The International Business Environment

Lecture no 1 Introduction in IBE and its players

Lecturer Dr Ana Marinoiu anamarinoiu@yahoo.com

Evaluation
LECTURE Written exam- 70% of the final rade !"ith the condition of o#tainin a minimum rade of $ in the seminar% SEMINAR- 30% of the final rade

&aterials'
(ite' """.catedrarei.ase.ro )ser' anamarinoiu@yahoo.com *ass"ord' neronero

Theme of the lecture

' 3 * + , 7 / 0 0 Ecolo.& an! climate chan.e ' 3 Critical i##ue# in %er#%ective$ the economic an! financial cri#i# * Mana.ement an! lea!er#hi% in the international environment Ethic# an! cor%orative #ocial re#%on#a"ilit& "u#ine## Intro!uction in the international "u#ine## environment$ the %la&er# of the international "u#ine## environment (lo"ali)ation an! the "u#ine## environment The com%an& in the international "u#ine## environment The economic environment$ it# influence on "u#ine##e# at an international level The %olitical environment$ it# influence on "u#ine##e# at an international level The cultural environment$ it# influence on "u#ine##e# at an international level The #ocio-!emo.ra%hic environment$ it# influence on "u#ine##e# at an international level The le.i#lative environment$ it# influence on "u#ine##e# at an international level The com%etitive environment$ The !eterminant# of the com%etitive "u#ine## environment Technolo.& an! innovation

A1 Terminolo.&-International 2u#ine## 3I24

Definition of I2 $ The tran#action of the com%an&5# economic re#ource# out#i!e the countr&5# "or!er#$ (oo!# Ca%ital Service# 3technolo.& tran#fer6 tran#%ort6 etc4 International %ro!uction The I2 o"7ective# Increa#in. #ale# Ac8uirin. re#ource# Minimi)in. the com%etitive ri#9 Diver#ification

National "u#ine## ver#u# international "u#ine##

Similaritie# 3 4 Business+ either international or national+ involve the purchase and selling of goods and services. 3'4 The %rofit is the main o#,ective of any #usiness+ either international or national. 334 Both in the case of national #usiness as "ell as in the case of international #usiness the #ucce## depends on client #ati#faction1 3*4 :ormin. a clientele is another common o#,ective of the t"o a#ove mentioned #usiness. Difference# 3 4 The rule# of national "u#ine## are #tan!ar!i)e! "hereas in the case of international "u#ine## there is a reat !iver#it& and indistinctness re ardin re ulations. 3'4 In the first case there is a #in.le lan.ua.e and a #in.le culture "hereas in the case of international #usiness there is a lar e num#er of dialects and different cultures. 334 The financial climate i# uniform in the case of national #usiness compared to a varied financial climate in the case of international #usiness. 3*4 The %atrioti#m helps in the case of national #usiness "hereas in the case of international #usiness it mostly hinders the processes.

3+4 Re#earch an! !evelo%ment necessary to 3+4 In national #usiness there is only one adapt and improve the product is mandatory currenc& and a sin le taxin system+ "hile in for #oth types of #usiness. the international case+ there are multiple currencies and taxin systems. 3,4 The conce%t#6 %roce##e# an! "u#ine## 3,4 In national "u#ine## there is a !e#cri%tive %rinci%le# are universally applica#le+ and the a%%roach "hereas in the case of mar-etin tas-s are the same. international "u#ine## there is an inte.rative a%%roach1 374 ;lannin. the %ro!uct# and the development is al#o a!a%te! accor!in. to location-%roce!ure differently for the local mar-et compared to the forei n mar-ets. 3/4 The mar9etin. environment i# more #ta"le on national mar-ets compared to the mar-etin environment in the international #usiness. 304 The control of the activitie# is easier in the case of national #usiness. 3 04 The national "u#ine## are !evelo%e! <ithin the "or!er# of the countr& compared to the international #usiness that expand #eyond these frontiers.

Terminolo.&-the !rivin. force# of international "u#ine## 3

The L;( movement-The .ree World"ide &ovement to"ards literali/ation+ privati/ation and lo#ali/ation is one of the most important forces that lead to "orld inte ration. MNC-With multinational the development ne" of the culture re ardin arisen

companies+

opportunities

have

concernin the lo#al expansion and considerin the countries of the "orld as a sin le tradin platform. The technolo.&-The technolo y is an universal factor that transcends the national and cultural #orders. It is truly "ithout mem#ership to a sin le state and is a po"erful drivin force in international commerce. The .lo"al economic tren!#-they have a ma,or drivin force for the international commerce. The rapid ro"th of the developin economies has created ne" mar-etin opportunities and has helped the lar e companies to expand lo#ally.

Terminolo.&-the !rivin. force# of international "u#ine## 3'4

The Re.ional economic inte.ration - Economic inte ration systems act as an important drivin force for the international commerce+ #ecause it encoura es the free commerce #et"een participant countries. The im%rovement# in tran#%ort an! communication-The revolution in the area of transportation and communication "as an important drivin force for the international commerce. The revolution reduced #oth the time and the cost #arriers+ "hich in its turn made easier the development of #usiness at a lo#al level.

 The %ro!uct !evelo%ment co#t# - 0ertain industries such as the IT and pharmaceutical ones re1uire lar e investments+ such investments can #e recuperated throu h placin the product on different mar-ets. Com%etition-This has #ecome a drivin force for the

international commerce due to the fact that the pressure imposed #y the external competition has convinced some companies to expand their #usiness areas on international mar-ets.

Metho!# to enter international mar9et#

Direct=In!irect E>%ort

Counter-tra!e

Metho!# to enter international

Contractual Entry Modes Licensing Franchise Management contracts Key contracts

mar9et#

:orei.n inve#tment ?@ A (reenfiel!

2efinin IBE-The external environment

3The external environment is the #et of uncontrolla"le force#6 to "hich the com%an& has to a!a%t it# %olicie#6 #ein formed from the participants in economic transactions and external

forces that mostly influence the company4s possi#ilities to enter into profita#le transactions5 (ource' *h. 6otler+ 1778

2efinin IBE-The external environment-se1uel

E>ternal environmentBmicro-environment C macroenvironment
&acro-environment- the conditions and wide trends of the companies and economies in "hich the firm operates in the international environment &icro-environment-The specific elements "ith "hich the company comes into contact+ includin suppliers+ overnment institutions+ etc. clients+ competitors+

The nee! to 9no< I2E ;A(INA ' e#te !e7a in en.le)a

The %la&er# of the international "u#ine## environment

1.International companies 2.Governments 3.NGOs 4.International organisations 5.Consumers in different countries

1International com%anie#
&ultinational companies-features' 0ontrol of the economic activities in more countries9 The a#ility to o#tain advanta es from

eo raphical differences #et"een countries and re ions in the factor endo"ment and in the policies9 :eo raphical flexi#ility+ the a#ility to dispose of resources and operations #et"een different locations. overnmental

International com%anie#

 Dunnin.- three main reasons that determine the location of .2I in the "orld economies' 1.The race after strategic assets !-no"led e+

technolo y% identified especially in developed countries9 ;. The si e of trading costs determined !" distance+ decreasin #oth re ardin the a#solute levels as "ell as in importance due to the li#erali/ation of the economic activity9 <. Besides strate ic assets+ certain conditions are re1uired that allo" the companies to ain a greater level of #no$ledge of the industry in the host country+ somethin that usually ta-es place "ith the development of national companies "ith "hich one co-"or-s.

International com%anie#-#e8uel
Internationali)ation %ha#e# Motivation# @aluin. the a!vanta.e# o"taine! in the

Initial internationali)ation

internal mar9et Develo%in. the mar9etin. re-technolo.& #9ill# The #u%%ort of the .overnment for internationali)ation Diver#if&in. ri#9# The %otential of internali)ation location# the tar.ete!

Internationali)ation

Re!ucin. the co#t "& #u"contractin. Local Develo%ment=Im%lantation Avoi!in. commercial "arrier# D%timi)in. the local re#ource# D%timi)in. the %ro!uction an! lo.i#tic# Multi nationali)ation=(lo"ali)ation A "etter mana.ement of an e>ten!e! net<or9 of client# (lo"ali)in. certain com%an& function#$ mar9etin.6 fi#calit&6 etc1 (ource' .ilip+=.*opa+I. International Management+ Economic *u#lishin + 1777+ p 8$

'1 (overnment#

 :overnments competitiveness+

important that

determinants the #asis

of of

national external

represent

competitiveness in the international #usiness environment9 The factors throu h "hich the overnment can influence the competitiveness of the economic a ents at an international level-national competitiveness, based on national advantage9 Traditionally+ there is a political dependence determined #y the economic influence9 '1(overnment# The overnments are affected #y the increase in importance of the multinational companies as lo#al players+ due to various reasons+ amon "hich' Tra!in. "et<een countrie# !in "hich there is control from the national authorities% #ecomes less important than tradin #et"een companies The #tructure of %ro!uction an! commerce- affected on the lon term #y the production and investment decisions made #y lar e companies The com%anie#5 #trate.ie# #ecome important for the economic development throu h the considera#le scale eo raphically and re ionally of the international company

'1 (overnment# Do) 3 0/,4 three methods that the overnment can use to influence international competition' Inte ratin the #ranches of the multinational companies9 (upportin the national companies in enterin external mar-et9 International coalitions.

31 Dther %la&er# of the international "u#ine## environment

N(D# in particular+ transnational >:?s respond to the challen es enerated #y the formin of a civil transnational company+ that learns to understand and even influence the ma,or forces that determine modern companies9 International or.ani)ation# - esta#lish rules re ardin international competition9 Con#umer# from !ifferent countrie#- changing preferences, educated+ "ith hi h means to compare products and prices+ "ith access to Information and 0ommunication Technolo y

and electronic commerce+ "ith a ro"in purchase po"er in certain countries.

Trends in IBE-se1uel
:rafic pa ina ;1 de,a in en le/a

Trends in IBE
'00*-'00/ Develo%e! countrie# !ominate the .2I flo" statistics+

ho"ever+ they are closely follo"ed #y the developin countries+ especially the @sian ones+ that identify themselves as attractive mar-ets for investors9 There are im%ortant mer.er# an! ac8ui#ition#

!example' lar e ac1uisitions made #y the )(@ in 0anada or the mer ers done on the @sian continent in 0hina%9 '00/ the ro"th cycle of the .2I flo" ends the financial crisis the decrease #y 1A B of the flo"s compared to ;AAC+ #ut also a decrease in cross-#order mer ers and ac1uisitions "ith approximately ;7B compared to ;AAC9

 '000 the descendin trend of .2I in "orsenin 9 '0 Enterin on forei n mar-ets is done mainly throu h the

cross-#order MA A not greenfield9 ;A1; UNCTAD5# %o#itive6 &et mar.inal .ro<th e#timation# -Im%ort !eman! from developed economies -Increa#e in the oil %rice in ;A11+ that is expected to persist in ;A1; and ;A1<+ -The threat of the Euro )one cri#i# Tren!# in I2E International com%anie#$ Dave experienced structural changes+ determined

especially #y the appearance of knowledge intensive industries+ the expansion of the electronic commerce9 Especially specialized in mar-etin technological

services =epresent the ma,ority of the international

investments9 The tendency to"ards lar e mer ers and

ac1uisitions9

The #mall an! mi!!le #i)e com%anie# have ro"n and #e an to play a determinant role in the international economy9

Tren!# in I2E E#e8uel

Multinational com%anie#$ Dave started organizational innovations+ thus enterin in very close relationships "ith their suppliers and clients+ a fact that+ in time+ leads to the relativity of the companys borders9 The increase in .2I in developin countries The diversification of activities in developin includin production+ assem#ly+ services+ etc. countries+

in their portfolio the primary sector next to

Tren!# in I2E- e>ternalitie#

 %ositive e&ternalities !re ardin host countries%

(upply of products and services at competitive prices, efficient use of capital, human and natural resources+ facilitatin technology, forming employees+ etc the transfer of

Negative e&ternalities ! re ardin host countries%'

The competition for the national #usinesses+ mana ement

practices and methods forei n to the local culture+ different consumption imposed preferences, etc.