International Business Management

III Semester MBA @ NSM

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

What For Customers From Firms Doing International Business???

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

International Business Management - Performance of all the management of business

functions (POLC) across national frontiers
- Management of an International Organization that requires integration of all aspects of the business functional decisions relating to organizational structure, production, marketing, human resources, public relations, finance and strategies

Domestic vs. International Business

Differences / Challenges in IB originate from the following: Change in Currency Interest Rates Inflation Taxation system Govt. Regulations Language Culture Availability of Business infrastructure Economic conditions and characteristics Managerial Capabilities and Business Practices

Nature / Features of International Business

International businesses: cause the flow of ideas, services, and capital across the world offer consumers new choices permit the acquisition of a wider variety of products facilitates the mobility of labor, capital and technology provide challenging employment opportunities reallocate resources, makes preferential choices, and shifts the organizational activities to a global level

Globalization
The shift toward a more integrated and interdependent world economy Perceived distances have been shrinking due to advances in transportation and telecommunications

Factors driving Globalization

Increase in and expansion of Technology Liberalization of cross-border trade and resource movements Development of services that support IB Growing Consumer Pressures Increased Global Competition Changing Political situations Expanded cross-national co-operation Emergence of Regional Trading Blocs NAFTA, ASEAN, EU, etc.

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

Difficulties that arise from the globalization of markets:

Significant differences still exist among national markets Country-specific marketing strategies Varied product mix

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

Impediments to the globalization of production include:

Tariff and Non-tariff Barriers to trade Barriers to foreign direct investment Transportation costs Issues associated with economic risk Issues associated with political risk

Reasons behind Comp. going Global

Pull factors / Proactive Reasons
# Profit Advantage # Growth Prospects # Counter-competition # White skin Advantage

Push factors / Reactive Reasons

# Domestic market Constraints [Saturation; Negligible growth; Minimum
EOS / Very Small domestic market; Recession] # Competition [To follow competitors decisions] # Monopoly Power [Dominance in Resources, Patent Rights, Technology, Product Differentiation]

Govt. Policies & Regulations [Economic, Legal, Environmental]

Strategic Vision

Impact of Exports on Unit Cost

Cost

Cp Co Export Poten -tial

AC

Qp

Qo

Quantity

International Orientations / Management Approaches to Globalization

EPRG frame-work by Wind, Douglas & Perlmutter Ethnocentric Approach Polycentric Approach Regiocentric Approach Geocentric Approach Home country Orientation Host country Orientation Regional Orientation World / Global Orientation

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

Comparison of different International orientations

Stages of Internationalization
Global Co. International Co.

Multinational Co.

Pure Domestic Co.

Domestic Co. with a bit of Foreign business

The Globalization Debate

Pro Factors
Better quality products and Standard of Living Lower prices for goods and services Economic growth stimulation Increase in consumer income Creates jobs Countries specialize in production of goods and services that are produced most efficiently

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

IB Restricting / Restraining Factors

External Factors
Govt. Policies and Control Social and Political oppositions

Internal Factors
Management Myopia Organizational Culture Lack of adequate Resources Incompetent Management

International Business Decisions

Environmental Analysis: External & Internal International Organization & HR decisions

International Business Decision

Marketing Mix Decision

Market Selection

Entry and Operating Strategies

Major Global Companies Student Presentation