"The trend towards greater integration and interdependence  between countries and regions of the world".

Nowadays, communication is so fast and efficient that it is possible to:

• be aware of what is going on elsewhere,
• Communicate in real time and it does not involve large expenditures of  money,
• consume products that have been produced anywhere in the world and buy them in our neighbourhood shop.

Multinational enterprises (MNEs): a company headquartered in one country but having operations in other countries.

• Trade (exports and imports): More than 50% of all trade is made by the world’s largest 500 MNEs.
• Foreign direct investment (FDI): 80% of all FDI is made by the world’s largest 500 MNEs.

Trade consists of exports and imports: 

• Exports: goods and services produced in one country and then sent to another country.
• Imports: goods and services produced in one country and brought in by another country.

Foreign investment: consists of companies investing funds to start or improve operations in another country.

• Increased trade liberalisation through trade agreements,
• Improvements in technology,
• The emergence of SMEs

• Export: the act of selling, delivering and collecting payment for products or services to  customers outside the boundaries of the domestic market.
• Importing: the action of buying, introducing and paying for products or services that are  outside the boundaries of the domestic market but which enter our domestic market.
• Relocation of production to a third country: relocating the production centre of a company to  a third country with the aim of using economies of scale, reducing labour costs, locating skilled labour or receiving aid and incentives, among others.
• International transfer of know-how: to the extent that the company transferring the  information generates profits through this transfer and that the companies receiving the  information are located in third countries.
• Direct investment abroad (creation of subsidiaries, branches, permanent establishments,  joint ventures, etc.): the company seeks to have a market presence through a physical  presence.

• To diversify themselves against the risks and uncertainties of the domestic business cycle.
• To tap the growing world market for goods and services.
• In response to foreign competition.
• To reduce costs.
• To overcome barriers to entry into foreign markets.
• To take advantage of technological expertise by manufacturing goods directly.

• Diversification of commercial risks.
• Higher sales equals higher turnover and higher net business profit.
• Use of economies of scale and consequently reduction of unit manufacturing  costs.
• Learning about new markets and locating new opportunities.
• Longer product life.
• Brand recognition and prestige condensation for the company and its  management, staff and investors.
• Positioning in relation to the competition.
• Economic revitalisation of the company's area of influence.
• Brand recognition in those markets where the product penetrates successfully.

• Different cultures, consumer habits and languages require product modification.
• More complex transport and distribution logistics.
• Recruitment of new staff trained in foreign trade and outsourced services.
• Adaptations of the product according to regulations.
• Costs for market research, travel, trade fairs, promotion and advertising of  products on foreign markets, etc.
• Increased administrative formalities.
• Political, socio-economic risk-taking.

The international business process:

• Initially, the firm might license patents, trademarks or technology to a foreign company in exchange for a fee or royalty.
• The firm sees a potential for extra sales by exporting and uses a local agent or distributor to enter a foreign market.
• The firm may use exporting for its surplus production and might have no long-term commitment to the international market.
• As exports become more important, the company may set up an office for its sales representative or a sales subsidiary.
• The firm might set up local packaging and/or assembly operations.
• Finally, the firm will set up a wholly owned subsidiary (FDI).

Phase 1

• The company adopts a passive attitude and receives orders from abroad.
• It carries out sporadic exports that are not deliberately sought after, but are encouraged by external agents and few customers.
• It does not follow a previously implemented business strategy.
• Little or no investment on the part of the company.

Phase 2

• The company adopts an active attitude in the search for business partners and customers in foreign markets.
  There is regular exporting through local importers-distributors, retailers or small wholesalers in the destination countries.
  Minimal investment by the company in the promotion of foreign trade.

Phase 3

• The company consolidates its sales in the international markets in which it operates.
• Exports are regular and form part of the company's strategy, making an important contribution to the company's turnover.
• The company invests heavily in prospecting trips, its own foreign trade department, with its own sales and marketing plan.
• It has its own staff in foreign markets or with several agents, distributors-importers that promote the business.

• The company has its own subsidiaries, branches, permanent establishments, warehouses, etc. in the target countries, developing its own commercial and marketing activities.
• The company invests significant economic resources in infrastructure and personnel in the target countries. The company's presence abroad is significant and long-lasting.

• In this phase, which is the highest level of business internationalisation, the company has its own production centre abroad in order to make use of economies of scale, cheap and/or skilled labour and other advantages of industrial relocation.
• The aim is to adapt to the local market, save on production and transport costs, strategic objectives, etc. The investment required is high and constant.

1. Analysis of our production capacity.
   What is our current production? What could be our maximum production capacity? You will have to take into account your fixed and variable costs.
2. Compliance with commitments. Does the company comply with manufacturing and product delivery deadlines, its manufacturing period, strictness in its compliance, capacity to react to unforeseen events, deviation from estimated and actual deadlines, as well as the customer satisfaction for at least the last three years?
3. Product analysis is the product or service of minimum acceptable quality?
4. Strength in the domestic market. It is advisable to be strong in the domestic market, especially during the internationalisation process?  Will we lose focus on our domestic market?
5. Human Resources. Do we have the necessary human resources to externalise our product or service?
6. Financial resources. Do we have the minimum resources to pay for prospecting trips, commercial and marketing actions, staff recruitment, product adaptations, etc.?
7. Management committed to internationalisation. Do we have the mindset and attitude to deal with the internationalisation process?

Cost Strategy

A strategy that relies on low price through the pursuit of cost reductions.

Differentiation strategy

A strategy directed toward creating something that is perceived as being unique.

Focus strategy

A strategy that concentrates on a particular buyer group and segments.

Strategic formulation: the process of evaluating the enterprise’s environment (opportunities) and its internal strengths (resources).

External environmental assessment:
information gathering; information assessment.

Internal environmental assessment:
physical resources and personnel competencies; value chain analysis.

• Trust of suppliers, customers, stakeholders plays a critical role in our export performance
• In some countries trust is THE KEY ELEMENT that will help us be successful or even allow us to do business there (for example, China – guanxi)
• Trust absolutely comes from who we are, what we do, our reactions to requests etc. BUT
  • It germinates (intangibly) with where we are from!  Our country of origin!!!

• Traditional image understanding:
• Our impressions / stereotypes / understanding of a country, region, rural impacts our views towards the people and products of that area, for example:
  • Italians are stylish therefore they must do design well
  • Germans are very engineering oriented so they must produce technologically sophisticated products
  • Spaniards are known for their excellent and healthy mediterranean diet so they must produce quality gastronomic products.

The establishment of transnational rules and regulations that enhance or inhibit economic trade and cooperation among countries.

• Levels of economic integration:
• Free Trade Area: barriers to trade (such as tariffs) among member countries are removed (e.g. NAFTA).
• Customs Union: tariff between member countries are eliminated and a common trade policy toward nonmember countries is established.
• Common Market: elimination of trade barriers among member countries, a common external trade policy and mobility of factors of production among member countries.
• Economic union: A deep form of integration characterized by free movement of goods, services and factors of production among member countries and full integration of economic policies.
• Political union: An economic union in which there is full economic integration, unification of economic policies and a single government.

• Examples of economic integration
• ANDEAN Community: An economic union that consists of Bolivia, Colombia, Ecuador, Peru and Venezuela.
• MERCOSUR: A free trade group that consists of Argentina, Brazil, Paraguay and Uruguay.
• ASEAN: Founded by Indonesia, Malaysia, the Philippines, Singapore and Thailand.
• FTAA: A free trade agreement of the Americas that has not yet been implemented.

Economic integration and strategic management

A strategic alliance is a business relationship in which two or more companies work together to achieve a collective advantage.

These alliances can take a number of forms:

• research cooperation;
• marketing cooperation;
• licensing of a product or technology for a specific market region.

Globalisation and  its consequences
Technology, easy access to knowledge and mobility between countries has fostered the phenomenon of globalisation. This has had as a direct consequence: the possibility of internationalising companies in a more competitive market.

What do we mean by international business?
The process of internationalisation of companies allows organisations to develop their capacities and expand their business beyond the borders of the country where they started their activity. This offers many advantages and opportunities.