Topic 1: International Business

1. Why companies engage in international business?
There are three major operating objectives that underline the reasons for companies to engage in international business:
-expanding sales: pursuing international sales usually increases the potential market and potential profits
-acquiring resources: foreign sources may give companies lower costs, new or better products, additional operating knowledge
-minimizing risk: international operations may reduce operating risk by smoothing sales and profits, preventing competitors from gaining advantages.

2. Identify three of the drivers of globalisation. Justify your selection supporting your argument with the use of examples.

3. Which
2. Define protectionism and identify the industries that are typically protected. Explain the “infant industry” argument for protectionism. How can MNEs overcome host country protectionism? You may work for or own stock in a company whose performance or even survival depends on governmental trade policies. These policies may affect the ability of foreign producers to compete in your home market. They may limit or enhance your company’s ability to sell abroad or acquire needed foreign supplies. So such governmental restrictions and competitive support are know as protectionism. One of the oldest arguments for protectionism is the infant-industry argument, which holds that a government should shield an emerging industry from foreign competition by guaranteeing it a large share of the domestic market until it can compete on its own. Many developing countries use this argument to justify their protectionist policies, especially if entry barriers are high and foreign competition is formidable.
MNEs have only a very limited ability to overcome host country protectionism. However, MNEs do enthusiastically sup- port efforts to reduce protectionism by joining together in regional markets. The best examples of regional markets are the European Union (EU), the North American Free Trade Association (NAFTA), and the Latin American Free Trade Association (MERCOSUR). Among the objectives of regional markets are elimination of internal trade