Slide 1 Slides developed by Jeff Madura, with additions and enhancements by Tim Richardson

Slide 2 Slides developed by Jeff Madura, with additions and enhancements by Tim Richardson Overview u u Management’s goal u u Hurdles to achieving goal u u Theories of international business u u Globalization and trade

Slide 3 Slides developed by Jeff Madura, with additions and enhancements by Tim Richardson Multinational Challenges u u Management’s goal – –increase shareholder wealth F F new international markets F F small and large companies benefit u u Hurdles to achieving goal – –agency problem – –constraints to business

Slide 4 Slides developed by Jeff Madura, with additions and enhancements by Tim Richardson Theories of International Business u u Comparative advantage – –e.g., shoes vs. computers & software u u Imperfect markets – –goods and labor: not easily transferred u u Product cycle – –domestic production – –export to foreign market – –foreign production

Slide 5 Slides developed by Jeff Madura, with additions and enhancements by Tim Richardson Globalization u u Reasons for increased linkages – –international trade and investment – –standardization of products and services – –privatizations F F national airlines, phone companies, mines, power plants, etc.

Slide 6 Slides developed by Jeff Madura, with additions and enhancements by Tim Richardson International Business Methods u u 1. International trade – –importing and exporting u u 2. Licensing – –MNC provides technology in exchange for goods and services (soft drink companies)

Slide 7 Slides developed by Jeff Madura, with additions and enhancements by Tim Richardson International Business Methods u u 3. Franchising – –MNC provides expertise and support for a fee u u 4. Joint Venture – –operations owned by complementary firms – –e.g., products of one meshes with distribution channels of another

Slide 8 Slides developed by Jeff Madura, with additions and enhancements by Tim Richardson International Business Methods u u 5. Acquisitions – –a quick method to obtain market share u u 6. Subsidiaries – –establishing new operations

Slide 9 Slides developed by Jeff Madura, with additions and enhancements by Tim Richardson Increased Globalization u u International trade u u Direct foreign investment u u Globalization and profitability

Slide 10 Slides developed by Jeff Madura, with additions and enhancements by Tim Richardson International Opportunities and Risk u u Opportunities – –Europe, Mexico, other places u u Risk – –exchange rate fluctuations – –foreign economies – –political risk

Slide 11 Slides developed by Jeff Madura, with additions and enhancements by Tim Richardson Summary u u Main goal of MNC is to maximize shareholder wealth u u Three theories justify international business – –comparative advantage – –imperfect markets – –product cycle u u Five common methods exist for conducting international business