Major Risks
An American fast-food company opens a restaurant in India but continues selling mostly beef burgers. Sales are extremely low because many customers avoid beef for religious and cultural reasons. What type of risk is the company facing?
Cultural Risk
Performance of trade and investment activities by firms across national borders.
International Business
An American clothing store purchases sneakers manufactured in Vietnam and brings them into the United States to sell to customers. What is the United States doing?
Importing
A Japanese car company builds a brand-new automobile factory in the United States and hires American workers. Is this FDI?
Yes
A company has its headquarters in the United States and owns factories, offices, and stores in 20 other countries. What type of business is it?
MNE
Protests and political violence break out near a company's overseas warehouse. Workers cannot safely report to work, and shipments are delayed. What type of risk is this?
Political Risk
Ongoing economic integration growing interdependency of countries world wide.
Globalization
A restaurant in Rhode Island purchases olive oil produced in Italy. The olive oil is shipped across the Atlantic Ocean to the restaurant. From the perspective of the United States, is this an import or an export?
Import
An American investor purchases $500 worth of shares in a German company through a stock-trading app. Is this normally considered FDI?
No
McDonald's operates restaurants in countries around the world and adapts some menu items to local tastes. Why is McDonald's considered an MNE?
It operates internationally and conducts business across multiple countries.
A company sells a toy overseas that does not meet the country's required product safety standards. The government orders the company to stop selling the toy. What type of risk is this?
Legal Risk
The tendency of companies to deepen their international business activities systematically.
Internationalization
An American farmer sells soybeans to a company in China. From the perspective of the United States, what is the farmer doing?
Exporting
A British company purchases 100% of an existing clothing factory in Mexico and takes over its daily operations. Is this FDI? Explain.
Yes
A family-owned bakery employs 35 people and sells its specialty cookies to customers in the United States and Canada. What type of business might this be?
A small or medium-sized enterprise (SME).
An American company buys products from Europe. The euro becomes more expensive compared with the U.S. dollar, increasing the company's purchasing costs. What type of economic risk is this?
Economic/Currency Risk
Sales of Products or services to customers located abroad from a base in the home country or a third country.
Exporting
Question: A Japanese company purchases wheat grown in the United States. From Japan's perspective, what is this transaction?
Import
An American restaurant company allows a business owner in South Korea to open a restaurant using its brand name and recipes in exchange for fees. The American company does not purchase or control the restaurant. Is this FDI?
No, This is franchising
A technology startup launches in the United States and begins selling its software to customers in 12 countries during its first year. What type of company might this be?
Born Global Firm
A foreign government takes control of a privately owned oil company and its facilities. The company loses control of its investment because of a government decision. What type of risk is this?
Political Risk
An internationalization strategy in which the firm establishes a physical presence abroad through acquisition of productive assets such as capital, technology, labor, land, plant, and equiptment
Foreign Direct Investment (FDI)
A French winery sells wine to a distributor in the United States. From France's perspective, is the wine an import or an export?
Export
An American electronics manufacturer invests in a lithium mining operation in Chile to secure a reliable supply of lithium for its batteries. Which motive does this represent?
Resource Seeking
Two companies launch the same year. Company A sells only in the United States for six years before expanding overseas. Company B starts selling to customers in 15 countries during its first year. Explain which company is more likely to be a born global firm and why its strategy could provide a competitive advantage.
Company B. Early international expansion can help it reach more customers, build a global brand, and establish international relationships before competitors. It may also face higher costs and greater complexity early on.