International Business Management PDF

International Business Management Bachelor's Degree in Business Administration THE PROCESS OF INTERNATIONALIZATION OF THE COMPANY Chapter 2 The process of © M.A. Montoro Sánchez internationalization of the company 2.1. An...

International Business Management Bachelor's Degree in Business Administration THE PROCESS OF INTERNATIONALIZATION OF THE COMPANY Chapter 2 The process of © M.A. Montoro Sánchez internationalization of the company 2.1. Analysis of the attractiveness and selection of target countries 2.2. Information sources for internationalization 2.3. International taxation 2.4. Multinationals enterprises The process of © M.A. Montoro Sánchez internationalization of the company References: Cavusgil, S.T.; Knight, G.; Riesenberger, J.R. (2013). A framework for international business, Pearson-Prentice-Hall. Chap. 4, 5, 6 y 7. Cavusgil, S.T.; Knight, G.; Riesenberger, J.R. (2024). International Business: The new realities. Edición global, Pearson. 6th. edition. Chap. 4, 5, 6 y 7. ICEX_CECO_Manual_de_Internacionalización_2023. Chap. 2, 5 y 6. Lasserre, P.; Monteiro, F. (2022). Global strategic management. Bloomsbury Publishing. 5th. edition. Chap. 6. Pla Barber, J.; León Darder, F. (2016). Dirección internacional de la empresa. McGrawHill, Madrid. Chap. 3, 6 y 8. 2.1. Analysis of the attractiveness © M.A. Montoro Sánchez and selection of target countries DETERMINANTS 1. Factors related to the FIRM itself (that is, market positioning, new product development capacity, internal processes, organization, etc.). 2. Factors related to the COUNTRY (such as the cost of productive factors, qualification of workers, economic policy, level of infrastructure, culture of the country, etc.). 3. Factors related to the INDUSTRY (among others, level of rivalry between companies and cooperation with suppliers and customers). Therefore, international competitiveness is not a one-dimensional issue, but very different causes are involved in its configuration. 2.1. Analysis of the attractiveness © M.A. Montoro Sánchez and selection of target countries FIRM. Competitive advantage: Characteristic of a firm that differentiates it from others by placing it in a relative position to compete. It must lead to profitability or value creation. For it: 1. It must be related to a key success factor in the market. 2. It must be substantial to make a difference, valued by the market. 3. It must be sustainable facing changes in the environment and the actions of the competition. It has its origin in internal or external aspects of the Company. External factors Internal factors SWOT ANALYSIS - Opportunities and threats Ability to detect Efficiency - General environment changes Quick and flexible Competitive Quality - Industry: 5 Competitive Forces Response to advantage Resources answer Innovation - Strengths and weaknesses external and factors Customer capabilities - Funtional analysis Take advantage for satisfaction - Value Change opportunities capability - Resources and capabilities 2.1. Analysis of the attractiveness © M.A. Montoro Sánchez and selection of target countries COUNTRY.  Comparative advantage: Characteristic of a country that differentiates it from others by placing it in a superior comparative position, usually with respect to one or a set of industries. NATIONAL COMPETITIVE ADVANTAGE in a particular industry.  Useful analysis tools:  Porter’s Diamond  Industrial distrits and clusters 2.1. Analysis of the attractiveness © M.A. Montoro Sánchez and selection of target countries Fuente: Cavusgil et al, 2013, pp. 31 2.1. Analysis of the attractiveness © M.A. Montoro Sánchez and selection of target countries PORTER DIAMOND, 1990 2.1. Analysis of the attractiveness © M.A. Montoro Sánchez and selection of target countries PORTER’S DIAMOND  Condition factors: Endowment of relevant and specialized production factors (labor, infrastructure, knowledge) that are scarce and difficult to imitate by foreign competitors and that require sustained investment to create them.  Home demand conditions: Domestic demand gives their companies a clearer or earlier picture of the new needs of customers. Informed and demanding consumers, who pressure companies to improve quality and innovation.  Related and supporting industries: Presencia de otros sectores que proveen, colaborar o prestan sus servicios al sector de referencia. Presence of other sectors that supply, collaborate or provide their services to the reference sector.  Firm strategy, structure and rivalry: Competition stimulates the creation and persistence of competitive advantages over companies from other countries. Inner rivalry pressures competitiveness. 2.1. Analysis of the attractiveness © M.A. Montoro Sánchez and selection of target countries INDUSTRIAL DISTRITS AND CLUSTERS  Aglomerations fo firms connected by the same economic activity and located in a specific geographic environment.  Agents: businesses dedicated to the same activity, businesses located upstream and downstream activities in relation to the main or focus product, institutions, business in related industries.  Factors:  Increase in productivity  Boost for innovation  New start-ups 2.1. Analysis of the attractiveness © M.A. Montoro Sánchez and selection of target countries ECONOMIC ANALYSIS.  ADVANCED ECONOMIES  DEVELOPING ECONOMIES  EMERGING MARKET ECONOMIES SOCIO-CULTURAL ANALYSIS.  ETHNOLOGICAL. “SILECT LANGUAGE”.  MANAGERIAL VALUES AND ASSUMPTIONS.  COUNTRIES CLUSTERS.  ECONOMIC CULTURES DIFFERENCES. POLITICAL AND LEGAL ANALYSIS. “COUNTRY RISK”. 2.1. Analysis of the attractiveness © M.A. Montoro Sánchez and selection of target countries ECONOMIC ANALYSIS:  ADVANCED ECONOMIES  DEVELOPING ECONOMIES  EMERGING MARKET ECONOMIES 2.1. Analysis of the attractiveness © M.A. Montoro Sánchez and selection of target countries ADVANCED ECONOMIES  They are postindustrial countries caracterizad by high per-capita income, highly competitive industries, and well-developed comercial infrastrucutres.  They are the owrld’s richest nations and include Australia, Canada, Japan, New Zealand, the United States , and most European countries.  They have largely evolved from manufacturing into service-based economies.  Home 14% of the world’s population: about one-half or world GDP, more tan one-half of world trade in goods, and three-quarters of world trade in services.  They have democratic, multiparty systems of goverment and economic systems usually based on capitalism.  Purchasing power, few restrictions on international trade and investment and host the world’s largest MNEs. 2.1. Analysis of the attractiveness © M.A. Montoro Sánchez and selection of target countries DEVELOPING ECONOMIES  They are low-income countries characterized by limited industrialization and stagnant economies.  They make up the lasgest group of countries. They are found throughout Africa, most of south Asia, and much of Latin America, among other regiones (Bangladesh, Nicaragua, Zaire…).  Consumer have low discretionary incomes; approximately 17% live on less that $1 per day; around 40% live on less that $2 per day.  They tend to be highly developed in historical and cultural terms but are hindered by high infant mortality, malnutrition, short life expectancy, illiteracy, and poor education systems.  Goverments often carry debt that approaches or excedes their anual GDP. 2.1. Analysis of the attractiveness © M.A. Montoro Sánchez and selection of target countries EMERGING MARKET ECONOMIES  They are former developing economies that have achieved substantial industrialization, modernization, and rapid eocnomic growth since the 1980s.  More tan two dozen countries are considered emerging markets and are found mainly in Asia, Latin America and Eastern Europe. The largest are Bazil, Russia, India and China (called “BRIC”).  They are rapidly improving living standards and a growing middle class with rising economic aspirations. Their attractiveness as destinations ofr exports, FDI, and sourcing has been on the rise.  Certain emerging markets that have evolved from centally planned economies to liberalized markets (China, Russia and several countries in Eastern Europe) are called TRANSITION ECONOMIES. 2.1. Analysis of the attractiveness © M.A. Montoro Sánchez and selection of target countries 2.1. Analysis of the attractiveness © M.A. Montoro Sánchez and selection of target countries 2.1. Analysis of the attractiveness © M.A. Montoro Sánchez and selection of target countries SOCIO-CULTURAL ANALYSIS. Four main streams  ETHNOLOGICAL. “SILECT LANGUAGE”.  MANAGERIAL VALUES AND ASSUMPTIONS.  COUNTRIES CLUSTERS.  ECONOMIC CULTURES DIFFERENCES. 2.1. Analysis of the attractiveness © M.A. Montoro Sánchez and selection of target countries ETHNOLOGICAL. “SILECT LANGUAGE”. Cultures differ in the way they communicate through non-verbal means or “silect language”:  Perception of time. Sequential and scarce (Germanic culture)… fluid, circular and abundant (Arabic countries).  Perception of space. Social distance (physical and emotional). British/Latin.  Material goods. Importance of financial wealth as a sign of status.  Friedship. Short and superficial/Long.  Agreement. Western (writing)/Eastern (verbal).  Context. Importance of person rather than the content in a communication. 2.1. Analysis of the attractiveness © M.A. Montoro Sánchez and selection of target countries MANAGERIAL VALUES AND ASSUMPTIONS. HOFSTEDE’S RESEARCH. Four dimensions:  Power distance: the extent to which people in certain societies accept inequality in power distribution or have a somewhat egalitarian view of power distribution.  Individualism/colectivisim: individuals look after theri own or immediate relative interests.  Uncertainty avoidance: ambiguity and unpredictability is not accepted, and there is a continual search to codify, plan and regulate the environment.  Masculinity/feminity: high value given to assertive, competitive behaviour. 2.1. Analysis of the attractiveness © M.A. Montoro Sánchez and selection of target countries 2.1. Analysis of the attractiveness © M.A. Montoro Sánchez and selection of target countries COUNTRIES CLUSTERS. Grouping countries according to their degree of geographical linguistic, religious, historical and social proximity.  Ronen and Shenkar, 1985. See figure: Arab, Near Eastern, Far Eastern, Nordic, Germanic, Anglo, Latin European, Latin American, Independent.  Huntington, 1997: “Civilisations” (language, religión, values, beliefs, and institutional and social structures): Sinic, Japanese, Hindu, Islamic, Orthodox, Latin American, African, and Western. 2.1. Analysis of the attractiveness © M.A. Montoro Sánchez and selection of target countries POLITICAL AND LEGAL ANALYSIS. “COUNTRY RISK”. Country risk is exposure to potential loss or adverse effects on company operations and profitability caused by developmetns in a country’s political and/or legal environments. Dimensions of country risk in international business include the following:  Harmful or unstable political systems.  Laws and regulations unfavorable to foreing firms.  Inadequate or underdeveloped legal system.  Bureaucracy and red tape.  Corruption and other ethical issues.  Goverment intervention, protectionism, and barriers to trade and investment.  Mismanagement or failure of the national economy. 2.1. Analysis of the attractiveness © M.A. Montoro Sánchez and selection of target countries 2.1. Analysis of the attractiveness © M.A. Montoro Sánchez and selection of target countries 2.1. Analysis of the attractiveness © M.A. Montoro Sánchez and selection of target countries INDUSTRY:  Globalization: Economies tend to integration.  The competitive strength of a company in one country is influenced by its position in others.  There are forces that lead companies to globalize their activities. This causes the homogenization of its activities and the concentration of its resources. GLOBALIZER FORCES.  Other forces favor the dispersion of activities and adaptation to local markets. FRAGMENTER FORCES. 2.1. Analysis of the attractiveness © M.A. Montoro Sánchez and selection of target countries Globalizer and fragmenter forces Technical factors related to the business Competitive factors related to the industry  Scale economics  Needs and tastes of consumers  Competitive advantage  Types of customers  Obsolescence Rate  Type of competitors  Logistic costs  Competitive advantage sources  Requirements of local governments  Distribution structure  Embedded assets to the territory  Substitute products and need to adaptation 2.1. Analysis of the attractiveness © M.A. Montoro Sánchez and selection of target countries GLOBALIZER FRAGMENTER PUSH PUSH TECHNICAL FACTORS RELATED TO THE BUSINESS Scale economies-investment intensity HIGH LOW Comparative advantage among countries HIGH LOW Obsolescence Rate HIGH LOW Logistic costs LOW HIGH Requirements of local governments LOW HIGH Embedded assets to the territory LOW HIGH 2.1. Analysis of the attractiveness © M.A. Montoro Sánchez and selection of target countries GLOBALIZER PUSH FRAGMENTER PUSH COMPETITIVE FACTORS RELATED TO THE INDUSTRY Needs and tastes of consumers HOMOGENEOUS HETEROGENEOUS Types of customers MULTINATIONAL LOCAL Types of competitors MULTINATIONAL LOCAL PRICE / GLOBAL PERSONALIZATION / Competitive advantage sources IMAGE LOCAL IMAGE Distribution structure HOMOGENEOUS HETEROGENEOUS Substitute products and need to adaptation LOW HIGH 2.1. Analysis of the attractiveness © M.A. Montoro Sánchez and selection of target countries Globalization drivers A. Supplier structure. A. Competitive structure. Domestic, Regional, Global B. Degree of national specialization. B. Access the market. A. Entry barriers to a country. Easy, Moderate, Difficult B. Similarity of demand. Types of Industries: Globals, Multidomestics, Potentially Globals 2.1. Analysis of the attractiveness © M.A. Montoro Sánchez and selection of target countries 2.1. Analysis of the attractiveness © M.A. Montoro Sánchez and selection of target countries  GLOBAL industry. There are a few major competitors that dominate global competition, the supply structure is specialized, there are no significant barriers to international trade and consumer behavior is similar in all countries. Aviation industry, shipbuilding, automobile...  MULTIDOMESTIC industry. The competition is very fragmented, there are many competitors and they are present in all countries. There are high barriers to entry and heterogeneity of demand. Catering, tax consulting,...  POTENTIALLY GLOBAL industry. Intermediate positions. Much of the industries. 22/25 2.1. Analysis of the attractiveness © M.A. Montoro Sánchez and selection of target countries WHY IS A COUNTRY ATTRACTIVE?  A country will be ATTRACTIVE for a foreign investor if, in investing in that country, she/he gets a return that is equal to or higher that her/his risk adjunted weighted cost of capital (as any investment decisión).  Two key questions:  Are the market prospects and the competitive conditions in a particular country such that given a set of competitive advantages, the business is likely to generate a return equeal to or higher tan the cost of capital? MARKET AND INDUSTRY OPPORTUNITIES  Are the risks of operating in this country aceptable for the shareholders and employees? COUNTRY RISKS 2.1. Analysis of the attractiveness © M.A. Montoro Sánchez and selection of target countries High High Risk High High Return Attractiveness Market and competitive opportunities Low Risk Low Attractiveness Low Return Low High Risks Low 2.1. Analysis of the attractiveness © M.A. Montoro Sánchez and selection of target countries MARKET OPPORTUNITIES assesment measures the potential demand in the country for the products of the firm:  Market size  Market growth  Quality of demand INDUSTRY OPPORTUNITIES assesment measures how easy it is to compete in the country:  The quality of the competitive climate  The quality of the industry competitive structure  The investment incentives granted by governments 2.1. Analysis of the attractiveness © M.A. Montoro Sánchez and selection of target countries 2.1. Analysis of the attractiveness © M.A. Montoro Sánchez and selection of target countries MARKET 2.1. Analysis of the attractiveness © M.A. Montoro Sánchez and selection of target countries INDUSTRY 2.1. Analysis of the attractiveness © M.A. Montoro Sánchez and selection of target countries INCENTIVES 2.1. Analysis of the attractiveness © M.A. Montoro Sánchez and selection of target countries RESOURCES ENDOWMENT The resources that attract foreign invetors fall into three broad categories:  Natural resources. Minerals, mining, palm oil, foresty, etc.  Human resources. Quality and cost of labour.  Infrastructures and support industries resources. Quality of communication and logistics infrastructures, as well as the avalilability of supporting industries and services. 2.1. Analysis of the attractiveness © M.A. Montoro Sánchez and selection of target countries TOOLS:  PESTEL  Porter`s Industry analysis framework  Porter`s Dimond  ….  ICEX: Pasaporte al exterior  Decision matrix 2.1. Analysis of the attractiveness © M.A. Montoro Sánchez and selection of target countries 2.2. Information sources for © M.A. Montoro Sánchez internationalization COUNTRY INFORMATION SOURCES:  IMD. The World Competitiveness Ranking. Ranking of 47 countries on a world competitiveness scoreboard. Assesses competitiveness as well as location attactiveness. www.imd.ch/wcy  Economic Intelligence Unit. Ranking of 60 countries on the quality of the attractiveness of the investment environment. www.EIU.com  ICON Group. Measures latent demand and market accessibility by industries. www.icongroupedition.com  Euromonitor. Provides market sizing and forecasts for 330 consumer products across 49 countries plus marketing parameters (1,000 types of data) for 209 countries over 20 years. www.euromonitor.com  A.T. Kearney Offshore Location Index. www.atkerney.com  World Economic Forum. Reports, etc. www.weforum.org  Eurostat. https://ec.europa.eu/eurostat/web/main/data/database 2.2. Information sources for © M.A. Montoro Sánchez internationalization COUNTRY INFORMATION SOURCES:  Ministry for Foreign Affairs, European Union and Cooperation of Spain. Information about countries and terriotories. https://www.exteriores.gob.es/es/Comunicacion/Paginas/Ficha.aspx  World Bank, Doing Business. It offers a wide collection of economic data from 2003 to today by country. Consult data in the Economic Outlook and in the Ease of Doing Business Score of Doing Business. https://archive.doingbusiness.org/en/data  World Bank, World Development Indicators. Source of country data useful for evaluating the attractiveness of a country. World Development Indicators, https://datatopics.worldbank.org/world-development-indicators/  OCDE Stat. Data to analyze the attractiveness of a country (productivity, social protection and well-being, finances, agriculture). https://stats.oecd.org/index.aspx?DataSetCode=PDB_LV  Economic Freedom Ratings. Heritage Foundation y Fraser Institute. https://www.heritage.org/index/explore  Expansion. https://datosmacro.expansion.com/paises 2.2. Information sources for © M.A. Montoro Sánchez internationalization COUNTRY INFORMATION SOURCES:  FMI (Fondo Monetario Internacional). Economic and financial data by country. https://data.imf.org/?sk=388dfa60-1d26-4ade-b505-a05a558d9a42  United Nations. Human Development Index Report. https://hdr.undp.org/data- center/human-development-index#/indicies/HDI  BERI SA. Business Risk Service (BRS). Monitors 50 countries three times per year to assess quantitatively and qualitatively political, operational and financial risks. www.beri.com  Political Risk Services (PRS). ICRG risk rating system and The Coplin-O’Leary System.  Institutional Investor. Country creditworthiness.  Euromoney. Country credit rating.  Expansion. https://datosmacro.expansion.com/paises  ICEX. Información sobre países y e informes de mercados. https://www.icex.es/es/quienes- somos/donde-estamos/red-exterior-de-comercio.html 2.2. Information sources for © M.A. Montoro Sánchez internationalization INDUSTRIES AND MARKETS INFORMATION SOURCES:  ICEX. Sector information, market studies and other foreign trade documents. More than 2,500 specialized reports on countries and sectors updated regularly. https://www.icex.es/es/todos-nuestros-servicios/informacion-de- mercados/estudios-de-mercados-y-otros-documentos-de-comercio-exterior  Statista. Data and indicators from 170 sectors in more than 150 countries. https://www.statista.com/ 2.2. Information sources for © M.A. Montoro Sánchez internationalization COUNTRY IMAGE. Perception of direct, indirect, real and potential consumers in countries. IC = P + CAP P = Producto/país CAP = Communicative Action Policy DIMENSIONS OF COUNTRY IMAGE  Politics. Democratic system, trade diplomacy, free market system, active member of multilateral institutions.  Economic. Economic development, economic stability, product quality, salary level, GDP  Social. Quality of life, legal security, infrastructure development, educational level, social security system development.  Technological Degree of industrialization, level of technological research, patents and registered industrial designs, innovation. Country Brand Ranking: https://www.bloom-consulting.com/en/country-brand-ranking 2.2. Information sources for © M.A. Montoro Sánchez internationalization BRAND SPAIN  The current image of Spain, although it is evolving positively, is mostly confusing, stereotyped and, in any case, insufficient to clearly support the choice of our products in other countries.  New positioning that must take into account the need to convey that Spain is a country with thrust, enthusiastic, creative and innovative and, that breaking topics, is able to offer competitive products and services, meeting the quality requirements of consumers from any country  España Global: https://espanaglobal.gob.es/en/we-are  Invest in Spain: http://www.investinspain.org/invest/en/index.html 2.2. Information sources for © M.A. Montoro Sánchez internationalization National stereotypes Europe is the heaven if… or the hell if… British Spanish German Spanish policemen entertainers policemen organizers German Nordic French Portuguese engineers technologist engineers drivers French Swiss Bristish Italian chefs bankers chefs bankers Italian Swiss lovers lovers 2.2. Information sources for © M.A. Montoro Sánchez internationalization Country brand: stereotypes 2.3. International taxation © M.A. Montoro Sánchez CUSTOMS:  Customs Territory: is the space in which the same tariff system, the same customs regulations and the same commercial policy are applied. It does not have to coincide with the space sphere in which a State exercises its sovereignty (for example, the European Union).  Customs: is the point of entry and exit of goods from a specific customs territory. It is of great importance in the international activity of companies.  The original function of customs was the collection. Customs currently develops, among others, the following functions:  Statistics  Currency control.  Security merchandise control.  Commercial Policy Application.  Conservation of Historic Artistic Heritage.  Fight against drug trafficking.  Control of merchandise and goods of illegal or prohibited trade. 2.3. International taxation © M.A. Montoro Sánchez CUSTOMS:  Foreign trade is governed by the principle of commercial freedom and only for some goods does prior statistical surveillance apply. To determine the regime applicable to each product, it is necessary to know its tariff heading and country of destination.  To classify a merchandise tariff is to assign it one of the codes of the nomenclature used applying precise rules.  The origin of the merchandise: the importance of specifying the country of origin of a merchandise is of a tax gender, since depending on the country of origin, the imported merchandise will be taxed at a normal, reduced, increased or free of those rights.  Products originating in third countries, once imported into the European Union, obtain the status of community goods, being able to circulate freely. They are already products in free practice. 2.3. International taxation © M.A. Montoro Sánchez INTERNATIONAL TAXATION:  Companies that internationalize sometimes do not take into account the tax aspects that accompany any economic transaction.  This can cause unpleasant surprises and make the proposed business model unprofitable, in whole or in part.  Taxation affects both the goods that are the subject of the transaction, at the time of their import or export (indirect taxation), and the benefits that companies obtain in the countries in which they internationalize (direct taxation). 2.3. International taxation © M.A. Montoro Sánchez INTERNATIONAL TAXATION: INDIRECT TAXATION: Indirect taxes tax the introduction of the goods in the country of destination. The taxes that tax the entry of goods into a territory are of two types:  Tariff duties give rise to customs debt. Take into account: the tariff classification (the tariff is a classification system for all goods, harmonized system, digits), the origin of the goods (preferential and non-preferential) and the customs value of the goods.  Internal taxes: indirect taxes that take the entry of goods into the customs territory as a taxable event. Consumption tax, VAT. Taxation of intra-community operations (principle of taxation at origin and destination). 2.3. International taxation © M.A. Montoro Sánchez INTERNACIONAL TAXATION: DIRECT TAXATION: Direct taxes tax the benefits obtained in the countries in which it operates.  The benefits obtained by a company in a country other than that of its headquarters can be taxed both in the country of its residence, and in that in which the benefits are obtained.  To avoid this, countries negotiate bilateral agreements to avoid double taxation. There are two main models: OECD (used by developed countries, it is the most widespread) and UN (used in relations with developing countries, more equitable).  General criterion: income is subject to taxation in the country in which the natural or legal person has his residence. 2.4. Multinationals enterprises © M.A. Montoro Sánchez  UNCTAD (United Nations Conference on Trade and Development) definition: A MULTINATIONAL ENTREPRISE is one that is implemented through commercial or production subsidiaries in more than one country. It carries out a decision system that allows a common strategy to be applied.  Multinational companies have three characteristic elements:  There are one or more subsidiaries located together with the parent firm in one or more host countries.  There is a centralized management that obeys a global strategy.  The different entities that make up the firm are related by property or other links, so that one or more of them exert a significant influence on the activities of others.  It is currently estimated that there are more than 2,000,000 multinational companies in the world, of which some 25,000 are headquartered in Spain. 2.4. Multinationals enterprises © M.A. Montoro Sánchez  Economic influence. Multinational enterprises represent a very significant part of world trade and investment. Two thirds of world trade is done through multinationals. Around half of US imports are transactions between branches of multinational companies, which means that both buyer and seller are controlled by the same company. The income of these large companies exceeds the GDP of some countries (Wal-Mart exceeds the GDP of Poland, Volkswagen that of Greece or Toyota that of Portugal).  Social influence. The tastes and tendencies of the home countries of the multinationals are spread throughout the world (way of dressing, the music that is heard, the soft drinks that are drunk or the films that are seen). The multinationals manage to expand their products all over the planet, tending to homogenize the markets and consumers  Political influence. The multinationals of strategic sectors (oil, gas, financial, IT...) control the policy at all geographical levels: local, national, regional and global. The globalization causes that it is the companies and not the governments of the states that take the initiative and the protagonism in the world economy.  Multinational enterprises can be nationally owned or foreign owned. In many countries foreign multinational companies play a very important role. In European countries the role of foreign multinationals is greater than they play in the United States, although in recent decades they have also increased their importance in the economy. 2.4. Multinationals enterprises © M.A. Montoro Sánchez SPECIFIC DECISIONS OF THE MULTINATIONAL COMPANY  LOCATION. Geographical distribution of value chain activities. Number, location, degree of integration, etc... Offshoring phenomenon.  PRODUCT COMMERCIALIZATION. Product policy (single or different product), brands and trade names (a global brand or multiple brands), and pricing policy (standard policy or price discrimination).  HUMAN RESOURCES MANAGEMENT. Expatriate management  MANAGEMENT OF DIVERSITY. Management of differences in the systems of norms, language, behavior habits, values, culture, etc...  SOCIAL AND ETHICAL ASPECTS. Employment and labor relations, environment, codes of conduct and supranational bodies, relations with states, human rights.  ORGANIZATIONAL STRUCTURE. Three main models: international division, international multi-division and global matrix structure. 2.4. Multinationals enterprises © M.A. Montoro Sánchez GLOBAL TOP 100 COMPANIES 2.4. Multinationals enterprises © M.A. Montoro Sánchez GLOBAL TOP 5/100 COMPANIES 2.4. Multinationals enterprises © M.A. Montoro Sánchez GLOBAL TOP 5/100 COMPANIES 2.4. Multinationals enterprises © M.A. Montoro Sánchez GLOBAL TOP 100 COMPANIES 2023 2.4. Multinationals enterprises © M.A. Montoro Sánchez GLOBAL TOP 100 COMPANIES 2024 2.4. Multinationals enterprises © M.A. Montoro Sánchez GLOBAL TOP 100 COMPANIES 2023 2.4. Multinationals enterprises © M.A. Montoro Sánchez GLOBAL TOP 100 COMPANIES 2024 2.4. Multinationals enterprises © M.A. Montoro Sánchez 2.4. Multinationals enterprises © M.A. Montoro Sánchez International Business Management Bachelor's Degree in Business Administration THE PROCESS OF INTERNATIONALIZATION OF THE COMPANY Chapter 2