International Business
Business can take many different forms and can be conducted at different levels. Based on the level of business activity business may be defined as either domestic, international or multinational. If business acquires all its resources and sells all its products within a single country it is considered a domestic business. Although international business is also based in a single country it acquires a meaningful share of its resources and revenues from other countries. A multinational business operates on the world-wide scale regardless of national borders.
More and more domestic businesses decide to enter international markets and become international, while international companies expandand become multinational (transnational). This phenomenon is called globalization– the evolution of economy that comprises interrelated markets. The decision to adopt a global or nationally focused strategy depends upon both markets and technological considerations.
There are three primary motivations for firms to engage in international business: 1) to expand sales; 2) to acquire resources; 3) to diversify sources of sales and supplies. When a business decides to expand internationally , i.e. adopts a global strategy, it may choose among several options, including importing or exporting merchandise (visibles), service exports and imports (invisibles), foreign investment in the form of either direct or portfolio investments, setting up joint ventures or subsidiaries.
Although many mechanisms exist for promoting the growth of international business, there are also many barriers to doing business abroad. The major factors causing changes in world trade and investment patternsare economic conditions, technology and political relations.
The economic factor that influences the decision to engage in business beyond national borders includes the level of economic development in various countries, the presence of adequate infrastructure, a country’s balance of payments and monetary exchange rates. The political element is associated with the degree of political risk concerning a particular country, trade barriers erected by governments, legislation encouraging foreign business investments. The technological factor includes various methods of technology transfer.
A considerable amount of international business is conducted by multinational corporations though midsize and even small companies may also engage, especially when they offer a unique product and/or good value.
Exercise 3. Answer the following questions.
1. How do we differentiate between domestic, international and multinational business?
2. What is the usual way of business expansion?
3. What are the primary motivations for firms to become international?
4. Through what mechanisms can business become international?
5. What factors cause changes in world trade and investment pattern?
6.What economic factors influence the decision to become international?
7. What is the essence of political element that causes changes in world trade and investment pattern?
8. In what cases do midsize and small companies engage in international business?
Exercise 4. Translate into English.
Рівень бізнесової діяльності; значна частка; незважаючи на ...; приймати глобально/національно спрямовану стратегію; прямі або портфельні інвестиції; сприяти зростанню міжнародного бізнесу; структура світової торгівлі та інвестицій; відповідна інфраструктура; ступінь політичного ризику.