Page 102 - Business Principles and Management

Chapter 4 • International Environment of Business

What factors make exporting
and importing the simplest
forms of international
business?

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In recent years, many competitors have entered into strategic alliances with
each other. Under strategic alliances, firms agree to cooperate on certain aspects
of business while remaining competitors on other aspects. Thus, because of the
high cost of developing new medicines for curing cancer, two pharmaceutical
companies may agree to share research information and costs while competing
with each other in selling other medicines.
The expansion of international business has created multinational firms.
A multinational firm is a firm that owns or controls production or service
facilities in more than one country. The country in which the business has its
headquarters is referred to as the home country. The foreign location where
it has facilities is referred to as the host country. Company headquarters is
called the parent firm; and the foreign branches, if registered as independent
legal entities, are referred to as subsidiaries. Most of the world’s largest busi-
nesses are multinational firms. However, many small firms, too, are multina- facts
tional businesses. &
Trade and investment in the international environment have some unique
complications. Businesses must consider government policies toward foreign figures
firms and products, the value of foreign currencies, and the contrast of cultures
when doing business abroad.
The Japanese find it hard
to answer a definite “no” to
either a question or a state-
ment. They signal that they
CHECKPOINT “don’t know” or “don’t
List the different forms of international businesses. understand” by waving their
own hand in front of their
face, with the palm outward.

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