Rechtswissenschaften

Tax havens are countries hospitable to business and inward investment because of their low corporate income taxes.

MNEs take advantage of tax havens either by establishing operations in them or by funneling business transactions through them.

1. Decide on the Capital structure: (Choosing a capital structure (determine the ideal long-term mix of financing for the firms int. operations)

2. Raise Funds for the Firm (financing might come from selling stock, borrowing money)

3. Manage Working Capital & Workflows

4. Perform Capital Budgeting (Assess the financial attractiveness of major investment projects such as foreign expansion)

5. Manage Currency Risks (Oversee transaction in various foreign currencies (exchange rate fluctuations))

6. Manage the diversity of International Accounting & Tax practices (diverse account practices)

--> Companies with extensive international operations benefit from increeases opportunities to tap lower cost capital, minimize taxes and increase the efficiency of threi financial operations.

1. transaction exposure, 2. translation exposure, 3. economic exposure

Transaction exposure = outstanding accounts receivable or payable are denominated in foreign currencies

translation exposure = foreign currency into the functional currency of the parent firm --> consolidating

economic exposure = known as operating exposure

Transaction exposure affects ongoing contractual transactions. By contrast economic exposure affects long-term profitability through changes in revenues and expenses. Fluctuation problems explain why many countries in EU use a single currency. With a single medium of exchange, currency risk is eliminated in trade among the countries using the euro.

A typical tax treaty between country A and country B states that, if the firm pays income tax in A, it does not pay the tax in B. an automatic decrease in domestic tax liability when the firm can prove it has already paid income tax abroad. Or the firm may be liable to pay tax in each country, but the amount is adjusteed so the total is no more than the max. tax in either country.

1. low-income

2. limited industrialization

3. stagnant economies

4. high birth rates promote poverty

5. bad education system, illitercy (education is correlated with economic development)

6. a lot of natural resources

7. Government is severely indebted

8. Government policies discourage entrepreneurship, trade and investment (Bureaucracy and red tape)

9. agriculture and commodities sector create little basis for creating wealth

1. rapid industrialization, modernization, economic growth

2. attractive markets & low-cost manufacturing bases

3. former developing countries

4. serious rivals for advanced economies bc of Technology (includes educational systems, worker sill levels and banking infrastructure), government support (incentives), low cost capital

5. main emerging markets: Asia, Eastern EU, Latin America and a few in Africa, Middle East

6. rapidly improving living standards

7. growing middle class

8. attractive destinations for FDI, global sourcing

Emerging markets that changed from centrally planned economies to liberalized markets (China, Russia)

They were socialists (wohlstand aller über individuellem Wohlstand) now transformed into capitalism (Privateigentum)

leading firms from emerging markets that are fast becoming key contenders (Herausforderer) in world markets

1. post-industrial countries

2. well-developed commercial infrastructure (trade)

3. service based

4. based on capitalism

5. few restriction on international trade & investment

6. host the world largest MNEs

1. growing middle class and their rising demand for elecotronics & services (eg health care)

2. targets for machinery, equipment, technology sales

3. invest huge sums to develop manufacturing facilities

4. home to low-wage, high quality labor

5. noncore business to specialized suppliers (trend called outsourcing), and therefore concentrate on core competencies

= global sourcing, offshoring

the procurement of selected value-chain activities, including production of intermediate goods or finished products, from independent suppliers

... is difficult bc:

- limited data

- unreliable information

--> in early stages to estimate market potential: per capita income PPP (BIP pro Kopf) or size of middle class (bc makes up the largest proportion of households in advanced economies)

1. Political instability = corruption, weak legal framework which discourages inward investment & development of a reliable business environment --> reduces mngt ability to forecast business conditions

2. Weak intellectual Property Protection

3. Bureaucracy, Red Tape and Lack of Transparency

4. Poor Physical Infrastructure: MNEs often must build their own systems and find creative solutions to support value-chain activities

5. Partner availability and qualification

6. Likely Resistance from Family Conglomerates (FC): Government protection and support, giving them incentives of set up market-entry barriers to competitors (bc FC provide huge tax revenues and facilitate national economic development)

1. Customize offerigns to unique emerging markets needs: develop deep understanding, set prices appropriate

2. Partner with FCs: Reduce risks, time, gain networks

3. Target government in Emerging Markets: Government is important for 3 reasons:

    - enormous quantities of products

    - the public secftor influences the procurement activities of various private corporations

    - state enterprises buy from foreign companies (railway, airlines)

--> government is attracted that firms create local jobs, employ local resources and therefore reduce import dependence

- support economic development: P&G sells shampoo for 2 cents, which is more profitable bc huge population, or cell phone market brought up new related industries

- Microfinance to facilitate Entrepreneurship: assist entrepreneurs to start business in poor countries

Cross Border Business

1. Focal Firm: Meistens grosse Firmen die erfinden, designen und produzieren der Produkte machen FDI

2. Distributor channel intermediary (Zwischenhändler): ein Logistiker und Marketing Spezialist die ihren Service anbieten

3. Facilitator (Vermittler): Jedermann mit Spezial Expertise in eg Banking /Law

4. Freight Forwarder (Fracht): arrangiert die internationalen shippings (DHL)

5. Government: ist auch aktiv im IB und bringt so Mehrwert fürs Land

a young entrepreneurial company, go very fast into a foreign market, usuallywithing 3 yrs.

Born global firms target a dozen or more countries within the first few years of launching the firm.

1. competition from foreign manufacturer

2. cost pressure bc of stringent (streng) regulatory requirements and

3. volatility (Unbeständigkeit) in export

4. key customer expand abroad

5. growth trough market diversification

6. earn higher margins and profits

7. gain new ideas about products & business methods

8. more market opportunities which increases the living standard

.. international transactions, cooperation, competition among firms --> seek foreign customers.

1. new markets

2. USA/EU consume products which are produced in Asia

3. Technology canceled trade barriers

- Globalization of Market

 - Interenational Trade

 - International Investment

- International Risk

- Participants (firms, intermediaries, facilitators, government)

- Foreign Market entry Strategy

1. Seek opportunities for growth through market diversification

2. Earning higher margins and profits

3. gaining new ideas about products, services and business nethods

4. To better serve key customers that have relocated abroad

5. Bein closer to supply sources, benefit from global sources advantage, or gain flexibility in product sourcing

--> Dell has facilities in Asia, EU, USA, that allow mngt to shift production quickly (flexibility = comp. advantage)

6. Gaining access to lower-cost or better-value factors of production, marketing and R&D

7. To develop economies of Scale in Sourcing, production, marketing and R&D

8. To confront international competitors more  effectively or thwart (entgegenwirken) the growth of competition in the home market

9. To invest in a potentially rewarding relationship with a foreign partner

1. Cross Cultural Risk

2. Country Risk (=political)

3. Currency Risk

4. Commercial Risk

firms gradually intensify their  activities in foreign markets. they first gain their experience in the home market before going abroad in a similar market (culturally etc). Then they first export before going trough a subsidiary (Tochterfirma).

Steps:

1. Irregular Export activities

2. Export via independent sales representative

3. Establishment of overseas sales subsidiary

4. Establishment of foreign manufacturing subsidiaries

firm enjoys direct relationships with foreign actors. which can lead to furhter linkages with other actors and so on.

degree of internationalisation at both micro and macro levels can be listed in 4 broad firm level international situations:

1. Early Starter (low degree of int. of the firm and low degree of int. of market)

2. Late Starter (high of market and low degree of int firm)

3. Lonely International (high int. of firm and low intg. of market)

4. International among Others (high int. of firm and high int. of market)

Born Global Firms also called International Entrepreneurship 

- born global firm internationalize rapidly.

- After a short time they export at least a quarter of total production.

- Tend to be small

 - usually have a significant breakthrough in a process or technology

Multinational Enterprises

Firms that have HC in one country but have operations in others.

HC in developed countries

Small & Medium International Enterprises

Smaller than MNEs, usually are the suppliers of MNEs (backbone)

annual sales less than 5 Mio

since they are small, quicker to respond  to global business opportunities

can compete with MNEs bc they are innovative, well traines work forces, efficient, good technology

are integrated into the production process of larger MNEs