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A German businessman wearing an Italian Suit meeting an English Friend at a Japanese Restaurant who later returns home to drink Russian Vodka with his French Wife and watch American Idol on TV
An American might drive to work in a Car designed in Germany that was assembled in Mexico by Daimler from components made in US and Japan that were fabricated from Korean Steel and Malaysian Rubber
Definitions
Home Country country in which the parent organization is based Host Country country in which the parent organization makes the investment Internationalization - Act of bringing a business activity into the International arena under international control - Thinking & Acting beyond the Domestic Business
International Trade - Exchange of goods and services across international borders or territories; it refers to exports of goods and services by a firm to a foreign-based buyer (importer)
International Marketing - Finding out what customers want around the world and then satisfying them profitably better than competitors, both domestic & international
International Investment investment of resources in business activities outside a firms home country
International Business all business transactions that involve two or more countries consists of transactions that are devised and carriedout across national borders to satisfy the objectives of individuals, companies and organizations activities that require the movement of resources, goods, services and skills across national boundaries collectively describes all commercial transactions (private and governmental, sales, investments, logistics and transportation) that take place between two or more nations
Globalization
The shift toward a more integrated and interdependent world economy Perceived distances have been shrinking due to advances in transportation and telecommunications
Components of Globalization
The shift toward a more integrated and Interdepe ndent world economy
Markets
Production
Globalization of Markets
The merging of distinctly separate national markets into one huge global marketplace
Falling barriers to cross-border trade have made it easier to sell internationally Tastes and preferences converge onto a global norm Firms offer standardized products worldwide creating a world market The global acceptance of Coca-Cola, Levis jeans, Sony Walkman, and McDonalds hamburgers By offering a standard product worldwide, Cos. help create a global market
Globalization of Production
Refers to sourcing of goods and services from locations around the world to take advantage from the national differences in cost or quality of the factors of production like Labor, Land, Energy and Capital Historically this has been primarily confined to manufacturing enterprises Advantageous use of modern communication technologies, and particularly the Internet to outsource service activities to low-cost producers in other nations Companies hope to lower their overall cost structure and/or improve the quality or functionality of their product offering increasing their competitiveness The result of having a global web of suppliers is a better final product
AC
Qp
Qo
Quantity
Depends on size of the firm, Co. resources, objectives, experience gained, size of the potential market and the projected profitability, type of product or product mix, cultural dependencies, etc.
Ethnocentric Orientation
Domestic companies perceive overseas operations as secondary to their domestic operations Overseas markets are considered only to dispose surplus production Overseas Plans, Policies and Procedures are done in the home country and are similar to those employed in domestic country Relies on Export Agents or an Export dept. to sell abroad Firms possess a centralized structure Domestic product mix mostly carried abroad as the same A proper approach for small firms just entering international arena Advantages being minimum risk, less commitment to international market, roughly nil investment costs, no additional selling costs Higher Distribution costs are to be provided for
Polycentric Orientation
Polycentric attitude emerges as the important differences in foreign markets are recognized Understands the many differences that exist in cultural, economic and marketing conditions of different nations Firms operate with decentralized structures Cos. With this orientation (MNCs) Think Global and Act Local Multi-national Cos. believe that local personnel and techniques are better in local marketing conditions Independent subsidiaries are formed which would have self-determined marketing objectives and plans Adaptation of the business strategies to the local conditions are essential
Regiocentric Orientation
A set of foreign nations whose important market characteristics identified to be common, is termed a Region Treats different Regions as different Markets The markets in the Region is viewed as Single market, irrespective of differences in national boundaries Strategy integration, Organizational approach and Product policy done at the Regional level Objective setting and constant interactions are done between HQ and Regional HQ; and between the Regional HQ and the individual subsidiaries Regiocentric appeal viewed as economical & manageable
Geocentric Orientation
The entire world or Globe viewed as a single market Adopts standardized marketing mix, projects a uniform image for the company and its products for the global market Geocentrism brings about high costs in information collection and policy administration worldwide National differences in Currencies, Laws, etc. may hinder this world market concept Environmental differences affect the Marketing Management activities than functions of Production or Finance
Stages of Internationalization
Global Co. International Co.
Multinational Co.
Con Factors
Destroys manufacturing jobs in wealthy, advanced countries Wage rates of unskilled workers in advanced countries decline Growing Income inequalities Companies move to countries with fewer labor and environment regulations Loss of sovereignty / independence / autonomy Threat of Forward / Backward integration or acquisition
Internal Factors
Management Myopia Organizational Culture Lack of adequate Resources Incompetent Management
Market Selection