Unit 5 International Business,Content,Warm-up activities,Look at the following pictures. Talk about them with your partners. I. Pair works What do you know about international business? Think about the implied meaning of these pictures and talk with your partner. II. Group work All these above pictures are about international business. Work in small groups, discussing what the function of world trade is for world economy today. III. Think about and then make a list of all the transnational corporations that you know today, for example, LENOVO, DELL, ,I - Introduction,International Business is all business transactions that involve two or more countries. International Business comprises a large and growing portion of the worlds total business. International Business usually takes place within a more diverse external environment.,Why Companies Engage in International Business To Expand Sales: companies sales are dependent on two factors: the consumers interest in their product or services and the consumers ability and willingness to buy them. Acquire Resources: products, services, technology, and information Diversify Sources of Sales and Supplies Minimize Competitive Risk: companies move internationally for defensive reasons. Profits from one market can be used to expand operations in other markets.,Reasons for Recent International Business Growth Expansion of Technology: transportation, telecommunications; Transportation and telecommunications costs are more conducive for international operations. Liberalization of Cross-Border Movements: goods, services, labour, Capital Development of Supporting Institutional Arrangements: development by business and governments of institutions that enable us to effectively apply that technology. Increase in Global Competition: new products become global; Globalization of production,Modes of International Business,A - Merchandise Exports and Imports: visibles and invisibles B - Performance of Services: fees; turnkey operations; management Contracts C - Use of Assets: licensing agreements; royalties; franchising D - Investments: 1) Foreign Direct Investment: gives the investor a controlling Interest in a foreign company. It gives access to: - foreign markets - foreign resources - higher profits than exporting - partial ownership,2) Portfolio Investment: stock in a company or loans to a company or country in the form of bonds, bills, or notes that the investor purchases. E - Other Operational Definitions - Strategic Alliances F MNCs, MNEs, TNCs, Global Company, Multidomestic Company,Corporations,A corporation is an artificial being, distinct and separate from the individuals who create and operate it, unlike the case with sole proprietorships and partnerships. The ownership of a corporation is divided into units called shares of stock. The owners of the shares of stock own the corporation and are called stockholders or shareholders.,Separate legal entity,shareholders enjoy limited liability,ease of transferring ownership interests,not mortal,Separation of ownership from management,Instincts,Types of Corporations,Public,Quasi public,Private,Profit,Nonprofit,Closely held,Publicly held,Corporate Structure and Governance,Most companies are made up of three groups of people:,Shareholders,Board of Directors,Officers,Employees,Shareholders elect a board of directors to manage the corporation. The board delegates the operation to officers, responsible for guiding corporate affairs and selecting corporate officers. The board of directors and the officers comprise the management of the corporation.,(in charge of corporate strategy and general policy) (responsible for the general course of business. Make sue policy is implemented and advises the board of management) Corporate Departments,President,Board of management,Supervisory board group management committee,Finance: Accounting &Control,Information technology,Human resource management,Legal affairs,Communication and Public relations,Advantages of multinational companies,They are able to produce large quantities which can reduce production costs and enable them to sell their products for lower prices By producing in a host country, the company can save on transport costs and avoid import taxes, e.g. Toyota produces cars in Thailand Profits are returned to the head office and the shareholders Risk is reduced if the market in one country is in decline, another one in another country will probably be expanding,Disadvantages of multinational companies,Seeking to minimise costs may lead to the company paying very low wages and exploiting the workforce. They are often more powerful than governments and can dictate terms to countries about location, working conditions, tax benefits, pollution levels, etc. Its difficult for smaller, local businesses to compete with multinationals and some will be forced to shut down Profits are often taken out of the host countries and are returned to the home countries