People Innovation Excellence

MNE vs International Firm

International business refers to the trade and investment activities by companies across national borders(cross border business).  Firms seek for international market opportunities. They must have value adding activities otherwise you are out of business.  The subjects of cross border trade can be products, services, capital, and technology, know how and labour.  Firms internationalize through exporting, foreign direct investment, franchising, licensing, or joint ventures. Exchange of goods and services around the world is typically made through exporting and importing.

International trade refers to cross border exchange of products (merchandise) and services (intangibles) typically through exporting and importing. Exporting is the sale of products/services to customers located abroad. Importing (global sourcing) is the procurement of products/services from foreign suppliers for consumption at home.  Exporting and importing may include both intermediate (raw materials and components) and finished products.

International investment refers to the transfer of assets to another country or the acquisition of assets in another country. These assets include capital, technology, managerial talent and manufacturing infrastructure. There are 2 types of cross border investment:

1.  International portfolio investment (typically short term) is the passive ownership of foreign securities such as stocks and bonds for the purpose of generating financial returns.

2.   Foreign direct investment (FDI) (typically long term) is an internationalization strategy in which the firm establishes a physical presence abroad through acquisition of productive assets such as capital, technology, labour, land, plant, and equipment.

International transaction means a transaction between two or more associated enterprises, either or both of whom are non-residents, in the nature of purchase, sale or lease of tangible or intangible property, or provision of services, or lending or borrowing money, or any other transaction having a bearing on the profits, income, losses or assets of such enterprises and shall include a mutual agreement or arrangement between two or more associated enterprises for the allocation or apportionment of, or any contribution to, any cost or expense incurred or to be incurred in connection with a benefit, service or facility provided or to be provided to any one or more of such enterprises.

Multi-national means a company which operates in more than one country and international means a company which exists in one country but sells products in more than one country.

Oded Shenkar and Yadong Luo. (2004). International Business (for lecturer only). 00. Wiley. United States. ISBN: 0471429376..

Published at : Updated
Written By
Ng Scherly Hansopaheluwakan, S.E, MIB
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