INTERNATIONAL BIZ OPERATION

Dr. Vu Kim Dung, Lương Minh Hằng, Mạc Thị Ngọc Diệp (3b cuối)
Email: dungvk@ftu.edu.vn
Phone number: 0987254088
Attendance: 10% (đi học đầy đủ: 9đ; phát biểu và làm bt: 10đ)
Mid-term test: 30%
Group presentation: 15%
Presentation topics related to the content of chapters
Submit slides + reports on the shared drive 2 days before the
presentation date. Other groups need to read and prepare questions for the QnA session
Submit the hard copy report to the teacher on the day of presentation
Report: 15%
Final test: 60% (MCQs n Writing)
Main contents
BUỔI 1
I. Basic concepts Definition
1. International business:
Commercial transactions that take place between two or more nations or across
border
Economic system of exchanging goods and services, conducted between indi
and businessess in multiple countries
2. Nature of International Biz
All value-adding activities can be performed in international locations
The subject of cross-border trade can be products, services, capitals, technology
and labor (market offerings)
Firms internationalize through exporting, FDI, licensing, franchising and
collaborative ventures
3. Globalization of Markets
Ongoing economic integration and growing interdependency of countries
worldwide
4. The Dimensions of Market Globalization consist of:
 Greater intergration and interdenpendency of national economics, leading to
freer movement of goods, services, capital and knowledge
Rise of regional economic intergration blocs (custom area: same targets, same
purposes, eg: CPTTP)
Growth of global investment and financial flows
Convergence of consumer lifestyles and preferences
Globalization of production
International biz key players
Key players include the United States, China, the European Union (EU), Japan
and Germany
Three main types: Multinational Enterprise (MNE), Small and Medium-sized
enterprise (SME), International Direct Venture Firm (Born Global Firms)
1. MNE: a large comp with substantial resources performing various business
activities through a network of subsidiaries and affiliates located in many countries
around the world (ed: Citibank, Wal-mart, IKEA, Nokia)
2. SME: Most of the def mainly focus on the number of employees that the company
currently engaged in. In U.S, a company is considered as SME if its current number is
less then 500. But, in other less developed economies, the number of employees is
adjusted to reflect the growth of the local economy
3. International direct venture firm (Born Global Firms): Due to rapid advancement of
technology, many young, energetic, entrepreneurial companies take a shorter route to
establish themselves by launching internatioanl biz activities directly at their promary
evolution
Why do firm internationlize:
Obtain new opportunities for growth and earn higher returns on investment
Expand new ideas about products and services and biz methods
Deal with international competitors more effectively or thwart the development
of competition in the home market
Increase economics of scale (expand production to cut down cost,) in sourcing,
production, marketing and RnD
Be nearer to lower-cost or better value factors of production
Invest in profitable venture with a foreign partner
International Biz & Dosmetis Biz
Cost
 Tariff, time costs due to border delays, costs associated with country differences
such as language, the legal system or a different culture
Currencies
Management
Risk
Level of complexity and risk of the biz nature, unknown political, social and
economic systems
International biz may yielsd superior performance through:
Maximizing returns market share, attaining global scale economies, the ease to
acquire resources and cost, enhanced competitiveness, superior knowledge transfer
Risks in international biz
1. Business risk: is a firm’s potential loss or failure from poorly developed or executed
biz strategoes, tactics or procedures
Less than optimal formulation and/or implementation of strategies, tactics or
procedures
Selections, market entry timing, pricing, product features, and promotional
themes poor
Execution of stratgey and competitive intensity
2. Economic risk
Political and legal risk
Cultural risk
o Economic risk is the risk of adverse unexpected fluctuation in exchange rates, inflation and other harmful
economic conditions create uncertainty of returns.
 For example, if money must be converted into a different currency to make a certain investment,
changes in the value of the currency relative to the U.S. dollar will affect the total loss or gain on the
investment when the money is converted back.
 Sometimes, this term is also called exchange rate risk.

Risks in International Business

o Political and legal risks is the potentially adverse effects on company operations and profitability holes by
developments in the political, legal, and economic environment in a foreign country.
 Differences in host country political, legal and economic regimes may adversely impact firm profitability.
 Changes in the laws, regulations and indigenous factors such as property rights, intellectual-property
protection, product liability, taxation policies.
 The level of government intervention
 Culture risk involves a situation or event whereby a cultural miscommunication can put a damper on
business dealings and at the same time place human value at risk
o Foreign customers' attitude and behavior differ significantly form those buyers at home
o > Trade is between two countries.
o Only two commodities are traded
o Free Trade exists between the countries
o The only element of cost of product is labor.
o Adam Smith: Wealth of Nations (1776) argued that a country has a absolute advantage in the production
of product when it is more efficient than any other country producing it
o Countries should specialize in the production of goods for which they have an absolute advantage and
then trade these goods for the goods produced by other country
o In economics, principle of absolute advantage refers to the ability of a party (an individual, or firm, or
country) to produce more of a good or service than competitors, using the same amount of resources
Global Business Strategy
 In what countries does the company operate?
 What does the company do there?
 How are its operations organized there?
d4 international business strategies:
 international strategy
 multi-domestic strategy
 global strategy
 transnational strategy
Absolute Advantage Theory
o Adam Smith: Wealth of Nations (1776)
o argued:
o Capability of one country to produce more of a product with the same amount of input than other country
o A country should produce only goods where it is most efficient, and trade for those goods where it is not
efficient
> Trade between countries is, therefore,
beneficial
• Assumes there is an absolute balance among nations
Limitations
Fails to explain how free trade can be advantageous to two countries when one country can produce all goods
Country not having absolute advantage can't gain from free trade
Differences in climatic conditions & natural resources won't lead to absolute advantage
What if the country is bad at making everything?
Comparative Advantage Theory
INTERNATIONAL
TRADE
> David Ricardo: (1817) argued:
• A country should produce only goods where it is most efficient & import those goods in which it's less efficient
Even if a country is efficient in producing all goods, still trade between two countries will prove beneficial
> Assumes that a country does not have to be best at anything to gain from trade
•Country gains in those activities which it can produce at world prices even though it may not have absolute
advantage

Buổi 3
DEFINITION
Exporting is thus typically used in initial entry and gradually evolves towards foreign-based operations. In some
cases where there are substantial scale economies or limited number of buyers in the marketing world wide,
production may be concentrated in a single or a limited number of locations, and the goods then exported to other
markets
REASONS FOR EXPORTING
+ Production Surplus (Expand sales)
+ Comparative advantages (S, Quantity, Quality, Availability)
+ Product and Market Diversification
+ Competitiveness
+ Less Risky than FDI
+ Reach Economies of Scale
WHY ARE BUSINESSES PASSIVE IN FINDING EXPORT OPPORTUNITIES?
Not familior with foreign markefs a› don't know how big the opportunity
Afraid of the comploxity and mechanism of exporting to ather countries
Direct export modes
Manufacturer sells directly to the importer located in the foreign market
DISTRIBUTOR
o independent company that stocks the manufacturer's product
o It has freedom to choose own customer and price
Profit from the differences between seller and buyer price
o Exclusive representatives = sole distributors in a country
o Buy on their own accounts
.
Usually represents the manufacturer in all aspect of sales and servicing
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AGENT
o Independent company that sells on behalf of the manufacturer
o Usually it will not see or stock the product
o Exclusive, semi-exclusive, non-exclusive
Commission on a pre-agreed basis
Sells to wholesalers and retailers
Gathering some market and financial information- but not always - depends on contract

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Value chain includes a set of vertically linked chains of activities to create and increase value for customers. In
terms of structure, the value chain consists of two groups. First, main activities include physical activities, related
to product creation, sale and delivery to customers as well as post-sale support activities. Second, are support
activities, which will complement main activities and support each other through the provision of inputs,
technology, human resources and other functions within the enterprise (Porter, 1985).
1; SOME BASIC CONCEPTS
1. Manufacturing
All activities involved in creating a product
2. Logistics
The activity of controlling the flow of materials in the value chain, from purchasing materials to production and
distribution.