3. INTRODUCTION TO INTERNATIONAL BUSINES
Learning Objectives:
At the end of this module, the learners can able to:
(1) Define the concept of multinational corporation (MNC) and the
environment in which it
operates;
(2) Identify the management goal and organizational structure of
the MNC;
(3) Describe the key theories that justify the international business;
(4) Explain the common methods used to conduct international
business.
4. Meaning of Multinational Corporations
(MNC)
Multinational Corporation (MNC) are
those companies with the central office
and operations in one particular
country but operates as well in other
countries around the world. In layman’s
term, these companies are engaged in
doing international business.
5. A multinational corporation (MNC) is a business firm incorporated in one country that
has production and sales operations in many other countries. The term suggests a firm
obtaining raw materials from one national market and financial capital from another,
producing goods with labor and capital equipment in a third country, and selling the
finished product in yet other national markets. Indeed, some MNCs have operations in
dozens of different countries. MNCs obtain financing from major money centers around
the world in many different currencies to finance their operations. Global operations
force the treasurer’s office to establish international banking relationships, place short-
term funds in several currency denominations, and effectively manage foreign
exchange risk.
6. Jollibee is committed to its core business
which is the development, operation and
franchising of its quick-service restaurant
brands. It offers a wide variety of affordable
and delicious dishes and great tasting food
prepared to satisfy customers of all ages and
from all walks of life.
7. Management Structure of MNC
Multinational Corporations are considering the two major
management styles. Study the following
presentation of centralized and decentralized management
style of multinational corporations.
15. International trade is a relatively conservative
approach that can be used by firms to penetrate
markets (by exporting) or to obtain supplies at a low
cost (by importing). This approach entails minimal risk
because the firm does not place any of its capital at
risk. If the firm experiences a decline in its
exporting or importing, it can normally reduce or
discontinue this part of its business at a low cost.
16. Licensing obligates a firm to provide its technology
(copyrights, patents, trademarks, or trade names) in
exchange for fees or some other specified benefits.
17. Franchising obligates a firm to provide a specialized sales or
service strategy, support assistance, and possibly an initial
investment in the franchise in exchange for periodic fees.
For example, McDonald’s, Pizza Hut, Subway Sandwiches,
Blockbuster Video, and Dairy Queen have franchises that are
owned and managed by local residents in many foreign
countries.
18. A joint venture is a venture that is jointly owned
and operated by two or more fi rms. Many firms
penetrate foreign markets by engaging in a joint
venture with firms that reside in those markets.
Most joint ventures allow two firms to apply their
respective comparative advantages in a given
project.
19. Firms frequently acquire other firms in foreign
countries as a means of Operations
penetrating foreign markets.
For example, American Express recently
acquired offices in London, while Procter &
Gamble purchased a bleach company in
Panama. Acquisitions allow firms to have full
control over their foreign businesses and to
quickly obtain a large portion of foreign
market share.
20. Firms can also penetrate foreign markets by establishing new
operations in foreign Subsidiaries foreign countries to produce and
sell their products.
Like a foreign acquisition, this method requires a large investment.
Establishing new subsidiaries may be preferred to foreign
acquisitions because the operations can be tailored exactly to the
firm’s needs. In addition, a smaller investment may be required
than would be needed to purchase existing operations. However,
the firm will not reap any rewards from the investment until the
subsidiary is built and a customer base established.
21.
22. Instruction: Make a comparison chart of the three theories above. Kindly refer to the reading materials and video
presentation to complete the portion of this module. You can use open resources as well like online journals and
others. Write your answers on the given format.
23. Do you know some multinational corporations? Then, share this by
reflecting your ideas on the template
below. At least 10 companies
24. Instruction: The meaning
and/or descriptions of
different methods of
multinational corporations
are well indicated above.
Using this, make a brief
summary or conclusion using
your own words
