Contemporary world

• Corporation


  A legal entity that is separate and distinct from its owners, known as shareholders or stockholders
• Incorporation


  The process where a corporation is granted legal status as a separate "person" under the law
• Corporation


  • Owned by shareholders, who invest capital in the corporation by purchasing shares of stock
  • Commonly used as a business structure for medium to large-sized enterprises due to their advantages in terms of limited liability, access to capital markets, and potential for growth and expansion
  • Subject to more extensive regulatory requirements and tax obligations compared to other business structures such as sole proprietorship and partnerships
• Limited Liability


  • Shareholders are typically not personally liable for the debts, obligations, or legal liabilities of the corporation beyond their investment in the company
• Separate Legal Entity


  • Can enter into contracts, own property, incur debts, sue and be sued, and engage in various business activities in its own name
• Perpetual Existence


  • Their existence is not dependent on the lifespan of their shareholders or key personnel. They can continue to exist indefinitely, even if ownership changes or key individuals leave the company
• Centralized Management


  • Typically managed by a board of directors, who are elected by shareholders, and officers (such as a CEO, CFO, etc.), who are responsible for the day-to-day operations of the company. Shareholders exercise their control and influence through voting rights attached to their shares
• Ownership through Stocks


  • Shareholders may receive dividends as a return on their investment and have the opportunity to participate in corporate governance through voting rights
• Global Corporation


  A large business organization that operates and conducts business activities in multiple countries around the world
• Global Corporation


  • Have a significant presence in various regions and countries, with subsidiaries, branches, or affiliates established to facilitate their operations
  • Engage in various business activities, including manufacturing, sales, marketing, research and development, and service provision, across borders
• Key Characteristics of Global Corporations

  • Presence in Multiple Markets
  • International Supply Chain
  • Adaptation to Local Market
  • Centralized Management with Global Coordination
  • Diverse Workforce and Talent Pool
  • Use of Technology and Information System
  • Participation in Global Governance and Advocacy
• Companies that Operate Across National Borders

  • Multinational Companies (MNCs)
  • Transnational Companies (TNCs)
  • International Companies (INCs)
• Multinational Companies (MNCs)


  Typically have a centralized management structure with headquarters in one country and operations in several others. They may adapt their products, services, and marketing strategies to suit the preferences and needs of local markets
• Transnational Companies (TNCs)


  Similar to a multinational corporation but tends to have a more decentralized organizational structure. They may distribute decision-making authority and resources among their subsidiaries or divisions located in different countries
• International Companies (INCs)


  Have a limited international operations compared to MNCs and TNCs and may focus primarily on domestic market while engaging in some international market
• Foreign Direct Investment (FDI)

  Occurs when a firm based in one country builds a new plant or a factory or purchases an existing one in a second country, thus becoming an MNC by making a foreign direct investment
• The world's stock of FDI, the total amount of foreign investment in operation, has grown from 692.5 billion dollars in 1980 to 16.2 trillion dollars in 2008, a 2,300 percent increase in less than 30 years
• Examples of Foreign Direct Investment

  • Acquisition of Foreign Assets
  • Establishment of Foreign Subsidiary
  • Greenfield Investment
• Horizontal Integration


  Occurs when firms create multiple production facilities, each of which produces the same good or goods. Firms integrate horizontally when a cost advantage is gained by placing a number of plants under common administrative control
• Vertical Integration


  Refers to instances in which firms internalize their transactions for intermediate goods. An intermediate good is an output of one production process that serves as an input into another production process
• Nation


  A group of people that share the same/common characteristic
• State


  A political entity that is sovereign, has a defined territory, and has an established government
• Nation-State


  A state where the population shares the same characteristic, e.g., Israel
• SONA (State of the Nation Addresses)


  A report of a country's activities
• Global Interstate System


  A framework used by countries for international relations
• Features of the Global Interstate System


  • Sovereign State
  • International Laws and Norms
  • Diplomacy and Diplomatic Relation
  • International Organization and Institution
  • Balance of Power and Alliances
  • Conflict and Cooperation