Class Excercises:

Excercise 2
Find out the differences between an international and a global company regarding:
A) Size
B) International Presence
C) FDI
D) Where do they produce their products?
E) Do they have branches?) Examples

A) Size
International Company: Typically has a smaller scale of operations compared to global
companies. It may operate in a few countries and have a moderate market presence.
Global Company: Operates on a larger scale, often with a widespread presence in multiple
regions or continents.

B) International Presence
International Company: Has a presence in multiple countries but may focus on specific
regions or markets.
Global Company: Has a broader and more extensive presence, spanning various countries
and continents.
C) FDI (Foreign Direct Investment)
International Company: May engage in FDI, but the extent is usually more limited, with
investments concentrated in certain regions.
Global Company: Actively seeks and engages in significant FDI across various countries,
aiming for a global market share.

D) Where do they produce their products?

International Company: Production may be localized or concentrated in specific regions,
often aligned with their primary markets.
Global Company: Production facilities are distributed globally, strategically located to
serve different markets efficiently.

E) Do they have branches?

International Company: Typically has branches or subsidiaries in a limited number of
countries.
Global Company: Has an extensive network of branches, subsidiaries, or affiliates in
numerous countries to facilitate global operations.

F) Examples
International Company: Nestle (operates in various countries but has a regional focus),
L'Oreal (with a significant international presence).
Global Company: Coca-Cola, McDonald's, and Samsung (with operations and market
presence spanning the globe).
1. Explain and analyze the external factors of international business (Political,
Economic, Socio-Cultural, Technological, Legal) and give your opinion on whether
these may impact businesses or not.

Political Factors
These include government stability, political ideologies, and policies. Political instability or
changes in leadership can impact businesses by introducing uncertainty.
For example, sudden policy shifts may affect trade agreements and regulations.
Economic Factors
Economic conditions, such as inflation rates, exchange rates, and overall economic
stability, significantly impact international businesses. Fluctuations in currency exchange
rates, for instance, can affect the cost of imports and exports, influencing profit
margins.
Socio-Cultural Factors
Cultural differences, social norms, and demographics play a vital role. Understanding local
cultures helps businesses tailor their products and marketing strategies. Failure to do so
may lead to misunderstandings or rejection of products.
Technological Factors
The pace of technological advancements can impact competitiveness. Embracing innovation
can provide a competitive edge, while resistance or slow adaptation may lead to
obsolescence. Additionally, technology affects communication, supply chain efficiency, and
market reach.
Legal Factors
Legal frameworks, regulations, and compliance requirements vary across countries.
Businesses must navigate diverse legal environments, including intellectual property laws,
labor regulations, and trade restrictions. Non-compliance can lead to fines or operational
challenges.

External factors profoundly impact international businesses. The interconnected global

landscape means changes in politics, economics, culture, and technology can ripple through
the supply chain. Political stability influences long-term investments, economic conditions
affect purchasing power, cultural nuances impact marketing success, and technological
advancements create opportunities or disruptions.
In my opinion, businesses that proactively monitor and adapt to these factors are better
positioned for success. Flexibility, cultural sensitivity, and awareness of geopolitical and
economic trends are crucial for navigating international complexities.

2. Offer 2 reasons on why the Internet may result in more international business

Global Market Access:

The internet provides a platform for businesses to reach a global audience without the
need for a physical presence in multiple countries. Online marketplaces and e-commerce
platforms enable companies to showcase and sell their products or services
internationally, breaking down geographical barriers.
Efficient Communication and Collaboration:
Digital communication tools and online collaboration platforms have facilitated seamless
interaction between businesses and partners across the globe. Video conferencing, email,
and collaborative software enable real-time communication, making it easier for
companies to coordinate activities, manage supply chains, and engage in international
collaborations without the constraints of time and distance.

3. Imports are the good thing about international trade, whereas exports are more like
the necessary evil. True or False? Explain.

False. The statement oversimplifies the nature of international trade. Both imports and
exports play crucial roles in the global economy, and neither can be strictly categorized
as either "good" or a "necessary evil."

Imports:
Imports are valuable for countries as they allow access to a variety of goods and services
that may not be readily available domestically. It provides consumers with choices,
promotes competition, and often leads to cost savings. Imports also contribute to
economic diversity and help meet consumer demands that cannot be fulfilled solely by
domestic production.
Exports:
Exports are fundamental to a country's economic growth. Selling goods and services to
other nations generates revenue, creates jobs, and enhances a country's economic
competitiveness. Exporting helps to balance trade deficits, strengthen the domestic
economy, and can lead to the development of specialized industries and expertise.

In summary, both imports and exports are essential components of international trade,
each bringing its own set of benefits. A balanced approach that recognizes the
significance of both aspects is crucial for fostering a healthy and sustainable global
economic system.

Exercise 3: Multiple Choice

1. Which of the following would be an example of FDI in equity funds from the
United States to Taiwan?

a) U.S bank buys bonds in the stock exchange issued by a Taiwan computer
manufacturer.
b) U.S car manufacturer enters into a contract with a Taiwan firm for the
latter to make and sell it spark plugs
c) Microsoft hires a Taiwanese computer programmer to debug some
software for it.
d) The state of California rents space in Taipei to use it for promoting
tourism in California.
 e) Warren Buffet (a U.S citizen who owns a company) buys a controlling
share in a Taiwanese electronics firm.
2. What is the relationship between Foreign Direct Investment (FDI) and
multinational enterprises (MNEs)?

a) An MNE never involves FDI

b) FDI is never done by an MNE.
c) Many MNEs are involved in FDI

3. What is the connection, if any, between comparative advantage (CA) and FDI?

a) Nothing. CA has nothing to do with FDI

b) Countries often engage in FDI in industries where the country they invest
in has a comparative disadvantage.
c) Countries often engage in FDI in industries where the country they invest
in has a comparative advantage.
4. Tariff Jumping occurs when:

a) A firm that otherwise would have exported to a country instead invests

there in order to avoid paying the country’s tariff.
b) A country raises a tariff against a foreign exporter who sells to it below
cost,
c) Countries raise (and lower) their tariffs in an effort to stabilize the price
of a product on the domestic market.
d) A firm buys inputs from domestic firms rather than importing them from
abroad over a tariff.
e) A government levies a tariff on the price of a good that already has been
increased by another tariff.
5. Suppose that Mexico has previously had restrictions on inflows of foreign direct
investment from all sources, including the United States. Then suppose that they
removed those restrictions on flows from the United States in a particular
industry, say hammock. As a result, several hammock producers in the U.S move
production to Mexico via FDI.
Indicate for each of the groups whether you expect them to gain or to lose from
this flow of investment

a) Workers previously employed in hammock production in the US Gain/Lose

b) Gain
c) Gain
d) Gain
e) Gain

Exercise 3
What are global value chains and why do they matter? Article.
 1. GVCs refer to:
a) Global Distribution networks all around the world
b) The outsourcing of different parts of production in different countries.
c) The International production sharing, where production is broken intro
activities and tasks carried out in different countries.
Operations are spread across national borders (instead of being confined to
the same location) and the products made are much more complex than a pin.
d) None is true.

2. FDIs are related to Global Value Chains: True or False? Justify your answer.
True. FDI has been the primary driver of Global Value Chain expansion in the past
several decades.

FDIs play a significant role in shaping and influencing how production and value
creation are distributed across different countries in the context of global value
chains.

3. Apart from TNCs (Transnational Corporations), what other type of companies

that we studied usually get involved in FDIs?
Multinational Company.
Global Company.

4. International Outsourcing is a necessary condition for Global Value Chains.

True or False? Justify your answer.
True. International outsourcing plays a crucial role in enabling global value chains
by allowing companies to leverage comparative advantages across borders.

By outsourcing certain tasks or processes to locations where they can be

performed more efficiently or cost-effectively, businesses can streamline their
operations, reduce costs, and access specialized skills or resources that may not
be available domestically.

5. Imports and exports…

a) Can be part of a GVC.
b) Are never considered in GVC.
c) Always are a necessary activity in GVC

“Countries can participate in GVCs by engaging in either backward or forward linkages.

Backward linkages are created when country A uses inputs from country B for domestic
production. Firms in country A can source inputs from country B through direct as well as
indirect imports, i.e. inputs are either supplied by local affiliates of TNCs from country B or
by locally owned firms that import inputs from other countries.”

Para entender Cross- Border Production puedo pensarlo como una Global Value Chain, o
parte del proceso debido a que por ejemplo el proceso de Assembly es en Argentina pero a
su vez traen piezas desde China para dicho proceso.

Excercise 4. Questions about modes of entry:

1. In which mode of entry there could be problems with the integration of a foreign
company and local company? Full acquisitions
2. In which mode of entry partners may share know how and assets? Shared
Ownerships
3. Licensing
4. They need expertise, knowledge, and money in order to
5. They do but not necessary
6. FDI