chapter 1 intro to international business
TRANSCRIPT
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CH1- What is International Business??
International business consists of all commercial transactions (eg : sales, investments, transportation ) between two or more
countries. Private companies – for profit
Governments – profit or political reasons
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Factor in International Business Operations
PHYSICAL AND SOCIETAL FACTORS
• Political policies and legal practices
• Values, attitudes, and beliefs
• Economic forces• Geographical
influences
COMPETITIVE ENVIRONMENT
• Major advantage in price,marketing,innovation
or other factors• Number and relative
capabilities of competitors• Competitive differences
by country
EXTERNAL INFLUENCES
OBJECTIVES• Sales expansion
• Resource acquisition• Diversification
• Competitive risk minimization
STRATEGY
OPERATIONS
MEANS
Modes•Importing & exporting•Tourism & transportation•Licensing & franchising•Turnkey operations•Management contracts•Direct & portfolio investment
Functions•Marketing•Production•Accounting•Finance•Human Resources
Overlaying Tactical Alternatives•Choice of countries•Organization & control mechanisms•Degree of integration among countries’ operations
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1. Economic- International trade and investment2. Technological – Internet connectivity3. Personal contact – International trade & tourism, international telephone
traffic & personal transfers of funds internationally4. Political – Participation in international organizations & government
monetary transfers
Four Dimensions of Globalizations
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Factors in Increased Globalization
1. Increased in & expansion of technology2. Liberalization of cross-border trade & resource movements3. Development of services that support international business4. Growing consumer pressures5. Increased global competition6. Changing political situations7. Expanded cross-national cooperation
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1. Threats to national sovereignty2. Economic growth & environment stress3. Growing income inequality
What wrong with Globalization ????
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Why Companies engage in International
Business???
Expanding sales
Acquiring resources
Minimizing risk
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Modes of Operations in IB
PHYSICAL & SOCIETAL FACTORS
• Political policies & legal practices
• Values, attitudes & beliefs• Economic forces
• Geographical influences
COMPETITIVE ENVIRONMENT
• Major advantage in price, marketing, innovation or
other factors• Number & relative
capabilities of competitors•Competitive differences by
country
OBJECTIVES• Sales expansion
• Resource acquisition• Diversification• Competitive risk
minimization
STRATEGY
MEANSModes
•Importing & exporting•Tourism & transportation•Licensing & franchising•Turnkey operations•Management contracts•Direct & portfolio investment
Functions•Marketing•Production•Accounting•Finance•Human Resources
Overlaying Tactical Alternatives•Choice of countries•Organization & control mechanisms•Degree of integration among countries’ operations
EXTERNAL INFLUENCES OPERATIONS
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1. Physical & social factors- Physical ( eg: geography)- Social ( eg: politics, law, culture, economy)
2. Competitive factors- Number & strengths of a company’s suppliers, customers and rival
firms)
Why International Business Differs from Domestic Business??
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International Strategy Evolution
Patterns of international expansion :
Strategy for heavy international commitments usually evolve gradually from•Passive to active expansion•External to internal handling of operations•Deepening mode of commitment•Geographical diversification
Leapfrogging of Expansion
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Usual Pattern of Internationalization
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Global OperationsOperations Strategy in a Global Environment
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Reasons of GlobalizeTangibleReasons
IntangibleReasons
Reasons to Globalize1. Reduce costs (labor, taxes, tariffs, etc)2. Improve supply chain3. Provide better goods & services4. Understand markets5. Learn to improve operations6. Attract & retain global talent
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Reduce Costs
Foreign locations with lower wage rates can lower direct & indirect coats
World Trade Organization (WTO)North American Free Trade Agreement (NAFTA)APEC, SEATO, MERCOSUREuropean Union (EU)
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Improve the Supply Chain
Locating facilities closer to unique resources
•Auto design to California•Athletic shoe production to China•Perfume manufacturing in France
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Culture and Ethical Issues
•Cultures can be quite different•Attitudes can be quite different towardsPunctualityLunch breaksEnvironmentIntellectual propertyThieveryBriberyChild labor
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You May Wish To Consider
National literacy rate Rate of innovationRate of technology changeNumber of skilled workersPolitical stabilityProduct liability lawsExport restrictionsVariations in languageWork ethicTax ratesinflation
Availability of raw materialsInterest ratesPopulationNumber of miles of highwayPhone system
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Match Product & Country
•Braun Household Appliances•Firestone Tires•Godiva Chocolate•Haagen-Dazs Ice Cream•Jaguar Autos•MGM Movies•Lamborghini Autos•Alpo Pet Foods
1. Great Britain2. Germany3. Japan4. United States5. Switzerland
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`Marketing
DistributionPromotionChannels of distributionProduct positioning(image, functions)
Finance/AccountingLeverageCost of capitalWorking capitalReceivablesPayablesFinance controlLines of credit
Production/Operations
Decisions Sample Options
ProductQualityProcessLocationLayout
Human resourceSupply chain
InventorySchedule
maintenance
Customized or standardizedDefine customer expectations & how to achieve them
Facility size, technology, capacityNear supplier or near customer
Work cells or assembly lineSpecialized or enriched jobsSingle or multiple supplier
When to reorder, how much to keep on handStable or fluctuating production rate
Repair as required or preventive maintenance
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Activity Mapping southwest Airlines
Competitive Advantage : Low
Cost
Courteous but Limited Passenger
Service
Short Haul, Point to point Routes, Often
to Secondary Airports
Frequent, Reliable Schedules
Standardized Fleet of Boeing 737
Aircraft
High Aircraft Utilization
Lean, Productive Employees
No baggage transfers
No meals (peanuts)
Lower gate costs at secondary airport
High number of flight reduces employees idle time between flights
Saturate a city with flights, lowering administrative costs ( advertising, HR, etc) per passengerFor that city
Pilot training required on only one type of aircraft
Reduced maintenance inventory required because of only one type of aircraft
Excellent supplier relation with Boeing has aided financing
Flexible employees & standard planes aid schedulingFlexible union contracts
Maintenance personnel trained on only one type of aircraft
20 minute gate turnarounds
High level of stock ownership
Hire for attitude, than train
High employees compensation
Empowered employees
Automated ticketing machines
No seat assignments
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Four International Operations Strategies
Global Strategy• Standardized product• Economies of scale• Cross-cultural learning
Examples• Texas Instruments
• Caterpillar• Otis Elevator
International Strategy• Import-export or license
existing productExamples
• U.S Steel• Harley Davidson
Transnational Strategy• Move material, people, ideas
across national boundaries• Economies of scale• Cross-cultural learning
ExamplesCoca-Cola
Nestle
Multidomestic Strategy• Use existing domestic model
globally• Franchise, joint ventures,
subsidiariesExample• Heinz
• The Body Shop• McDonald’s
High
Low
Cost
Red
uctio
n Co
nsid
erati
ons
Low High Local Responsiveness Considerations(Quick Response and/or Differentiations)