Session 2: The International Business Environment
- TATA: Is an Indian car company. They currently have over 165 billion dollars in revenue. They also are the
mother company of Range Rover etc.
- Expected world GDP growth in 2025 following the IMF is around 3.2%. Compared to previous years this
isn’t too bad.
- MNE: MulOnaOonal enterprise
- Belgian city is home to Belgium’s largest MNE = Leuven à namely AB-InBev
The firm as a system of transforma/on ac/vi/es
- The Porter value chain
- Is a way to start & analyze firms
- 2 direc;ons:
o Horizontally
§ Suppor;ng ac;vi;es
§ Not related to the flow of
the goods
o Ver;cally
§ Considered as “steps”
§ Those are from leH to right
what goods / materials go
through
The firm embedded in a set of rela/ons
- Companies have a lot of rela;ons
- Also, compe;tors are a sort of “rela;on”
,Mul/na/onal Enterprise
- = MNE
- A mul;na;onal enterprise is any business that has produc;ve ac;vi;es in two or more countries
- Such companies have risen since the 1960s
o The number of non-US mul;na;onal has risen
o The number of mini mul;na;onals has risen
- Special forms:
o Born Globals
§ Companies that are born to be global
§ They have a global vision from the start
§ (Begin expor;ng within 2-3y of forma;on)
o Emerging Market MNEs
§ Companies that come from rapidly growing economies like China, India etc
§ OHen lack tradi;onal advantages like brand recogni;on
Firms have different reasons to interna/onalize
- Market-seeking à globaliza;on of markets
o Exploring and discovering new market opportuni;es
o Following customers
- Resource-seeking à globaliza;on of produc;on
o Exploi;ng factor-driven loca;on advantages
o Exploi;ng demand-driven loca;on advantages
- Using global network à both of the above
o Global experience
o Economies of scale in all types of ways (produc;on, logis;cs…)
o Mobility of produc;on
o Lowering risk
§ Eg: if there’s crisis in country A, countries B and C could cover those
o Product differen;a;on
Why would you want to produce close to your customers à Follow your customers
,But… interna/onaliza/on is not without risk
- Target in Canada, failed whilst a lot of things are equal, such as culture etc
o Same for Walmart in Germany and Delhaize & AH in Germany
- Main problem is Liability of Foreignness
o If you enter a market that is not your own you always start with disadvantages, with
liabili;es
o Those problems could be:
§ Not understand the government
§ Not understand how people react exactly
Different entry modes to interna/onal markets for firms
- An interna;onal market entry is an ins;tu;onal
arrangement that makes possible the entry of a form
products, services, technology, human skills,
management, or other resources into a foreign
country
- What influences that choice:
o Factors like transport costs, trade barriers,
poli;cal risks, economical risks or strategy
à Op;mal choice varies by situa;on
A theory of interna/onaliza/on: Dunning’s OLI
- Three classes of advantages determing the mo;ve, loca;on & mode
o Ownership (Mo;ve)
§ Why
§ Nature and size of technological, managerial, financial and marke;ng
advantages vis-à-vis domes;c firms
§ Applica4on of Tesla in China:
• Brand, Design, Technology
o Loca;on
§ Where
§ Combining O-advantages with immobile factors in a foreign market
(reflects loca;on-specific advantages abroad)
§ Applica4on of Tesla in China
• Presence of high-skilled labor, and low labor costs, proximity of crucial
customers
, o Internaliza;on (Mode)
§ How
§ Advantages of internal coordina;on and control, and advantages of combina;on
with other assets of the firm
§ This choice is for example licensing. Do I do my business on my own in my own
house, or with a partner etc
§ Applica4on of Tesla in China
• Large synergies in produc;on, processes too complex and sensi;ve to
describe in contracts and manuals for partners
Globaliza/on
- Globaliza;on is the movement towards a more integrated and mutually dependent global
economy
o Globaliza;on of produc;on
o Globaliza;on of markets
- Dimensions of globaliza;on
o Interna;onal economy
§ From na;onal to interna;onal markets and produc;on systems
o Interna;onal poli;cs
§ The end of the na;on-state
o Interna;onal culture
§ A world “without borders”
- The world changed from independent, na;onal economies to a mutually dependent, integrated
economic system
- AHer covid people were talking about slowbaliza4on
o Slowdown of the globaliza;on
o External shocks cause uncertainty, and hinder trade and investments. That also indicates
that there is a shock in the “network” of the companies (seen above)
o There are ahempts to limit the emerge and the impact of the shocks
§ Ahempts to regulate the environment & avoid uncertainty
§ Interna;onal environment: the rela;ons between na;ons with different interest
§ To create stability for businesses, the rela;ons between na;ons are regulated
• Via ins;tu;ons such as WHO, WTO and EU
à Not always successful
àThe current ins;tu;onal system is increasingly put in ques;on. Overall
“egois;c” tendency among states
- TATA: Is an Indian car company. They currently have over 165 billion dollars in revenue. They also are the
mother company of Range Rover etc.
- Expected world GDP growth in 2025 following the IMF is around 3.2%. Compared to previous years this
isn’t too bad.
- MNE: MulOnaOonal enterprise
- Belgian city is home to Belgium’s largest MNE = Leuven à namely AB-InBev
The firm as a system of transforma/on ac/vi/es
- The Porter value chain
- Is a way to start & analyze firms
- 2 direc;ons:
o Horizontally
§ Suppor;ng ac;vi;es
§ Not related to the flow of
the goods
o Ver;cally
§ Considered as “steps”
§ Those are from leH to right
what goods / materials go
through
The firm embedded in a set of rela/ons
- Companies have a lot of rela;ons
- Also, compe;tors are a sort of “rela;on”
,Mul/na/onal Enterprise
- = MNE
- A mul;na;onal enterprise is any business that has produc;ve ac;vi;es in two or more countries
- Such companies have risen since the 1960s
o The number of non-US mul;na;onal has risen
o The number of mini mul;na;onals has risen
- Special forms:
o Born Globals
§ Companies that are born to be global
§ They have a global vision from the start
§ (Begin expor;ng within 2-3y of forma;on)
o Emerging Market MNEs
§ Companies that come from rapidly growing economies like China, India etc
§ OHen lack tradi;onal advantages like brand recogni;on
Firms have different reasons to interna/onalize
- Market-seeking à globaliza;on of markets
o Exploring and discovering new market opportuni;es
o Following customers
- Resource-seeking à globaliza;on of produc;on
o Exploi;ng factor-driven loca;on advantages
o Exploi;ng demand-driven loca;on advantages
- Using global network à both of the above
o Global experience
o Economies of scale in all types of ways (produc;on, logis;cs…)
o Mobility of produc;on
o Lowering risk
§ Eg: if there’s crisis in country A, countries B and C could cover those
o Product differen;a;on
Why would you want to produce close to your customers à Follow your customers
,But… interna/onaliza/on is not without risk
- Target in Canada, failed whilst a lot of things are equal, such as culture etc
o Same for Walmart in Germany and Delhaize & AH in Germany
- Main problem is Liability of Foreignness
o If you enter a market that is not your own you always start with disadvantages, with
liabili;es
o Those problems could be:
§ Not understand the government
§ Not understand how people react exactly
Different entry modes to interna/onal markets for firms
- An interna;onal market entry is an ins;tu;onal
arrangement that makes possible the entry of a form
products, services, technology, human skills,
management, or other resources into a foreign
country
- What influences that choice:
o Factors like transport costs, trade barriers,
poli;cal risks, economical risks or strategy
à Op;mal choice varies by situa;on
A theory of interna/onaliza/on: Dunning’s OLI
- Three classes of advantages determing the mo;ve, loca;on & mode
o Ownership (Mo;ve)
§ Why
§ Nature and size of technological, managerial, financial and marke;ng
advantages vis-à-vis domes;c firms
§ Applica4on of Tesla in China:
• Brand, Design, Technology
o Loca;on
§ Where
§ Combining O-advantages with immobile factors in a foreign market
(reflects loca;on-specific advantages abroad)
§ Applica4on of Tesla in China
• Presence of high-skilled labor, and low labor costs, proximity of crucial
customers
, o Internaliza;on (Mode)
§ How
§ Advantages of internal coordina;on and control, and advantages of combina;on
with other assets of the firm
§ This choice is for example licensing. Do I do my business on my own in my own
house, or with a partner etc
§ Applica4on of Tesla in China
• Large synergies in produc;on, processes too complex and sensi;ve to
describe in contracts and manuals for partners
Globaliza/on
- Globaliza;on is the movement towards a more integrated and mutually dependent global
economy
o Globaliza;on of produc;on
o Globaliza;on of markets
- Dimensions of globaliza;on
o Interna;onal economy
§ From na;onal to interna;onal markets and produc;on systems
o Interna;onal poli;cs
§ The end of the na;on-state
o Interna;onal culture
§ A world “without borders”
- The world changed from independent, na;onal economies to a mutually dependent, integrated
economic system
- AHer covid people were talking about slowbaliza4on
o Slowdown of the globaliza;on
o External shocks cause uncertainty, and hinder trade and investments. That also indicates
that there is a shock in the “network” of the companies (seen above)
o There are ahempts to limit the emerge and the impact of the shocks
§ Ahempts to regulate the environment & avoid uncertainty
§ Interna;onal environment: the rela;ons between na;ons with different interest
§ To create stability for businesses, the rela;ons between na;ons are regulated
• Via ins;tu;ons such as WHO, WTO and EU
à Not always successful
àThe current ins;tu;onal system is increasingly put in ques;on. Overall
“egois;c” tendency among states
