2.1 ASPECTS OF INTERNATIONAL BUSINESS Saad, Max, Jason, Arzish

TYPES OF GLOBAL BUSINESS OPERATIONS  DISTINGUISH BETWEEN THREE TYPES OF CORPORATIONS:  LOCAL (NATIONAL)  INTERNATIONAL (BRANCH PLANT)  MULTINATIONAL (MNC)

LOCAL OR NATIONAL BUSINESSES:  (E.G., LOBLAWS, CANADIAN TIRE, PETRO CANADA, AT ONE TIME TIM HORTON’S)  CLIENT OR CUSTOMER BASE IS “LOCAL”;  AREA OF OPERATION IS THE NEIGHBOURHOOD, CITY, PROVINACE/STATE; OR HOME COUNTRY;  MAY DO SOME IMPORTING (E.G., COFFEE AND TEA, RICE OR FORIEGN GOODS FOR SALE LOCALLY);

GOODS MAY BE:  BUILT FROM “RAWER” MATERIAL (VALUE ADDED);  PURCHASED LOCALLY AND RE-SOLD;  IMPORTED FROM OTHER COUNTRY AND SOLD LOCALLY.

BENEFITS TO HOME COUNTRY:  ALL FACTORIES, OFFICES, STORES LOCATED IN HOME COUNTRY;  ALL EMPLOYEES ARE HOME COUNTRY CITIZENS;  LOCAL MATERIALS /SUPPLIES USED;  PROFITS AND TAXES PAID AND STAY IN HOME COUNTRY.

 THE CORPORATION HAS MADE A FINANCIAL DECISION TO DUPLICATE ITS MANUFACTURING OPERATION OR HAVE PARTS MANUFACTURED IN A HOST COUNTRY.  THE ALTERNATIVE WOULD HAVE BEEN TO EXPAND LOCAL MANUFACTURING CAPACITY IN THE HOME COUNTRY AND THEN TRANSPORT/EXPORT TO OTHER COUNTRIES.

ITS A BASIC QUESTION OF WHICH IS MORE EFFICIENT (LESS COSTLY) PARTICULARLY GIVEN:  HOST COUNTRY INCENTIVES;  TARRIFFS, DUTIES, QUOTAS;  RULES, LEGISLATION;  RELATIONSHIP BETWEEN COUNTRIES.

THE BRANCH PLANT:  EARLY IN THE 1950’S, CANADA BECAME AN ATTRACTIVE MARKET FOR AMERICAN MANUFACTURERS WISHING TO SELL THERE PRODUCTS HERE.  CANADA’S POPULATION WAS INCREASING (BABY BOOMERS);  CANADIANS WERE BECOMING WEALTHIER.  BASICALLY, A BRANCH PLANT IS A BUSINESS (FACTORY, RETAIL STORE) OPERATING IN A HOST COUNTRY BUT OWNED BY FORIEGN CORPORATIONS (TOYOTA, WAL-MART, TARGET)

ADVANTAGES FOR THE HOST COUNTRY:  VERY IMPORTANTLY, PROVIDES JOBS FOR THE HOST COUNTRY;  FORIEGN COMPANY PAYS CORPORATE TAXES;  COMPANY INVESTS CAPITAL TO BUILD AND ADD TO INFRASTRUCTURE (E.G., ROADS);  MAY PROVIDE TECHNICAL “KNOW-HOW” AND TRAINING TO LOCAL EMPLOYEES

DISADVANTAGES:  MOST PROFITS RETURN TO THE HOME COUNTRY;  FORIEGN COMPANIES WITH SIGNIFICANT INVESTMENTS CAN CONTROL SEGMENTS OF THE COUNTRY’S ECONOMY AND...  AS A RESULT, CAN PUT SIGNIFICANT PRESSURE ON GOVERNMENT LEVELS (E.G., GRANTS, LOWER TAXES, LESS LABOUR AND ENVIRONMENT LAWS, ETC).  FORIEGN COMPANIES TEND TO BUY SUPPLIES, PARTS, RAW MATERIALS FROM HOME COUNTRY PARTNERS;

VERY IMPORTANTLY:  DECISIONS REGARDING OPERATIONS AND THE STATUS OF EMPLOYEES MADE AT HOME OFFICE BY FORIEGN OFFICIALS.  THIS IS THE “HIGH VALUE” PART OF THE FORIEGN CORPORATION THAT STAYS IN THE HOME COUNTRY HEAD OFFICE:

HOME COUNTRY HEAD OFFICE:  STRATEGIC PLANNING;  PRODUCT DESIGN AND DEVELOPMENT;  RESEARCH;  FINANCE AND ADMINISTRATION;  MARKETING AND SALES.

Examples???  A BRANCH PLANT BASICALLY PRODUCES THE PRODUCT WHILE MAJOR DECISIONS REGARDING THE ENTIRE SCOPE OF THE COMPANY’S OPERATION AND FUTURE IS MADE IN A FORIEGN COUNTRY

MULTINATIONAL CORPORATIONS  “ IN CANADA, IT IS NOT UNCOMMON TO FIND A GERMAN CAR MADE OF SWEDISH STEEL, WITH FRENCH TIRES AND AN INTERIOR OF ARGENTINE LEATHER, WHICH OPERATES ON GASOLINE MADE FROM SAUDI ARABIAN CRUDE OIL SHIPPED IN A LIBERIAN TANKER WITH A FILIPINO CREW TO A REFINERY ON THE ISLAND OF ARUBA,”

MULTINATIONAL CORPORATIONS  AS INDICATED, MNC’S GO BEYOND THE “BRANCH PLANT” MENTALITY OF REPLICATING THEIR MANUFACTURING OPERATIONS IN HOST COUNTRIES.  RATHER, MNC’S TAKE A GLOBAL PERSPECTIVE WITH REGARDS TO THEIR TOTAL OPERATIONS.  ALL PARTS OF THEIR OPERATIONS ARE, IN ESSENSE BROKEN UP AND ARE LOCATED TO THAT PART OF THE WORLD THAT IS MOST EFFICIENT AND EFFECTIVE TO OPERATE FROM. 

MNC’S ARE ALSO CALLED:  GLOBAL COMPANIES  TRANSNATIONAL COMPANIES  WORLWIDE COMPANIES.  ALMOST ALWAYS, THE MNC HEAD OFFICE IS IN THE HOME COUNTRY BUT OPERATE ITS DIVISIONS OR COMPANIES IN A NUMBER OF HOST COUNTRIES.  MITSUBSHI OF JAPAN (HOME COUNTRY) CONSISTS OF OVER 160 COMPANIES DOING BUSINESS IN MANY HOST COUNTRIES (CANADA, U.S.A., ENGLAND, EUROPE, ETC).

CHARACTERISTICS OF AN MNC:  WORLDWIDE MARKET VIEW.  SEES THE WORLD AS ITS PROSPECTIVE MARKET;  SEEKS PRODUCT IDEAS FROM ITS FORIEGN SUBSIDIARES;  OBTAINS RAW RESOURCES ON A WORLD-WIDE BASIS.

 CULTURALLY SENSITIVE HIRING:  HAS CONSISTENT HIRING PRACTICES THROUGHOUT THE WORLD BUT RECOGNIZE CULTURAL DIFFERENCES IN HOST COUNTRIES.  MNC’S ALSO RECRUIT MANAGERS INTERNATIONALLY RATHER THAN JUST FROM HOME COUNTRY (LIKE INTERNATIONAL COMPANIES). CHARACTERISTICS OF AN MNC:

 STANDARDIZED PRODUCTS:  ATTEMPTS TO OFFER A STRANDARDIZED PRODUCT/SERVICE ACROSS HOST MARKETS WHEN POSSIBLE;  HAS BOTH AN INTERNATIONAL AND LOCAL PERSPECTIVE.  ALLOWS FLEXIBILITY TO RECOGNIZE THE TASTES/CULTURE OF THE HOST ENVIRONMENT (E.G., McDONALD’S) CHARACTERISTICS OF AN MNC:

IMPACT OF MNC’S ON HOST COUNTRIES  MORE JOBS (WAGES, BENEFITS AND TRAINING OPPORTUNITIES);  MORE PRODUCTS AVAILABLE LOCALLY;  MORE SERVICES AVAILABLE TO EMPLOYEES AND PUBLIC;  ADDS INFRASTRUCTURE:

CLASS ACTIVITY Part 1 In groups of 3-4, choose from a topic presented and find an article or video online relating to news, developments, or issues being faced in the category. Briefly present your findings to the class. The covered topics were:  International trade  Importing  Exporting  Starting an Import or Export Business  Trade Missions  Trade Shows  Exporting Goods and Services  Foreign Investments

CLASS ACTIVITY Part 2 In the same groups, choose an industry and write down the steps needed for a new company to set up imports and exports. What legal processes are required? How would the company choose which foreign markets to operate in? Should the company create subsidiaries or set up a joint venture? Which trade shows could the company attend? Note the different strategies required in different industries. Present the information to the class as your group is the head of the company (i.e. from the company’s point of view).

 In your presentation groups, pick a country and state the benefits of starting a company or investing in your country. Activity