Other industrial MNEs leaders include vehicle manufacturers such as: Multinational enterprises range from any kind of business activity or market, from consumer goods to machinery manufacture; a company can become an international business. Therefore, to conduct business overseas, companies should be aware of all the factors that might affect any business activities, including, but not limited to: Each of these factors may require changes in how companies operate from one country to another. Each factor makes a difference and a connection.
One of the first scholars to engage in developing a theory of multinational companies was Canadian economist Stephen Hymer. There were three phases of internationalization according to Hymer's work. The first phase of Hymer's work was his dissertation in called the International Operations of National Firms. At first, Hymer started analyzing neoclassical theory and financial investment , where the main reason for capital movement is the difference in interest rates.
After this analysis, Hymer analyzed the characteristics of foreign investment by large companies for production and direct business purposes, calling this Foreign Direct Investment FDI. By analyzing the two types of investments, Hymer distinguished financial investment from direct investment. The main distinguishing feature was control. Portfolio investment is a more passive approach, and the main purpose is financial gain , whereas in foreign direct investment a firm has control over the operations abroad.
So, the traditional theory of investment based on differential interest rates does not explain the motivations for FDI. According to Hymer, there are two main determinants of FDI; where an imperfect market structure is the key element. The first is the firm-specific advantages which are developed at the specific companies home country and, profitably, used in the foreign country.
The second determinant is the removal of control where Hymer wrote: Hymer's second phase is his neoclassical article in that includes a theory of internationalization and explains the direction of growth of the international expansion of firms. In a later stage, Hymer went to a more Marxist approach where he explains that MNC as agents of an international capitalist system causing conflict and contradictions, causing among other things inequality and poverty in the world.
Hymer is the "father of the theory of MNEs", and explains the motivations for companies doing direct business abroad. Among modern economic theories of multinationals and foreign direct investment are internalization theory and John Dunning's OLI paradigm standing for ownership, location and internationalization. Dunning was widely known for his research in economics of international direct investment and the multinational enterprise. His OLI paradigm, in particular, remains as the predominant theoretical contribution to study international business topics.
Hymer and Dunning are considered founders of international business as a specialist field of study.
Core Course
The conduct of international operations depends on a company's objectives and the means with which they carry them out. The operations affect and are affected by the physical and societal factors and the competitive environment. All firms that want to go international have one goal in common; the desire to increase their respective economic values when engaging in international trade transactions. To accomplish this goal, each firm must develop its individual strategy and approach to maximize value , lower costs, and increase profits.
A firm's value creation is the difference between V the value of the product being sold and C the cost of production per each product sold. Value creation can be categorized as: However, the success of firms that extend internationally depends on the goods or services sold and on the firm's core competencies Skills within the firm that competitors cannot easily match or imitate.
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For a firm to be successful, the firm's strategy must be consistent with the environment in which the firm operates. Therefore, the firm needs to change its organizational structure to reflect changes in the setting in which they are operating and the strategy they are pursuing. Once a firm decides to enter a foreign market, it must decide on a mode of entry. There are six different modes to enter a foreign market, and each mode has pros and cons that are associated with it.
The firm must decide which mode is most appropriately aligned with the company's goals and objectives.
MA (Hons) International Business Management with Economics
The six different modes of entry are exporting, [5] turnkey projects , licensing , franchising , establishing joint ventures with a host-country firm, or setting up a new wholly owned subsidiary in the host country. The first entry mode is exporting. Exporting is the sale of a product in a different national market than a centralized hub of manufacturing. In this way, a firm may realize a substantial scale of economies from its global sales revenue.
As an example, many Japanese automakers made inroads into the U. There are two primary advantages to exporting: Some possible disadvantages to exporting are high transport costs and high tariff barriers. The second entry mode is a turnkey project. In a turnkey project, an independent contractor is hired by the company to oversee all of the preparation for entering a foreign market. Once the preparation is complete and the end of the contract is reached, the plant is turned over to the company fully ready for operation. Licensing and franchising are two additional entry modes that are similar in operation.
Licensing allows a licensor to grant the rights to an intangible property to the licensee for a specified period of time for a royalty fee.
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Franchising, on the other hand, is a specialized form of licensing in which the "franchisor" sells the intangible property to the franchisee, and also requires the franchisee operate as dictated by the franchisor. Lastly, a joint venture and wholly owned subsidiary are two more entry modes in international business. A joint venture is when a firm created is jointly owned by two or more companies Most joint venture are partnerships. This is in contrast with a wholly owned subsidiary, when a firm owns percent of the stock of a company in a foreign country because it has either set up a new operation or acquires an established firm in that country.
Exports and imports of merchandise:. Strategic variables affect the choice of entry mode for multinational corporation expansion beyond their domestic markets. These variables are global concentration, global synergies, and global strategic motivations of MNC. To achieve success in penetrating a foreign market and remaining profitable, efforts must be directed towards the planning and execution of Phase I.
The use of conventional SWOT analysis , market research , and cultural research, will give a firm appropriate tools to reduce risk of failure abroad.
International Business and Trade (English) | Professionele bachelor (Engels) | Thomas More
Risks that arise from poor planning include: There are also cultural risks when entering a foreign market. Lack of research and understanding of local customs can lead to alienation of locals and brand dissociation. As such, they are key matters for the board and impinge on the whole business, rather than just an isolated unit. A company has to be conscious about the production costs to not waste time and money.
If the expenditures and costs are controlled, it will create an efficient production and help the internationalization. How a government governs a country governance can affect the operations of a firm. The government might be corrupt , hostile, or totalitarian ; and may have a negative image around the globe. A firm's reputation can change if it operates in a country controlled by that type of government.
Elections or any unexpected political event can change a country's situation and put a firm in an awkward position. Political risk tends to be greater in countries experiencing social unrest. When political risk is high, there is a high probability that a change will occur in the country's political environment that will endanger foreign firms there.
Corrupt foreign governments may also take over the company without warning , as seen in Venezuela. Technological improvements bring many benefits, but some disadvantages as well. Some of these risks include "lack of security in electronic transactions , the cost of developing new technology Companies that establish a subsidiary or factory abroad need to be conscious about the externalizations they will produce, as some may have negative effects such as noise or pollution.
This may cause aggravation to the people living there, which in turn can lead to a conflict. People want to live in a clean and quiet environment, without pollution or unnecessary noise. If a conflict arises, this may lead to a negative change in customer's perception of the company. Actual or potential threat of adverse effects on living organisms and environment by effluents, emissions, wastes, resource depletion, etc.
As new business leaders come to fruition in their careers, it will be increasingly important to curb business activities and externalizations that may hurt the environment. These are the economic risks explained by Professor Okolo: The effect of exchange-rate and interest rate make it difficult to conduct international business. In practice, the biggest problem arising from economic mismanagement has been inflation.
Historically many governments have expanded their domestic money supplying misguided attempts to stimulate economic activity. According to Professor Okolo: The devaluation and inflation will also affect the firm's ability to operate at an efficient capacity and still be stable. It might be higher or lower in the host countries.
Then "the risk that a government will indiscriminately change the laws, regulations, or contracts governing an investment—or will fail to enforce them—in a way that reduces an investor's financial returns is what we call 'policy risk. Terrorism is a voluntary act of violence towards a group s of people.
An exploration of the basis of trade, the gains from trade, and the impact of trade on growth, employment, and income through in-depth analysis and case studies, simulations and policy debates. Examines international finance and the institutions and principles governing the functioning of the international monetary system. Among the topics discussed are the structure, operation, and stability of foreign exchange markets, the causes and consequences of international accounts disequilibria, the mechanisms of balance-of-payments adjustment, the merits of different exchange rate regimes, financial crises, the effects of international capital mobility on trade, growth, and employment, and the problem of international policy coordination.
This course addresses the question of how multilateralism may facilitate policy making in meeting global challenges. The readings, discussions, and guest speakers survey emerging issues in the debate on global governance. Special attention is given to the role of international institutions, including the United Nations, regional organizations, and international financial institutions.
Pressing security issues are discussed, including terrorism, weapons of mass destruction, and prospects for peacebuilding in war-torn societies. Attention then turns to global policies on investment and trade, combating poverty, and sustainable development. This course examines central issues in contemporary international security policy such as causes of war, American primacy, rising major powers, international and civil wars, the spread of weapons of mass destruction, unconventional warfare, crisis management, standards for legitimate use of force, and key concepts in the study of international politics and conflict.
International Business and Trade (English)
This seminar surveys the defining political economy issues of our time. It explores the interplay between politics and economics in the substantive issue areas of trade, finance, investment, development, and redistribution. The seminar surveys the most provocative, influential contributions in multiple disciplines utilizing a wide range of research methods. Contemporary debates are studied in depth, including the fragmentation of production, causes and consequences of financial crises, growing inequality, economic development challenges, and the determinants of public goods provision.
The course equips students with the conceptual and empirical tools to better understand current developments, provides exposure to multiple perspectives, and builds confidence in development one's own point of view.
- International business.
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- Trade and International Business.
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This course serves as an introduction to the politics of international economic relations. We examine the history, structures, and institutions of the international political economy IPE and the theories that seek to explain them. The first half of the course is devoted to the IPE of trade, international monetary and financial affairs, globalization, and inequality.
The second half explores the IPE of foreign aid, public health, energy, intellectual property, and migration through illuminating cases and group presentations. Students need not have an extensive background in international economics to complete this course satisfactorily, but those not familiar with basic economic principles will find several sections of the class challenging. A survey course that explores aspects of day-to-day managerial communication, presentations and high-profile moments, as well as interpersonal communication.
The course uses many teaching techniques: This course will introduce students to the global context of CSR through comparative business perspectives. After considering the theoretical frameworks for undertaking CSR activities the course will addresses a number of public policy issues facing globalizing companies through a series of case studies.