BUSI-1694 International Business Functions Lecture Notes

MODULE AIM

  • Introduction to the operational and strategic context of multinational enterprises.
  • International business functions includes:
  • Innovation Management
  • Marketing
  • Human Resource Management
  • Finances
  • Production

LEARNING OUTCOMES

Upon successful completion of this module, students will:

  1. Apply a range of theoretical management models.
  2. Implement various international business strategies.
  3. Manage different business functions effectively.
  4. Analyze business situations (e.g., case studies).

OWNERSHIP IN INTERNATIONAL BUSINESS

Importance of Ownership
  • Distinction between Shareholders and Stakeholders:
  • Shareholder: An owner of the company; makes decisions about management.
  • Stakeholder: Affected by the company's actions; includes employees, customers, suppliers.
  • Ownership complexity increases as companies grow.
Types of Ownership Structures
  1. Sole Trader:
  • Common in small start-ups (e.g., electricians, plumbers).
  • Has unlimited personal liability.
  1. Partnerships:
  • Combination of individuals for mutual benefit.
  • Ownership shared based on capital contribution.
  • Not always equal ownership.
  1. Public Limited Company (PLC):
  • Legal entity separate from owners.
  • Can have one or multiple shareholders.
  • Shares can be publicly traded.
  1. Private Limited Company (PLC):
  • Similar characteristics to PLC but cannot offer shares to the public.
  1. State-owned Enterprises (SOEs):
  • Owned entirely by the state; appoints managers.
  • Can include collective enterprises and township/village enterprises.
  1. Foreign-owned Enterprises (FIEs):
  • At least 25% of assets owned by foreign investors.
SOEs: Advantages & Disadvantages

Advantages:

  • Control over critical industries.
  • Ability to save failing industries.
  • Exploits economies of scale (e.g., transport infrastructure).

Disadvantages:

  • Conflicted goals due to political influences.
  • Slower decision-making processes.

ORGANIZATION SYSTEMS & STRUCTURES

Importance of Organizational Structure
  • Involves organization of work around roles and grouping these roles into teams or departments.
  • Affects power distribution, job descriptions, coordination, and control.
Types of Organizational Structures
  1. Functional Structure:
  • Divides responsibilities into primary roles (e.g., production, research).
  • Benefits: Specialization, clear command chain.
  • Drawbacks: Conflicting objectives between departments.
  1. Multidivisional Structure:
  • Comprises separate divisions based on products, services or geographical areas.
  • Benefits include profit center operation and flexibility.
  • Drawbacks: Complexity in accounting and management control.
  1. Matrix Structure:
  • Combines different structural dimensions (e.g., product divisions and geographical territories).
  • Benefits: Flexibility, ability to transfer expertise.
  • Drawbacks: Possible conflicts of interest and slowing adaptation due to multiple management layers.
Factors Influencing Structure
  • Company size.
  • Product complexity.
  • Cultural differences.
  • Business environment changes.

AGENCY PROBLEM

  • Definition: Problem arising from separation of ownership and control, where shareholders delegate management control to professional managers.
  • Leads to management holding more power while shareholder influence diminishes.
  • Expansion complexity necessitates specialization, furthering the agency problem.

RECOMMENDED READINGS

  • Needle, 2024, Chapter 6.
  • Lee, E., & Puranam, P. (2016). The implementation imperative.
  • Sengupta, A., & Ray, A. S. (2017). Choice of structure and business model in British universities.

NEXT WEEK'S LECTURE

  • Management and Leadership.