Lecture 7

Virtual organization and

international business
 Contents

1. Virtual organization

2. International business
1. Virtual organization
(Tổ chức ảo)
 Functions

What is virtual
organization?
The virtual organization is a
network-based structure built on
partnerships where a small core
operating company outsources
most of its processes.

Source: KBmanage , n.d. Techniques. [Online] Available at: https://www.kbmanage.com/concept/virtual-organisations [Accessed 13 6 2021].
 Virtual organization

• It is a network of small companies specializing in various aspects

of production.

• The organization can be very big in trading terms but very small in
the numbers of permanent staff.

• The process is typically mediated by information technology

 Virtual organization

• Virtual organization adapts to the business environment changes

because: relationships both within and between become more

flexible by teleworking.

• Given modern forms of communication, opportunities exist for the

creation of totally electronic-based organizations trading in

expertise and information with no real-world physical identity.

 Characteristics of Virtual
organization

Source: Tamošiūnaitė, R., n.d. Research Gate. [Online] Available at: https://www.researchgate.net/figure/Characteristics-of-Virtual-organization_tbl1_267394518. [Accessed 13 6 2021].
 Advantages of virtual
organization
Advantages

• Efficiency, flexibility and responsiveness to changes in market

conditions

• Overhead cost are minimized: training cost, support cost…

• Information technology develops

 Disadvantages of virtual
organization
Disadvantages

• Loss of control over outsourced activities

• Cost more to manage

• Depend on Information technology

 Disadvantages of virtual
organization
Disadvantages of outsources:

• Flexibility is reduced because of being locked into contracts

• Lack of commitments of key resources

• Loss of contractors
2. International business
 International business

1. Exporting and Importing

2. Licensing
3. Franchising
4. Joint venture
5. Strategic alliance
6. FDI
7. Multi-national corporations
 International Business

Exporting and Importing

Import and
Export

Source: Wexpo, n.d. [Online] Available at: https://wexpo.vn/nua-cuoi-nam-2020-xuat-khau-lieu-se-phuc-hoi/amazon-import-export/ [Accessed 14 6 2021].

 5 forms of international
Business
1. Importing & exporting

• Imports: a good or service brought into one country from another.

• Exports: a good or service produced in one country then get

marketed to other country.

Source: CHANTAPUT, S., 2015. [Online] Available at: https://sopapornchantaput.wordpress.com/2015/06/28/5-forms-of-international-business/ [Accessed 14 6 2021].
 5 forms of international
Business

1. Importing & exporting

• The largest international business activity.

• Popular and easy way for the businesses to expand abroad

and enter the market with a small outlay of capital.

Source: CHANTAPUT, S., 2015. [Online] Available at: https://sopapornchantaput.wordpress.com/2015/06/28/5-forms-of-international-business/ [Accessed 14 6 2021].
 International Business

Licensing
(Cấp giấy phép/Bản quyền)
 Licensing

• Licensing is authorized a company, called licensor, to use its

intellectual property

• Intellectual property rights: Brand name, copy right, patent,

technology, trademark and so on for a specific period of time.

• The licensor gets benefits in term of the royalty.

Source: CHANTAPUT, S., 2015. [Online] Available at: https://sopapornchantaput.wordpress.com/2015/06/28/5-forms-of-international-business/ [Accessed 14 6 2021].
 Licensing

• The licensor gets benefits in term of the royalty.

• Licensing when the domestic production costs are too high, strict
government regulations, or the company wants to sell and
produce standardized products everywhere.
 Examples of Licensing

Licensor Licensee
granting McDonalds a
license for
• Walt Disney McDonalds
Disney To co-brand

trademarked
character. McDonalds Happy Meals

Lets talk, n.d. Franchise your business. [Online] Available at: https://www.franchiselawsolutions.com/franchising/licensing-versus-franchising/ [Accessed 14 6 2021].
 Licensing
examples

Source: Paes, R., 2018. [Online] Available at: https://toybuzz.org/disney-toys-returning-to-happy-meals-after-more-than-a-decade/

 International Business

Franchising
(Nhượng quyền)
 Franchising

• Franchising is a parent company (franchiser) sell the right to

another company (franchisee) to do business using the
franchiser’s name and products in a prescribed manner.

• There are several types of franchising

Source: CHANTAPUT, S., 2015. [Online] Available at: https://sopapornchantaput.wordpress.com/2015/06/28/5-forms-of-international-business/ [Accessed 14 6 2021].
 Franchising
• There are several types of franchising:

➢ Master franchise

➢ Regional franchise

➢ Area development franchise

➢ Single-unit franchise

Source: CHANTAPUT, S., 2015. [Online] Available at: https://sopapornchantaput.wordpress.com/2015/06/28/5-forms-of-international-business/ [Accessed 14 6 2021].
 Franchising

• There are several types of franchising:

➢ Master franchise

➢ Regional franchise

➢ Area development franchise

➢ Single-unit franchise

Source: CHANTAPUT, S., 2015. [Online] Available at: https://sopapornchantaput.wordpress.com/2015/06/28/5-forms-of-international-business/ [Accessed 14 6 2021].
 Franchising

• There are several types of franchising:

➢ Master franchise

➢ Regional franchise

➢ Area development franchise

➢ Single-unit franchise

Source: CHANTAPUT, S., 2015. [Online] Available at: https://sopapornchantaput.wordpress.com/2015/06/28/5-forms-of-international-business/ [Accessed 14 6 2021].
 Franchising

• There are several types of franchising:

➢ Master franchise

➢ Regional franchise

➢ Area development franchise

➢ Single-unit franchise

Source: CHANTAPUT, S., 2015. [Online] Available at: https://sopapornchantaput.wordpress.com/2015/06/28/5-forms-of-international-business/ [Accessed 14 6 2021].
 Franchising vs. Licensing

• Franchising has to follow much stricter guidelines.

• Licensing is more about restaurants, hotels, and rental

services. (Licensing relates to manufacturers)
Advantages and Disadvantages of
Franchising
 Examples of Franchising

Franchiser Franchisee
Give rights to use name
McDonalds and products…
McDonalds in
in the US
Vietnam
Guidelines Payment and
An independent business follows strictly

Source: BOYCE, P., 2021. Microeconomics. [Online] Available at: https://boycewire.com/franchise-definition-and-examples/ [Accessed 6 14 2021]
Franchising
examples
 Exercise 1

• Give 2 examples related to Franchising and Licensing.

 International Business

Strategic alliance
(Hợp đồng hợp tác kinh doanh)
Examples of Strategic alliance

A Contract

Strategic alliance
 Strategic alliance

• A strategic partnership or alliance is a cooperation of two or more

companies in different countries.

• NO independent incorporated business is established

• Right and Obligations follows the commitments in the signed

contract.
 Strategic alliance

• The benefit is to share the production cost, technologies,

development, and sales networks.

 International Business

Joint venture
(Liên doanh)
Examples of Strategic alliance

A Contract Of joint venture

Establish

A independent company
 Examples of joint venture

CARADIGM (MICROSOFT CORPORATION + GENERAL ELECTRIC)

• One of the better-known joint venture examples is the Caradigm venture

between Microsoft Corporation and General Electric (GE) in 2011.

• The Caradigm project was launched to integrate a Microsoft healthcare

intelligence product with various GE health-related technologies.

Source: Tony Robin, n.d. Business Cycle. [Online] Available at: https://www.tonyrobbins.com/business/what-is-a-joint-
venture/#:~:text=Another%20famous%20example%20is%20Hulu,companies%20and%20their%20respective%20subsidiaries. [Accessed 14 6 2021].
 Joint venture

• A joint venture is usually a jointly owned and independently incorporated

business venture involving two or more organizations.
• This is a popular method of expanding abroad as each party can diversify
• The benefit is the experience of the others involved in the venture and a reduction
in the level of risk.
• There a large number of members, involved in such an arrangement, this is called
a consortium
 Strategic alliance VS. Joint venture

• No company is established • An independent company is

• Working based on the established

contract of alliance • Working independently with

the members
 International Business

Foreign Direct Investment

(Đầu tư trực tiếp nước ngoài)
 FDI

• Foreign direct investment is a company’s physical investment such as into

the building and facilities in the foreign country, and acts as a domestic

business with a full scale of activity.

• Benefits from cheaper labor costs, tax exemptions, and other privileges in

that foreign country.

Source: CHANTAPUT, S., 2015. [Online] Available at: https://sopapornchantaput.wordpress.com/2015/06/28/5-forms-of-international-business/ [Accessed 14 6 2021].
 Examples of FDI

For example, Intel, which is United States based company, has

made the FDI in many countries in Southeast Asian.

 FDI in Vietnam

Source: Thời Báo Tài Chính, 2021. Kinh doanh. [Online] Available at: http://thoibaotaichinhvietnam.vn/pages/kinh-doanh/2021-03-30/infographic-von-fdi-quy-i-2021-dat-hon-10-ty-
usd-101705.aspx [Accessed 14 6 2021].
 Examples of FDI

Build factories in other countries

Build factories in other countries

 FDI and Multi-national
companies

Results
Multi-national
companies

Source of pictures: The independent, n.d. [Online] Available at: https://www.theindependentbd.com/post/220526 [Accessed 14 6 2021].
 International Business

Multi-national Companies
(Công ty đa quốc gia)
Multinational-company examples
 Multi-national companies

• Multinational enterprises/ companies (MNEs/MNCs), strictly defined, are

enterprises operating in a number of countries and having production or
service facilities outside the country of their origin.

• These multinationals usually have their headquarters in a developed country.

THE END