INTERNATIONAL BUSINESS Types of companies & OC

Drivers : Product mix, People, Production, Market mix, Vision, Mission (transition)
Domestic Company: Orientation Local, limited operations, Strategic focus on local opportunities
Any Indian Company

International Company: Orientation Ethnocentric = Overseas operations are viewed as

secondary operations & a means of disposing surplus domestic production. Overseas operations are managed from home country base. Practices domestic strategies to international business extn. Tata Motors, L&T, BMW, Porsche, Airtel

Multinational Company: Orientation Polycentric = Overseas subsidiaries are established & are
managed independently with the view that local personnel & techniques are best suited to deal with local market conditions. Practices diff. strategies according to market needs Toyota, Phillips, Siemens, ABB

Global Company: Orientation is Mix, Practices global strategies Produce locally sell Globally
LG, SAMSUNG, BENZ, SONY

Transnational Company: Orientation Geocentric = Different regions are viewed as different

markets. Think Globally Act Locally Invest, Produce , Market Globally

Coca-cola, Pepsi, Unilever, P&G, Tata motors, Nestle

IGOs International Govt. Organisations WTO, IMF, WHO, International Std. Orgs, UN etc. etc

Multinational Corporations

A product : includes physical objects, services, persons, places, organizations, ideas. Components and Level Product: Tangible Product: Augmented Product: It refers to certain additional services offered with the product like installation, warranty, after sales service. New Product Development Copying Many products without patent or any legal hurdles are copied & marketed. Product Modifications Product improvements. Innovations Development of an entirely new product. Higher cost of R & D , Higher profits

Factors Influencing Packaging Decisions

Physical Characteristics like weight, stability, physical state, fragility, effect of sunlight, flame, moisture, bacteria. Cost Convenience like ease to open & close ( Rasgullas ) , ease of recycle , handling, pack , stack & display.

Special Consideration in International Marketing

Regulations in the foreign countries need to mention content, expiry date , in various language including local.
Socio-cultural factors ex : colors Retailing Characteristics The package should withstand the stresses & hazards of handling, transporting , stacking, storing . Should be easily disposed or recycled. Should be ease to identify & marked adequately.

Labelling

Label should clearly mention date of manufacturing & expiry, composition, storage conditions, method of use , statutory warning ( cigarette) in the popular language of that country.

Think Global, Act Local?

Wheres the right balance?

Product Efficiency Market Suitability

Costs

Revenues

CAGE: Four Types of Distance

Cultural
Different languages Different ethnicities Different religions Different social norms

Administrative
Absence of colonial ties Absence of monetary and political union Differences in political system Differences in institutions of government

Geographic
Physical remoteness Lack of common border Lack of sea or river access Differences in climate

Economic
Differences in consumer income levels Differences in costs and quality of Natural and financial resources Inputs Information

COMPETITIVE ADVANTAGES OF INTERNATIONAL BUSINESS High Living Standards Increased Socio Economic Welfare Wider Market

Reduced Effects of Business Cycle

Reduced Risk Large Scale of Economic

Market Untapped Potential

Provides Opportunity to Challenge Domestic Market Labour Skill and Specialisation Complimenting World Economic Growth Optimum Utilisation of World Resources Cultural Transformation

1 IB Environment

Customer-based What will the market bear?

Three approaches to price-setting

Competitor-based What do competitors charge?

Cost based What margin should we make?

Type of insurance
There are two types of insurance In Export. The Marine insurance. Which is prevent the losses occur from damage of the goods during transportation, storage, packaging, loading and unloading. Export Credit Guarentee Corporation. Which is prevent the losses occur due to non payment by the importer or any political reason.

The Marine Insurance

Marine Insurance is the oldest form of insurance in the world. It covers transportation of goods by rail, road, air as well as couriers. Goods are often lost or damaged due to the operation of transportation, storage, loading and unloading and there is a financial loss to the exporter/ importer. It is this loss that is taken care of by marine cargo insurance.

Marine insurance Coverage

The Marine Insurance policy covers the following perils:1. 2. 3. 4. Fire. Burglary. Earthquake. Terrorism.

Advantages of Marine Insurance

The Marine insurance by its express term, or by usage of trade, be extended so as to protect the assured against losses on inland waters or any land risk which may be incidental to sea voyage.

EXPORT RISK INSURANCE

Types of Policy. Time Policy. Voyage Policy. Mixed Policy. Construction Policy or Building Risk. Floating Policy. Marine Insurers. General Insurance Corporation. National Insurance Company. New India Assurance Company. Oriental Fire and General Insurance Company. United Insurance Company. Others.

Export Credit Guarantee Corporation of India

Export Credit Guarantee Corporation of India provides protection against nonpayment by the importers.
ECGC also helps the exporter in getting better access to credit facility from financial institutions. 5th largest credit insurer of the world

Risk Covered by ECGC

1. Commercial Risk. a) Insolvency of Buyer b) Protected Buyers Default c) Buyers failure to accept the goods Political Risk. a) Import Restriction b) War/Civil war/revolution.

2.

3. L/C Opening Bank Risk. a) Insolvency of L/C Opening bank Risk

b) Failure of L/C Opening Bank to make payment with in specific period

c) Non Payment or acceptance due to discrepancies in the L/C.

Advantages of ECGC
To provide insurance cover to exporters against political risks and commercial risks. To provide insurance cover to exporters against the risk of exchange rate fluctuations in respect deferred payments. To provide insurance cover to banks against export credit and guarantees extended by them.

To provide insurance cover to Indian investors abroad against political risks.

Expression of Interest in Product Samples Approval

Inquiry
Quotation, unit price Negotiations

Proforma Invoice
Order Order Confirmation Payment / LC Start of Production

BCG Matrix
According to the Boston Consulting Group, the two most significant factors which govern the long-term profitability of a product are the rate of growth of its market and the share of the market that

the product has relative to its largest competitor.

Method applies equally well to Services or any form of Strategic Business Unit.

Maps products on to a two-dimensional matrix :

1) relative market share of Product : w.r.t largest competitor 2) market growth rate : originally put at 10 per cent p.a.

Interpretation of the strength or limitations of a product is done by its

position in the matrix.

The BCG product portfolio matrix

High

Relative Market Share WILD CAT

Problem Children They are unprofitable, due to low market share, they consume a lot of cash merely to maintain their market position because of the high growth rate of the market Convert to Star or Divest

Low

STAR
Tomorrows cash earners Will nedd a lot of cash to finance working capital and to build capacity.

Market Growth

Invest to maintain Market Share Cut the prices only to Hold Share

CASH COW
Real Cash Generators, Will create surplus cash not required to finance growth

DOG
Inherently unprofitable and seem to possess no future, Their cash requirements are low

Low

Maintain Prices, Watch & Keep out new entrants, Plan new investments

Get the cash and withdraw

The overall strategy is defined simply with regard to the management of cash flows in order to achieve a balanced portfolio over time.

The Non-market Environment

4 Is Definition The focus of action Examples Proposed law, product liability, labour relations, national security Legislative, regulatory, judiciary, nongovernmental bodies, news media

ISSUES INSTITUTIONS

Major decisionmakers in the issue area and their processes

INTERESTS

Major actors stakes Stakes of policymakers, (goals, preferences, companies and their fears) in this issue associations, NGOs, etc. (organized vs unorganized) Actors knowledge/ beliefs about the issue Channeled via lobbying, media reporting, prejudices, rumour, think tanks, etc.

INFORMATION

Examples of Non-market Strategies Main objective is to manage opportunities and threats, via positioning, influencing, and anticipating Create opportunities for self: opening foreign markets Alter rivals current opportunities: raising rivals costs through impact of differential regulation Block rivals opportunities altogether: opposing a rivals plan for market entry by making it a political issue Reduce threats from the state: self regulation, e.g. in financial services Create threats and uncertainty: threatening rivals with legal action Non-market strategies affect the market environment

Integrating market and non-market strategies

Need not involve a change in the objectives of the firm

Integration is about synergy: non-market action increases return from market action, and/or a market action increases return from a non-market action
Effective strategy involves: Identifying the relevant 4Is and Five Forces Identifying a set of strategic options with market and non-market components Anticipating strategies of other actors in market and non-market environment Evaluating the coherence of strategies in both spheres Implementing the chosen integrated strategy, with consideration of resources required and risks that can be mitigated

Niche Marketing Concentrating on a market segment which is not satisfactorily served by other players.

It avoids direct competition with major firms.

Balsara in US as herbal dental product. The niche market should be sufficiently big to be profitable & room to expand / No much competition / Firm have capabilities to serve the segment very well / It should able to defend its domain.

The nichers have 3 responsibilities : Create niche , expand it & protect it.

Market Entry Strategies

Licensing & Franchising -

A firm in one country permits firm in another country to use its intellectual property( patents, trade marks, copyrights, technology ) & charges royalty.
Cross licensing is a mutual exchange of knowledge and/or patents. In franchising, the franchiser grants the franchisee the right to do business in a prescribed manner. It may be using its name , product, marketing technique or important ingredient for the finished product. Coca Cola , Mac.

A good entry strategy as it does not require capital investment & marketing set up in foreign markets. The local company takes care of Govt regulations.
Strategy to promote obsolete products. (Kijang Qualis ) Risk of developing licensee as competitor.

Exporting Appropriate if foreign market size is not big enough for production there, supply & infrastructural problems exist , political instability, investment is not favored by foreign country. However, in some countries, imports are discouraged.

Contract Manufacturing A company doing international marketing contracts with a foreign company to manufacture / assemble the products while retaining marketing responsibility. The company does not have to commit resources for production set up. It can start immediately if idle capacity is available in foreign country. Cost of product is low. Exit strategy is easy. However, less control over process , risk of developing competitors , not suitable for high tech products. Management contract enables a firm to commercialise existing know how & can make money by using experienced available personnel.

Turnkey Contracts

Common in supply , erection & commissioning of plants such as cement, chemical, pharmaceuticals, oil refineries, steel mills , cement & fertilizer plants.
All is Ready.

Fully Owned Manufacturing Facilities

Companies with long term & substantial interest in foreign markets generally go for it. It gives complete control over production & quality. However, it needs sufficient financial & managerial resources.

Fully owned enterprises may not be allowed in some countries.

It may have political risk.

May encounter problems like infrastructure , skilled labour availability.

Assembly Operations CKD / SKD

Assembling the product in foreign market for foreign market Has cost advantage Low import duty on parts & components Gets foreign Govt support as generates employment.

Joint Ventures
Joint Ownership Venture Ownership & Management are shared betn foreign & local firms. A foreign investor buying an interest in a local co., a local firm acquiring interest in an existing foreign firm , both foreign & local firms jointly forming a new enterprise. Permits a firm with limited resources to enter foreign market. Less public hostility since involvement of local partner.

Third Country Location Can have advantage of friendly trade betn third country & the foreign market concerned Ex :Taiwanese companies entering China thro bases in HK., India and Sri Lanka

Mergers & Acquisitions Provides instant access to markets & distribution networks, new technology or a patent right.
However, you take over all problems, liabilities also along with the company.

Strategic Alliance To enhance long term competitive advantage, a firm may form an alliance with its competitor rather than competing each other. Tata Tea with Tetley so that international marketing expertise is available.

Countertrade Certain export & import transactions are directly linked to each other , instead of money changing hands. Barter : Direct exchange of goods of equal value . No money or third party involved. Buy Back : The supplier of plant or technology agrees to purchase goods manufactured with that technology. Compensation Deal : Seller receives a part of the payment in cash & the rest in products. Counterpurchase : The seller receives the full payment in cash but agrees to spend an equivalent amount of money in that country within a specified period When foreign exchange problem became severe, developing countries pursued it to increase the exports.

Entry Strategies of Indian Firms

Exports With right policies , procedural reforms & institutional support , with technological upgradation of production facilities, check on quality, value added products, improvement in infrastructure , with right marketing strategy. exploring export opportunities for products currently produced in India, identifying products with good demand in foreign markets which can be produced in India competitively & supplied. Foreign Investment Ex : Thapar Paper mills in Indonesia ; Ceat Tyres in SL. M&A JVs Essar Gujarat JV in Indo. , Bangladesh for cold rolled steel. Strategic Alliance Licensing & Franchising