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TUTORIAL 1 Is it better for a country to encourage international trade? Why do you say so? Yes, Is it better for a country to encourage international trade. Three major operating objectives the reasons for engaging in international business : 2 1)EXPANDING SALES Pursuing international sales usually increases the potential market and potential profits. 2) ACQUIRING RESOURCES Producers and distributors seek out products, services, resources and components from foreign countries. Forei
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  TUTORIAL 1 Is it better for a country to encourage international trade? Why do you say so? Yes, Is it better for a country to encourage international trade. Three major operating objectives the reasons for engaging in international business : 2 1)EXPANDING SALES Pursuing international sales usually increases the potential market and potential profits. 2) ACQUIRING RESOURCES Producers and distributors seek out products, services, resources and components from foreign countries. Foreign sources may give companies lower costs. Sometimes firms gain competitive advantage by improving new differentiating or better products quality from those of competitors, in both case s they ‘re potentially increasing market share and profits. Lastly, additional o perating knowledge such as many companies establish foreign R&D facilities to tap additional scientific resources. They also learn while operating abroad and they acquire product knowledge for entering new markets at home. 3) REDUCING RISK International operations may reduce operating risk by operating in countries with different business cycles can smoothing sales and profits. Other than that, companies often go international for defensive reasons. Perhaps they want to counter competitors’ advantages in f  oreign markets or preventing competitors from gaining advantages. TUTORIAL 2 Choose 3 countries that are economically diverse. What are the impacts of foreign direct investment upon those countries?   FDI occurs when a firm invests directly in facilities to produce and/or to market a product in a Foreign country. o   FDI takes on 2 main forms: I.   Greenfield investment II.   Acquisition/Merger o   FDI occurs when: I.   The parent company obtains sufficient common stock in a foreign company to assume voting control II.   The parent company acquires or constructs new plants and equipment overseas. III.   The parent company shifts funds abroad to finance an expansion of its foreign subsidiary IV.   Earnings of the parent company’s foreign subsidiary are reinvested in plant Expansion Motives for Foreign Direct Investment o   Demand factors ã   tap into foreign markets ã   expand demand beyond domestic ã   preemptive measures to prevent foreign competition o   Cost factors ã   Access to raw material ã   Lower labor ã   Transportation cost o   cost factors ã   transportation costs ã   especially when representing high percentage of total costs ã   When the cost of transporting raw material is significantly higher than the cost of shipping its finished product to the markets-production facilities closer to its raw material sources ã   When the cost of transporting raw finished products is significantly higher than the raw maerial-production facilities closer to its market ã   When transportation cost are minor,MNEs tend to locate where the availability of cost of labor and other inputs provide them the lowest manufacturing cost.
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