International Business

The American College

Chapter 5

Question No 1:

Describe the four basic levels of international business activity.Do you think any organization will achieve the fourth level?Why or why not.

Question No 2:

For each of the four globalization strategies, describe the risks associated with that strategy and the potential returns from that strategy. __________________________________

Answer for question No 1:

The four general levels of international business

activity are:

1. Domestic business

2. International business

3. Multinational business

4. Global business.

Domestic Business: Is the one that acquires all of its resources and sells all of

its products ot services within a single country.(8/143)

Interational business: Is the one that is based primarily in a single country

but acquires some meaningful share of its resources or revenues (ot both)

from othe countries. (8/143)

Multinational business: The one that has a worldwide marketplace from

which it buys raw mateials, borrows money, and manufactures its products

and to which it subsequently sells its prducts.(8/143)

Global business: Is the business that transcends national boundaries and is not

committed to a single home country.(8/143)

In my opinion there is no opportunity for a business to achieve this

level of Iinternationalization.The reason is that all business in all over the world are

controled by the government which are committed.There is no way for a business

which is spread-out in all over the world with high revenues and big profits not to

be controlled by noone.

Answer for question No 2:

The four globalization strategies are the followng:

1. Importing and exporting

2. Licensing

3. Strategic alliances

4. Direct investments

In all of those strategies there are many risks and of course many efforts.In

Importing/exporting,the main risk is that, the products are not adapted to

local conditions, and they may miss the needs of a large segment of the market..On

the other hand the effort of imports/exports is that you can get in the market of your

country with a small outlay of capital.

In licensing the main risk is that the licensing firm can lose profits if the

licensee does not develop the market effectively.This could happen only if the firm tie

up control of its product or expertise for a long time period.In addition the advantages

of licensing are increased profitability and extended profitability.

In strategic alliances the main advantage is that the two or more firms that are

cooperating may allow a quick entry into the market by taking advantage of the

existing strengths of participants.In addition strategic alliances are also an effective

way to gain access to technology or row material, and they allow the firms to share

the risk of cost of the new venture.

Finally many firms make direct investment in order to capitalize on lower

labor costs.On the other hand in direct investment there is a great economic and

political risk, which may cost lots of troubles in the profit and of course in the firm.(8/145-148)

Type-Terms Chapter 5 :

Domestic Business: Is the one that acquires all of its resources and sells all of

its products ot services within a single country.

Interational business: Is the one that is based primarily in a single country

but acquires some meaningful share of its resources or revenues (ot both)

from othe countries.

Multinational business: The one that has a worldwide marketplace from

which it buys raw mateials, borrows money, and manufactures its products