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Lecture 1

INTBUS 151G Lecture 1: INTBUS 151G NOTES

International Business
Course Code
Brent Burmester

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Business Across Borders 14/10/30 11:02 下午
Multi national corporations (MNCs) are not necessarily big, hi-tech,
politically powerful, American/Japanese/European or bad. An MNC is
simply a firm that engages in foreign direct investment (FDI). A MNC is
comprised of a parent firm based in the home country, which engages in
FDI to take control over another company, called the subsidiary, located
in the host country. Consequently, an MNC is a firm comprised of multiple
companies situated in different countries.
Foreign Direct Investment (FDI)
Buying something that pays you back
Something you buy but don’t consume
Buying something situated beyond the jurisdiction that governs
Notionally involves the idea of capital moving from one country
to another country
The states involved need to be independent from each other (e.g.
not a colony of a sovereign nation, not two states within a
Buying something that pays you back more because you actively
manage it
The Rise of the MNC
When did FDI become a thing?
Early Quasi-MNCs
o Assyria 4000BP – early writing reveals embryonic MNEs
Fortified city at the intersection of important long-distance trade
1200km away: the Anatolian city of Kanesh, where ~20,000 clay
tablets with texts in Assyrian cuneiform found – 85% are of an
economic nature
The lower city of Kanesh was largely inhabited by international
businesspeople, especially Assyrians from Ashur

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The East India Country
Private company granted a Royal Charter by Queen Elizabeth in
Controlled trade between Britain and the Indian subcontinent
(and elsewhere – other British dominions)
Traded in cotton, silk, indigo dye, salt, saltpetre, opium
From mid 1700s the Company came to rule large areas of India
with its own private armies
The Right Climate for MNCs
The emergence of corporate personality and limited liability
A world of independent states
High speed communication
War and the Emergence of MNCs
WWII – Big changes
Big leaps into computer technologies helped emergence of MNCs
The Marshall Plan – official plan to aid countries affected by
WWII – aided private money outflow to invest in foreign nations
MNCs in all their variety
We might differentiate MNCs by…
Size (how is this measured?) – number of people that work for it,
amount of revenue, market value of its assets etc.
Industry or sector (what they do) – they do pretty much
Country of origin – where it started, where its headquarters are
Geographic diversification – how much of the world they do
business in or particular regions that they work in
Motivation – what motivates them to become multinationals
Integration methods - how they do business, how they organize
and coordinate their activities around the world
Subsidiary type
Type of owner
There is a big dominance by America, Europe and China.

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The Not so Large
Paengaroa – hub of global commerce
Comvita – therapeutic bee-products manufacturer
1974, Comvita = on old bloke and some bees
2011 – 200+ employees and turnover of around $103.5 million
($7.4 million profit)
Exports to 20+ countries, six distribution companies in UK and
Asia. Honey production and olive growth/processing in Australia
There is always more going on at home than abroad.
Why Companies go Overseas?
Resource Seeking
Market Seeking
o It can be cheaper
o Can’t provide a service when you’re not there
o Some products aren’t exportable due to country’s laws etc
o Some markets are not able to compete with
o If a big customer goes abroad you may have to follow
them to keep supplying them
Efficiency Seeking
o About making costs as low as can be
o Resources, costs, through reducing labour costs
o Searching for low cost labour
o New Zealand is attracting FDI for its land – i.e. for cheap
farming, forestry, etc.
Knowledge Seeking
o Have to understand the markets and customers
o To seek what other businesses and markets do
o E.g. Chinese companies expanding out to see if they can
understand why they make everyone’s products
o To see other business’ talent, processes etc
o Usually buying a pre-existing company to gain its
knowledge/talent/experience/relationships rather than the
other seeking reasons which are more about starting from
scratch in a new country to access its resources etc.
Haven Seeking
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