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A German businessman wearing an ItalianSuitmeeting anEnglish Friend at a Japanese

Restaurant who later returns home to drink

Russian Vodka with his French Wife andwatchAmerican Idolon TV

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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

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What For Customers From

Firms Doing International Business???

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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 Internationalarena under international control

- Thinking & Acting beyond the Domestic Business

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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 outsidea firms home country

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International Business

all business transactions that involve two or morecountries

consists of transactions that are devised and carried-

out 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

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International Business Management

- Performance of all the management of business

functions (POLC) across national frontiers

- Management of an International Organization thatrequires integration of all aspects of the business

functional decisions relating to organizational structure,

production, marketing, human resources, public relations,

finance and strategies

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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

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Nature / Features of International Business

International businesses:

cause the flow of ideas, services, and capital acrossthe world

offer consumers new choices

permit the acquisition of a wider variety of products

facilitates the mobility of labor, capital andtechnology

provide challenging employment opportunities

reallocate resources, makes preferential choices, andshifts the organizational activities to a global level

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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.

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Components of Globalization

The shift

toward a

more

integratedand

Interdepe

ndent

worldeconomy

Markets Production

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Globalization of Markets

The merging of distinctly separate national

markets into one huge global marketplace

Falling barriers to cross-border trade have made iteasier 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

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Difficulties that arise from the globalization of markets:

Significant differences still exist among national

markets

Country-specific marketing strategies

Varied product mix

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Globalization of Production

Refers to sourcing of goods and services from locations around

the world to take advantage from the national differences incost 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

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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

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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

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Impact of Exports on Unit Cost

AC

o

Cost

Qp QoQuantity

Co

Cp

Export

Poten

-tial

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International Orientations /

Management Approaches to Globalization

EPRG frame-workby Wind, Douglas & Perlmutter

Ethnocentric Approach Home country Orientation

Polycentric Approach Host country OrientationRegiocentric Approach Regional Orientation

Geocentric Approach 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.

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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

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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 ActLocal

Multi-national Cos. believe that local personnel andtechniques are better in local marketing conditions

Independent subsidiaries are formed which would haveself-determined marketing objectives and plans

Adaptation of the business strategies to the localconditions are essential

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Regiocentric Orientation

A set of foreign nations whose important market

characteristics identified to be common, is termed aRegion

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 donebetween HQ and Regional HQ; and between the Regional

HQ and the individual subsidiaries

Regiocentric appeal viewed as economical & manageable

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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 informationcollection and policy administration worldwide

National differences in Currencies, Laws, etc. may hinder

this world market concept

Environmental differences affect the MarketingManagement activities than functions of Production or

Finance

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Comparison of different International orientations

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Stages of Internationalization

PureDomesticCo.

DomesticCo. witha bit ofForeignbusiness

International Co.

Multinational Co.

Global Co.

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The Globalization Debate

Pro Factors Better quality products and

Standard of Living

Lower prices for goods andservices

Economic growth

stimulation Increase in consumer

income

Creates jobs

Countries specialize in

production of goods andservices that are producedmost efficiently

Con Factors Destroys manufacturing jobs

in wealthy, advancedcountries

Wage rates of unskilledworkers in advanced

countries decline Growing Income inequalities

Companies move tocountries with fewer laborand environment regulations

Loss of sovereignty /independence / autonomy

Threat of Forward /Backward integration oracquisition

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IB Restricting / RestrainingFactors

External Factors

Govt. Policies and Control

Social and Political oppositions

Internal Factors

Management Myopia

Organizational Culture

Lack of adequate Resources

Incompetent Management

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International Business Decisions

EnvironmentalAnalysis:

External &Internal

InternationalBusinessDecision

MarketSelection

Entry andOperatingStrategies

Marketing MixDecision

InternationalOrganization

& HR decisions

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Major Global Companies

Student Presentation