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

©1996 David L. Sturges©1996 David L. Sturges

UT-Pan American UT-Pan American College of College of

Business Administration Business Administration

INTB 4365 INTB 4365 International International

Competitiveness Competitiveness

David L. Sturges, Ph.D.David L. Sturges, Ph.D.


International Business International Business CategoriesCategories

International BusinessInternational Business Foreign BusinessForeign Business Multinational CompanyMultinational Company Global CompanyGlobal Company International CompanyInternational Company


International BusinessInternational Business

International business occurs whenever an International business occurs whenever an individual, corporation, or public institution individual, corporation, or public institution located in one country engages in located in one country engages in commercial transaction with an individual, commercial transaction with an individual, corporation, or public institution in another corporation, or public institution in another country.country.


International BusinessInternational Business

Activities involve crossing national borders. Activities involve crossing national borders. Includes international trade, foreign Includes international trade, foreign

manufacturing, and service businessesmanufacturing, and service businesses


Foreign BusinessForeign Business

Domestic operations within a foreign Domestic operations within a foreign countrycountry

For Wal-Mart, Monterrey stores’ sales For Wal-Mart, Monterrey stores’ sales activities are foreign businessactivities are foreign business


Multinational CompanyMultinational Company

Company with multiple country affiliatesCompany with multiple country affiliates Each affiliate formulates own strategyEach affiliate formulates own strategy


Multinational or Multinational or transnational enterprise transnational enterprise

(Dunning)(Dunning) engages in foreign direct investment (FDI) engages in foreign direct investment (FDI)

and owns or controls value-adding activities and owns or controls value-adding activities in more than one country.in more than one country.

NOTE: transnational is a term adopted by the United NOTE: transnational is a term adopted by the United Nations Center on Transnational Corporations in 1974 at Nations Center on Transnational Corporations in 1974 at the request from some Latin American countries who the request from some Latin American countries who wanted a differentiation between companies domiciled in wanted a differentiation between companies domiciled in Latin American and those from other parts of the world.Latin American and those from other parts of the world.


MNC (Bartlett and Goshall)MNC (Bartlett and Goshall)Two characteristics:Two characteristics:

Substantial direct investmentSubstantial direct investment Active management of offshore assets.Active management of offshore assets.


Global CompanyGlobal Company

Company with multiple country affiliatesCompany with multiple country affiliates Tries to standardize operations in all Tries to standardize operations in all

functional areasfunctional areas


Global EnterpriseGlobal Enterprise

engages in value-adding activities in each engages in value-adding activities in each of the major regions of the world and which of the major regions of the world and which pursues an integrated strategy toward these pursues an integrated strategy toward these activities.activities.


International CompanyInternational Company

Refers to Both global and multinational Refers to Both global and multinational companiescompanies


Globalization ForcesGlobalization Forces

Advances in computer technology and Advances in computer technology and communicationcommunication

Progressive reduction of barriers to tradeProgressive reduction of barriers to trade Trend toward unification and socialization Trend toward unification and socialization

of global community.of global community.


Explosive GrowthExplosive Growth

World Stock of FDI in 1992 was 1,932 World Stock of FDI in 1992 was 1,932 BillionBillion

37,000 transnational firms in 199137,000 transnational firms in 1991 206,000 foreign affiliates206,000 foreign affiliates What did you find on the Internet?What did you find on the Internet?


Degree of multi- or Degree of multi- or transnationalitytransnationality

number and size of foreign subsidiaries or number and size of foreign subsidiaries or associate companies it owns.associate companies it owns.

number of countries in which it engages in number of countries in which it engages in value-adding activities such as mines, value-adding activities such as mines, plantations, factories, selling outlets, banks, plantations, factories, selling outlets, banks, offices, or hotels.offices, or hotels.


Degree of multi- or Degree of multi- or transnationalitytransnationality

proportion of its global assets, revenue, proportion of its global assets, revenue, income, or employment accounted for by its income, or employment accounted for by its foreign affiliates.foreign affiliates.

degree to which management or stock degree to which management or stock ownership is internationalized.ownership is internationalized.

extent to which its higher value activities (ex. extent to which its higher value activities (ex. R&D) are internationalized (this describes R&D) are internationalized (this describes the quality or depth of foreign production)the quality or depth of foreign production)


Types of International Types of International BusinessBusiness

Most international business transactions Most international business transactions occur between corporations and other occur between corporations and other corporations or individuals. Usually, they corporations or individuals. Usually, they take the form of assets, goods, or services take the form of assets, goods, or services exported or imported for a money price. exported or imported for a money price. Exceptions include counter-trade, that is, Exceptions include counter-trade, that is, the exchange of goods or services for other the exchange of goods or services for other goods or services.goods or services.


Trade CategoriesTrade Categories

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



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



Trade in products may consist of final Trade in products may consist of final goods or services or of intermediate goods goods or services or of intermediate goods or services, which are used by purchasers to or services, which are used by purchasers to create additional value.create additional value.


Foreign direct investmentForeign direct investment

The investment made outside the home The investment made outside the home country of investing company, but inside the country of investing company, but inside the investing company. Control over use of the investing company. Control over use of the resources transferred remain with the investor.resources transferred remain with the investor.

It consists of a package of assets and It consists of a package of assets and intermediate products such as capital, intermediate products such as capital, technology, management skills, access to technology, management skills, access to markets, and entrepreneurship.markets, and entrepreneurship.


Foreign Indirect Foreign Indirect Investment (portfolio or Investment (portfolio or contractual) transfer of contractual) transfer of

resourcesresources Specific assets and intermediate products Specific assets and intermediate products

(capital, debt, or equity, technology) are (capital, debt, or equity, technology) are separately transferred between two separately transferred between two independent economic entities through the independent economic entities through the modality of the market. Control over the modality of the market. Control over the resources is relinquished to the buyer.resources is relinquished to the buyer.

Only these resources are transferred.Only these resources are transferred.


End of SessionEnd of Session

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