International businessInternational business is a term used to collectively describe all commercial transactions(private and governmental, sales, investments, logistics, andtransportation) that take placebetween two or more regions, countries and nations beyond their political boundary. Usually,private companies undertake such transactions for profit; governments undertake them for profitand for political reasons. It refers to all those business activities which involves cross bordertransactions of goods, services, resources between two or more nations. Transaction of economicresources include capital, skills, people etc. for international production of physical goods andservices such as finance, banking, insurance, construction etc..A multinational enterprise (MNE) is a company that has a worldwide approach to markets andproduction or one with operations in more than a country. An MNE is often called multinationalcorporation (MNC) or transnational company (TNC). Well known MNCs include fast foodcompanies such as McDonalds and Yum Brands, vehicle manufacturers such as General Motors,Ford Motor Company and Toyota, consumer electronics companies like Samsung, LG and Sony,and energy companies such as ExxonMobil, Shell and BP. Most of the largest corporationsoperate in multiple national markets.Areas of study within this topic include differences in legal systems, political systems, economicpolicy, language, accounting standards, labor standards, living standards, environmentalstandards, local culture, corporate culture, foreign exchange market, tariffs, import and exportregulations, trade agreements, climate, education and many more topics. Each of these factorsrequires significant changes in how individual business units operate from one country to thenext.The conduct of international operations depends on companies objectives and the means withwhich they carry them out. The operations affect and are affected by the physical and societalfactors and the competitiveenvironment.Operations Objectives: sales expansion, resource acquisition, risk minimization
Means Modes: importing and exporting, tourism and transportation, licensing and franchising, turnkey operations, managementcontracts, direct investment and portfolio investments. Functions: marketing, global manufacturing and supply chain management, accounting, finance, human resources Overlaying alternatives: choice of countries, organization and control mechanismsPhysical and societal factors Political policies and legal practices Cultural factors Economic forces Geographical influencesCompetitive factors Major advantage in price, marketing, innovation, or other factors. Number and comparative capabilities of competitors Competitive differences by country Local taxesThere has been growth in globalization in recent decades due to the following eight factors: Technology is expanding, especially in transportation and communications. Governments are removing international business restrictions. Institutions provide services to ease the conduct of international business. Consumers know about and want foreigngoods and services. Competition has become more global. Political relationships have improved among some major economic powers. Countries cooperate more on transnational issues. Cross-national cooperation and agreements.Studying international business is important because:
Most companies are either international or compete with international companies. Modes of operation may differ from those used domestically. The best way of conducting business may differ by country. An understanding helps you make better career decisions. An understanding helps you decide what governmentalpolicies to support.Managers in international business must understand social science disciplines and how theyaffect all functional business fields.Tom Travis, the managing partner of Sandler, Travis & Rosenberg, PA. and international tradeand customs consultant, uses the Six Tenets when giving advice on how to globalize onesbusiness. The Six Tenets are as follows: 1. Take advantage of trade agreements: think outside the border o Familiarize yourself with preference programs and trade agreements. o Read the fine print. o Participate in the process. o Seize opportunities when they arise. 2. Protect your brand at all costs o You and your brand are inseparable. o You must be vigilant in protecting your intellectual property both at home and abroad. o You must be vigilant in enforcing your IP rights. o Protect your worldwide reputation by strict adherence to labor and human rights standards. 3. Maintain high ethical standards o Strong ethics translate into good business. o Forge ethical strategic partnerships. o Understand corporate accountability laws. o Become involved with the international business self-regulation movement. o Develop compliance protocols for import and export operations. o Memorialize your companys code of ethics and compliance practices in writing.
o Appoint a leader. 4. Stay secure in an insecure world o Security requires transparency throughout the supply chain. o Participate in trade-government partnerships. o Make the most of new security measures. o Secure your data. o Keep your personnel secure. 5. Expect the Unexpected o The unexpected will happen. o Do your research now. o Address your particular circumstances. 6. All global business is personal o Go to the source. o Keep communications open. o Keep the home office operational. o Fly the flag at your overseas locations. o Relate to offshore associates on a personal level. o Be available to overseas clients and customers 24/7.According to C.K. Prahalad& S. Hart,2002, The fortune at the bottom of the pyramid, Strategy &Business, 26: 54-67, and (2) S.Hart, 2005, Capitalism at the Crossroads (p. 111), Philadelphia:Wharton School Publishing.Top Tier: Per capita GDP/GNI > $20,000 Approximately one billion peopleSecond Tier: Per capita GDP/GNI $2,000-$20,000 Approximately one billion peopleBase of the Pyramid Per capita GDP/GNI < $2,000 Approximately four billion people