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MNB3702 - Summary for exam (2020)
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MNB3702 - Global Business Management
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,TABLE OF CONTENTSPART FOUR - THE FIRM ON THE GLOBAL STAGE
CHAPTER 11 (SU 1) Starting International Business
CHAPTER 12 (SU 2) Foreign Entry Strategies
CHAPTER 13 (SU 3) Competitive Dynamics
CHAPTER 14 (SU 4) Global Strategies and Acquisitions
PART FIVE – OPERATIONS IN THE GLOBAL MNE
CHAPTER 15 (SU 5) Organizing and Innovating in the MNE
CHAPTER 16 (SU 6) People in the MNE
CHAPTER 17 (SU 7) Customers and Suppliers of the MNE
, CHAPTER 11 (SU 1)
STARTING INTERNATIONAL BUSINESS
Introduction
Small- and medium-sized enterprises (SMEs) – firms with fewer than 500 employees
Entrepreneur – leader identifying opportunities and taking decisions to exploit them
Entrepreneurial team – a group of people jointly acting as entrepreneurs
Exporter – seller of products or services to another country
Importer – buyer of goods or services from another country
1. GOING INTERNATIONAL
Firms can act as sellers or buyers or both
In international trade, the sellers are known as exporters and the buyers as importers
1.1 Managing exports and imports
Many firms start international business through direct exports – which is the sale of products to
customers in another country
This strategy is attractive for less experienced firms because they can reach foreign customers directly
Delivering an export order, however, creates practical challenges for an inexperienced firm
Who is in charge of moving the goods from your place to theirs?
Table 11.2: The trader’s vocabulary
Term Meaning Explanation
Trade documents
AWL Airway Bill Document issued by an airline to certify receipt of merchandise
Contrary to B/L, it does not entail a legal title to the products
B/L Bill of lading Document issued by a courier or shipping company certifying
that the merchandise has been delivered and paid for
Only the person holding the B/L has the right to claim the
products
L/C Letter of credit A document certifying that the importer’s bank will pay a
specific sum of money to the exporter upon delivery of the
merchandise
Contract terms
CIF Cost, insurance & The seller pays all costs of transport, including insurance and
freight freight
DDP Delivered duty paid The seller will deliver the goods to a specified place and pay
the necessary customs duties
EXW Ex works Buyer has to pick up the goods from the seller’s specified
factory or warehouse
FOB Free on board The seller delivers the goods on board a boat or train but does
not pay for the transport
Direct exports represent the most basic mode, capitalizing on economies of scale in production
concentrated in the home country and affording better control over distribution
Marketing considerations suggest that the firm needs to be closer, both physically and psychologically, to
its customers
Small businesses do not have resources to build a local marketing operation, thus they reach customers
through indirect exports – exporting through an intermediary
, 1.2 Trade intermediaries
Export intermediaries are based in the same country as the exporter but have the expertise to perform a
‘middleman’ function my linking sellers and buyers overseas
Export via intermediaries not only enjoys economies of scale in domestic production (similar to direct
exports), but it is also worry-free because the intermediary handles cross-cultural communication,
international payments and other activities that small firms may find rather burdensome
Exporters may also employ their own local agent or distributor – sales agents receive a commission on
sales, while distributors trade on their own account by buying products and selling them in the local
market at their own risk and using their own channels
Such intermediaries provide knowledge of the local market and network relationships with local
customers – however this entails the risk that the distributor controls the local market and shares
information selectively; they may also repackage products under their own brand and monopolize the
communication with customers
Some firms that have negative experiences with intermediaries subsequently move back to direct exports
A particular challenge for such firms may be after-sales service: how do you fix a defective machine at
the other side of the world?
The internet may assist with after-sales service – yet, customers may still develop more confidence in a
supplier with a local operation
Many focus on the exporter as the primary decision-maker, but importers are equally important in driving
international trade – the activities are the same, but just from the buyer’s perspective
For large transactions, a letter of credit guarantees importers that their payment is only released when they
have received the goods
Importers may employ specialized intermediaries to find suitable suppliers and to negotiate appropriate
terms of delivery
1.3 Managing international services
Traditionally, international trade meant sending goods across borders, but with advances in
communication and transport technologies has changed that
Countries like Greece and Cyprus earn more through exports of services than through exports of goods,
mainly due to their shipping and tourism industries
Traditionally, services had to be produced at the site of delivery, however, regulatory and technological
changes facilitate trade in services, taking two different forms:
Cross-border services services that are sent across national borders, e.g. airlines transport
people across the world, courier companies deliver parcels and letters,
maritime shipping carrying cargo and containers
Such transactions count as exports in the balance of payments, because
they earn money for the national economy
Servicing foreign resident involves delivery of services to people living in other countries, e.g.
tourism, education and health care businesses
In tourism when businesses targeting international customers
In education when individuals desire to tap into knowledge and
experience available abroad
In health care attracting foreign citizens seeking affordable medical care
(e.g. US citizens seeking outside of the USA)
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