Definitions Used In This Text
In this text, I employ the definitions listed below, which are widely accepted in academic and business circles.
- International business is business whose activities involve the crossing of national borders. This definition includes also the growing service industry in such areas as transportation, tourism, banking, and advertising.
- Foreign business denotes the domestic operations within a foreign country. This term is sometimes used interchangeably with international business by some writers.
- Multinational corporation (MNC). I use the threshold
definition of a multinational corporation (or
multinational enterprise), that is as follows:
"A multinational or transnational enterprise is an enterprise that engages in foreign direct investment (FDI) and owns or controls value-adding activities in more than one country" (Dunning 1992).
A multinational corporation (MNC) has the following characteristics:
- It maintains a production, assembly, sales, or service presence in two or more countries.
- A considerable portion of its sales, profits, and assets come from its international activities. For example, it has been suggested that when operations in other countries account for 35 percent of sales and profits, an organization is considered multinational. It has also been suggested that an organization becomes multinational when 20 percent of its assets are in other countries.
- In considers opportunities throughout the world, even though it may not do business in every region and country of the world.
- It has a worldwide perspective and orientation in managerial decision making. In other words, the organization makes managerial decisions regarding the use of its resources -funds, technology, and business know-how -on a global basis.
- Global corporation. The term "global"'corporation has a more specific meaning, "refereeing to an enterprise that engage in value-chain activities in each of the major regions of the world and which pursues an integrated strategy towards these activities" (Dunning 1992).
- Worldwide company refers to both global and multinational companies.
The terms "transnational" and "multinational" are used interchangeably. Multidomestic has also been suggested as a synonym for multinational.
Finally, the term "enterprise," "corporation," "firm," and "company," also tend be used synonymously, although I recognize that each has a particular legal connotation.
The company investing in international operations is called the parent company; the country in which the investment is made is called the host country.