International Business

 Chapter 1, Daniels: International Business

IB Definition
 Any cross border transaction

 Transaction between two business enterprise/gov/individual

across the national border.

 All commercial transactions- private or and governmental;

sales, investment and transportation that take place
between two or more countries.

 International business consists of business transactions

between parties from more than one country.
IB vs Domestic Business
 International business can differ from
domestic business for following reasons –

Different currencies
Local law
Different culture
Availability of resources
Reasons For Growth In IB
 Increase in and application of technology
 Liberalization of cross border trade and
resource movements
 Development of services that support IB
 Growth of consumer pressures
 Increase in global competition
 Changes in political situations and
government policies
 Expansion of cross national cooperation
Why Companies Engage In IB
 Three major operation objectives
Expanding sales
 Increasing potential market and profit
Acquire resources
 Lower cost
 New or better product
 Additional operating knowledge
Reducing risk
 Take advantage of business cycle
 Preventing competitors from gaining advantage
Modes of IB
 Importing and Exporting
 Investment
Modes of IB
 Importing and Exporting
Merchandise
Service
1. Tourism and transportation
2. Services performance
o Turnkey Operations
o Management Contracts

3. Asset Use
o Licensing
o Franchising
Modes of IB
 Licensing
 Licensing is a contract between licensor and licensee of two
different countries by which licensor permits the licensee to
use its intellectual properties like patent, trademark,
copyright, trade secret, brand name etc. for production or
distribution of goods in return of a fee or commission.

 Franchising
 Franchising is an agreement between two parties franchisor
and franchisee by which the franchisor allows franchisee to
use its intellectual properties in production and marketing of
goods in return of fee or commission keeping a reasonable
amount of control in the hands of franchisor.
Example of Int’l Licensing
 Disney Consumer Products
 Marvel Entertainment
Example of Int’l Franchising
Top 10 Franchises 2019
(franchisedirect.com)
Modes of IB
 Investment
Direct Investment (FDI)
It refers to the transfer of capital by the nationals or
citizens of one country into another to start a
business under its ownership and control

 Joint venture: Starting business with local partner in

another country. (private/gov)
Modes of IB
 Investment

Portfolio Investment
It is the transfer of capital by the nationals or
citizens of one country into another in the form of
buying stocks, bonds and giving loans to
company.
International Companies and Terms To
Describe Them
 Multinational corporation (MNC)
A multinational corporation is a firm that engages in a
foreign direct investment and owns and control value
adding activities in more than one country.

 Multinational enterprise (MNE)

MNC and MNE are used interchangeably but there are
some internationally involved companies like accounting
partnerships that are not organized as corporations.
International Companies and Terms To
Describe Them
 Multinational organization (MNO)
MNO is a not-for-profit organization, that means activities
of the MNO is not aimed at earning profit for ex. Red
Cross, UNO, Oxfam etc.