In a short essay, identify and explain three competitive factors that influence international businesses.

In a short essay, identify and explain three competitive factors that influence international businesses.

Answer:

a. Product strategy—A company's choice of strategy, either cost or differentiation, plays a part in determining how and where the company will operate.

b. Company resources and experience—A company's size, resources, and experience in comparison to competitors' affects how it will operate in international markets. In addition, a company's national market share and brand recognition will affect the operating tactics it employs.

c. Competitors faced in each market—Success for a company in any market will always be influenced by the strategies and operations of competitors within the market.

What is foreign direct investment? What social factors in the external environment might affect FDI?

What is foreign direct investment? What social factors in the external environment might affect FDI?

Answer: In foreign direct investment (FDI), sometimes referred to simply as direct investment, the investor takes a controlling interest in a foreign company. Control need not be a 100 percent or even a 50 percent interest; if a foreign investor holds a minority stake and the remaining ownership is widely dispersed, no other owner may effectively counter the investor's decisions. A nation's political policies of course affect how international business is conducted within its borders. In particular, political disputes can disrupt the flow of international business. Domestic law, which includes both home- and host-country regulations on issues such as taxation and employment, affects how a company can operate internationally. International law—the legal agreements between countries—also obviously affects FDI.

What is a multinational enterprise (MNE)? How do physical and social factors affect how an MNE functions in a foreign country?

What is a multinational enterprise (MNE)? How do physical and social factors affect how an MNE functions in a foreign country?

Answer: The multinational enterprise (MNE) is a company that takes a global approach to foreign markets and production. It is willing to consider market and production locations anywhere in the world. However, most writers use the term to mean any company with operations in more than one country. Physical factors, such as a country's geography or demography, and social factors, such as its politics, law, culture, and economy, influence the functioning of an MNE. Physical and social factors can affect how companies produce and market products, staff operations, and even maintain accounts. Geographic barriers—mountains, deserts, jungles, and so forth—often affect communications and distribution channels. And the chance of natural disasters and adverse climatic conditions (hurricanes, floods, droughts, earthquakes, volcanic eruptions, tsunamis) can make business riskier in some areas than in others, while affecting supplies, prices, and operating conditions in far-off countries.

What is globalization? What modes of international business are used by firms that want to globalize? Briefly describe each method.

What is globalization? What modes of international business are used by firms that want to globalize? Briefly describe each method.

Answer: Globalization refers to the widening set of interdependent relationships among people from different parts of a world that happens to be divided into nations. The term can also refer to the integration of world economies through the elimination of barriers to movements of goods, services, capital, technology, and people. Firms have many options available when they want to globalize their operations including licensing, franchising, turnkey operations, management contracts, and direct/portfolio investment.

a. Licensing and franchising—Licensing agreements are used when companies allow others to use their assets, such as trademarks, patents, copyrights, or expertise under contract. Franchising is a mode of business in which one party allows another party the use of a trademark that is an essential asset for the franchisee's business.

b. Turnkey operations—Refers to business operations, performed under contract, that are transferred to the owner when they are ready to begin operating.

c. Management contract—Refers to arrangements in which one company provides personnel to
perform general or specialized management functions for another company.

d. Direct and portfolio investment—A direct investment is one that gives the investor a controlling interest in a foreign company. A portfolio investment is a noncontrolling interest in a company or ownership of a loan to another party.

What are the differences between merchandise and service imports and exports? Provide examples to illustrate your answer.

What are the differences between merchandise and service imports and exports? Provide examples to illustrate your answer.

Answer:

a. Merchandise exports are tangible products—goods—sent out of a country. Merchandise imports are goods brought into a country. When a Chinese contractor sends toy action figures from China to Hasbro in the United States, the contractor exports and Hasbro imports.

b. Service exports and imports generate non product international earnings. The company or individual receiving payment is making a service export. The company or individual paying is making a service import. When an American tourist stays at a hotel in London, the hotel stay is the service export.

What is international business? What are the primary reasons that companies engage in international business?

What is international business? What are the primary reasons that companies engage in international business?

Answer: International business is all commercial transactions—private and governmental—between two or more countries. Private businesses undertake such transactions for profit; governments may or may not do the same in their transactions. These transactions include sales, investments, and transportation.

Firms engage in international business for three main reasons.

1. To expand sales—The number of people and the amount of their purchasing power are higher for the world as a whole than for a single country, so companies may increase their sales by reaching
international markets.

2. To acquire resources—Manufacturers and distributors seek out products, services, and components produced in foreign countries.

3. To minimize competitive risk—Many companies enter into international business for defensive reasons. They want to counter advantages competitors might gain in foreign markets that, in turn, could hurt them domestically.