1. University Of Finance & Administration
INTERNATIONAL BUSINESS
[E_IB]
PhDr. Karel Eliáš, CSc.

2. INTERNATIONAL BUSINESS [E_IB]
Lecture content
 INTERNATIONALISATION  dimensions
 motives for foreign expansion
 Drivers of internationalisation
 Goods categories traded internationally  Entry / operational modes
 Special IB operations 5.
INTERNATIONAL BUSINESS [E_IB]
PhDr. Karel Eliáš, CSc.

3. INTERNATIONAL BUSINESS [E_IB]
International ENVIRONMENT
GLOBAL
MACRO
MICRO 6.
INTERNATIONAL BUSINESS [E_IB]
PhDr. Karel Eliáš, CSc.

4. INTERNATIONAL BUSINESS [E_IB]
INTERNATIONALIZATION - MICRO view
Dimensions of Internationalization
INTERNAL
EXTERNAL
Motives for foreign expansion / Drivers of INT
Proactive
Reactive
Entry / Operational modes
EXPORTING
CONTRACTUAL
INVESTMENT
Special IB operations: e.g. barter, switch, clearing 7.
INTERNATIONAL BUSINESS [E_IB]
PhDr. Karel Eliáš, CSc.
INTERNATIONAL BUSINESS [E_IB]

5. INTERNATIONAL BUSINESS [E_IB]
INTERNATIONALIZATION - MACRO view
•Basic drivers of INT:
• patented product
Innate strategic capability
• exceptional
reputation
Access to production factors, which its
• comparative advantage
overseas competitors lack
Economies of scale
(its unit costs of
production are lower than competitors’ - based on volume) 8.
INTERNATIONAL BUSINESS [E_IB]
PhDr. Karel Eliáš, CSc.

6. INTERNATIONAL BUSINESS [E_IB]
Goods traded internationally - categories
For these reasons, GOODS which are traded internationally
typically tend to fall into 4 broad categories:
PRIMARY products
• Minerals, agriculture products (comparative advantage)
LOW VALUE added goods
• Low-fashion clothing
• Producer enjoys preferential access to production factors
HIGH VALUE added goods
• firms enjoying the right strategic capabilities
CAPITAL-intensive goods
• only large-scale production on an international scale can allow firms to reach their min.efficient scale of production 9.
INTERNATIONAL BUSINESS [E_IB]
PhDr. Karel Eliáš, CSc.

7. INTERNATIONAL BUSINESS [E_IB]
INTERNATIONALIZATION
•- various research approaches INTERNACIONALIZATION
• process of increasing involvement of enterprises in
international markets, although there is no agreed definition of internationalization or international entrepreneurship
MULTINACIONALIZATION
• the decision to establish foreign direct investment (FDI)
• production units abroad
GLOBALIZATION
• an ongoing process by which regional economies, societies, and cultures have become integrated through a globe-spanning network of communication and trade
• integration of national economies into the international economy through trade, FDI, capital flows, migration, and the spread of technology
INT = cover for international operations
10.
INTERNATIONAL BUSINESS [E_IB]
PhDr. Karel Eliáš, CSc.

8. INTERNATIONAL BUSINESS [E_IB]
Dimensions of INTERNACIONALIZATION
• Material purchase / components /
• (active IB in external flow)
technology / goods
• Export
• FDI in a company
• Ownership of production unit
(impact on
competition at a domestic market)
abroad
• Licence / Contracts
INTERNAL
EXTERNAL
dimension
dimension
11.
INTERNATIONAL BUSINESS [E_IB]
PhDr. Karel Eliáš, CSc.

9. INTERNATIONAL BUSINESS [E_IB]
MOTIVES for foreign expansion
PROACTIVE motives
REACTIVE motives
Profit advantage
Strong competition
Unique product
Over-production
Technological advantage
Domestic revenues decline
Exclusive information
Capacity (surpluses)
Tax advantage
Saturated domestic market
Customer distance / logistic point distance
Economy of scale
12.
INTERNATIONAL BUSINESS [E_IB]
PhDr. Karel Eliáš, CSc.

10. INTERNATIONAL BUSINESS [E_IB]
Entry modes & business activities in IB
ENTRY MODES
EXPORTING
INVESTMENT
CONTRACTUAL
Joint Licence & venture
Wholly Owned
Aliance Other
Subsidiary
Franchise
Direct Indirect export export
Major / Minor / 50-50%
Greenfield Acquisition
13.
INTERNATIONAL BUSINESS [E_IB]
PhDr. Karel Eliáš, CSc.

11. INTERNATIONAL BUSINESS [E_IB]
INT. TRADE
EXPORT
• Quantity of goods and services exported abroad
• Selling of products made in one’s own country for use or resale in other countries
• DIRECT x INDIRECT (intermediary)
IMPORT
• Quantity of goods and services imported from
abroad
• buying of products made in other countries for use or resale in one’s own country
• Internal dimension of internationalisation
14.
INTERNATIONAL BUSINESS [E_IB]
PhDr. Karel Eliáš, CSc.

12. INTERNATIONAL BUSINESS [E_IB]
CONTRACTUAL international business activities
LICENCE
• contractual agreement in which a firm in one country licenses the use of its
INTELLECTUAL property to a firm in a second country in return for a RAYALTY pay
•licensor provides its patents, trademarks, know-how, trade secrets x royalty
• beer breweries, Skoda
• avoiding restrictions - investment / testing market
FRANCHISE
• Provision of right to make business in a certain - in advance agreed way (recipe, brand names, trademarks, logos, mktg techniques, procedures) for a royalty payment
• unique product, unique conditions
• high level of standardization (LR, McD. - color, space solution)
ALIANCES
• Cooperation (customers - purch. strength / compet. - cartel, capacity, research, anti- red-tape administration)
OTHER agreements
• Technological / Management
15.
INTERNATIONAL BUSINESS [E_IB]
PhDr. Karel Eliáš, CSc.

13. INTERNATIONAL BUSINESS [E_IB]
INVESTMENT business activities
JOINT VENTURE
• an entity formed between two or more parties to undertake economic activity together
• Major [> 50%] - Minor [< 50%] -
50 / 50
WOS [Wholly Owned Subsidiary]
• GREENFIELD
• ACQUISITION
MNC / MNE / MNO
• MNC = buy resources, create goods in a variety of countries & then sell them in a variety of countries. Coordination of activities from headquarters (often).
• MNE = non-for-profit organizations (Int.Red Cross) and non typical MNC
• MNO = general term when referring to both non-for-profit and profit- seeking organizations
16.
INTERNATIONAL BUSINESS [E_IB]
PhDr. Karel Eliáš, CSc.

14. INTERNATIONAL BUSINESS [E_IB]
International INVESTMENTS - generally
FDI = Foreign Direct Investment
• investments made for the purpose of
ACTIVELY CONTROLLING PROPERTY, assets, or companies located in host countries
• home x host country
Portfolio Investment
• purchases of foreign financial assets (stock, bonds, certificates, deposits) for a purpose OTHER than CONTROL
17.
INTERNATIONAL BUSINESS [E_IB]
PhDr. Karel Eliáš, CSc.

15. INTERNATIONAL BUSINESS [E_IB]
•CONSISTS IN:
International TRADE
• Import / Export
International INVESTMENT
• FDI / Portfolio inv. // JV / WOS / MNO etc.
Other forms of int. business ACTIVITY
(counter-trades)
• Barter, Switch trading, Buyback, .
18.
INTERNATIONAL BUSINESS [E_IB]
PhDr. Karel Eliáš, CSc.

16. INTERNATIONAL BUSINESS [E_IB]
Further IB operations / countertrades
Counter trade
= is exchanging goods or services that are paid for, in whole or part, with other goods or services
BARTER
SWITCH trading
Counter
BUYBACK
OFFSET
PURCHASE
•Exchange of goods or
• occurs when a firm builds a
•Agreement that a
•Practice in which one
•Sale of goods and services to
plant in a country
services directly for
- or supplies
company will offset a hard
a country by a company that promises to make a future purchase of a
company sells to
technology, equipment,
other goods or services without the use of money
- currency purchase of an
another its obligation to make a
training, or other services to the country and
specific product
agrees to take a
unspecified
as means of
purchase in a
from the
certain
product from that nation in the future.
purchase or payment
given country.
country
percentage of the plant's output as partial payment for the contract
19.
INTERNATIONAL BUSINESS [E_IB]
PhDr. Karel Eliáš, CSc.

17. INTERNATIONAL BUSINESS [E_IB]
KEY terms
- Internationalization, drivers of internationalization
- Dimensions of internationalisation: internal x external
- Motives for foreign expansion: proactive x reactive
- Home x Host country
- Economies of scale
- Entry / opeartional modes
- Exporting
- Contractual
- Investment
- FDI x Portfolio investment
- Countertrade operations (Barter, Switch, Counter purchase, Buyback, Offset)
20.
INTERNATIONAL BUSINESS [E_IB]
PhDr. Karel Eliáš, CSc.

18. INTERNATIONAL BUSINESS [E_IB]
Thank you for your attention
21.
INTERNATIONAL BUSINESS [E_IB]
PhDr. Karel Eliáš, CSc.