Lecture1 - What is International Business

8/2/2019 Lecture1 - What is International Business

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325 BSS

International BusinessBrian McMullan


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International Business What isit?

International Business is all commercialtransactions private and governmental between two or more countries.

Private companies undertake such transactionsfor profit; governments may or may not do thesame in their transactions.

These transactions include sales, investmentsand transportation.


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International Business What isit?

Today, global events and competition effectalmost 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.


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Why companies engage ininternational business?

To expand sales

The number of people and the amount of theirpurchasing power are higher for the world as

a whole than for a single country, socompanies may increase their sales byreaching international markets.

To acquire resources

Manufacturers and distributors seek outproducts, services and components producedin foreign countries. They also look for foreigncapital, technologies and information they can

use at home.


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Diversify Sources of Sales and Supplies

To minimise swings in sales and profits,companies may seek out foreign markets to

take advantage of business cycle

recessions and expansions differencesamong countries.

Sales decrease in a country that is in

recession and increase it one that isexpanding economically.


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Minimize competitive risk

Many companies enter into internationalbusiness for defensive reasons. They want to

counter advantages competitors may gain inforeign markets that, in turn could hurt themdomestically


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Growth in international business

Reasons for increased growth in internationalbusiness in recent times:

Rapid increase in and expansion of

technology Transportation and communication are quicker

and more cost effective.

Liberalisation of cross-border movements

Lower governmental barriers to the movementof goods, services and resources.


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Development of Supporting Services

Companies and governments have developedservices that ease international business. For

example, banks have developed efficientmeans for companies to receive payment fortheir foreign sales.


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Increased global competition

More companies operate internationallybecause:

New products quickly become known globally Companies can produce in different countries

Domestic companies' competitors, suppliersand customers have become international


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Means of carrying outinternational operations


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Entry to international business

Merchandise Exports and Imports

Companies may export or import either goodsor services.

More companies are involved in export/importthan in any other international mode.

Merchandise exports are tangible products goods sent out of the country; merchandise

imports are goods brought in.


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Service exports and imports

Non product international earnings.

Company or individual receiving payments is

making a service export. Company or individual making payments is

making a service import.

Examples of service exports and imports:

Tourism and transportation

Performance of services (e.g. banking)

Use of assets (e.g. trademarks)


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Investments

Ownership of foreign property in exchange forfinancial return, such as interest and

dividends. Foreign investment takes two forms:

Direct (FDI) gives the investor controllinginterest in a foreign company. Controllinginterest need not be 100%

Portfolio a non controlling interest in acompany or ownership of a loan to anotherparty (stock in a company or loans to acompany).


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International companies andterms to describe them

Strategic Alliance

An agreement that is of critical importance tothe competitive viability of one or more

partners. Multinational Enterprise (MNE)

An organisation that is willing to considermarket and production locations anywhere in

the world. An MNE takes a global approach toforeign markets and production.

MNC (Multinational Corporation) and TNC(Transnational Company) mean nearly the

same thing.


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Physical and Societal Influenceson International Business

International business managers mustunderstand the importance of:

Political science

Law Anthropology

Psychology

Economics Geography


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Physical and Societal Influenceson International Business


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The Competitive Environment andInternational Business

Lecture1 - What is International Business

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