Chapter 5 MANAGING IN A GLOBAL ENVIRONMENT © Prentice Hall,

Meaning of international business 1. Domestic Business  Acquires all resources and sells its products or services within a single country  Example: 2. International Business:  Based primarily in a single country  Also acquire some meaningful share of its resources or revenues from other countries  Example:

Meaning of international business 3. Multinational Business  Worldwide marketplace from which it buys raw materials, borrow money and manufacture and sells it product 4. Global Business  Transcends national boundaries and not committed to single country  No business has truly achieved this level of internationalization, a few are edging closer

A multi-national organization has locations or facilities in multiple countries, but each location functions in its own way, essentially as its own entity. A global company also has locations in multiple countries, but they’ve figured out to create 1 company culture with 1 set of processes that facilitate a more efficient and effective single global organization. Differences Multinational Business and global business

Differences Among International Business

How Organizations Go Global Three Stages –each stage requires more investment globally and entails more risk Stage I –nominal steps toward being a global business exporting - making products and selling them overseas importing - selling products at home that are made overseas –most organizations start doing business globally this way –involves minimal investment and minimal risk © Prentice Hall,

How Organizations Go Global (cont.) Stage II –no physical presence of company employees outside the company’s home country –to handle sales, company may: send domestic employees on regular overseas business trips hire foreign agents or brokers –to handle manufacturing may contract with a foreign firm to produce the organization’s products © Prentice Hall,

How Organizations Go Global (cont.) Stage III –most serious commitment to pursue global markets –licensing and franchising both involve an organization giving another organization the right to use its brand name, technology, or product specifications licensing primarily used in manufacturing franchising primarily used in service operations © Prentice Hall,

How Organizations Go Global (cont.) Stage III (cont.) –strategic alliances partnerships between an organization and a foreign company both organizations share resources and knowledge both organizations share risks and rewards joint venture - partners agree to form a separate, independent organization for some business purpose © Prentice Hall,

How Organizations Go Global (cont.) Stage III (cont.) –foreign subsidiary involves direct investment in a foreign country –establish a separate and independent production facility or office entails the greatest commitment of resources poses the greatest amount of risk © Prentice Hall,

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How Organizations Go Global Stage I Passive Response Stage II Initial Overt Entry Stage III Established International Operations Exporting to foreign countries Importing from foreign countries Hiring foreign representation or contracting with foreign manufacturers Licensing/ Franchising Foreign Subsidiary Joint Ventures Strategic Alliances © Prentice Hall,