Sie sind auf Seite 1von 23

Introduction to International

Business and Multinational


Corporations
By Abdul Halim
Book: International Business Theory and
Practice 2nd Edition
(Ajami et al, 2006)
WHAT IS
INTERNATIONAL BUSINESS?

In its purest definition, international business is


described
as any business activity that crosses national
boundaries.
Types of IB
Foreign trade. Visible physical goods or commodities
move between countries as exports or imports.
Trade in services, such as insurance, banking, hotels,
consulting, and travel and transportation.
Portfolio investments are financial investments made in
foreign countries. The investor purchases debt or equity
in the expectation of nothing more than a financial
return on the investment. Resources such as equipment,
time, or personnel are not contributed to the overseas
venture.
Direct investments are differentiated by much greater
levels of control over the project or enterprise by the
investor. The level of control can vary from full control,
when a firm owns a foreign subsidiary entirely, to partial
control, as in arrangements such as joint ventures with
other domestic or foreign firms or a foreign government.
DEFINITION OF A MULTINATIONAL
CORPORATION
Multinational firm is one that is structured so that
business is conducted or ownership is held across a
number of countries or one that is organized into
global product divisions.
Types of Organisations
Howard Perlmutter looks MNC by the decision
makers of an organization and differentiates among
ethnocentric, polycentric, and geocentric
organizational types:
Ethnocentric organizations are those that are
focused in a home or domestic environment and
therefore exclude MNCs.
Polycentric organizations have investments,
operations, or markets in several countries but do
not integrate the management of these
international functions.
Geocentric organizations are integrated and have
a world perspective regarding the breadth and
reach of possible organizational operations.
Advantages Gained by MNCs
Superior Technical Know-how
Most large MNCs have access to higher or advanced
levels of technology, which was either developed or
acquired by the corporation. the MNC a strong
competitive advantage in the
international market, because it results in the
production of efficient, hi-tech, low-priced products
and services that command a large international
market following.
Large Size and Economies of Scale

Most MNCs tend to be large. Some of them, such as


Wal-Mart and ExxonMobil, have sales that are larger
than the gross national products of many countries.
The large size confers the advantage of significant
economies of scale to MNCs.
Lower Input Costs Due to Large Size

Bulk purchases of inputs enable MNCs to bargain


for lower input costs, and they are able to obtain
substantial volume discounts. The lowered input
costs imply less expensive and, therefore, more
competitive finished products.

Wal-Mart is able to sell its products at low prices


relative to its competition due to both its bulk
purchasing and its effective
inventory control. By understanding which products
are selling effectively, Wal-Mart combines low-cost
purchasing with the effective movement of
inventory to achieve competitive advantage in the
retail consumer products market.
Ability to Access Raw Materials
Overseas
Many MNCs lower input and production costs by
accessing raw materials in foreign countries. In
many of these cases, MNCs supply the technology
to extract or refine the raw materials, or both.
Ability to Shift Production Overseas

To increase their international competitiveness,


MNCs relocate their production facilities overseas,
thereby taking advantage
of lower costs for labor, raw materials, and other
inputs, and, often, utilizing incentives offered by
host countries.
Scale Economies in Shipment,
Distribution, and Promotion
The large volumes of freight they ship permit them
to negotiate lower rates with the shippers.
Distribution and promotion costs are also lower for
MNCs because of their high volumes of production.
Brand Image and Goodwill
Advantages
Many of the MNCs possess product lines that have
established a good reputation for quality,
performance, value, and service. This reputation
spreads abroad through exports and promotion,
which adds to an MNCs arsenal of potent weapons
in the form
of brand image or goodwill, which it is able to use
to differentiate its own products from others in its
genre.
Access to Low-Cost
Financing
As a result of their size, MNCs require large
amounts of financing, and generally they are
excellent credit risks. Therefore, they are the
favoured customers of financial institutions, which
lend to them at their best rates. The lower cost of
financing for the MNCs adds to their competitive
strength.
Financial Flexibility
MNCs also have an advantage in being able to
manipulate their profits and shift them to lower-tax
locations. This greater financial leverage can be
used to artificially lower prices to enter new
markets or to increase market shares in existing
ones.

MNCs also utilize several financial mechanisms with


the objectives of shifting profits and manipulating
taxes.
Information Advantages
Multinationals have a global market view and are
able to collect, process, analyse, and exploit their
in-depth knowledge of worldwide markets. They use
this knowledge to create new openings for their
existing products or to create new products for
potential market niches.
Managerial Experience and Expertise

Because MNCs function simultaneously in a large


number of very different countries, they are able to
assimilate a wealth of valuable managerial
experience. This experience provides insights into
dealing with different business situations and
problems around the globe.
Diversification of Risks
The simultaneous presence of MNCs in different
countries allows them to more effectively bear the
risk of cyclic economic declines. Generally these
cycles are not the same among different countries.
Thus, losses in one country can be offset by gains in
other countries.
Disadvantages Faced by MNCs

Business Risks

Since MNCs conduct business outside the


borders of their own countries, they deal with the
currencies of other countries, which renders them
vulnerable to fluctuations in exchange rates.
Host-Country Regulations
The MNC has the difficult task of familiarizing itself
with these regulations and modifying its operations
to ensure that it does not overstep them.
Different Legal Systems
MNCs must operate under the different legal
system of different countries. In some countries the
legislative and judicial processes are extremely
cumbersome and contain many nuances that are
not easily understood by non-natives.
Political Risks
Host countries are sovereign entities and their
actions normally do not admit any appeals. This
political risk, as it is known, increases in countries
whose governments are unstable and tends to
change frequently.
Operational Difficulties
Unwritten business practices and market
conventions often prevail in host countries. MNCs
that lack familiarity with such conventions find it
difficult to conduct business accordance with them.
Cultural Differences
Many find that their expatriate executives are not
able to adjust to the local culture, both personally
as well as professionally.

Das könnte Ihnen auch gefallen