OVERVIEW OF THE INTERNATIONAL BUSINESS

Group members:
● Duong Thi Van Anh
● Lang Thi Ngoc Anh
● Tran Duy Anh
● Tran Thi Ngoc Anh

CONTENT

I. Why do Companies enter International Business?

1.1 What is International Business?

Because international business is a relatively new discipline and is extremely

dynamic, you will find that the definitions of a number of terms vary among users. To
avoid confusion due to the range of different definitions of terms in international
business, in this text we will employ the definitions listed here, which are generally
accepted by managers:
1. International business is businesses whose activities are carried borders. This
definition includes not only international trade and foreign manufacturing, but
also the growing service industry in areas such as transportation , tourism,
advertising construction, retailing, wholesaling, and mass communications.
2. Foreign business denotes the operations of a company outside its home or
domestic market; many refer to this as business conducted within a foreign
country.

1.2 Why do Companies enter International Business?

In general, companies enter international business because they want to grow

or expand operations. The benefits of entering international business include
generating more revenue, competing for new sales, investment opportunities,
diversifying, reducing costs and recruiting new talent…
In details, we listed the 6 most significant reasons why companies enter
international business:

1. INCREASE REVENUE POTENTIAL

When businesses have exhausted growth opportunities at home, they turn to

global expansion to help grow their business. For many companies, international
expansion offers a chance to explore markets and gain access to millions of
customers, thus increasing sales.
2. ENTRY TO NEW MARKETS

Once your company has been successful in your home country, it’s
time to look at markets overseas. However, before you enter the new market,
it’s vital to do research. Whether it’s looking at emerging markets in South
America, advanced technology hubs in Asia or exploring developed markets
in Europe, each region offers plenty of opportunities for expansion success.

3. GREATER ACCESS TO TALENT

Another excellent benefit of taking your business global is that you get
access to a much greater pool of talent. Hiring international talent can bring
many advantages including advanced language skills and diverse educational
backgrounds. In addition, expanding globally also allows companies to
employ local workers who have the expertise to communicate and serve your
clients (within the same time zone) without any complications.

4. IMPROVE COMPANY'S REPUTATION

One of the reasons why businesses expand globally is to be able to

provide a reliable service to their international clients. A good global
reputation will attract new customers. Expanding abroad allows a company to
build name brand recognition and establish credibility internationally.

5. GAIN COMPETITIVE ADVANTAGE

Go to the market before your competitors do. Expanding abroad allows

you to get out of a saturated market. Expanding abroad gives you access to
new customers and in a market where your competitors do not operate.

6. EXPANSION ALLOWS COMPANIES TO DIVERSIFY

Keeping your business in the home market can limit potential for profit.
One of the downsides companies face when they operate in only one country
is the exposure to market changes. Taking your business international allows
you the opportunity to diversify your markets, so your revenue is more stable.
If your domestic market is slowing down, having the advantage of a global
market will help cushion the company during slower economic times.
II. Definition of international business and the role of international business

2.1 Definition of international business

- International business is a business whose activities are carried out across

national borders. International business occurs in many different formats:

● The movement of goods from country to another (exporting, importing, trade)

● Contractual agreements that allow foreign firms to use products, services, and
processes from other nations (licensing, franchising)
● The formation and operations of sales, manufacturing, research and
development, and distribution facilities in foreign markets.

Multi-domestic – A strategic business model that involves promoting products and

services in various markets around the world and adapting the product/service to the
cultural norms, taste preferences and religious customs of the various markets.

Multinational – A business strategy that involves selling products and services in

different foreign markets without changing the characteristics of the product/service
to accommodate the cultural norms or customs of the various markets.

The United Nations and the governments of many developing nations use
transnational instead of multinational to describe any firm doing business in
more than one country.

2.2 The role of international business

- For consumers: international business introduces them to a variety of goods and

services. For many, it enhances their standard of living and increases their exposure
to new ideas, devices, products, services, and technologies.

- For enterprise:

● First of all, international business helps businesses and economic

organizations satisfy their needs and interests in terms of product exchange,
investment capital, and advanced technology.
 ● By participating in international business activities, enterprises can increase
production and business efficiency, expand the scale and diversify business
activities to create better profits.
● Helping businesses develop and expand customer and partner relationships;
learn management experience, absorb modern technology.

- For countries: Participation in international business allows countries to take

advantage of their comparative advantage.

The concept of comparative advantage means that a nation has an advantage over
other nations in terms of access to affordable land, resources, labor, and capital. For
example, China's comparative advantage with the United States is in the form of
cheap labor. Chinese workers produce simple consumer goods at a much lower
opportunity cost.

Participation in international business allows countries to take advantage of

specialized expertise and abundant factors of production to deliver goods and
services into the international marketplace.

III. The drivers of globalization

3.1. Political

- The progressive reduction of barriers to trade and foreign investment by

ernments, which is hastening the opening of new markets by international
firms that are both exporting to them and building production facilities in them
- The privation of much of the industry in formerly communist nation and the
opening of their economies to global competition

3.2. Technological

- With cable and satellite TV systems, advertisements can reach numerous

countries simultaneously, thus creating regional and sometimes global
demand.
- With global communications networks, they enable manufacturing personnel
to coordinate production and design functions worldwide so that plants in
many parts of the world may be working on the same product.
 - With the internet and networking computers, they enable small companies to
compete globally. Because they make possible the rapid flow of information
regardless of the physical location of the buyer and seller
- With Internet video conferencing, it allows sellers to demonstrate their
products to prospective buyers all over the world without the need to travel.
- With email, It is faster and more reliable to use postal mail and much less
expensive. Both internet uses have given home office managers greater
confidence in their ability to direct overseas operations.

3.3. Market

- Advertising agencies established offices in forign markets when clients

entered those markets to avoid having a competitor steal the accounts.
- Finding the home market saturated sends companies into foreign markets.

3.4. Cost

- Economies of scale to reduce unit costs are a common management goal.

One means of achieving them is to globalize product lines to reduce
development, production and inventory costs.
- Management can also move production or other parts of the company’s value
chain to countries where costs are lower.
- Dramatic reductions in the cost of generating and transmitting information due
to innovations in computing and telecommunications, as well as the decline in
transportation costs, have facilitated this trend toward relocating activities
worldwide.

3.5. Competitive

- New firms, many from newly industrialized and developing countries, have
entered world markets in automobiles, computers and electronics.
- Another competitive driving force for globalization is the fact that companies
are defending their home markets from competitors by entering the
competitor's home market to distract them. Many firms that would not have
entered a single country because it lacked sufficient market have establish
plants in the comparatively larger trading group.
IV. Types of international business environments

The environment here means all the forces influencing the life and development of
the firm. The forces themselves can be classified as external or internal.

- The external forces(uncontrollable forces) :1.Competitive 2. Distributive: 3.

Economics 4. Socioeconomic 5. Financial 6. Legal 7. Physical. 8. Political 9.
Sociocultural:10. Labor 11.Technological

- The internal forces(controllable forces) such as the factors of production (capital,

raw materials, and people) and the activities of the organization (personnel, finance,
production, and marketing).

There are 3 types of international business environments that International Business

involves

1. The domestic environment

- The domestic environment is all the uncontrollable forces in the home country,
influencing the life and development of the firm.

- However, these domestic forces influence foreign factors.

For example, if a country is experiencing a shortage of foreign currency, the

government may place restrictions on direct investment abroad to reduce the
shortage because of foreign exchange outflow. As a result, managers of international
companies will not be able to expand overseas as they would like.

2. The foreign environment

The forces in the foreign environment are the same as those in the domestic
environment foreign environment except that they occur in foreign country.

- Although the forces are the same in the domestic and foreign environments, their
values often differ, and changes in the values of foreign forces are at times more
difficult to assess, and they can affect the oversea operations
+ Different values:

Eg: The President of the United States extended an embargo on shipments of most
goods to Cuba. This embargo meant that Cuba could not buy buses from a U.S.
manufacturer. So the Cuban government ordered the buses from the US firm's
Argentine subsidiary. At that time, the firm's US headquarters instructed its branch to
cease production because of the embargo, but the Argentine government ordered
the Argentine subsidiary to fill the order.

=>the opposite values of politics have created confusion and difficulty for the
managers of a multinational company

- Forces Can Be Difficult to Assess: foreign forces are difficult to assess, especially
legal and political forces.

For example, Mexico, until 1988, this country had a law that prohibited foreigners
from owning a majority of shares in companies located in Mexico. However, there is
a provision that allows an exception "if the investment contributes to social welfare".
Many companies could establish wholly owned subsidiaries under this clause.

- Interaction between factors: national and international factors

2. The international environment

The international environment consists of the interactions

(1) between the domestic environmental forces and the foreign environmental
forces and

(2) between the foreign environmental forces of two countries when an affiliate in
one country does business with customers in another.

In other words, we can understand the concept of international business as

business activities beyond the borders of a country.
For example, personnel working at the headquarters of Samsung work in the
international environment because their work is related, in any way, to another
country

However, personnel at foreign branches of Samsung will not work in the

international business environment if they are not engaged in international export
business, or manage other subsidiaries.

In detail, a sales manager of Samsung’s China operations does not work in the
international environment if he or she sells cellular phones only in China. If
Samsung’s China operations export cell phones to Vietnam, then the sales manager
is affected by forces of both the domestic environment of China and the foreign
environment of Vietnam and, therefore, is working in the international environment.

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