quickly become known globally.• companies can produce in different countries.• Suppliers• Competitors and• Customers of domestic companies have
become international as well.
© Luis Pachon
Development and Expansion of Technology
• Internet • Commercial transatlantic supersonic travel• Faxing - E-mailing• Teleconferencing• Overseas direct-dial telephone service• Sales over the Internet (electronic commerce; e-
commerce sales). • Transportation and communication costs are more
conducive for international business operations.
© Luis Pachon
Liberalization of Cross-Border Movements
• The European Union, the NAFTA, and other regional economic blocs throughout the world provide fewer restrictions on cross-border movements.
© Luis Pachon
Development of Supporting Services
• Companies and governments of various countries, alike, have developed services that ease international business.
• Mail (Government monopoly)• Banking
© Luis Pachon
Consumer Pressures
• Tastes have changed.• Consumers know about products and services
available in other countries.• More, new, better and differentiated products.• Spend on R&D.
© Luis Pachon
Modes of International Business
• Merchandise Exports and Imports– The most common international economic
transaction.– Tangible products.
© Luis Pachon
Modes of International Business
• Service Exports and Imports.– Tourism and transportation Movies Crew– Performance of Services Fees (Turnkey
operations - Manufacturing Contracts)– Use of Assets Royalties (Licensing – franchising)
© Luis Pachon
Modes of International Business
• Investments– FDI• Joint Venture (companies)• Mixed Venture (government + company)
– Portfolio Investment• Non-controlling interest in a company.
– Stocks– Loans
• Financial Benefits.