INTERNATIONAL BUSINESS MANAGEMENT

1. Introduction to International Business management 2. Theories of IB 3. International Business Environment 4. The Global Monetary System 5. International business strategy and operations 6. Regional Economic Integration and Globalization

Chapter one Introduction to International Business management

Definition IB Versus Domestic Business Forms of IB International Business Mgt Process Internationalization Decisions Importance of IB

1.1 Definition of IBM

IBM involves Conception, analysis, planning, Implementing and Controlling of business operations across and outside national borders. More than one nation is involved in IBM

1.2 IB Versus Domestic Business

New Culture New Currency New Political Environment Economic barriers such as tariffs Different Business Practices More risk More cost More experience and managerial competency are needed

1.3 Forms of IB
Export/Import Business Foreign Business/Foreign Subsidiary Joint Ventures Management Contracts Licensing Franchising Contract Manufacturing Assembly Operations Foreign Direct Investments (Multinational and Global Businesses)

1.3.1 Licensing
Under licensing agreement one firm, the licensor, grant to another firm, the licensee the right to use any kind of expertise, such as manufacturing processes, marketing procedures, and trademarks for one or more of the licensors products for a fee or a royalty of from 2% to 5 % of sales over the life of the contract

1.3.2 Franchising
Is a new kind of licensing which permits the franchisee to sell products or services under a highly publicized brand name and a well proven set of procedures and a carefully developed and controlled marketing strategy. Examples of franchisors are hotels (Hilton, Holiday in) and soft drinks (Coca-cola)

1.3.3 Contract Manufacturing

The firm contracts with a local manufacturer to produce products for it according to its specifications.

1.4 International Business Mgt Process

Identification of IB Opportunities Analysis of IB Environment Assessing and selecting foreign markets Identification and selection of the appropriate strategies Implementation and control of the selected strategies

1.5 Internationalization Decisions

Whether to internationalize Where to internationalize How to internationalize How to market products How to organize international operations

1.6.1 Significance of IB based on aggressiveness

Opening up new markets More profitability Acquiring products for home market Satisfying managements desire for expansion

1.6.2 Significance of IB based on Defensiveness

Protection of Domestic Market Protection of Foreign Market To get foreign exchange Guarantee Supply of Raw Materials Acquiring technological and managerial know-how Geographic diversification Political Stability

1.6.3 Significance of IB based on other reasons

Extension of PLC Existence of excess capacity Enhancement of the business image

1.7 Evolution of International Business

International Trade Export marketing. international marketing International Business

1.8 Stages of Internationalization

Stage 1: Domestic Company: Domestic Company limits its operations, mission and vision to the national political boundaries Stage 2: International Company: Some of the domestic companies, which grow beyond their production and/or domestic marketing capacities, think of internationalizing their operations.

 Stage: 3 Multinational Companies: Sooner or later, the international companies learn that the extension strategy (i.e., extending the domestic product, price and promotion to foreign markets) will not work. Stage 4: Global Company: A global company is the one, which has either global marketing strategy or a global strategy. Stage 5: Transnational Company: Transnational Company produces, markets, invests and operates across the world.

1.9 Characteristics of a Transnational Company

Geocentric Orientation Scanning or information Acquisition Vision and Aspirations Geographic Scope Operating Style Adaptation Extensions Creation through Extension Human Resource Management Policy Purchasing

1.10 International Business Approaches

1. Ethnocentric Approach

Characteristics of Ethnocentric
Extension strategy is adopted for international marketing. Plans are made in home country and by its personnel and generally operate through agents. Export is viewed as a means of disposing the surplus in the domestic market. Believes home country practices to be superior and so can be successful everywhere. Only sees the similarities in the markets. Does not conduct any systematic International market research The approach does not allow a company to be a major player in International Business. Many call these types of companies International companies

2. Polycentric Approach

characteristics are
Opposite of Ethnocentrism assumes each country is unique. Only sees dissimilarities. Each subsidiary develops its own unique business and marketing strategies ( that is decentralized) Focus is on local conditions, laws, culture etc. Adaptation strategy is followed in marketing. These are called Multinational companies/ Multi-domestic companies / Locally responsive companies.

3. Region centric Approach

4. Geocentric Approach

Characteristics of Regioncentric and Geocentric

Pursues both extension and adaptation strategies in global markets Lies between the extremes of polycentrism and ethnocentrism it is a hybrid approach. Views the entire world/global market to be a single market but sees both similarities and dissimilarities within it. Adopts a policy of blending of cultures. Integration strategy adopted at region/global level However it does not adapt just for the sake of adapting only does when it adds value. Thinks globally, acts locally. These are called Transnational Companies ( TNC) or Multinational Enterprises (MNE).