MGMT1101 Study Guide - Final Guide: Anti-Globalization Movement, Joint Venture, Foreign Direct Investment

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Verren Jesilia
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MGMT1101 Global Business Environment
Chapter 1 International Business
International Business: consists of all commercial transactions that take place between two or more
countries.
- Refers to business activities that straddle two or more countries.
- MNE (Multinational Enterprise) is any business that has productive activities in two or more
countries.
Types of IB transactions:
- Trade of values between two parties:
Companies and shares/ stocks
Investors
Investment banks, analysts, etc.
- By private or public enterprises
Exchanging (combinations of):
Goods
Services
Technology
Capital
Ideas and intellectual property
Significance of Borders and Boundaries
- State boundaries: Political and legal system boundaries; nation-state system
- Cultural boundaries: nation-state is a ode ietio ad th
- Economic boundaries: most economic transactions take place within borders
- Boudaies of id ad haits: borders are both psychological, social and physical
Businesses, both small and large, are shifting towards becoming international due to the integrated
global economy.
- Free Trade Agreement
- Managers need to understand the context within which they operate -> evaluate
opportunities and risks to make decisions and to take actions
- Context + Action = Performance
Why international business?
- Potential benefits of the global market
- Distance and cost of doing business
- Operating in an unfamiliar environment (western vs non-western, democracy vs
authoritarian) **underestimated the complexity of countries with high authority
- Political, social, cultural, legal and economic differences
- Protectionism of governments
- Different currencies used in transactions
- Lak of old goeet : o fial aitato to set ules, resolves disputes, enforce
agreements. ***
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Chapter 2 Multinational Enterprises
MNE Multinational Enterprises is any business/firm that has productive activities in 2 or more
countries (engages in international trade and investment)
Role of MNE:
- Provide standard products worldwide
- Facilitates the convergence of consumer taste
- Main actor of global production (eg. Toyota, apple, Samsung)
- Facilitates global trade of intermediate and finished goods (between subsidiaries and
headquarters)
- Influence local players and firms (supplier, distributors, employees) with global standard and
value.
Benefit:
- Eg. Technology Spillover
- Japanese style of manufacturing transfer to other countries create the environment
globally bring prosperity
All MNEs are not equal in terms of:
- Size/ Resources
- Geographical scope/diversification
- Experience/Process of internationalisation
- Management attitude and structure
- Degree of control over foreign op.
- Foreign/Total Assets
- Foreign/Total Sales
- Foreign/Total Employment
Eg. Agriculture, technology -> producing different things, what company is capable of doing (goals),
hence not equal.
- Heterogeneous set up of organisation
Firm internationalisation: The process by which firms establish and conduct transactions with firms
and customers in other countries, and international operations have an increasing influence on their
future.
- Evolutionary process over time as firm expand their geographical reach and mindset
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Modes of Operation:
- Inward: Servicing domestic customers through transactions with foreign firms.
- Outward: Servicing customers in foreign markets.
Export (if producing at home, otherwise) and sells to customer in foreign market.
Appoint another firm in foreign country as its representative (agent, distributor)
Favoured mode for SMEs and firms in the early stages of internationalisation
Eg. Wine, Cheese
Produce abroad
1. Contracting: by Licensing, franchising, subcontracting. By Management
contracts, turnkey
Licensing: Legal ight ealig fis to use aothe fis itelletual itagile
property in exchange for a fee
Trademarks
Patents and Inventions
Copyrights
Franchising: Form of license required franchisee to work under supervision/control
of franchisor
MDoalds, Hotels stit ualit otol
Subcontracting/ Contract manufacturing: Part/all of product produced by foreign
contractee.
Management contracts: International firm provides the managerial expertise to
operate another firm in a foreign country for an agreed fee for fixed period of time
Turnkey project: Firm designs, builds and equips facilities, then transfers them to
foreign owner on completion (chemical, pharmaceutical, petroleum-refining
industries) require complex, expensive production.
2. Foreign Direct Investment: Joint ventures. Mergers, acquisition, greenfield
Ownership and control, to some degree, of foreign firms
Eg. LG, Zenith. Tesco.
Cooperative venture: Joint venture: two or more firm agree to cooperate to set up a
new jointly owned firm in the foreign market
Division of labour and expertise
Sometimes required by a host country
Going it alone: Merging with or acquiring an exisiting firm
Establish a new firm (greenfield)
Globalisation: Increasing rates of cross-border transactions leading to greater interdependence of
countries, industries, companies. (has many dimensions)
Changing face of Globalisation
- Declining trade barrier: global institutional development
- Information revolution: technology
- Multi-centred: non-US firms and fall of the communist regime
Anti-globalisation
- Globalisation of anti-globalisation
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Document Summary

International business: consists of all commercial transactions that take place between two or more countries. Refers to business activities that straddle two or more countries. Mne (multinational enterprise) is any business that has productive activities in two or more countries. Trade of values between two parties: companies and shares/ stocks. By private or public enterprises: exchanging (combinations of), goods, services, technology, capital. State boundaries: political and legal system boundaries; nation-state system. Cultural boundaries: nation-state is a (cid:373)ode(cid:396)(cid:374) i(cid:374)(cid:448)e(cid:374)tio(cid:374) a(cid:374)d (cid:862)(cid:373)(cid:455)th(cid:863) Bou(cid:374)da(cid:396)ies of (cid:858)(cid:373)i(cid:374)d a(cid:374)d ha(cid:271)its(cid:859): borders are both psychological, social and physical. Economic boundaries: most economic transactions take place within borders. Businesses, both small and large, are shifting towards becoming international due to the integrated global economy. Managers need to understand the context within which they operate -> evaluate opportunities and risks to make decisions and to take actions. Operating in an unfamiliar environment (western vs non-western, democracy vs authoritarian) **underestimated the complexity of countries with high authority.

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