Companies of all types and sizes, and in all types of industries, enter into international business transactions. Manufacturing companies, service com- panies, and retail companies all search for customers outside their coun- tries. As mentioned earlier, an international company is a business that engages directly in any form of international business activity such as export- ing, importing, or international production. No matter what the nature of the international business transactions, there are different types of interna- tional companies, and we will take a closer look at them in the following pages.
Small companies are becoming increasingly active in international trade and investment. Companies are having quicker turnaround times with regard to exports and are growing faster as a result of increased international busi- ness activities.4Because of improved technological advancements; electronic distribution is a cheap and effective method for many small businesses.
Some small businesses are reaching out to customers exclusively through the World Wide Web (WWW). Despite all these technological amenities, many small businesses that are capable of exporting have not yet begun to do so.
There are certain myths that keep small businesses from exporting: there is no export financing available for small businesses; small businesses have no place to turn for export advice; the licensing requirements needed for export- ing are not worth the effort; only large companies can export successfully;
small businesses do not have the right people to assist in exporting; small businesses find it difficult to research and identify international markets;
and so on.
Despite all these, small businesses play a vital role in their national economies—through employment, new job creation, development of new products and services, and international operations, typically exporting.
Although many small businesses are affected by globalism only to the extent
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they face competing products from abroad, potential offshore customers, thanks to the burgeoning number of trade shows, are welcoming an increas- ing number of entrepreneurs and federal and state export initiatives. Further- more, one quarter of all exporting companies employ fewer than 100 people.
As small companies expand abroad, international management skills become an important asset to managers other than those in large corporations. The problem is that most small businesses cannot afford to create an interna- tional division, and many entrepreneurs are too independent to relinquish power to someone else. But it is very time-consuming for an entrepreneur to learn about trade regulations and business practices in other countries, or to travel abroad to negotiate and finalize a business deal. They are often unable to take the time away from the domestic business and so may turn to export management companies to handle all the details.
Because most small businesses are limited by their resources to exporting, they are pursuing other strategies. One of these strategies is franchising, which is ideal for small businesses because of the low investment needed in capital and personnel to establish franchise outlets.
Multinational corporations vary in size, being as small as a security firm or as large as a car manufacturer. The units of large international companies can function either rather independently or as parts of a tightly integrated global network. Independent operations tend to have a good understanding of local culture and are often able to adapt quickly to changing local market conditions. On the other hand, firms that operate as global networks often find it easier to respond to changing conditions by shifting production, marketing, and other activities among national units. Depending on the type of business, either structure can be appropriate.
The multinational corporations’ economic and political muscle makes them highly visible. Large companies generate a large number of jobs, greater investment, and significant tax revenue for the areas in which they operate.
On the other hand, the downsizing of large international companies, or the closing of factories throughout the world, makes these companies visible as well. Furthermore, these companies’ transactions involve large amounts of money. For example, in 1998, Daimler-Benz of Germany announced a merger with Chrysler of the United States, which was valued at $40 billion; in the same year, Exxon and Mobil, two global petroleum companies, created a merger worth $86 billion.
Around the world, MNCs are already giants and growing even more gigantic. These big, traditional manufacturing enterprises, with their long planning horizons, are leading the drive toward globalization. Increasingly, too, we are seeing service organizations go global—financial institutions such as Citigroup, retailers such as Wal-Mart, telecommunications com- panies such as MCI-WorldCom. Leadership in global trends comes from the close involvement of these companies in cross-boundary relationships
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with suppliers, customers, and venture partners.5 Conglomerates such as Thailand’s Chraroen Pokphand, with revenues of $7.6 billion, have chosen to go global through alliances with foreign players such as Nynex in the tele- com market and Wal-Mart in retailing. Some American MNCs (e.g., Exxon Mobil Oil and Hoover) earn most of their sales outside the United States;
Daimler-Chrysler, IBM, and Coca-Cola earn more than half their profits outside the United States. In addition, many nonprofit organizations—called multinational enterprises (MNEs)—such as the Red Cross in Switzerland and the Roman Catholic Church in Italy operate globally.
Because many MNCs have become complex conglomerates, it is difficult to identify which companies are the parents of which, or which companies own various other companies or properties around the world. Although American MNCs own many foreign firms, a significant number of large American firms are owned by foreign MNCs. Many of these foreign-owned firms have familiar American names, so they are assumed to be American firms—for example, RCA is owned by Thompson SA of France; Vaseline is owned by Unilever, a UK–Dutch company; Tropicana Orange Juice is owned by Canada’s Seagram; and Green Giant is owned by Grand Metropolitan in England.
Exhibit 1.2 shows the first 50 out of the total of the Fortune Global 500 for 2005, as a sample of MNCs. The exhibit is limited to the first 50 MNCs.
These MNCs are manufacturers, service providers, and/or distributors, and their location varies from being in the United States, Germany, the United Kingdom, Japan, the Netherlands, France, Italy, Switzerland, China, etc.
They are found everywhere in the world and most of them are global in nature.
Exhibit 1.2
Fortune Global 500 (2005)
Rank Company Revenues Profits
($ millions) ($ millions)
1 Wal-Mart Stores 2879890 102670
2 BP 2850590 153710
3 Exxon Mobil 2707720 253300
4 Royal Dutch/Shell Group 2686900 181830
5 General Motors 1935170 28050
6 DaimlerChrysler 1766875 30671
7 Toyota Motor 1726163 108982
8 Ford Motor 1722330 34870
9 General Electric 1528660 168190
10 Total 1526095 119550
(continued)
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Exhibit 1.2continued
Rank Company Revenues Profits
($ millions) ($ millions)
11 ChevronTexaco 1479670 133280
12 ConocoPhillips 1216630 81290
13 AXA 1216063 31330
14 Allianz 1189372 27350
15 Volkswagen 1106487 8420
16 Citigroup 1082760 170460
17 ING Group 1058864 74228
18 Nippon Telegraph & Telephone 1005453 66080
19 American Intl. Group 979870 97310
20 Intl. Business Machines 962930 84300
21 Siemens 914932 41446
22 Carrefour 903817 17248
23 Hitachi 839939 4792
24 Assicurazioni Generali 832676 16351
25 Matsushita Electric Industrial 810777 5441
26 McKesson 805146 −1567
27 Honda Motor 804866 45239
28 Hewlett-Packard 799050 34970
29 Nissan Motor 797996 47666
30 Fortis 755181 41772
31 Sinopec 750767 12689
32 Berkshire Hathaway 743820 73080
33 ENI 742277 90471
34 Home Depot 730940 50010
35 Aviva 730252 19368
36 HSBC Holdings 725500 118400
37 Deutsche Telekom 719889 57636
38 Verizon Communications 715633 78307
39 Samsung Electronics 715559 94195
40 State Grid 712902 6940
41 Peugeot 706419 16878
42 Metro 701593 10286
43 Nestlé 698257 54054
44 US. Postal Service 689960 30650
45 BNP Paribas 686544 58059
46 China National Petroleum 677238 87571
47 Sony 666180 15245
48 Cardinal Health 651306 14745
49 Royal Ahold 646756 −5423
50 Altria Group 644400 94160
Source: http://money.cnn.com/magazines/fortune/global50.
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