1. What does International Business mean?
Performance of trade and investment activities by firms across national borders.
2. What is globalization of markets?
Ongoing economic integration and growing interdependency of countries worldwide.
3. What are the keys concept in international trade and investment? (FEI4)
i) International trade
Exchange of products/services across the national borders typically through importing and exporting.
ii) Exporting
Sale of product/services to customers located abroad from a base in the home country or third country.
iii) Importing/Global Sourcing
Procurement of products/services from suppliers located abroad for consumption in the home country or third country.
iv) International investment
The transfer of assets to another country or the acquisition of assets in that country.
v) International Portfolio Investment
Passive ownership of foreign securities such as bonds & stocks for the purpose of generating financial returns.
vi) Foreign Direct Investment
An internationalization strategy in which the firm establishes a physical presence abroad through acquisition of productive assets such as capital, tech, labor, land, plant and equipment.
4. Four Risk of internalization? (4C’s)
i) Cross-Cultural Risk
- Refers to a situation/ event where a cultural miscommunication puts some human value at stake
- Including cultural differences, negotiation patterns, decision making styles and ethical practices
ii) Country Risk
- Refers to the potentially adverse effect on company operations and profitability caused by developments in the political, legal, and economic environment in a foreign country.
- Including government intervention, barriers to trade and in bureaucracy, red tape, lack of legal safeguard, legislation unfavorable, economic failures, and social & political unrest and instability.
iii) Currency Risk (Financial Risk)
- Refers to the risk of adverse fluctuations in exchange rates.
- Including currency exposure, asset valuation, foreign taxation, inflationary, and transfer pricing.
iv) Commercial Risk
- Refers to the firm’s potential loss or failure from poorly developed or executed business strategies , tactics, or procedures
- Including weak partner, operational problems, timing of entry, competitive intensity & poor execution strategy.
5. Who participate in international business? (BSNM)
i) Multinational Enterprise (MNE)
A large company with substantial resources that performs various business activities through a network of subsidiaries and affiliates located in multiple countries.
ii) Small and Medium Enterprise (SMEs)
A company with 500 or fewer employees (in US), this number need to be adjusted downward for other countries.
iii) Born Global Firm
A young entrepreneurial company that initiates international business activity very early in its evolution, moving rapidly into foreign markets.
iv) Non Governmental Organizations (NGOs)
There are non-profit organizations that pursue special causes and serve as an advocate for the art, education, politics, religion and research.
6. Why do firm pursue internationalization strategies? (BEG BGS DICE)
i) Seek opportunities for growth through market diversification
ii) Earn higher margins and profits
iii) Gain new ideas about products, services & business methods
iv) Better serve key customer that have relocated abroad
v) Be closer to supply sources, benefit from global sourcing advantages or gain flexibility in the sourcing of products
vi) Gain access to lower cost or better value factors of production
vii) Develop economies of scale
viii) Confront international business more effectively
ix) Invest in a potentially rewarding relationship with a foreign partner
x) Enhance competitive advantage and seek growth and profit opportunities.
7. Why we should study international business? (FOC3)
i) Facilitator of the global economy & interconnected
ii) An opportunity for global corporate citizenship
iii) Contributor to national economic well being
iv) A competitive advantage for the firm
v) A competitive advantage for you.
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