Download - IB Mod1 (2)
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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