International Business Structures Ch. 2

Why do businesses expand internationally? The opportunity to reach hundreds of millions of customers. Six types of international business structures: ▫Joint Ventures ▫International Franchises ▫Strategic Alliances ▫Mergers ▫Offshoring ▫Multinational Corporations

Joint Ventures Provide opportunities to market your products or services to a wider audience. Matches the skills and expertise of two different individuals or businesses to benefit both parties. ▫Can be adopted for any period of time, from weeks to years In Ontario, a legal definition does not exist and there is no specific legislation to regulate them. ▫For example, Pacific Northern Gas Ltd. and Kitimat LNG Inc. Are participating in a joint venture to build a 1.2 billion dollar gas pipeline in B.C.

International Franchise Authorizing a group or an individual to sell your goods or services internationally. For example, Boston Pizza expanding into the U.S. ▫Was an easy transition as everything was kept the same, except the name which was changed to Boston’s, The Gourmet Pizza. ▫Top 100 international franchisesTop 100

Strategic Alliances Agreements between businesses in which each business commits resources to achieve a common set of objectives. Usually done to co-develop, co-produce, and co- market the products and/or services. ▫Arctic Cat/Yamaha to produce a snowmobile ▫Subaru and Toyota to create/produce the BRZ/

Yamaha & Arctic Cat Snowmobiles statement-on-yamaha-partnership/ statement-on-yamaha-partnership/

Strategic Alliance alliancehttp://jalopnik.com/129724/toyota-and-subaru-form- alliance

Mergers Occurs when one business purchases a controlling interest in the other company or because the companies have combined their interests. ▫i.e. Best Buy & Future Shop ▫ snaps-up-future-shop-for-580-million http:// snaps-up-future-shop-for-580-million

Offshoring The relocation of some of a company’s operations to another country. Typically, the new location takes advantage of much lower labour costs in the new country. ▫For example, many Canadian manufacturing companies have moved to China and Mexico.  The emergence of these economies also offer millions of potential customers. ▫Offshoring vs. outsourcing

Offshoring & Outsourcing Video

Multinational Corporations (MNC) A business enterprise that conducts business operations in several different countries. ▫Saves a lot of money because they take advantage of what each country has to offer. Also known as Transnational Corporations

MNCs MNCs have to abide to regulations, policies and rules in each country. ▫However, most operations are strategically located to cut costs.  Most manufacturing operations are set up in third world countries to keep labour and environmental costs down.

Power and Multinational Corporations Many multinational corporations are powerful enough to pressure governments to give in to their demands (to avoid penalties, etc.). ▫The most common threat is to close offices and lay-off thousands of workers and take employment elsewhere. ▫Most poor countries are desperate for jobs and will likely overlook any wrongdoings by these businesses.

Benefits of MNCs When a MNC invests in a country, that country benefits by: ▫New jobs ▫New technology (Research & Development) ▫Workforce training ▫Economic Growth (Tax revenue, increase in GDP, etc.)

Downside to MNCs in new countries Take advantage of poor people and offer extremely low wages/salary ▫Thus, economic benefits in host country are minimal. Loss of natural resources and environmental destruction Loss of local businesses (b/c products are cheaper) Money flows out of host country to home country – profits return to home country.

Movies: The Corporation Manufactured Landscapes