Business Internationalization

summer semester 2016/2017

Maciej Szczepankiewicz

Chair of Economic Sciences

Motto

I hear things, and I forget them. I see things, and I remember them. I do things, and I understand them.

Confucius (551 B.C. – 479 B.C.)

Contacts

E: maciej.szczepankiewicz@put.poznan.pl

Hearing hours:

• Mo. 9.45-11.15

• Fr. 12.00-13.30

Chair of Economic Sciences 307 IIIrd floor WIZ Strzelecka 11 St.

About course

• Hours

• List of attandance

• Absences

• The activity of students during classes

• Homework

• How to pass..

Literature

www.szczepankiewicz.net/studenci.htm

Basic literature:

• M. P. Todaro, S. Smith, Economic Development (12th Edition) (Pearson Series in Economics, Prentince Hall.

• P. Krugman, M. Obstfeld, M. Melitz, International Trade, Prentince Hall.

List of issues 1/ Assessing the role of the international environment of the firm: a/The competitive environment. Role of transnational firms. b/The economic environment. Influence of regional economic integration c/The political-legal environment. Its stability versus risk associated with market entry d/The socio-cultural environment. Cultural values and business customs e/The technological environment.

2/ Motives and forms of foreign market entry 3/ The process of foreign market entry and expansion. Target country choice, market segmentation, target segment choice and product positioning and repositioning. 4/ Distribution strategy a/Factors affecting choice of channels b/Logistics 5/ Promotion strategy a/Export promotion b/Standardizing or adapting the promotion mix

Diagnose The traditional market for jeans in Japan has peaked and is likely to shrink further. In addition, the distribution structure is changing resulting in the emergence of a new type of large-scale suburban chain store. Levi-Strauss has to determine how to respond to these trends and chart a direction for future growth. Should they focus on increasing market share of the traditional blue jeans market?

introduce new products targeted to the primary target market?

expand their customer base by targeting new customer segments? increase presence in other types of stores?

move to another country with current products?

Business Internationalization

Assessing the role of the international environment of the firm

Categories/Types of environment

a/The competitive environment b/The economic environment c/The political-legal environment d/The socio-cultural environment e/The technological environment

• The modern economy is globally connected, and growing more so every day. Weighing the pros and cons of international expansion is a key strategic consideration.

• The multinational enterprise (MNE) is the primary player in international business. MNEs are present in virtually every industry nowadays.

• Entry modes for international businesses include global concentration, global synergies, and other strategic global motivations.

• With the complexity of international operating environments, organizations should consider economic, technological, legal, socio-cultural and environmental factors.

• Weighing the risks and potential returns and determining a required rate of return for an international expansion is a key aspect of global financial management.

Factors that will impact success during a global transition:

• Socio-cultural: The social environment of a given region can have a significant impact on success. Food companies are highly impacted by this – certain cultures prefer certain types of foods.

• Geographic/Environmental - For example, skiing equipment may not do so well in regions without snow or mountains. Oil companies can only source oil from resource-rich regions.

• Legal/Political – Some countries have high barriers to entry, complex tax rates, and/or unclear legislative practices. Ease of doing business is critical here.

• Economic – The standard of living is different from region to region, and recognizing the value of a given market in terms of spending power, currency, and market size is critical to deciding upon expansion.

• Technology – Access to internet, electricity, clean water and a variety of other technological dependencies must be considered prior to entry if the organizational operations rely on easy access.

Weighing the pros and cons of entering a given reason, and calculating projected cash flows, costs, and required returns on investment are central financial considerations to entering a new international market.

1. Specialty coffee (price >90%M) 2. Bulgarian market • Motto - "Unity makes strength” • Ethnic groups: 84.8% Bulgarians, 8.8% Turks, 4.9% Roma, 1.5% others • GDP (PPP) Per capita $20,116 (62nd) • Gini (measure of inequality) Negative increase 37% • Bulgaria has an emerging market economy in the upper middle income

range, where the private sector accounts for more than 80 per cent of GDP

• Economic activities are fostered by the lowest personal and corporate income tax rates in the EU

• The ICT sector generates 10 per cent of GDP[238] and employs the third-largest contingent of ICT specialists in the world

• According to the organization Mensa Bulgarians are second in the world in test results for intelligence and Bulgarian students have the second highest results on SAT

• Bulgarian cuisine is similar to those of other Balkan countries and demonstrates a strong Turkish and Greek influence

• Until 1989, Bulgaria was the world's second-largest wine exporter • Bulgarian media outlets are experiencing negative economic and political

pressures, and instances of self-censorship have emerged

SWOT

If not done properly it can give you misleading results!

1. Listing down too many things is probably the most common SWOT analysis mistake. This usually happens when there is no clear goal or if the scope is not well defined.

1. Overestimating Strengths. Strengths are usually the first to be added to the SWOT when everyone is fresh and eager to contribute. So it’s very easy to go overboard with strengths.

2. Brushing Over Weaknesses. Almost everyone is reluctant to admit weaknesses. It is even harder during a SWOT analysis because you’re on a high now after identifying your most important strengths. It is even harder in a business environment because nobody wants to show a weakness in front of their superiors.

• Ignoring PEST Analysis. Opportunities and threats present a different challenge. Strengths and weaknesses are internal factors so it is somewhat easy to figure and list them out. Not so easy with opportunities and threats because they are external factors.

• PESTLE analysis provides businesses with a standard and structured way to asses those external factors. Unfortunately people often confuse SWOT analysis and PEST analysis.

• PEST analysis (political, economic, social and technological) describes a framework of macro-environmental factors used in the environmental scanning component of strategic management.

Foreign Market Entry

Strategy: Questions to Answer

The Case of Ziaja

FACTORS AFFECTING MARKET SELECTION

MARKET ENTRY: CONTROL VS. INVESTMENT

Choosing the right market boils down to issues over control, resources, appetite for risk and familiarity with the market. Other factors include legal restrictions, or the availability of distributors and partners. Exporting and licensing involve the least investment, but also offer the least control of the business. Joint venture and 100% ownership are more intensive managerially in terms of both time and money but offer more control.

STRATEGY: QUESTIONS TO ANSWER

• LOCALISATION Does the product need to be localised? In other words, must it be changed to meet local tastes and conditions? Are entirely new products needed? Or is it simply a case of selling the exact same product in new markets? • AWARENESS How much awareness is there of the product, the brand and even the category? Do consumers need to be educated on how to use it?

• LOCATION

Where will the gateway into the country be? Do major cities offer the best starting point? Or would one region work best? Or is a nationwide strategy more workable? Should there be a test phase in a few locations? Or a blanket entry?

• TIMING

First-mover advantage allows the company to set the rules of the market and build brand loyalty. Yet it can be a high cost, high-risk strategy. Entering the market later can allow the company to imitate and improve on incumbents, gain a better understanding of the market and find a niche.

Business Internationalization

Promotion strategy

Maciej Szczepankiewicz

Chair of Economic Sciences

There are numerous ways to promote a product or service. Some companies use more than one method, while others may use different methods for different marketing purposes.

• Assessing the role of the international environment of the firm

• The process of foreign market entry and expansion

• Foreign Market Entry Strategy

• Promotion Strategy