International Business: Key Issues, Functioning, Entry Methods, Theories and Impact of Multinationals

This research work explores the concept of international business, with a focus on FIRST MILK's expansion in China. It identifies the key contemporary issues involved in international business, evaluates the functioning of international business in the twenty-first century, discusses alternative methods of entry into foreign markets, and explores the theories of internationalization. The impact of multinationals on both the home and host nations is also discussed.

International business

Executive summary
The research work is based on international business in which the business were engaged in the
economic activities. The determination and evaluation done on the trade policies. The economies
of scale and growth share is increased which is the integral part of the globalization. The study is
done on the company of FIRST MILK which deals in the UHT MILK and wants to expands its
business in China. In the research the discussion is made on the key contemporary issues
involved in the international business. The evaluation of the 21st century in the international
business is done. The organisation also determines the entry modes in the international markets.
The reason are discussed the company wants to internationalise and theories of internationalize.
With this the impact of the multinational on both the host and home nation is discussed.

Table of Contents
Executive summary .........................................................................................................................2
Introduction .....................................................................................................................................4
LO1 Key contemporary issues involved in international business related to organisation.............4
LO2 The international business functioning in the twenty-first century in global context is
identified and evaluated...................................................................................................................6
LO3 Alternative methods of entry into foreign markets .................................................................7
LO4 The company decide to internationalize and alternative theories of internationalization.......8
LO5 Discussing the impact of multinationals on both the home and host nations. ......................10
LO6 Select analyse and evaluates data on country markets.........................................................11
CONCLUSION ............................................................................................................................13
References .....................................................................................................................................15

Introduction
In the economy each organisation is trying to expand business from local market to
international market by spreading the products to international customers in order to get large
amount of selling of goods that are produced. To take the advantage of the product the chances
for the customers is increased. To gain more advantage the business activities of every business
is increased from local environment to the globally. The concept of international business defines
trading of goods and services, technology, capital and knowledge crosswise the national borders
at worldwide scale. It comprises of cross border transactions between two or more regarding the
goods and services (Blau, B.M., 2017). The purpose of this research is to identify the
international business clear objective. To have the right observation about the international
business FIRST MILK Company is taken dealing in UHT Milk. FIRST MILK company is based
in United Kingdom supplying milk, cheese and other dairy products with the members of about
2200. The products of the company is supplied to the united kingdom and international markets
where the business is expanding in China. The company was founded by Jim Paice in November
2012. In the report the discussion is based on the identifying the contemporary issues involved in
international business. In accordance to twenty-first century the global context and business
functions are identified and evaluated. With these alternative methods of entry into foreign
markets is shown and various international business theory is prepared. In the last, for the
company betterment the impact and data is evaluated and analysed by taking the actions for long
term business expansion .
LO1 Key contemporary issues involved in international business related to organisation.
UHT Milk is a food processing technology known as ultra-high temperature processing
that sterilizes liquid food to kill the bacteria by heating above 135 °C (275 °F). It is packed in
sterile container with the shelf life of six to nine months stored at room temperature without need
of refrigerator due to growing preference of consumers in UHT Milk. The contemporary issues
faced by the First Milk are as follows (Chen, H.S., 2017)-
Trade protectionism
Tariffs- On imported goods and services tariffs are imposed. In accordance to tariff the tax rate is
imposed which varies on the goods uses and types. The international competition is control
by the economy which has floating export rate imposing export tariff.

Import quotas- To increase the market price of goods and industry product and import quantity
reduced by imposing import quota. The effects of import quota and tariff is similar.
Administrative barriers- The extra barrier and several rules on organisation is imposed by
government which reduces the import quantity and country product price is increased
(Chiarvesio, M. and Romanello, R., 2018).
The other kinds of trade protectionism include direct subsidies, export subsidies, political and
social impact on business.
The ethical and social issue considered by the First Milk.
At the time of the international business ethical and social issues is maintained by the
first milk. In respect to social welfare more responsibility is taken by the first milk to grow
international business. The environment is protected, human rights are given respect and local
tradition is honour and performed by international company. The first milk wants to run its
business operations in another nation of China. On the basis of tradition and reformation first
milk products are offered. It also ensures the health safety and security. Well-being of consumers
and workers. To protect the environment is another social and ethical responsibility. First milk
company has the good relation with the global association such as trade union, world
environment protection association etc.
The other key contemporary issues are-
 Foreign laws and regulations- The international law is imposed by the EU and trade
association which affects the international business. The multinational company exercise
the international laws to expand and contract the business operations and policy. The
British government have problem for Brexit policy (Fassas, A.P and et.al., 2020).
 Universal payment methods- The universal payment system is imposed by the global
association in regards to protecting the trading payment security.
 Political issue- The international business is impacted by the political instability. The
profitability of the first milk is reduced because of government decision and
implementation policy of trade protectionism. In accordance to both micro and macro the
international business is impacted. To run the business internationally the environmental
issues must be considered (Hernandez-Perlines, F., 2018).

LO2 The international business functioning in the twenty-first century in global context is
identified and evaluated.
The social, economic and political is transformed with the new global markets in intense way.
The global business is a composition of globalization, trade liberalization and information
technology. In the 21st century the organised and developed business market comes. The global
business structure is related to social, political, economic which varies the day by day of the
sociality lives, together working, communication and social service etc.
Perspective on globalisation and international business
In the business globalisation is the new concept which is used for international business. The
global business is made easy and comfortable with globalisation. The first milk company
communicates to the customers, suppliers with the use of technology. The cross-border trade is
increased and distance between supply and finished goods is reduced. In accordance to first milk
company international business is facilitated by globalisation which reduce the international
trade barrier, technology changes for UHT Milk (Isaac, V.R. and et. al., 2019).
Political, economic and legal system within the international business
Political system- It represents the rules and regulation which is governed by political parties. The
system has two diversified sectors of collectivism and individualism. The collectivist political
system affects the international business. The democracy is followed by various organisation
where the persons are involved in decision-making process. In the democratic the power of the
political party arises from general people and for the welfare of the society all the decisions are
taken (Jameel, A.S. and Ahmad, A.R., 2019).
Economic system- It is governed economically by the country such as-
 Market economy- The goods and services are owned and produced privately in the
market economy. Under this system free and fair market policy is encouraged and
ensured by the government and unfair monopoly system is discouraged.
 Command economy- In this system the power of right to produce, launch and control
system is with the government which is the owner. China is the largest country exercised
this economy. The first milk faces trade restriction to run their business.
 Mixed economy- The owner of the organisation is both individual and government. Trade
policy is imposed by the government to control the market competition and have little
control over the market (Ketteni, E. and Kottaridi, C., 2019).

Legal system – The individual and corporate behaviour is modified characterizes specific
rules and regulations of legal system. In business sector various important laws are imposed
like civil law, common law and religious law etc. in accordance to country tradition and
customs the common law is formulated. In the belief of religious the religious or Islamic law
is imposed. The first milk company should follow different types of trade law to operate in
international business.
LO3 Alternative methods of entry into foreign markets
There are several ways to enter in the international market which first milk company enters in
global market by followings ways-
 Licensing- In the home country the other country is permitted to use the property and fee is
charged for specified period. It includes the intangible property like trademark, patents,
production technique etc. in the foreign market the licensee pays fee use the right of
[property which is also considered as manufacturing & marketing cost. There is high return
on investment which requires little investment. It is similar to franchising (Khojastehpour,
M. and Shams, S.R., 2020).
 International agents and international distributors- International Agents is sort of
international marketing channel. For the commission the client product is sale by an
individual of international agent. It is low-cost marketing system. The international agents
are exercised by the first milk to expand their business operations in China.
 Strategic alliances- It is a series of relationship between different industry and types of
companies. The relationship between the competitor is facilitated. The strategic alliances
help in act as agent one other. The two or more organizations helps in sharing the
management expertise, plant production, marketing channel and research & development
supporting.
 Joint ventures- It is a type of partnership which encompasses of dual businesses to begin
jointly owned business. One proprietor is from the resident corporate. The businesses offer
novel corporate with organization team and regulator the portion of joint ventures. The
incomes and hazard are shared correspondingly among the members. It helps in entering
international market to the newly created company (Kirkpatrick, N and et.al., 2018).

 Overseas manufacture or international sales subsidiary – The business operations of the
business organization can be expanded by expanding business plant in global market. The
overseas manufacturing plant is expanded through foreign direct investments. In the foreign
market the company sets the manufacturing plant which helps in taking tax benefits, export
facilities and support of raw material.
LO4 The company decide to internationalize and alternative theories of internationalization.
The organisation takes different ways to enter into international market. The company takes the
helps of processes which is appropriate for business strategy. To motivate the customers in the
marketplace the market strategy depends on the company in what way they operate and
operations are applied. The internationalization strategies is applied one of the following by
keeping in minds tariff rate, strategy, transportation and marketing costs and degree of adaption
needs. The company also gets the help from theories which describes the right decision that
needs to be taken to internationalize. Internationalization is the process where the involvement
of the enterprises in the international market is increased and the sustainability is provided for
the development (Kumar, B. and et. al., 2020).
Due to some reasons the company needs to internationalize-
First-mover advantage- In this the business tries to take the advantage from other business. The
product is purchased by the one country from other country at cheap rate as the other country has
less production cost. It is a uppermost benefit for the company that tries to diversify their
business strategy and products are internationalize. The business are internationalization which
benefits both the countries.
Potential for growth- In the business the growth is the most common expectation. The production
and other business functions increases of the business motivated due to increase in demand. In
the business the chances of spreading globalization process implementation increases for first
milk. The first milk gets the large marketplace being in touch with international customers and
earns good amount of revenue and leads to increment in the growth of the firm.
More customers- There are large number of customers in the international market where the
producers do not think for the customers regarding the product. From the big market the firm
earns the certain amount of profit from the earnings and gets some certainty from market. To
motivate the customers the company easily targets different market segment which also diversify
the production.

Great access to talent- Taking business at global level provides the great benefit in accessing the
large pool of talent which is hired by the company. The international talent provides the various
advantages in terms of skills and divers educational backgrounds. In the expansion of the
business at global level the companies are allowed to employ local workers and communicate
with the expertise by serving to the clients (Omane-Adjepong, M. and Alagidede, I.P., 2019).
Cost savings- The business is able to lower the operational costs and money is saved by setting
up in the new market. It provides the advantage in moving the manufacturing operations to
another market because of cheap cost of labour and more affordable talent.
Alternative theories of internationalization
There are several theories of internationalization which explains the international
activities. There are mainly three major theories the investor can make the use of any theory for
company internationalization.
1. Trade theory- It is a concept of exchanging goods and services among the two peoples or
entities. It has a great dealing with the theory, policy and business strategy to constitute
international trade. Trade theory comprises of-
 Absolute cost advantage- It was introduced by Adam Smith in 1776 where the
commodity is produce in the country with less cost per unit than trading partner. The
country should be specialised in export commodities to have absoluter advantage.
 Comparative cost advantage – It was introduced by David Ricardo in 1817 which argued
that the country do not require absolute advantage for the production of commodity for
international trade. The benefit to both the countries can be if there is relative advantage
in production from trade (Popli, M and et.al., 2017).
2. Traditional theory- In this Various theory and models were developed
 Diamond model- Michael porter develop this model stating the reasons of industries
competitiveness in particular locations. It comprises of six factors factor condition,
demand condition, related and supporting industries, firm strategy, structure and rivalry,
government, and chance.
 Eclectic paradigm- It is a theory in economics called as OLI-Model introduces by John
H.Dunning in 1993 which is a further development theory of internalization. The theory
is based on the transaction cost theory where the transactions are made in institutions.

3. Further theories- It comprises of many theories.
 Contingency theory- It defines to number of management theories developed
concurrently late in 1960s. The organisational structure was influenced by numerous
aspects of environment (Rialp-Criado, A. and Rialp-Criado, J., 2018).
 Economy of scale- It is cost advantage in the microeconomics due to expansion obtain
by the business. These are the factors which cause producer's average cost per unit to fall
as output rises. The firm of any size can utilize the economics of scale to expand their
business operations.
LO5 Discussing the impact of multinationals on both the home and host nations.
In the economy the multinationals impacts directly or indirectly which provides the most
effective benefits. The benefits is not for only unto business but also kept for the development of
social and economic. The country also gets the support from that companies.
The impact of multinational at home
 Providing employment- The problem of unemployment is solved easily and to provide
the services internationally the local people can be recruited. The growth of the economy
is smooth due to the multinational companies. The chance of development and
performance increases in several ways (Saleh, Y., 2020).
 Sources of tax revenue- The international country is linked with the local nation this is
most attractive. In the result from the tax and other services the local country gets the
advantage which also increases the gross production. The country strength is increased
and and helps in developing the country as well. The new ideas is developed by the
companies and introduce the home to world with high reputation.
 Improvement in balance of payments- the industry gets the direct capital support to
improve the balance of payment. The home country gets the remittance and foreign
currencies by exporting the products. The home country does not require to purchase the
products from the outsiders.
 Transfer of technology- In the production the newer and latest technology can be
applied. The transferring of the technology from another country to home country is easy
and home country is benefited (Shapiro, D and et.al., 2018).

 Increasing choice- the local population get a wide choice of goods and services and at
price lower than import substitutes if multinational manufactures for domestic market and
for export.
Impact of host nation-
 Uncertainty- The host country face some problem because of uncertainty as those
companies rises rapidly and with the short notice can moved anytime.
 Increased competition- The other companies faces the competition when the big
companies stays locally. Sometimes to survive for the small companies becomes difficult
which can damage the economy. At lower cost the goods are produced.
 Influence and political pressure- In the multinational companies they are large with the
great investment. In some countries the political situation is influenced by those
companies as some nations depends completely on their investment (Vătămănescu, E.M.
and et. al., 2017).
 Export of profits- The profit is transferred to the home country which results the
derivation of profit form those companies to host nation but on the economy the impact is
negatively.
 Cultural and social impact- In the home country some companies introduces the new
culture which motivates the local customers for the purchase of product and with this the
result is local companies becomes loser and loses the market share. The capture of large
market share sometimes impacts negatively on the host nations.
With respect to the multinational companies have both advantage and disadvantage. The
advantage can be high if government control negative motive by applying rules and regulations.
LO6 Select analyse and evaluates data on country markets
The great marketplace in the world is UK. For the international and local investors it has good
regulation. To stay in the nation the supportive condition increases the attractiveness for other
countries company. To increase the marketplace over the country they get the large market and
best strategy is applied. The production is also spread internationally by marketing policy. The
advantage is gain by the international companies from the nations. In the nation to stay the good
conditioning helps which makes the business successful with long terms without having any
political to economic distress (Vendrell-Herrero, F. and et. al., 2018).

Brexit- For the business the UK depends on European unions. The business activities is
performed by the zone with thousand of multinational companies. The great marketplace is
introduced and world-wide business is controlled by the large economic zone.
Among the new investors the UK has become popular which gets large figure of FDI for the
business. The economy growth becomes stronger. For the livelihood the customers are able to
purchase the luxurious products because of large market.
United kingdom market conditions
Growth rates- The growth of the economy is steadily from the last few days and each parts the
advantage of the economy growth. From the previous year the expansion of the economy grows
from 0.5 percent. The growth rate of the GDP from the other nations is also high. In average the
0.60 percent increases from the previous year. Therefore the growth rate of the United kingdom
is given below.

Size of the economy- The UK is the largest economy in the world with the great market place
which easily controls the entire world market. It is the most attractive place for marketing as the
large number of customers gets the products from the country that no other country offers to
them. In result the country gets the best advantage and country becomes more popular.
Political condition- The united kingdom supports the investors as it has great business system.
The investors also uses the marketplace and the rules, regulation are so easy getting the business
support. In the business there is also some role of the British government. For the internationals
the another example is company law. In the business there is relax with the supportive
environment. In the result the multinational companies takes the advantage of the economy and
stays in UK.
CONCLUSION
The conclusion has been made that In the local market the business is became tradition in
the international business. The concept of the international business is wide related to the trading
of the goods and service globally. The foreign exchange is acquired by the international business
which is utilized to export the goods from the world-wide market. The external factors is
considered by the business to run their operations in the global market. The first milk company
proved that it can survive in the marketplace for the proper decision making implication. With
the performance the moire profit is generated. The concept of the internationalization must be
implemented when the business has strength to collect the customers by the product quality and
market development.

References
Books and Journal
Blau, B.M., 2017. Price dynamics and speculative trading in bitcoin.
Research in International
Business and Finance. 41. pp.493-499.
Chen, H.S., 2017. Travel well, road warriors: Assessing business travelers' stressors.
Tourism
management perspectives. 22. pp.1-6
Chiarvesio, M. and Romanello, R., 2018. Industry 4.0 technologies and internationalization:
Insights from Italian companies. In
International Business in the Information and Digital
Age. Emerald Publishing Limited.
Fassas, A.P and et.al., 2020. Price discovery in bitcoin futures.
Research in International
Business and Finance. 52. p.101116.
Hernandez-Perlines, F., 2018. Moderating effect of absorptive capacity on the entrepreneurial
orientation of international performance of family businesses.
Journal of Family
Business Management.
Isaac, V.R. and et. al., 2019. From local to global innovation: The role of subsidiaries’ external
relational embeddedness in an emerging market.
International Business Review. 28(4).
pp.638-646.
Jameel, A.S. and Ahmad, A.R., 2019. Leadership and performance of academic staff in
developing countries. In
Proceedings of the 33rd International Business Information
Management Association Conference, IBIMA (pp. 6101-6106).
Ketteni, E. and Kottaridi, C., 2019. The impact of regulations on the FDI-growth nexus within
the institution-based view: A nonlinear specification with varying
coefficients.
International Business Review. 28(3). pp.415-427.
Khojastehpour, M. and Shams, S.R., 2020. Addressing the complexity of stakeholder
management in international ecological setting: A CSR approach.
Journal of Business
Research. 119. pp.302-309.
Kirkpatrick, N and et.al., 2018. Sport business and marketing collaboration in higher
education.
Journal of Hospitality, Leisure, Sport & Tourism Education. 22. pp.7-13.
Kumar, B. and et. al., 2020. Digital mediation in business-to-business marketing: A bibliometric
analysis.
Industrial Marketing Management. 85. pp.126-140.
Omane-Adjepong, M. and Alagidede, I.P., 2019. Multiresolution analysis and spillovers of major
cryptocurrency markets.
Research in International Business and Finance, 49, pp.191-
206.
Popli, M and et.al., 2017. Business group affiliation and post-acquisition performance: An
extended resource-based view.
Journal of Business Research. 81. pp.21-30.
Rialp-Criado, A. and Rialp-Criado, J., 2018. Examining the impact of managerial involvement
with social media on exporting firm performance.
International Business Review. 27(2).
pp.355-366.
Saleh, Y., 2020. ICT, social media and COVID-19: evidence from informal home-based business
community in Kuwait City.
Journal of Enterprising Communities: People and Places in
the Global Economy.
Shapiro, D and et.al., 2018. Natural resources, multinational enterprises and sustainable
development.

Vătămănescu, E.M. and et. al., 2017. The influence of competitiveness on SMEs
internationalization effectiveness. Online versus offline business
networking.
Information Systems Management. 34(3). pp.205-219.
Vendrell-Herrero, F. and et. al., 2018. Uncovering the role of cross-border strategic alliances and
expertise decision centralization in enhancing product-service innovation in
MMNEs.
International Business Review. 27(4). pp.814-825.