Master of Business Administration

University of Hertfordshire, UK

July 2009

Prepared by Yaw Chooi Fun

Norazian Abdullah

Lee Tai Keong

Eu Wee Khai

International business (IB) is the study of business activities that cross national borders.

It is concerned with firms that undertake business and the national governments that regulate them

Business with interventions of governments of home and host countries in inter-country business activity

No unique theory to explain responses of business to government policies and policy making of governments towards international firms

Lack of theoretical focus has diverted emphasis on policies to conflicts and cooperation among corporations and governments.

Seek growth (efficiency) and distribution of benefits (equity)

Markets appropriately distorted to achieve objectives

Provide differential barriers and incentives to foreign business

Free trade and stable or fixed exchange rates;same considerations for inter/intra –

national trade and investments

Theory of specialisation and division of labour (comparative advantage); general explanation of benefits of division

of labour for domestic & international

Other theories applied; explains production and income generation

Adapted for us in IB to characterise and analyse business govt negotiation policy making and behaviour

Focuses on bargaining resources and stakes of participant economic and commercial conclusions

Focuses on collection of assets, interests and abilities of bargaining parties economic, political and social issues

Resources of businesses technology, funds, skills, foreign markets,

employment opportunities & trade relations with home govt

Resources of host govtsaccess to market, natural resources, low

cost labour, funding opportunities

Stakes of businessesavailability of markets, sources of supplies,

importance of successful negotiation and inter-relatedness of host country to business’s global interests

Stakes of host govtsvailability of business opportunities,

importance of business and negotiation to host govt and relevance to country’s overall interests.

Strategic alliance with business for desired resource – technology, local ownership or foreign distribution network

Purchase / contracting agreement for acquiring desired resource

Diversification and Multiple Locations of activities reduce control of host govt

Joint venture with local businesses lobbying govt for favourable policies

Strategic alliance with other businesses raise govt’s stakes in bargain

Offer more benefits to host country during initial negotiations

Involve host govt in business venture (GLCs) – mutual interests

Meet key concerns of host govt – profit remittances, financing, imports or training

Government concerns with TNC – negotiations, trade offs and resolutions

Patterns of exports and imports

Gains from trade

Reasons and directions of FDI and contractual relations

Strategies and operations in international production – effects of govt intervention

Cross cultural aspects

Differential barriers and incentives imposed by govts to determine distribution of benefits.

Difference among Governments as to their goals in dealing with TNC/INC initiatives and operationsAssessment and management of conflicting

rules of the game, i.e difference in lega, regulatory and institutional enviroments in the two or more countries

country risk that arises from different treatment of business activities by home and host countries

Exchange risks

Synthesis with culture differences for IB Phenomena?

Brian Toyne and Douglas Nigh“Introduce a new paradigm that believe

would enrich IB inquiry by shifting attention away from the firm as the central unit of analysis to a more comprehensive multilevel, hierarchical view of the international business process.” http://www.jstor.org/pss/155414

International product cycleThe international product cycle removes the

classical assumption that factors and products are immobile internationally.

Synthesis Conflict with Hamel? Product can sustain

longer now with globalizationMcKinsey Quarterly quoted Gary Hamel,

“Company must become as purposefully and creatively experimental in thinking about their management systems and processes as they already are in thinking about R&D or new-product development.”http://www.interknowledgetech.com/Innovative

%20Management.pdf

Imperfect competition success factorsProprietary technology Multi-country access to factors of

production and to consumersadditional scale economies in production

distribution, purchasing etc.

Production, distribution and consumption of materials, components, factors and some products and services occur entirely within the units of the firmEconomics of vertical and horizontal

integrationEmphasis on the advantage to the

individual firm of keeping decisions internalDynamic nature of competition

Transactions are carried out internally

Reduce cost of transaction in larger markets, with improved, unfettered communications and transportation.

Difference from internalization: does not considers the functioning of all the firm’s internal activities such as managing people and use of a monopoly position

Firm specific competitive advantages that enable individual firms to outcompete

Synthesis with the FSA and CSA article “The international competitiveness of asian firms”? Or porters diamond model

Combination of location theory, competitive advantages and the concept of internalization

Covers all the market-related factorsProduct, firm, industry and economy

But interactions between Governments and companies and among Governments are left aside

Finance theory, arbitrage national financial conditions

National currencies create unique difference for INCs and directly involve governmental decisions

International firms must pass through the foreign-exchange barrier

Existence of governmental policies differentiates a theory of international business from domestic business

Governments are satisfied with gains generated by an IB activity in open markets, they impose no barriers and, hence no theory of international business is necessary

More synthesis?