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WHY STUDY INTERNATIONAL BUSINESS ??

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1. Almost any large organization you work for, will have international operations or to be affected by the global economy – So, we need to understand this increasingly important area to be better assess career opportunities and to interact effectively with other managers

REASONS WHY WE MUST STUDY IB

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GLOBAL ISSUES

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REASONS WHY WE MUST STUDY IB2. Preparation for small

companies to involved in international business – using foreign-made materials or equipment, competing with foreign firms, and perhaps even selling in foreign markets.

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REASONS WHY WE MUST STUDY IB

3. To keep peace with our future competitors. Foreign student study and be trained to be a manager. So, we need to ensure our global skills and knowledge will aid our career to compete.

AP – Raland Brooks, of Washington, who has been looking for work 

since February, makes notes about a job opening …

P O L I T E K N I K SULTAN SALAHUDDIN ABDUL AZIZ SHAH

P O L I T E K N I K

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REASONS WHY WE MUST STUDY IB4. To stay abreast of the latest

business techniques and tools, because no single country has a monopoly on good ideas.

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REASONS WHY WE MUST STUDY IB5. To obtain cultural literacy because

cultures and political systems need to be understand and appreciating the similarities and differences.

many communities populated by various ethnic groups

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INTERNATIONAL BUSINESS

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INTRODUCTION• All business transactions, private and governmental that

involve two or more countries• Private companies undertake such transactions for profit• Governments may or may not do the same in their transactions• The goal :

PRIVATE BUSINESSTo increase or to stabilize profitsSuccess is influenced by:- Foreign sales- Foreign resources

GOVERNMENT BUSINESS:May or may not be profit oriented

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WHY COMPANIES ENGAGE IN IBIn operating internationally, a company should consider its:MISSION:What the company will seek to do and become over the long termOBJECTIVE:Specific performance targets to fulfill the missionSTRATEGY:The means to fulfill its objectives

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• To expand sales• To acquire resources• To diversify their sources of sales and supplies• To minimize competitive risk• To have diplomatic collaboration• To increase job opportunity• To establish and control of RM and foreign

exchange

WHY COMPANIES ENGAGE IN IB ctd..

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MODE OF ENTRY TO INTERNATIONAL BUSINESS

• Licensing• Franchising• Exporting• Turnkey Projects• Management Contracts• Contract Manufacturing• Joint Venture (FDI)• Wholly Owned Subsidiaries (FDI)• Strategic Alliances

Nonequity - No financial resources

Equity based

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LICENSING• A contractual arrangement in which one firm

grants access to its patents, trade secrets, or technology to another.Licensor = firm that give the patents, trade mark, product formula or technology Licensee = firm that used the patents, trade mark, product formula or technology. Will pay royalties of license fees to licensor

• Ex: Coca cola, Disney, Pierre Cardin, Hyundai Electronics and Samsung Electronics

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FRANCHISING

• A contractual arrangement in which one firm grants access to its patents, trade secrets, or technology to another and will provide operational & managerial help to franchiseeFranchisor= firm that give the patents, trade mark, product formula or technology Franchisee= firm that used the patents, trade mark, product formula or technology. Will pay royalties of license fees to licensorGive franchisor franchising fee and regular payment of a percentage of sales

• Ex: McDonald’s, Pizza Hut, KFC, Hilton

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TURNKEY PROJECTS• Is an port of technology, management expertise, and

capital equipment• The contractor agrees to design and erect a plant,

supply the process technology, provide the necessary suppliers and etc. before handing it o the owner

• The contractor have responsibilities to design, construction and operation of the project

• Usually made with government who have large public service and construction project such as building hospital, highway and ports

• Ex: Monorel in India, Building In Dubai

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EXPORTING

• Indirect Exporting- The exporting of goods and services through

various types of home based exporters• Direct Exporting

- The exporting of goods & services by the firm that produces them-Export business is handled by someone within the firm (such as sales manager)

• Ex: UMW Toyota, Petronas

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CONTRACT MANUFACTURING

• Arrangement in which one company contract with another company to produce product

• The company will take responsibility to market the product with their own brand after produce the product

• Company that give contract will get royalties• Ex: Sapura Crest Petroleum assembly the

production plant in Saudi Arabia and Indonesia

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JOINT VENTURE (FDI)• Two or more firm will form a partnership

- share ownership, risk, profit and control• Ex: FORD & Volkswagen to join operation in Argentina & Brazil• Ex: General Mills & Nestle to join operation in Europe

WHOLLY OWNED SUBSIDIARIES (FDI)• A company that wishes to own a foreign subsidiary and company take full

responsibility (get all profit and faced all risk)

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STRATEGIC ALLIANCES

• Partnerships between competitors, customers, or suppliers that may take one or more various forms (such as joint venture etc.)

• Ex: Japan’s Panasonic, Germany’s Siemens, Korea’s Samsung & Swedish-Japanese Sony Ericsson subsequently joined as equity partners in this alliances

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EXTERNAL FACTORS THAT INFLUENCE INTERNATIONAL BUSINESS

• Economy forces• Geographical influences• Political & Legal Practice• Technologies• Culture (Values, attitudes and belief)

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FACTORS INFLUENCE THE GROWTH OF INTERNATIONAL BUSINESS

• Expansion of technology• Development of institution• Liberalization and government policies• An increased in global competition

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GLOBALIZATION

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DEFINITION

• The term “globalization” describes the increased mobility of goods, services, labor, technology and capital throughout the world

• Globalization is a term for the horizontal and vertical integration of manufacturing and trade on an international level

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TOPIC TO BE DISCUSS1. Advantage of globalization towards business2. Disadvantage of globalization towards business3. Globalization, big companies forcing small

companies to compete at an unfair level4. Globalization, international companies growing

more powerful than some countries5. Globalization, created opportunities to small

medium size enterprise to success internationally6. Globalization gives threat to small business to

expand business globally7. Impact of globalization to world consumer.

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Advantage of globalization towards business• Increase resources, resources can be acquire from other

country• Everybody can involve at any level of business at any country• Increase target market due to big no. of population• Communication among people in different country more

efficient• Easy to locate/ market at any place of world• Increase country collaboration• Investment in different mode in different country.• Every country have chance to develop and increase the level

of economy• Business can share the technology, professionalism, and

expertization.

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Disadvantage of globalization towards business

• Punca kegawatan ekonomi – akibat kebergantungan ekonomi terhadap satu-satu negara sahaja.

• Tidak semua maklumat perniagaan yang diperolehi itu tepat- penyaluran maklumat perniagaan yang salah ke seluruh dunia

• Hilang keaslian yang terdapat pada produk akibat perubahan yang terpaksa dibuat untuk memenuhi citarasa pengguna negara lain.

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Globalization, big companies forcing small companies to compete at an unfair level

• Small company can’t compete at foreign level due to less chances given. • Business more focusing on big companies rather than small company due

to ability of big company to compete.• Small company have to increase promotion which incur higher cost and

small company difficult to afford.• Less confident towards service or product offered by small company.• Big company concurred/ monopoly the business• Less opportunities given to small company to compete at international

level.• Less government support for small companies to do business at

international level.

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Globalization, international companies growing more powerful than some countries

• Certain country have high purchasing power, this give an opportunities to companies to increase sales volume.

• Different strategy used to enter different market in different country.

• Different economic level in different country give impact to MNC to grow in certain country

• Different government support in different country create opportunities or threat to international business to grow at international level.

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Globalization, created opportunities to small medium size enterprise to success internationally

• Diversify the product due to different market in different country.

• Create global collaboration with different country

• Gain technology and expertise from other country

• Exchange resources with other country• Compete at international level

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Globalization gives threat to small business to expand business globally

• Due to law and legislation differ among country

• Different culture give an impact to adapt or to create new product

• Technology changes at different country• Different system management have to follow

might create problem

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Impact of globalization to world consumer

• Large size of consumer • Consumer are expose to different types of product or services due to different

culture offered by home companies• Consumer help to stabilize the economy of the country• Fund flow among country more easier using technology• Consumer can purchase product or service in different currency• Different price of product and service due to different exchange rate make

difficult consumer to purchase• Consumer can get more information about varieties product or services

through internet• Consumer can explore information of product and services worldwide• Sometimes information delivered not accurate or consumer wrong interpret.• Consumer have different alternative to choose the market• Can create new demand among consumer due to different lifestyle in different

world.

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MULTINASIONAL CORPORATIONS

(MNCs)

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INTRODUCTION

• Is a company engaged in producing and selling goods or services in more than one country.

• Its own production, distribution, service and other units in many nations.

• Plans the utilization of its resources on the global scale.

• It consists of a parent company located in the home country.

• MNCs seek to maximize its revenue at international level rather than national level.

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THEORY OF THE MNCs• Product and Factor Market Imperfections• Financial Market Imperfections

THE STRATEGY OF MN ENTERPRISES

• Innovation – based multinationals• The mature multinationals

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WHY MNCs SHOULD SURVIVE

• Cost reduction• Economies of scale• Multiple sourcing• Knowledge seeking• Keeping domestic customers

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ASSIGNMENT P4504

• Find out the article related to International business from business magazine, newspaper cutting, business jurnal or any related web site.

• Discuss the issue from the article and try to elaborate the mode of entry of the company’s/ MNC’s engage to international business level.

• Date to submit:

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• Find ONE (1) Small Medium Enterprises (SMEs) in Malaysia or Malaysian Entrepreneurs which involved in International Business.

• Identify the mode of entry of the company’s engage to international business level.

• Date to submit:

ASSIGNMENT P4504