LECTURE 1 A SUBJECT OF INTERNATIONAL BUSINESS

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LECTURE # 1 A SUBJECT OF INTERNATIONAL BUSINESS

International Business comprises all commercial transactions (private and governmental, sales, investments, logistics, and transportation) that take place between two or more regions, countries and nation s beyond their political boundaries. Usually, private companies undertake such transactions for profit; govern ments undertake them for profit and for political reasons. It refers to all those business activities which involve cross border transactions of goods, services, resources between two or more nations. Transaction of economic resources include capital, skills, people etc. for international production of physical goods and services such as finance, banking, insurance, construction etc.

A multinational enterprise (MNE) is a company that has a worldwide approach to markets and production or one with operations in more than a country. Multinational Companies(MNCs) are large companies that operate in several countries at the same time. The first MNCs were established in the 1920 s. Many more came up in the 1950 s and 1960 s as US businesses expanded world wide and Western Europe and Japan also recovered to become powerful industrial economies. The worldwide spread of MNCs was a notable feature of 1950 s and 1960 s. This was partly because high import tariffs imposed by different governments forced MNCs to locate their manufacturing operations and become 'domestic producers' in as many countries as possible.

An MNE is often called multinational corporation (MNC) or transnational company (TNC). Well known MNCs include fast food companies such as Mc. Donald's and Yum Brands, vehicle manufacturers such as General Motors, Ford Motor Company and Toyota, consumer electronics companies like Samsung, LG and Sony, and energy companies such as Exxon. Mobil, Shell and BP.

Most of the largest corporations operate in multiple national markets. Areas of study within this topic include differences in legal systems, political systems, economic policy, language, accounting standards, labor standards, living standards, environmental standards, local culture, corporate culture, foreign exchang market, tariffs, import and export regulations, trade agreements, climate, education and many more topics. Each of these factors requires significant changes in how individual business units operate from one country to the next.

MNC has become a concept of that concerns the business world with the establishment of the so called first MNC, Dutch-East India Company in the 17 th century. The company was the first that allocates the risk as international trade has considerable risks and allows collective ownership through share issuing that is the impulse of globalization. The modern MNCs were formed mainly in Europe, particularly in Belgium (Cockeril), Germany (Bayer), Switzerland (Nestle), France (Michelin) and UK (Lever) in the 19 th century and applied FDI strategies in order to overcome the difficulties in exports resulted from tariffs. The aim of MNC is to get capital where it is cheapest and produce where they get the highest rate of return. Today the number of MNCs and their efficiencies in the world increase parallel with the globalization process. The number of such companies is more than 37, 000 as of 2000 in the world. The number of branches or agencies of MNCs’ in different countries has reached to 450, 000. Therefore theories of MNCs have been developed. The most significant ones of these theories are the location and internationalization theories.

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