1. ©1996 David L. Sturges UT-Pan American College of Business Administration INTB 4365 International Competitiveness David L. Sturges, Ph.D.

2. ©1996 David L. Sturges International Business Categories u International Business u Foreign Business u Multinational Company u Global Company u International Company

3. ©1996 David L. Sturges International Business u International business occurs whenever an individual, corporation, or public institution located in one country engages in commercial transaction with an individual, corporation, or public institution in another country.

4. ©1996 David L. Sturges International Business u Activities involve crossing national borders. u Includes international trade, foreign manufacturing, and service businesses

5. ©1996 David L. Sturges Foreign Business u Domestic operations within a foreign country u For Wal-Mart, Monterrey stores’ sales activities are foreign business

6. ©1996 David L. Sturges Multinational Company u Company with multiple country affiliates u Each affiliate formulates own strategy

7. ©1996 David L. Sturges Multinational or transnational enterprise (Dunning) u engages in foreign direct investment (FDI) and owns or controls value-adding activities in more than one country. u NOTE: transnational is a term adopted by the United Nations Center on Transnational Corporations in 1974 at the request from some Latin American countries who wanted a differentiation between companies domiciled in Latin American and those from other parts of the world.

8. ©1996 David L. Sturges MNC (Bartlett and Goshall) Two characteristics: u Substantial direct investment u Active management of offshore assets.

9. ©1996 David L. Sturges Global Company u Company with multiple country affiliates u Tries to standardize operations in all functional areas

10. ©1996 David L. Sturges Global Enterprise u engages in value-adding activities in each of the major regions of the world and which pursues an integrated strategy toward these activities.

11. ©1996 David L. Sturges International Company u Refers to Both global and multinational companies

12. ©1996 David L. Sturges Globalization Forces u Advances in computer technology and communication u Progressive reduction of barriers to trade u Trend toward unification and socialization of global community.

13. ©1996 David L. Sturges Explosive Growth u World Stock of FDI in 1992 was 1,932 Billion u 37,000 transnational firms in 1991 u 206,000 foreign affiliates u What did you find on the Internet?

14. ©1996 David L. Sturges Degree of multi- or transnationality u number and size of foreign subsidiaries or associate companies it owns. u number of countries in which it engages in value-adding activities such as mines, plantations, factories, selling outlets, banks, offices, or hotels.

15. ©1996 David L. Sturges Degree of multi- or transnationality u proportion of its global assets, revenue, income, or employment accounted for by its foreign affiliates. u degree to which management or stock ownership is internationalized. u extent to which its higher value activities (ex. R&D) are internationalized (this describes the quality or depth of foreign production)

16. ©1996 David L. Sturges Types of International Business u Most international business transactions occur between corporations and other corporations or individuals. Usually, they take the form of assets, goods, or services exported or imported for a money price. Exceptions include counter-trade, that is, the exchange of goods or services for other goods or services.

17. ©1996 David L. Sturges Trade Categories u Trade may be conducted between independent buyers and sellers at arm's length prices, or between different parts of the same organization on an internally set price (transfer pricing).

18. ©1996 David L. Sturges Trade Categories u Trade in financial assets is called international or foreign investment. Such trade, and trade in non-financial assets (knowledge or organizational systems), may be portfolio or indirect where it is between independent economic entities, or direct where it is undertaken within the same economic entity.

19. ©1996 David L. Sturges Trade Categories u Trade in products may consist of final goods or services or of intermediate goods or services, which are used by purchasers to create additional value.

20. ©1996 David L. Sturges Foreign direct investment u The investment made outside the home country of investing company, but inside the investing company. Control over use of the resources transferred remain with the investor. u It consists of a package of assets and intermediate products such as capital, technology, management skills, access to markets, and entrepreneurship.

21. ©1996 David L. Sturges Foreign Indirect Investment (portfolio or contractual) transfer of resources u Specific assets and intermediate products (capital, debt, or equity, technology) are separately transferred between two independent economic entities through the modality of the market. Control over the resources is relinquished to the buyer. u Only these resources are transferred.

22. ©1996 David L. Sturges End of Session