Dr Zain Yusufzai Regional and Global Strategy Chapter # 1 (page2-34).Introduction:International Business: - The study of transactions takingplace across national borders for satisfying the needs of individuals and organizations.Multinational Enterprise: - A company headquarteredin one country but having operations in other countries(pizza hut, Macdonald, total finaelf, shell, ford motorSuzuki, Citicorp).
Activities of multinational enterprise classified into twomajor categories:1. Exports and imports; 2. Foreign directinvestment;1. Exports and Imports:Exports: Goods and services produced by a firm in onecountry and then sent to another country.Imports: goods and services produced in one county andbough in by another country.Exports and Imports are seen as physical goods (clothes,oil, cars) contrary to prevailing believes theyalso include services such as those provided byinternational airlines, cruise lines ,reservationagencies , and hotels.European Union (E.U.): single largest exporter followedby North America and Asia.European Union (E.U.): single largest importer followedby Asia and North America.Majority export, import activities involve:-
Manufactured goods: - such as industrialmachinery, computers, cars, televisions,electronic goods.
Increasing proportion of world trade in services.Why is study of international business important (Tworeasons)?1.Trade is historical bases of international businessand trade activities that help us understandMultinational enterprise (MNE) practices andstrategies.Why some countries export or import certain items?Some countries have trade agreements (NAFTA)North American free trade Agreement. A regional freeInternational businessAlan M. Rugman, Richard M. Hodgetts1
Dr Zain Yusufzai Regional and Global Strategy Chapter # 1 (page2-34).trade agreement between three countries USA,Canada and Mexico.First reason: information about exports and importshelps us understand:
The impact of international business on worldeconomies:Example: Japan imports all of its oil:Price change in oil globally affects autoexports due to rise in manufacturingcostsSecond reason: World wide exports, imports beginto slow down: A sign of world economiesare going into recession (slump).2.Foreign direct investment (FDI):
Equity funds invested in other nations;
Driver of international business and manycompanies , to establish footholds in world marketplace by setting up operations in foreign market or byacquiring businesses there; Recent data reveals two important trends:First: US a prime site for FDI by both Japan andcountries in Western Europe.Second: US invested heavily in 1. Western Europe 2.Latin America, Caribbean3.North America and 4. Japan.These four regions account for over 95 % of stock of allUS FDI.Triad: The Three Major Trading and investment blocksin the international arena:
United States of America (USA).
European Union (EU).
Japan.First segment: US have the largest economy in the worldwith Gross Domestic Product (GDP) of over $10 Trillion (Canada and Mexicoincluded due to NAFTA, 1994).Second segment: Collective GDP of EU is greater thanthat of Japan or USA.International businessAlan M. Rugman, Richard M. Hodgetts2
Dr Zain Yusufzai Regional and Global Strategy Chapter # 1 (page2-34).Example: - in terms of imports and exports: EU accountsfor
more than 34% of all imports
In addition, 35% of all world exports.
60% of all intra EU trade.France, Germany, Luxembourg, Netherlands and UK accounts for $550 billion of investment in the USA.Third segment: The triad in Japan:
Japan is the worlds fifth largest importer
Third largest exporter
Japan accounts for 27% of all the imports
Japan accounts for 30% of all the exports
Invested $400 billion in EU
Invested $100 billion in USATotal Global Environment (Dynamic):
Introduction of local and international traderegulation
The impact of technology
Rise of small and medium sized multinationalsWorld Economies:USA a market for exported goods; from all regions of theworld as well as a major source of FDI.Reason for Strong USA economy:
Willingness of USA business to cut their workforce
Reorganize their operations
Invest heavily in research and developmentLarge number of layoffs of employees and closures of businesses around the world to stay afloat or go under Organization for Economic Cooperation andDevelopment: (OECD)A group of 30 relatively wealthy member countries thatfacilitates a forum for the discussion of economic, Socialand Governance issues across the world.International businessAlan M. Rugman, Richard M. Hodgetts3
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