Question

Chapter 14 - Global Financial Management

class name; INTERNATIONAL BUSINESS

What did you learn from this course? Were you able to apply what you learned? Are you aware or more aware of the operations of how the global organizations you do business with? Please provide examples.

Answer 1

International business refers to the trade and investment activities by firms across national border .It is also referred to as CROSS-BORDER business or global business.All the commercial transactions that take place between two or more regions ,countries and nations beyond their political boundaries are included in international business.Firms and nations exchange many physical and intellectual assets including products,services,capital,technology,labor.International Business can occur in different mode such as export ,license,joint venture,contract etc.

Objectives of International business:

1)Market share:

Few companies wants to capture large market share internationally.

2)High Profit:International business could be more profitable than domestic business

3)Optimum Utilization of Resources:

When goods are produced on large scale it leads to optimum utilization of resources.

4)Risk Avoidance:

It helps to spread business risk so loss of one country can be avoided and balanced by profit of another company.

5)Earn foreign exchange:International business helps to earn foreign currency through export and operational activities.

It cab be applied at various places:

1)If anyone want to expand its business operation.

2)Integration of economies

3)Study of globalization

4)Understanding of markets across the borders

5)For higher education and better job

6)Inter cultural flow

7)Strong cross border relation

8)Increase in BOP(Balance of payment,this is a situation when export is more than import.it is positive BOP)

9)Industrialization

10)Advantage to customer.

How to do business with global organization

International business is being done in many forms .It can be done through export,Joint ventures,Acquisition,Franchising .

For example:

McDonald's :

It is one of the largest chain of fast food restaurants.The key to rapid and successful international expansion of McDonald’s is the franchise model pioneered by them. McDonald’s recognized early in their life that overseas market required an extremely high degree of local responsiveness and that they needed to manage business spread across different regions effectively and efficiently which would be achieved only through “Transnational Strategy”. The value chain was constructed taking into consideration of local culture, legal-political and economic environments in mind.

McDonald's emphasize on local market for better responsiveness to external environment.They enter into business globally mostly through franchising and hire locals who are well aware of the culture and it becomes easy to establish the chain.

In automobiles sector mainly the operation is done through joint ventures or directly setting up of manufacturing plant.

In joint venture the business remains separate in legal terms but collaborate together to achieve mutual objective.Vodafone and Telefonica agreed to shared their network together.Hero Honda it was a joint venture between Indian company Hero group and Honda a Japanese company.They come together to operate in automobile sector .Honda operated it's joint venture operations in 1984 by venturing with Hero cycles(India).