Unit 2.03 International Business Organizations Unit 2 – Business in the global economy Unit 2.03 International Business Organizations

International business organizations Multinational Corporations (MNCs) Global Market Entry Modes International Trade Organizations

Multinational corporation An organization that does business in several countries Home country – the country where parent company is located Host country – the country in which the MNC places business activities

Multinational corporations Global Top 100 Leading Industries Financials Technology Health Care Leading Countries USA (53) China (11) United Kingdom (9) Leading Companies Apple Exxon Mobil Corp Google Inc PWC Global Top 100 Companies by Market Capitalization

Multinational corporations

Multinational corporations Global Strategy – uses the same product and marketing strategy worldwide Coca-Cola 1886 Coca-Cola invented as fountain drink/tonic 1899 began bottling 1909 nearly 400 bottling plants in operation 1920s bottled sales exceed fountain sales 1930s global expansion begins 1940s 64 bottling plants around world (supplying WWII soldiers) 1950s packaging innovations 1960s new brands introduced (Fanta, Tab, Sprite) 1970-80s consolidation to serve customers technology leads  to a global economy international mega-chains 1990s new & growing markets previously closed, now open (eastern Europe, Africa) Today Coca-Cola is sold in more than 200 countries and is the most recognized brand in the world

Multinational corporations Multinational strategy – treats each country market differently i.e. McDonald’s Asia Middle East Europe McHotdog Mega Breakfast Sausage McArabia (grilled chicken or kofta) CBO (chicken, bacon, & onions) Bacon Potato Pie Chicken Big Mac Crocque McDo (ham & cheese) Shrimp Burger Veg McPuff Pizza Lakse wrap (fish) Bubur Ayam (chicken porridge) Chicken McCurry Pan McTurco (beef on pita) McRice Burger Paneer Salsa Wrap Bacon roll

Multinational corporations Benefits Large amount of goods available Lower prices Career opportunities Foster understanding, communication, and respect Friendly international relations Drawbacks Economic power Worker dependence on the MNC Consumer dependence Political power

Global market entry modes Licensing Franchising Joint Venture

LICENSING Selling the right to use some intangible property (production process, trademark, or brand name) for a fee or royalty Allows companies to produce items in other countries without being actively involved Has a low financial investment, so the potential financial return for the company is often low The risk for the company is low

Right to use a company name or business process in a specific way FRANCHISING Right to use a company name or business process in a specific way Allows organizations to enter into contracts with people in other countries to set up a business that looks and runs like the parent company Marketing elements, such as food products, packaging, and advertising, must meet both cultural sensitivities and legal requirements Commonly involves selling a product or service

An agreement between two or more companies to share a business project JOINT VENTURE An agreement between two or more companies to share a business project Allows two or more companies to share raw materials, shipping facilities, management activities, or production activities Concerns include the sharing of profits and not as much control because several companies are involved Very popular for manufacturing, such as Japanese and U.S. automobile manufacturers

INTERNATIONAL TRADE ORGANIZATIONS World Trade Organization International Monetary Fund World Bank

WORLD TRADE ORGANIZATION (WTO) Created in 1995 to promote trade around the world 150 member countries Settles trade disputes Enforces free-trade agreements Other goals Lowering tariffs that discourage free trade Eliminating import quotas Reducing barriers for banks, insurance companies, and other financial services Assisting poor countries with economic growth

INTERNATIONAL MONETARY FUND (IMF) Established in 1946 to help promote economic cooperation Maintains an orderly system of world trade and exchange rates Includes more than 150 member nations

Created in 1944 to provide loans for rebuilding after WW II WORLD BANK Created in 1944 to provide loans for rebuilding after WW II AKA the International Bank for Reconstruction and Development Today the World Bank has more than 180 member countries and two main divisions International Development Association (IDA), which makes loans to help developing countries International Finance Corporation (IFC), which provides technical capital and technical help to private businesses in nations with limited resources

assignment MNCs Pros & Cons