I

nter
nat
ional
Busi
ness
Management(I
BM)
 CORESUBJECT

UNI
TII
NTRODUCTI
ON

Inter
nationalBusiness – Definit
ion – Int
ernat
ional
izi
ng Busi
ness – Adv
ant ages –
FactorsCausi ngGl obali
zat
ionofBusi ness– Internat
ionalBusi
nessEnvi
ronment–
Count r
yAt tr
acti
veness–Pol it
ical
,EconomicandCul tur
alEnvi
ronment–Protecti
onVs
Liberal
izati
onofGlobal Busi
nessEnv i
ronment.

UNI
TIII
NTERNATI
ONALTRADEANDI
NVESTMENT

Promot ion ofGl obalBusiness – The Rol e ofGATT/ WTO – Mul til
ateralTrade
Negot i
ationand
Agreement s–VI IIandIX,RoundDiscussi
onsandAgr eement s–Challengesf orGlobal
Business–Gl obalTr adeandInv
estment–Theor i
esofInternat
ionalTr
adeandTheor i
es
ofInternati
onalInvestment–Needf orGlobalCompetit
iveness–RegionalTr adeBl ock
–Ty pes–Adv antagesandDisadvant
ages–RTBsAcr osst heGlobe–Br iefHistor
y.

UNI
TII
IINTERNATI
ONALSTRATEGI
CMANAGEMENT

Strat
egicCompul sions– St andardizat
ion vs.Di f
fer
enti
ation – StrategicOpt ions–
GlobalPortf
oli
oManagement–Gl obalEnt r
ySt r
ategy–DifferentFormsofI nt
ernational
Business – Adv antages– Or ganizati
onal Issues of I nternati
onal Busi ness –
Organizat
ionalStr
uct ur
es– Cont r
olli
ng ofI nt
ernati
onalBusi ness– Appr oachest o
Control–PerformanceofGl obalBusiness–Per formanceEv aluati
onSy stem.

UNI
TIVPRODUCTI
ON,MARKETI
NG, FI
NANCI
ALANDHUMANRESOURCE
MANAGEMENTOFGLOBALBUSINESS

Global Product
ion–Locat i
on–ScaleofOper at
ions–CostofPr oducti
on–MakeorBuy
Decisions– Gl obalSupplyChainIssues– Qual i
tyConsiderat
ions– Globalizat
ionof
Mar kets,Marketi
ngSt r
ategy–ChallengesinProductDevelopment,Pri
cing,Producti
on
and ChannelManagement– I nvestmentDecisions– Economi c– Polit
icalRisk–
Sour cesofFund– ExchangeRat eRiskandManagement– St rat
egi
cOr i
entati
on–
SelectionofExpatri
ateManagers–Tr aini
ngandDev el
opment–Compensat ion.

UNITVCONFLICTMANAGEMENTANDETHI
CSI
NINTERNATI
ONAL
BUSINESSMANAGEMENT

Disadv
antagesofI
nternat
ionalBusi
ness–Conf l
icti
nInternat
ionalBusi
ness–Sour ces
andTy pesofConf
li
ct–Conf li
ctResolut
ions–Negot i
ati
on–TheRol eofInt
ernat
ional
Agencies–Ethi
cal
IssuesinInter
nat
ionalBusi
ness–Et hi
calDecisi
on-Maki
ng.
 UNI
TII
NTRODUCTI
ON

Inter
nationalBusiness – Definit
ion – Int
ernat
ional
izi
ng Busi
ness – Adv
ant ages –
FactorsCausi ngGl obali
zat
ionofBusi ness– Internat
ionalBusi
nessEnvi
ronment–
Count r
yAt tr
acti
veness–Pol it
ical
,EconomicandCul tur
alEnvi
ronment–Protecti
onVs
Liberal
izati
onofGlobal Busi
nessEnv i
ronment.

I
nter
nat
ionalbusi
ness-Def
ini
ti
on:

Int
ernati
onalbusi nessmaybedef i
nedsimplyasbusi nesstransact
ionsthattakepl ace
acrossnationalbor ders.Nearl
yallbusi
nessenterprises,l
argeandsmal l
,areinspiredto
carryonbusi nessacr osstheglobe.Thismayi nclude,purchaseofrawmat eri
als,fr
om
for
eignsuppl iers,assemblingproduct
sfrom component smadei nseveralcount r
iesor
sel
lingproduct sorserv i
cestocustomersinothernat i
ons.

Int
ernat
ionalizat
ionofbusi
nesshasbenef
it
edTCS,Asi
anpaint
s,Wi
pro,
Infosy
s.I
tmay
beunder st
oodast hosebusi
nesstr
ansacti
onst
hatinvol
vethecr
ossingofnati
onal
boundar
ies'.Theyincl
ude;

1.Pr
oductpr
esencei
ndi
ff
erentmar
ket
soft
hewor
ld.

2.Pr
oduct
ionbasesacr
osst
hegl
obe.

3.Humanr
esour
cet
ocont
ainhi
ghdi
ver
sit
y

4.Inv
est
menti nint
ernat
ionalser
vicesl
i
kebanki
ng,adv
ert
isi
ng,t
our
ism,r
etai
l
ing,
andconst
ructi
on

5.Transact
ions i
nvolvi
ng i
ntel
lectualpr
oper
ti
es such as copy
right
s,pat
ent
s,
tr
ademarksandpr ocesst
echnology.

Benef
it
sofi
nter
nat
ional
busi
ness:

Causest
hef
lowofi
deas,
ser
vices,
andcapi
tal
aroundt
hewor
ld

Of
fer
sconsumer
snewchoi
cesandgr
eat
erv
ari
ety

Al
l
owst
hemobi
l
ityofl
abor
,capi
tal
andt
echnol
ogy

Pr
ovi
desempl
oymentoppor
tuni
ti
es

Real
l
ocat
esr
esour
cesandshi
ft
sact
ivi
ti
est
oagl
obal
lev
el
Assessi
ngcor
por
ategl
obal
ly
:

1.Gl
obal
izat
ionofsuppl
ychai
n

Towhichthecompanyi saccessi
ngt
hemostopt
imall
ocat
ionsf
ort
heper
for
manceof
var
iousact
ivi
ti
es.Forex;
Toyota

2.Gl
obal
izat
ionofmar
ketpr
esence

To which a companytarget
s cust
omer
sin al
lmaj
ormar
ket
s wi
thi
nit
sindust
ry
thr
oughoutt
hewor l
d.Forex;I
BM

3.Gl
obal
izat
ionofcapi
tal

Towhicht
hecompanyisaccessi
ngtheopti
malsourcesofcapi
tal
onawor
ldwi
debasi
s.
Forex;
HongKongbasedint
ernetser
vicepr
ovi
derchina.
com

4.Gl
obal
izat
ionofcor
por
atemi
ndset

Thi
sdimensi
onref
erst
ot heabil
i
tyofthecompanyt
ounder
standandi
ntegr
atedi
ver
sit
y
acr
osscul
tur
es.Forex;Generalel
ect
ric(
GE)

One ofthe mostcompr ehensi

veindices i
sthe one pr
ovded by A.
i T Kear
ney
,a
managementconsul
tancyandfor
eignpoli
cymagazi
ne.

Eachnat
ion’
sgl
obal
l
yisassessedconsi
der
ingf
ourv
ari
abl
es,
suchas;

1.Pol
i
tical
engagement

2.Technol
ogi
cal
connect
ivi
ty

3.Per
sonal
cont
act

4.Economi
cint
egr
ati
on.

Whyst
udyi
nter
nat
ionalbusi
ness?

1.Incr
easingl
y,compani
esar
esour
cingt
hei
rhumanr
esour
cer
equi
rementgl
obal
l
y,
Sonycorporat
ion.

2.Mostoftheproductsweconsumeev er
ydayaresuppli
edtousbygl obalbusi
nesses.
Wearesureofqualit
yiftheproductsbearsuchnamesasNi ke,Toyot
a,Colgat
e,GapT-
shi
rt
,andtheli
ke.Toknowt hesebrandsistounder
standint
ernati
onalbusi
ness

3.Managing aninternat
ionalbusi
nessi smaj orcompl
ext hanr unni
ng adomestic
busi
ness.Gl
obalbusinessinvol
vesproduct
ionofgoodsinfacil
it
ieslocat
edindi
ff
erent
count
ri
eswithresources,humanandphy sicalsour
cedfr
om allpartsofthegl
obeand
mar
ket
inggoodsandser
vicest
ouser
sacr
osst
hegl
obe.

4.The majorimpactofinternati
onalbusinessi nthi
sarea hasbeen i mpetuson
government
stoopenupthei
rbor der
stoint
ernati
onaltr
adeandinvest
ment,standardi
ze
thei
rsyst
emsandprocedur
es,andadoptinternat
ional
l
yaccept
ablevaluesandatti
tudes.

5.Int
ernationalbusi
nessexecut
ivespl
ayapowerf
ulrolei
ndet
ermi
ningt
her
elat
ive
competit
ivenessofvari
ouscount
ri
esint
hegl
obal
arena.

Dr
iver
sofi
nter
nat
ionalbusi
ness:

Moreandmorecompani
esar
eseeki
ngt
oint
ernal
i
zeorgl
obal
i
zet
hei
reconomi
csf
ora
numberofr
easons.

1.Dev
elopi
ngmar
ket
shav
ehugemar
ket
s

2.ManyMNC’s ar
elocat
ing t
hei
rsubsi
diar
ies i
nlow wage count
ri
es t
otake
adv
ant
ageofl
owcostpr
oducti
on.

3.Changi
ngdemogr
aphi
csal
soaddst
oincr
easi
nggl
obal
i
zat
ion

4.Regi
onal
tradi
ngblocksareaddingtot
hepaceofgl
obal
izati
on.WTO, EU,NAFTA,
MERCOSURandFTAAar emajorall
i
ancesamongcount
ries.Tradi
ngblocksseek
topr
omoteint
ernati
onalbusi
nessbyremovi
ngtr
adeandi nvestmentbar
rier
s.

5.Decl
i
ningt
radeandi
nvest
mentbar
ri
ershav
evast
lycont
ri
but
edt
ogl
obal
i
zat
ion.

6.Themostpower
ful
inst
rumentt
hatt
ri
gger
edgl
obal
i
zat
ioni
stechnol
ogy
.

7.TheBostonconsul
ti
nggr
oup(
2005)hasi
dent
if
iedf
ivecur
rent
sofgl
obal
i
zat
ion.
Thesecur
rent
sar
e;

a)Gr
owt
hofr
api
dlydev
elopi
ngeconomi
cs(
RDE’
s)

b)Cont
inui
ngcostandcapi
tal
adv
ant
agesofRDE’
s

c)Dev
elopmentoft
alentandcapabi
l
iti
esi
nRDE’
s

d)Mi
grat
ionofcust
omer
stoRDE’
s

e)Emer
genceofRDEbasedgl
obal
compet
it
ors.

8.Ther
eismoneyi
nint
ernat
ional
busi
nessandnoor
gani
zat
ionswoul
dwi
sht
omi
sst
he
opport
uni
ty.

9.Resour
ceseeki
ngi
sanot
hermot
ivef
orf
ir
msgoi
ngi
nter
nat
ional
.

10.Gl
obal
i
zat
ioni
str
igger
edwor
ldbodi
esandi
nst
it
uti
ons.WTO i
sthei
nter
nat
ional
organi
zati
onsthatregulat
esandpromotesbusinessacrossnat
ions.Themainpur
poses
ofWTO ar ea)helpf reetradeb)hel
pnegotiatefurt
heropeningofmar ket
sc)settl
e
tr
adedisputesbetweenmember s.

Ri
ppl
eef
fect
sofgl
obal
izat
ion:

1.Gl
obal
i
zat
ionandmanagement

2.Gl
obal
i
zat
ionandj
obs

3.Gl
obal
i
zat
ionandwages

4.Gl
obal
i
zat
ionandchi
l
dlabor

5.Gl
obal
i
zat
ionandwomen

6.Gl
obal
i
zat
ionanddev
elopi
ngcount
ri
es

7.I
nequal
i
ties

Di
ff
erencebet
weeni
nter
nat
ional
busi
nessanddomest
icbusi
ness

Business,whetherglobalordomestic,inv
olvingbuyi
ngandsel l
i
nggoodsandser vi
ces.
I
nmostcase, prof
iti
st hedri
vingfor
cebehi ndeachtr
ansact
ion.Thediff
erencebet
ween
these two pronounced primaril
yint he areas ofcurr
ency,inter
estrates,i
nfl
ation,
taxati
onsystems,gov ernmentregul
ati
ons,languageandcul
turalandeconomicbar
riers.

Rout
esofgl
obal
izat
ion

Abusinessf
ir
m seekingt
oglobal
i
zei
tsel
fneedst
ochooseoneoft
hesev
eralmodesof
ent
eri
ngcrossbordermarket
s.

1.Expor
tsandi
mpor
ts:

Exportsar egoodsandser v
icesproducedi nonecount rybutmar ketedi nanother
country.Importsar
egoodsandser vi
cespr oducedi
nonecount r
ybutboughtbyanot her
country.Europeancommunity(EC)isthewor ld’
ssi
ngl
elargesttr
adinguni t
,fol
lowedby
AsiaandNor t
hAmer i
ca.Themaj or
it
yoft hisexpor
tandimportacti
v i
tyisintheareaof
manuf actur
ingsuchasi ndustr
ialmachinery,computer
s,cars,tel
evisi
ons,VCR’ sand
otherelectr
onicgoods.

2.Tour
ism andt
ranspor
tat
ion:

Thesearetheroutesofglobali
zati
onforsuchindustr
iesasshipping,ai
rl
ines,hoteland
trav
elagency
.Somecount ri
es,GreeceandNorwayf orexample,dependoni nter
national
touri
sm andt
ransport
ati
onf oremployment,
profi
tsandforei
gnexchangeear ni
ngs
3.Per
for
manceofser
vices:

I
nternati
onalbusi
nessesearnmoneyint heform offeesf orser
vicesr
ender
ed.Thi
sis
part
icul
arlytr
ueininsur
ance,banki
ng,rent
als,engineeri
ng,managementservi
cesand
thel
ike.Turnkeyoper
ati
onsaretypi
calmodesf orearningsuchfees.

Companiesalsoear
nfeesthr
oughmanagementcont
ract
s,ar
rangement
sinwhichone
fi
rm cont
ract
swithaforei
gncor
por
ati
onorgover
nmenttomanageanent i
repr
ojector
undert
aki
ngforaspeci
fi
cperi
od.

4.Useofasset
s:

Li
censi
ngandf ranchisi
ngarethemodeswhichfacil
i
tatecompani
estoall
owother
sto
usetheirasset
s.Underal i
censeagreement,onef i
rm per
mitsanot
herto useit
s
i
ntel
l
ectualpr
opertyforcompensat
ioncal
ledr
oyalt
y.

Anotherrout
eofglobal
i
zat i
onisfr
anchisi
ng,whichi
nvolvesthegr
anti
ngofr i
ghtbya
parentcompany (t
he franchi
ser
)t o ant
her(the f
ranchiser
)to do busi
ness i
na
prescr
ibedmanner
.

5.Di
recti
nvest
ment
:

a)Joi
ntv
ent
ure:

Ajointventur
eisasharedowner
shi
pi naforei
gnbusi
ness.General
ly
,theventureis
50-
50owner shi
pinwhichtherear
et woparti
es,eachofwhichhol dsa50per cent
ownershi
pstakeandcontr
ibut
esateam ofmanagerst
oshareoperat
ingcontr
ol.

b)Whol
lyownedsubsi
diar
y:

Awholl
yownedsubsidi
arycanbesetupinaforei
gnmarketinei
theroft
woway s.
Thecompanycansetupatotal
l
ynewoperat
ionorcanacqui
reanest
abli
shedfi
rm and
uset
hefi
rmtopromoteit
sproduct
s.

Thesubsi
diar
ythati
sestabl
i
shedst
art
ingf
rom t
hegr
oundup(
i.
e.,
from agr
eenf
iel
d)i
s
edaGr
cal
l eenfi
eldi
nvest
ment.

Port
fol
ioi
nvest
mentrepr
esentsanon-
cont
rol
l
ingi
nter
est
,ret
urn-
mot
ivat
edi
nter
esti
na
company,
oraloant
oanothercompany.
I
nter
nat
ionalbusi
nessenv
ironment

Theenv i
ronmentofi nt
ernati
onalbusinessi
sr egar
dedasthesum totalofallthe
ext
ernalforceswor king upon t
hef i
rm asitgoesaboutitsaffai
rsi
nf orei
gn and
domesti
cmar ket
s.Theenv i
ronmentcanbeclassi
fi
edint
ermsofdomest
ic,f
orei
gn,and
i
nter
nati
onal spheresofimpact.

1.The domest
ic env
ironment– isf amil
i
arto manager
s and consi
sts oft
hose
uncont
rol
l
abl
eexter
nalf
orcesthataf
fectt
hefi
rmi
nitshomemarket
.

2.Theforei
gnenv i
ronment-canbet
akenas thosef
act
orswhi
choper
atei
nthose
ot
hercountr
ieswi
thinwhi
chtheMNCoper
ates.

3.Theinter
nati
onalenv
ironment-isconcei
vedastheinter
acti
onbet
weendomest
ic
andfor
eignfact
orsandi
ndeedtheycov
erawidespect
rum offor
ces

Thef
orces:

Pol
i
tical
env
ironment

Legal
env
ironment

Cul
tur
alenv
ironment

Technol
ogi
cal
env
ironment

Economi
cenv
ironment
.

Pol
it
icalenv
ironment

I
tr efer
st otheinf
luenceoft hesystem ofgov ernmentandj udi
ciar
yi nanati
onon
i
nternati
onalbusi
ness.Thet ypeandst r
uctureofgov ernmentprevai
li
nginacountry
decides,pr
omotes,fost
ers,encour
ages,shelt
ers,dir
ects,andcontr
olsthebusi
nessof
thatcountr
y.

Apoli
ti
calsystem isstabl
e,honest
,ef f
ici
ent
,anddy namicandwhi
ch
ensur
espoli
ti
calpar
ti
cipat
ion tothe people and assurespersonalsecur
it
ytothe
ci
ti
zens,
isapri
maryf
actorforeconomicdevelopment.

Democracy:ref
erstoapoli
ti
calarr
angementinwhichthesupremepowerisv
estedin
thepeopl
e.Democr aci
esmaint
ainstabl
ebusinessenv
ironmentspr
imar
il
ythr
oughlaws
prot
ecti
ngindiv
idualpr
oper
tyri
ghts.Ex:
Indi
a.

Mer
it
sofdemocr
acy
:
 1.Needf
orsuppor
ti
vev
alues

2.Funct
ionoff
reespeech

3.Fr
eedom t
odi
ssent

Total
itarianism: also cal
led authoritari
ani
sm,i ndivi
dual fr
eedom i s completel
y
subordinatedt othepoweroft heaut horit
yofstateandconcent r
atedinthehandsof
one per son ori n a smal
lgroup.Soci et
iesrul
ed bya pr essur
ecl i
que – pol
iti
cal,
economi cormi li
tar
yorbyadi ctat
or,plusmostol i
garchi
esandmonar chi
es–belongt o
thi
scat egor y.Thedoctri
nesoff ascism ander stwhil
ecommuni sm areexamplesof
tot
ali
tarianism.

NaziGer many( underAdol

fHitl
er)andtheformersovietunionunder(underJoseph
Stalin) are hi
stori
c examples of t
otal
it
ari
ani
sm gov ernments.Today,Cambodi a,
My anmar ,China,Cuba,Congo,andI raqareprominentexampl esoftotal
it
ari
ani
sm
gov ernments.

Ty
pesoft
otal
it
ari
ani
sm:

1.Theocr
ati
c

2.Secul
ar

3.Tr
ibal

4.Ri
ght-wi
ng

Pol
it
icalr
isk:

Macr
ori
sks Mi
cror
isks

1.Expropriati
on ofcor porat e assets 1.Ki
dnappings,ter
ror
ist
,thr
eat
s,et
c
wit
hout pr ompt and adequat e 2.I
ncreasedtaxati
on
compensat i
on 3.Off
ici
alsdishonest
y
2.Barri
erst orepat ri
at i
onpr ofi
ts
3.Confiscationofpr oper t
ies
4.Loss of t echnol ogy or ot her
i
ntell
ectual proper ty
5.Campai gnsagai nstf oreigngoods
6.Civi
lwar s
7.Inf
lati
onandcur rencydev al
uati
ons
8.Mandat orylabourl egislations
Cl
assi
fi
cat
ionofpol
it
icalr
isks
Managi
ngpol
it
icalr
isks

Legalenv
ironment

Thel
egalsy
stem r
efer
stot
her
ulesandl
awst
hatr
egul
atebehav
iorofi
ndi
vi
dual
sand
or
gani
zat
ion

Sy
stemsofl
aw:

Ther
ear
efourbasi
clegal
syst
emspr
evai
l
ingar
oundt
hewor
ld.

1.Isl
amiclaw:der
ived f
rom t
he i
nter
pretat
ion ofthe Qur
an and pract
iced i
n
count
ri
eswhereMusli
msarei
nmajori
ty.Ex:SaudiAr
abi
a,Paki
stan,
Iran.

2.Commonl aw:deri
vedf r
om Engl
ishlaw,ispreval
entincount
ri
es,whi
chwer
e
underBr
it
ishinf
luence.Ex:US,
Canada,Engl
and,Aust
ral
i
a.

3.Civi
llaw orcodel
aw:deri
vedf
rom Romanlaw,pr
acti
cedinGermany
,Japan,
France,andnon-Marxi
standnon-I sl
ami
ccountri
es.Ex:Ger
many,Fr
ance,
Japan.

4.Marxi
stlegalsyst
em:This has t
aker
sin communi
stcount
ri
es.Ex:Chi
na,
Vi
etnam,
Nor t
hKoreaandCuba.

Industr
ialdi
sputesresol
uti
on:Legaldisput
escanar i
seinthreesit
uat
ions:bet
ween
governments,bet
weenafir
m andagov ernment
,andbetweent
wof i
rms.

Conci
li
ation:al
soknownasmedi
ati
on,
thisi
sanonbondi
ngagr
eementbet
weenpar
ti
es
tor
esolvedisput
esbyaski
ngat
hir
dpart
ytomedi
ate.

Arbi
tr
ati
on:isthepreferr
edmet hodforresol
vingi
nternat
ionalcommercialdi
sput
es.
Theusualarbi
tr
ati
onprocedur
eisf ort
heparti
esinv
olvedtoselectadisi
nter
est
edand
i
nfor
medpar tyorpart
iesasrefereetodeter
minethemer i
tsoft hecaseandmakea
j
udgmentthatbothpar
tiesagr
eetohonor.

Li
ti
gat
ion:awi
secour
seofact
ionwoul
dbet
oseekaset
tl
ementot
hert
hanbysuei
ng.

Cul
tur
alenv
ironment
:

Accordi
ngt o El
bertW St ewardandJamesA Gl ynn“Cultur
econsi st
sthe
thoughtandbehavi
oralpat
ternsthatmember sofasoci
etyl
earnthroughlanguageand
otherformsofsy mboli
cinteract
ion– theircust
oms,habit
s,beli
efsandv alues,t
he
commonv i
ewpoi
ntsthatbi
ndt hem toget
herasasoci
alent
it
y.
Lev
elsofcul
tur
e:

1.Nat
ionalcul
tur
e:

I
tisdomi
nantcul
tur
ewi
thi
nthepol
i
tical
boundar
iesofacount
ry.

2.Busi
nesscul
tur
e:

I
tal
sopr
ovi
dest
hegui
desf
orev
ery
daybusi
nessi
nter
act
ions.

3.Occupat
ionalandor
gani
zat
ionalcul
tur
es:

I
tssisterter
mi scor
poratecul
tur
ereferstothephil
osophi
es,i
deologi
es,
values,assumpt ions,beli
efs,expect
ati
ons,atti
tudes and norms that knit an
organizat
iontogetherandar
esharedbyit
semployees

4.Mechani
sti
candor
gani
ccul
tur
es:

I
texhi
bit
sthev
aluesofbur
eaucr
acyandf
eudal
i
sm.

5.Aut
hor
it
ari
anandpar
ti
cipat
ivecul
tur
es:

Powerisconcentr
atedont heleaderandobedi
encetoordersanddisci
pli
nes
ar
est
ressed.Part
ici
pat
ivecult
urestendtoemergewheremostor
ganizat
ional
member s
ar
epr
ofessional
sorseethemselvesasequals.

6.Domi
nantandsub-
cul
tur
es:

Dominantcul
tur
e,nor
mall
yreferr
edtoast
heorganizat
ionalcul
tur
er ef
lects
cor
eval
uesthatar
esharedbythemajor
ityoft
heempl
oyees.Bycontrast
,sub-cul
tures
ar
efoundi
ndepar t
ments,di
vi
sionsandgeogr
aphicalar
easandref
lectt
hecommon
pr
obl
emsorexper
iencesofempl
oy eeswhor
esi
deinthesear
eas.

7.St
rong,
WeakandUnheal
thycul
tur
es:

AStrongcul
tur
ewi l
lhaveasigni
fi
cantinfluenceonemployeebehav
iormanifest
ingi
n
r
educedtur
nover
,lowerabsent
eei
sm,increasedcohesi
veness,
andposit
iveat
ti
tudes.

AWeakcultur
eischaract
eri
zedbyt
hepresenceofsev
eralsub-
cul
tures,
shari
ngoffew
val
uesandbehav
ior
alnormsbyemploy
eesandexist
enceoffewsacredtradi
ti
ons.

One Unheal
thycult
ureis a pol
i
tici
zed i
nter
nalenvi
ronmentthatall
ows i
nfl
uent
ial
managertooper
ateaut
onomous“fief
doms”andresi
stneededchange.

El
ement
sofcul
tur
e

1.Language

2.Cust
omsandmanner
s

3.At
ti
tudes

4.Aest
het
ics

5.Rel
i
gion

6.Educat
ion

7.Super
nat
ural
bel
i
efs

I
mpl
icat
ionsf
ori
nter
nat
ionalbusi
ness

Mul
ti
cul
tur
ali
sm:
Managi
ngmul
ti
cul
tur
ali
sm i
sessent
ial
forev
eryi
nter
nat
ional
fir
m.

1.Spr
eadcr
oss-
cul
tur
all
i
ter
acy

2.Compat
ibi
l
itybet
weenst
rat
egyandcul
tur
e

3.Cul
tur
eandcompet
it
iveadv
ant
age

4.Managi
ngdi
ver
sit
y.

Cul
tur
alpr
edi
sposi
ti
ons
Cul
tur
almodel
s:

Hof
stede’
scul
tur
aldi
mensi
ons:

Tr
ompenaar
s’7dmodel
 Uni
ver
sal
i
sm v
ersuspar
ti
cul
ari
sm

I
ndi
vi
dual
i
sm v
ersuscol
l
ect
ivi
sm

Neut
ral
ver
susaf
fect
ive

Speci
fi
cver
susdi
ff
use

Achi
evementv
ersusascr
ipt
ion

Ti
medi
mensi
on

I
nter
nal
ver
susext
ernal
cont
rol

Mul
ti
cul
tur
almanagement

Technol
ogi
calenv
ironment

Management of t
echnol
ogy i
nvolv
es i t
s cat
egorizat
ion,managing t
he
syst
ems that enabl
ethe awareness,acqui
sit
ion,adaptat
ion,adv ancement
,and
abandonment
.

Cl
assi
fi
cat
ionoft
echnol
ogy
:

1.St
ate-
of-
the-
art
-t
echnol
ogi
es

2.Pr
opr
iet
aryt
echnol
ogi
es
3.Knownt
echnol
ogi
es

4.Cor
etechnol
ogi
es

5.Lev
eragi
ngt
echnol
ogi
es

6.Suppor
ti
ngt
echnol
ogi
es

7.Paci
ngt
echnol
ogi
es

8.Emer
gingt
echnol
ogi
es

9.Scout
ingt
echnol
ogi
es

10.I
deal
i
zedunknownbasi
ctechnol
ogi
es.

Thet
echnol
ogycy
cle:

1.Awar
enessphase

2.Acqui
sit
ionphase

3.Adapt
ati
onphase

4.Adv
ancementphase

5.Abandonmentphase

I
mpactoft
echnol
ogy
:
Soci
ali
mpl
icat
ions:

Economi
cimpl
icat
ions:

I
ncr
easedpr
oduct
ivi
ty

Needt
ospendonR&D

Jobsbecomei
ntel
l
ect
ual

Pr
obl
emsoft
echno-
str
uct
ure

I
ncr
easedr
egul
ati
onandst
if
fopposi
ti
on

Ri
seanddecl
i
neofpr
oduct
sandor
gani
zat
ions

Boundar
iesr
edef
ined

Tr
aini
ngofsci
ent
ist
sandengi
neer
s.

Pl
antl
evelchanges:

 Or
gani
zat
ionst
ruct
ure

 Resi
stancet
ochange
  Fearofr
isk

 E-
commer
ce

 Pat
ent
ing

 Tr
anspor
tat
ion

 Mar
ket
s

 Technol
ogyt
ransf
ers

 Pr
oduct
ion

 Ot
her
s

Oper
ati
onalsequencesf
ort
echnol
ogyt
ransf
er

1.Ar
rangement
sforsal
es&l
i
censi
ng

2.Pr
ovi
sionofknow-
how&t
echni
cal
exper
ti
se

3.Pr
ovi
sionofdet
ail
edengi
neer
ingdesi
gns&i
nst
all
ati
on

4.Pur
chasesandl
easesoft
echnol
ogyel
ement
s

5.Techni
cal
cooper
ati
onagr
eement
s

Economi
cenv
ironment

I
tcanhelpint
ernati
onalmanagers,t
opr
edi
cthow t
rendsandev
ent
smi
ghtaf
fect
per
for
manceoffor
eignbusi
ness.

I
) Cl
assi
fi
cat
ionont
hebasi
sofi
ncome:

1.Devel
opi
ngcount
ri
es:shar
easetofcommonandwel
l–def
inedgoal
s.Ex:I
ndi
a,
Chi
na.

2.Developedcount
ries:Thosear
ehi
ghl
yindust
ri
ali
zed,
highl
yef
fi
cient
.Ex:Canada,
Japan,Aust
ral
ia,
US.

I
I)Count
ri
escl
assi
fi
edbyeconomi
csy
stem:

1.Mar
keteconomy
:pr
oduct
ionofgoodsandser
vicesi
snotpl
annedbyi
ndi
vi
dual
s

2.Commandeconomy:decisi
onsr
elat
ingt
oal
leconomi
cact
ivi
ti
es– whatt
o
pr
oduce,
howt
oproduce.

3.Mi
xedeconomy
:iti
ncl
udesbot
h.Ex:
Indi
a.
I
II
)Cl
assi
fi
cat
ionofcount
ri
esbyr
egi
on:

1.EastAsi
aandPaci
fi
c

2.Eur
opeandcent
ral
Asi
a

3.Lat
inAmer
icaandt
heCar
ibbean

4.Mi
ddl
eeastandNor
thAf
ri
ca

5.Sout
hAsi
a

6.Sub-
Sahar
anAf
ri
ca

7.Hi
ghi
ncomecount
ri
es

I
V)Economi
cscenar
io:

1.Rat
esofgr
owt
h

2.I
nfl
ati
on

3.Sav
ingsandi
nvest
ment

4.Fi
scal
stabi
l
ity

5.Bal
anceofpay
ment
s

6.Fi
nanci
alsy
stem

V)Economi
cpol
ici
es:

1.I
ndust
ri
alpol
i
cy

2.Monet
arypol
i
cy

3.Fi
scal
pol
i
cy

4.Tr
adepol
i
cy

Count
ryat
tract
iveness:

Acount
ryat
tract
ivenessassessmenti
sbasedont
wodi
mensi
ons

 
Mar
ket
 andi
ndust
ryoppor
tuni
ti
es

Count
ryri
sks(manyor
ganizati
onspubl
ishcount
ryassessmentr
esul
tsbasedon
v
ari
ouseconomic/
pol
it
ical
/soci
alf 
act
ors)
Mar
ketoppor
tuni
ti
es

Marketopport
uni
ti
esassessmentmeasur
est
hepot
ent
ialdemand 
i
nthe
count
ryf
oraf
ir
m’sproduct
sorserv
icesbasedon:

Mar
ketsi
ze

Gr
owt
h

Qual
i
tyof
 demand.

I
ndust
ryoppor
tuni
ti
es

I
ndustr
yoppor
tuni
ti
esassessment det
erminespr
ofi
tabi
l
itypot
ent
ial
 of
 acompany
pr
esencei
nacountr
ygi
venthefol
lowi
ngf
actors:

Qual
i
tyofindust
rycompet
it
ive st
ruct
ure(
Por
ter
sfi
ve-
for
ce I
ndust
ryAnal
ysi
s
Fr
amewor
k)

Resour
ceav
ail
abi
l
ity
(Por
ter
sdi
amondf
ramewor
k)

Count
ryr
isk:

Pol
i
tical
risks

Economi
cri
sks

Compet
it
iver
isks

Oper
ati
onal
risks

Pr
otect
ioni
sm andTr
adeLi
ber
ali
sat
ion

Pr
otect
ioni
sm:
Protect
ioni
sm meansbywhi
chtr
adebetweencount
ri
esi
srest
ri
ctedi
nsomeway–
normall
ythroughmeasur
est
oreducet
henumberofimpor
tscomingi
ntoacount
ry

Mai
nmeansar
e:

Tari
ff
s-Ataxonagoodcomi ngi
ntoacount
ry.i
ncr
easest
hepr
iceoft
hegood
andmakesitl
esscompet
it
ive

Quot
as-Physi
cal
restr
ict
ionont
henumberofgoods
comi
ngint
oacountry
.

Non-
Tar
if
fBar
ri
ers-Anymet
hodsnotcov
eredbyat
ari
ff
,mostusual
l
y:

• Rul
es

• Regul
ati
ons

• Vol
unt
aryExpor
tRest
rai
nts(
VERs)

• Legi
slat
ion

• Exact
ingSt
andar
dsorSpeci
fi
cat
ions

Tr
adeLi
ber
ali
sat
ion
 UNI
TIII
NTERNATI
ONALTRADEANDI
NVESTMENT

Promot ion ofGl obalBusiness – The Rol e ofGATT/ WTO – Mul til
ateralTrade
Negot i
ationand
Agreement s–VI IIandIX,RoundDiscussi
onsandAgr eement s–Challengesf orGlobal
Business–Gl obalTr adeandInv
estment–Theor i
esofInternat
ionalTr
adeandTheor i
es
ofInternati
onalInvestment–Needf orGlobalCompetit
iveness–RegionalTr adeBl ock
–Ty pes–Adv antagesandDisadvant
ages–RTBsAcr osst heGlobe–Br iefHistor
y.

CONTENTS:

o GATTa ndWTO
oInter
nationalt
radeandinv
est
mentt
heor
ies
o RTB(Regional
tradebl
ock)

WTO(
Wor
ldt
radeor
gani
zat
ion) 

TheWTOwasest shedon1stJanuar
abl
i y1995.TheWTOhaslar
germembershi
p,the
presentnumberofmember’
sstandsat151.I
ndiai
soneofthefoundermember
sof
WTO.

Def
ini
ti
on:
TheWTO i saninter
nati
onalorgani
zati
ondesignedbyi t
sf ounderstosuper
viseand
l
iber
ali
zeinter
nati
onaltr
ade.Itdealswithregulat
ionoft r
adebet weenpart
icipat
ing
count
ri
es;itprov
idesaf r
amewor kfornegot
iati
ngandf ormalizi
ngtradeagr
eement s
andadisputer
esolut
ionpr
ocessaimedatenforci
ngpart
ici
pants

Obj
ect
ives:

1. Pr
omot
etr
adef
lowsbyencour
agi
ngnat
ionst
oadoptnondi
scr
imi
nat
ory
t
radepol
i
cies.
2. The Wor
ld Tr
ade Or
gani
zat
ion (
WTO)i
sthe onl
ygl
obali
nter
nat
ional
or
gani
zat
iondeal
i
ngwi
tht
her
ulesoft
radebet
weennat
ions.
3. Thegoali
sto hel
p pr
oducer
sofgoodsand ser
vices,expor
ter
s,and
i
mpor
ter
sconductandgr
owt
hei
rbusi
ness.
4. Toimprov
et hewelfar
eofthepeoplesoft
hemembercount r
ies.
5. Handli
ngtr
adedisputesandmonitori
ngnat
ional
tradepol
i
cies
6. Techni
cal assi
stance and trai
ning for developi
ng countri
es and
cooper
ati
onwi
thot
heri
nter
nat
ional
organi
zat
ions.
7. Toensureopt
imum uti
l
izat
ionofwor
ldr
esour
ces.
8. Toprot
ectenvi
ronment.

BoxesofWTO

Gr
eenbox:
 Nott
radedi
stor
ti
ng

Bl
uebox:
 Mi
nimal
l
ydi
stor
ti
ngbecausepr
oduct
ioni
scont
rol
l
ed

Amberbox:
 Tr
adedi
stor
ti
ng,
subsi
diest
iedt
oei
therpr
iceorpr
oduct
ion

RedBox:
 Subsi
diest
hatmustbest
opped(
empt
ybox)
 

WTO:Basi
cPr
inci
ples 

o Tradewi thoutdiscri
mi nati
on
o Predictabl eandgr owingaccesst omar ket
o Undistorted, fai
rcompet i
ti
on
o Transpar ency
o Overseei ngnat i
onal t
radepol i
cy
o Co operationwi thIMFandWor l
dBank
oE xpandi ngt radeandpr oduct
ion,sust
ainabl
e dev
elopmentandpr
otect
ion
oftheenvir
onment
o Helpinganddevelopi
ngtr
ansit
ioneconomi
cs
o WTOi ngl
obaleconomicpol
icymaking
 o Taki
nginf
ormation
o Gi
v i
ngi
nformati
ont opubli
c
o Reduci
ngobstacleswhichfacil
it
ateseconomicgrowth
o Pr
ohibi
tsquanti
tati
verestr
ict
ions(QRs)ontheexport
ati
onandi
mpor
tat
ion
ofpr
oduct
s

Or
gani
zat
ionst
ruct
ureoft
heWTO 

1.Mi
nist
eri
alconf
erence

2.Gener
alcounci
l
,

3.Counci
l
s,

4.Commi
tt
eesandManagementbodi
es

1.Mi
nist
eri
alconf
erence:

Iti
stheaut
hor it
ytomakedecisionsonall
mattersrel
ati
ngtomul t
il
ater
altr
ade
agreement
s.Itisthetopdeci
sionmakingbodyoftheWTO.I tmeetsatleastoncei
n
everyt
woy ears.Ther
ehavebeensev enmini
ster
ial
conferences.

I
)Firstmini
steri
alconf
erence–heldinSingapor
e1996,pri
mar
ypur
poset
o
i
nit
iateanint
ernati
onalef
fortamongglobalt
radi
ngnat
ions.
 

I
I)Secondmi
nist
eri
alconf
erence-washel
dinGenev
ainSwi
tzer
land.

I
II
)Thi
rdmi
nist
eri
alconf
erence-
 washel
dinSeat
tl
einWashi
ngt
on

I
V)Fourt
hmi
nist
eri
alconf
erence-washel
dinDohai
nPer
siangul
fnat
ionof
Qat
ar.

V)Fi
ft
hmi
nist
eri
alconf
erence-washel
dinCancun,
Mexi
co.

VI
)Si
xthmi
nist
eri
alconf
erence-hel
dinHongKong.

VI
I)Sev
ent
hmi
nist
eri
alconf
erence-hel
dinGenev
a,Swi
tzer
land

2.Gener
alcounci
l:

Thegener
alcounci
lhasot
herf
ormsl
i
kedi
sput
eset
tl
ementbodyandt
rade
pol
icyr
evi
ewsbody.

3.Counci
ls:

I
. Counci
lfort
radei
ngoods
 II
. Counci
lfort
radei
nservi
ces
I
II
. Counci
lfort
rader
elat
edaspect
sofi
ntel
l
ect
ual
proper
tyr
ight
s.

4.Commi
tt
eeandmanagementbodi
es:

Thegener
alcounci
ldel
egat
espower
s,r
esponsi
bil
i
tiesandaut
hor
it
iest
othese
bodi
es.

I
. Commi
tt
eeontr
adeanddev elopment
II
. Commi
tt
eeonbalanceofbalanceofpay
ment s
I
II
. Commi
tt
eeonbudget,f
inanceandadminist
rat
ion.

Mul
ti
lat
eralagr
eement
s 

Mult
ilat
eral
ism -Coordinat
ionmechani
sm forachiev
ingmutuall
ybenefi
cial
t
radeoutcomes( responsetoacoordi
nati
onfail
ure,i
.e.
(tosuccessi
ve
r
etal
iati
ons)
.

GATT WTO

Wor
ldTr
adeOr
gani
zat
ion:Rounds 

Year
s Name Accompl
i
shment
s Count
ri
es

1947 Genev
a Tar
if
fs 23

1949 Annecy Tar

if
fs 13

1951 Tor
quay Tar
if
fs 38
1956 Genev
a Tar
if
fs 26
1960-
61 Di
l
lonRound Tar
if
fs 26
1964-
67 KennedyRound Tar
if
fs&AD 62
1973-
79 Toky
oRound Tar
if
fs,
NTBs&“
framewor
kAgr
eement
s” 102

1986-
94 Ur
uguayRound Mar
rakeshAgr
eement 123

WTO’
s Par
ts

GATT:toreducetradebarr
ier
sandt
ocr
eat
emor
ecompr
ehensi
veand
enf
orceabl
ewor l
dt r
aderul
es.

GATS:Gener
alAgr
eementonTr
adei
nSer
vices(
Nat
ional
Treat
mentf
orSer
vice
Fi
rms)

TRIPs:
 Agreementi
sTradeRelatedAspect
sofInt
ell
ect
ual
Proper
tyRi
ght
s
(Enf
orcePatent
s,Copy
right
s,andTrademarks)

TRI
Ms:Agr
eementonTradeRel
atedInvest
mentMeasur
es,ar
erul
est
hatappl
y
tot
hedomest
icr
egul
ati
onsacountryappli
est
ofor
eigni
nvest
ors.
 
 

WTO’
sMostBasi
cPr
inci
ples

MFN=MostFav
oredNat
ion

Eachmembercount
ryshouldtreatal
lmember
saswel lasitt
reat
s
i
ts“mostf
avor
ednati
on”(i
.e.,
thememberthatitt
reat
st hebest
)

Nat
ionalTr
eat
ment

Onceapr
oductorsel
lerhasenteredacount
ry,
itshoul
dbetreat
ed
t
hesameasproductsorsell
ersthator
igi
nat
edinsi
dethatcount
ry.

GATT-
WTO:Compar
ison 

GATT WTO
  Pr
ovi
sionalAgr
eement  I
nter
nat
ionalOr
gani
sat
ion

 Cont
ract
ingPar
ti
es  Member
s

 Rest
ri
ctedCov
erage  Br
oadCov
erage

 Goods  Goods,
Ser
vices,
 TRI
Ps

Di
sput
eSet
tl
ement Di
sput
eSet
tl
ementst
rengt
hened

GATTwasadhocandpr
ovi
sional WTOandi
tsagr
eement
sar
eper
manent

GATT(
gener
alagr
eementont
ari
ff
sandt
rade)
 

GATTisamulti
l
ateralt
radeagreementwithoverseasandithasbeenlabeled
t
helocomoti
vethatpowersi
nternati
onalconf
erence.Creat
edinJanuary1948i s
i
ntendedt
oachieveabroad,multi
lat
eral
andfreewor l
dwidesyst
em oftrading.

Basi
cpr
inci
plesofGATT:

1.
Membercount ri
eswil
lconsulteachot herconcer
ningtr
adeprobl
ems.
2.
Itpr
ovi
desaf rameworkfornegotiat
ionandembodi esr
esul
tsof
negot
iat
ionsinalegalenvi
ronment.
3.
Tradeshouldconductonanon- di
scriminator
ybasis.

 
Obj
ect
ivesofGATT:

1.
Toprov i
deequalopport
uni
tiestoallcountr
iesinint
ernati
onalmarketfor
tr
adingpurpose.
2.
Toincreasetheeff
ecti
vedemand.
3.
Toprov i
deamicabl
esoluti
ont othedisput
esr el
atedtointer
nat
ionaltr
ade.
4.
Toensur eabett
erli
vi
ngstandardsint heworldasawhol e.

FourTer
msf
rom Tr
adeLaw 
 

o Non-di
scri
minati
on
o Reci
proci
ty
o Marketaccess
 oFai
rcompet
it
ion

Tr
adeAgr
eement
s 
 

Uni
lat
eral
TradeAgr
eement
:

Atr
adeagreementjoinstwoormorestatesi
najoi
ntcommit
menttoexpandt
heirtr
ade.
Nor
mally
,thisincl
udes domest i
c st
ructur
alr
efor
ms such as l
oweri
ng t
ari
ffs and
r
educi
ngbureaucr
aticregul
ati
ons.

Bi
lat
eralTr
ade 
Agr
eement

Bil
ater
alTradeAgreement
sar
ebetweenontwonati
onsatati
me.Theyarefair
lyeasyt
o
negoti
ate,
andgivethoset
wonat
ionsfav
oredt
radi
ngstat
usbetweeneachother. 

Mul
ti
lat
eralTr
ade 
Agr
eement
:

Multi
lat
eralTrade 
Agreementi
sbet weenmanynat i
onsatonet i
me.Forthi
sreason,t
hey
are 
verycompl i
cat
edtonegoti
ate,butar
ev erypowerf
ulonceallpar
ti
essignthe
agreement.Theprimarybenef
itofmulti
l
ateralagr
eementsisthatal
lnat
ionsgettr
eated
equall
y

Example:The Doha r
ound oft
rade agreementsis a mul
ti
lat
eralt
rade agr
eement
betweenal
l149member soft
heWorl
dTr adeOrgani
zat
ion.

Pl
uri
lat
eralagr
eement
:

I
tisanagreementbetweenmorethantwocount
ri
es,butnotagr eatmany
,whi
chwoul
d
bemult
il
ateralagr
eement.Apl
uri
lat
eral
agr
eementimpli
est hatmembercount
ri
es
woul
dbegi venthechoi
cetoagr
eetonewrulesonav ol
untarybasis.
 
 

Theor
iesofi
nter
nat
ionalt
radeandi
nvest
ment
:

Cl
assi
calt
heor
ies

Cont
empor
aryt
heor
ies

Fi
rmi
nter
nat
ional
izat
ion

FDIandNon-
FDIexpl
anat
ions.
Cl
assi
calt
heor
iesofi
nter
nat
ionalt
radeandi
nvest
ment
:

1.Mer
cant
il
ism t
heor
y:

Thef
irsttheor
yofinter
nati
onaltr
adeemer
gedinEngl
andi
nthemid16thcentur
y,
i
tspri
ncipleasser
tionwast hatgol
dandsil
verwer
ethemainst
aysofnat i
onal
weal
thandessentialt
ov i
gor
ouscommerce.

2.Cl
assi
calt
heor
ies:gi
venbyAdam smi
thandDav
idRi
car
do.

Thetheor
yexpl
ainst
hecondi
ti
onofi
nter
nat
ionalt
radespeci
ali
zat
ionandbenef
it
sof
tr
ade.

A)Absol
uteadv
ant
aget
heor
y:

Itexpl
ainsthatacountryabsolut
ecostadvantageintheproduct
ionofapr
oducton
accountofgreat
eref
fi
ciencyshoul
dspeci
ali
zeinitspr
oduct
ionandexpor
t.

B)Comparati
vecostt heor
y:l
ooksatr elati
veproductivi
tydif
fer
ences,foracount
ryto
speci
ali
zei
ntheproductionofthosegoodst hatitproducesmostef f
ici
entl
yandtobuy
thegoodsthatitproduceslesseffici
entl
yf rom othercountri
es,evenifthi
smeans
buyi
nggoodsfrom ot
hercountri
esthatitcouldproduceitsel
feff
ici
entl
y.

3)Factorproport
ionst
radet
heor
y:Heckscher
-Ohl
int
heor
y:al
so cal
l
edt
hef
act
or
endowmentstheor
y .

I
) Pr
oduct
sdi
ff
eri
nthet
ypesandquant
it
iesoff
act
ors

(
Labor
,nat
ural
resour
cesandcapi
tal
)

I
I)Count
ri
esdi
ff
eri
nthet
ypeandquant
it
yofpr
oduct
ionf
act
orst
hatt
heypossess.

4.Opport
unit
ycostt heor
y:propoundedbyPr of
essorGot
tfr
iedHaber
leri
n1993,t he
basi
sofinter
nat
ionaltr
adeisthediff
erencesbet
weennati
onsintheoppor
tuni
tycosts
ofpr
oducti
onofcommodi ti
es.

5.Productlif
ecycletheory:RaymondVernon'sstat
esthatwhyt radetakesplace,and
whyinvestmentoccurs,thelocati
onofpr
oductionofcert
ainkindsofproductsshi
ftsas
theygothrought hei
rli
fecy cl
es,whi
chconsistsoffourstages–i nt
roducti
on,growth,
maturi
ty,anddecli
ne.

Cont
empor
aryt
heor
ies:
Hownat
ionsenhancet
hei
rcompet
it
iveadv
ant
age

1.Nat
ionalcompet
it
iveadv
ant
aget
heor
y:
2)Nat
ionalI
ndust
ri
alpol
icymodel
:

I
tdesi
gnedt
obui
l
dnewcapaci
tyandcapabi
l
iti
esshar
ethef
oll
owi
ng:

a)Dev
elopmentandmaint
enanceofstr
ongnat
ionali
nfr
ast
ruct
urei
nar
eassuchasI
T,
communicat
ionsy
stemsandtr
anspor
tat
ion.

b)Creati
onofstronglegalandregulator
ysystemstoensuret
hatci
ti
zensar
econf
ident
aboutthesoundnessandst abi
l
ityofthenat
ionaleconomy.

3.Newt
radet
heor
y:

Theoutputr
equir
edt or eali
zeeconomicsofscalerepr
esentasigni
fi
cantpor
ti
onof
worl
ddemand.Asar esulttheorgani
zat
ionst
hatent
erthemarketf
ir
st,
areabl
etoenj
oy
thef
ir
stmoveradvantageslike:

a)Theyar
eabl
etoest
abl
i
sht
hemsel
ves

b)Capt
ureasi
gni
fi
cantpor
ti
onoft
hewor
ldmar
ket

c)Ar
eabl
etoachi
evecompet
it
iveadv
ant
ageont
hebasi
sofeconomi
csofscal
e
 andl
ear
ningef
fect
s(costsav
ingst
hataccr
ueduet
olear
ningbydoi
ng)

Fi
rmi
nter
nal
izat
ion

1)I
nter
nal
izat
ionpr
ocessmodel
:(I
nter
nal
i
zat
ionpr
ocessoft
hef
ir
m)

a)Domest
icf
ocus:
acqui
ri
ngbusi
nessi
nthehomemar
ket
.

b)Pre-
exportst
age:managementi
nvest
igat
es t
he f
easi
bil
i
ty ofunder
taki
ng t
he
i
nter
nat
ional
busi
ness.

c)Exper
iment
ali
nvol
vement
:int
hef
orm ofbasi
cexpor
ti
ng.

d)Activ
einv
olv
ement
:thr
oughsyst
emat
icexpl
orat
ionofi
nter
nat
ionalopt
ionsandthe
commi t
mentoftopmanagementt
imeandresour
cestowardachievi
nginter
nat
ional
success

e)Commi
tt
edi
nvol
vement
:fi
rm’
spr
ofi
t-
maki
ngandv
alue-
chai
nact
ivi
ti
es.

2.Bor
ngl
obalandi
nter
nat
ionalent
repr
eneur
shi
p:

Thegrowing,i
ntensi
tyofi nter
nati
onalcompet it
ion,adv
ancesincommunicat
ionand
tr
anspor
tati
ontechnologi
est hathaver educedthecostofv ent
uri
ngabr
oad,andt he
i
ntegr
ati
on of wor l
d economi cs under global
izati
on whi
ch makes i
teasi er f
or
compani
esofallagesandsi zestoi
nternali
ze.

FDIbasedexpl
anat
ions:

FDIinvol
v estheestabl
ishmentofpr oduct
ionorotherfaci
l
iti
esabroad,ei
thert
hrough
Greenfi
eldinvestment(
theestabl
ishmentofnewfacil
it
iesfr
om theground-
up)orcross-
borderacquisi
tion(t
hepurchaseofanexisti
ngbusi
nessinanothernati
on).

1)Monopol
ist
icadv
ant
aget
heor
y:

Iti
sanapproachinint
ernat
ionalbusi
nesswhichexpl
ainswhyf
ir
mscancompet
ein
f
orei
gnset
ti
ngsagai
nstindi
genouscompetit
ors.

Thedirecti
nvest
ori
samonopol
ist
;forei
gndi
recti
nvest
mentt
ookpl
acebecauseoft
he
productandfact
ormar
keti
mper
fect
ions.

2)TheI
nter
nal
izat
ionTheor
y

Oneotherfinanci
all
ybasedt heor
y( por
tfol
iot
heory)wasputbyRugman,Agmonand
Lessar
d. These r esear
chers argued that i
nter
nati
onal oper
ati
ons al
l
ow for a
di
versi
fi
cat
ionofriskandt her
efor
etendtomaximizetheexpect
edretur
noninv
est
ment
.

3)TheEcl
ect
icPar
adi
gm
The eclect
ic paradigm is dev eloped by John Dunni ng seeks to off
era gener al
fr
amewor kf ordetermini
ngt heext entandpatter
nofbot hf orei
gn-
ownedpr oduct
ion
under
takenbyacount ry'
sownent erpri
sesandalsot hatofdomest i
cproductionowned
byforei
gnent er
prises.Itidenti
fiessomeoft hemor eimpor tantconf
igurat
ionsoft he
ownership,
locati
onandi nternal
ization(OLI
)advantages.

Non-
FDIbasedexpl
anat
ions:

1)I
nter
nat
ionalcol
labor
ati
vev
ent
ures:

Acol
l
abor
ati
vev
ent
urei
saf
orm ofcooper
ati
onbet
weent
woormor
efi
rms.

Hor
izont
alcol
labor
ati
on:occur
sbet
weenpar
tner
satt
hesamel
evel
oft
hev
aluechai
n.

Forex:
manuf
act
urer
-t
o-manuf
act
urerandsuppl
i
er-
to-
suppl
i
err
elat
ionshi
ps.

Ver
ti
calcol
labor
ati
on:occur
sbet
weenpar
tner
satdi
ff
erentl
evel
soft
hev
aluechai
n.

Forex:
ther
elat
ionshi
pbet
weenamanuf
act
ureranddi
str
ibut
or

2.Net
wor
ksandr
elat
ionalasset
s:

Networksandr el
ationalasset
sr epr
esentt hestockofthefi
rm’seconomical
lybenef
ici
al
l
ongt er
mr elat
ionshipswithotherbusinessentiti
essuchasmanuf act
urers,
dist
ri
butor
s,
suppli
ers,retai
lers,consult
ants,banks,transportat
ionsuppl
ier
s,governmentsandany
otherorganizati
ont hatcanprovideneededcapabi li
ti
es.

Rel
ati
onalasset
s:r
epr
esentadi
sti
nctcompet
it
iveadv
ant
age.

Networks:ar
eact or
s(buy
ersand sel
l
ers)becomebound t
o oneanot
hert
hrough
ongoi
ngexchanges.

RTB(
Regi
onalt
radebl
ocks)

DEFINI TION:A r egi

onalt r
adeblocki stheresul
tofeconomi ci
nt egr
ati
onofv ar
ious
tr
adingar easofdi fferentcountri
esanditisalsoknownast r
adeblocks,regionalt
rade
organizations,andr egionalgroupi
ngs.A t r
adeblock( regi
onaltradebl ock/r
egi
onal
grouping) i sat ype of i nter
governmentalagreement ,oft
en par tof a r egi
onal
i
ntergov ernmentalor ganizati
on,whereregi
onalbarrier
st otr
ade( t
arif
fsandnon- t
arif
f
barri
ers)ar ereducedorel iminat
edamongt hepart
icipati
ngcountr
ies.

Char
act
eri
sti
cs:
 1.I
timpl
i
esar
educt
ionorel
i
minat
ionofbar
ri
erst
otr
ade,
and

2.Thistradeli
beral
izat
ioni sdiscri
minator
y,i
nt hesensethati
tappl
i
esonlyt
othe
membercount ri
esoft het radeblock,outsidecountr
iesbei
ng di
scr
imi
nat
ed
againstint
heirtr
aderelationswithtr
adeblockmember s.

Ty
pesofr
egi
onalt
radebl
ocks:

1.Pr
efer
ent
ialt
radi
ngagr
eement
:

I
tisloosestfor
m ofeconomi
cint
egrat
ion.Undert
his,agroupofcount
ri
eshav ea
f
ormalagreementt
oal
loweachot
her’
sgoodsandservicest
obetr
adedonpref
erenti
al
t
erms.

2.Fr
eet
radear
ea:

I
tisapermanentar
rangementbet
weennei
ghbor
ingcount
ri
es.I
tinv
olv
esthecompl
ete
r
emovaloft
ari
ffsongoodstr
adedamongthemembersofthefr
eetr
adear
ea.

3.Cust
omsuni
on:

Cust
omsuni
onr
emov
esbar
ri
erst
otr
adei
ngoodsandser
vicesamongt
hemsel
ves.

4.Commonmar
ket
:

Ithasnobar r
ier
stot
radeamongmembers;i
nadditi
on,t
hecommonmar ketremoves
restr
ict
ionsonthemovementoff
act
orsofproduct
ion(l
abor
,capi
talandtechnol
ogy)
acrossborder
s.

5.Economi
cuni
on:

Thisrepresent
sful
lint
egrat
ionoftheeconomi csoft
woormor emembercount
ries.I
n
addit
ion to el
i
minati
ng i
nternalt
radebarri
ers,adopt
ing ext
ernalt
radepol
ici
esand
aboli
shingrest
ri
cti
onsonthemobili
tyoft
hef actor
sofproduct
ionamongmembers.

6.Pol
it
icaluni
on:

Whil
esomedegr eeofpol
it
icalint
egr
ati
onof t
enaccompanieseconomicintegr
ati
on,
pol
it
icaluni
oni
mpli
esmoreformalpoli
ti
call
inksbetweencount
ri
es.Ali
mi t
edform of
pol
it
icaluni
onmayexi
stwheretwoormor ecountr
iesshar
ecommondeci si
on-maki
ng
bodi
esandhavecommonpolici
es.

Maj
orr
egi
onalt
radebl
ocks/
groups:
1.Eur
opeanuni
on:
(EU)

Thelargestandmostcomprehensi
veoftheregi
onaleconomi cgr
oupsistheEur
opean
Union.Toabolishi
nter
naltar
if
fsinordertomor eclosel
yintegr
ateEUandhopefull
y
al
low economic co-
operat
ion t
o hel
p av oi
df ur
therpolit
icalconf
li
cts.I
tincl
udes
EuropeanEconomicCommunitylat
eri
tiscall
edasEuropeanCommuni t
y.

2.Nor
thAmer
icanFr
eeTr
adeAgr
eement:
(NAFTA)
:

Itcameintobei
ngonJanuary1,1994.Themostaffl
uentnati
onsoftheworl
dI.
e.,USA
andCanadawi t
hMexico–adev el
opi
ngcount
ryj
oinedtogether
,toel
i
minat
ingal
ltari
ff
s
andtradebar
ri
ersamongthesecount
ri
es.

3.Sout
hAsi
anAssoci
ati
onf
orRegi
onalCooper
ati
on(
SAARC)
:December1985

Thesuccessf
ulper
for
manceofthistr
adeblockis,f
oreconomicdevel
opmentoft
he
membercountri
esandini
mprovi
ngtheemploymentopport
uni
ti
es,i
ncomesandli
vi
ng
st
andar
dsofthepeopl
eofther
egiongavei
mpetusforthef
ormat
ionofSAARC.

4.SAARCPr
efer
ent
ialTr
adi
ngAr
rangement(
SAPTA)
:

Thememberst atesreal
izingt
hefactt
hatexpansionofint
ra-r
egionaltr
adecouldactas
a sti
mulust ot he developmentoftheireconomi cs,byexpandi ng i
nvest
mentand
product
ion,decidedtoest abl
i
shandpr omoteregionalpr
eferenti
altr
adingagreement
.
December7, 1995.

5.Sout
hAsi
anFr
eeTr
adeAr
ea(
SAFTA)
:

TheSAFTAagr eementcamei nt
oforcefrom Januar
y1, 2006.Theagreementpromot es
mutualtrade and economic cooperat
ion among t he contr
act
ing stat
es,t hrough
exchangeofconcessionsinaccor
dancewi t
hi t
.Ingeneral
,theagreementrequi
r esthe
completi
onoftradel
iberal
i
zati
onprogramme.

6.Associ
ati
onofSout
h-EastAsi
anNat
ions(
ASEAN)
:

A gr oupofsi xcount r
ies,Vi
z,Singapor
e,Brunei,Malaysi
a,Phili
ppines,Thailandand
Indonesia,agreedinJanuary1992t oest
abli
shaCommonEf f
ect
ivePr efer
enti
alTarif
fs
(CEPT) .Itenablest hemembercount r
iest o haveclosecohesiv eness,sharet heir
economi candhumanr esourcesandsynergyi nthedevelopmentoft hei
ragricul
tural
sectors,industri
alsectorsandser vi
cesectors.Thei
rst r
engthiswel leducatedand
skil
ledhumanr esour
ces.Thisstr
engthenabl
edt hem t
oachi ev
efasterindustr
iali
zat
ion.

7)ASEANFr
eeTr
adeAr
ea(
AFTA)
:

Themaj
orobj
ect
ivesoft
heAFTAar
e:
 a)Toencour
agei
nfl
owoff
orei
gni
nvest
menti
ntot
hisr
egi
on,

b)Toest
abl
i
shf
reet
radear
eai
nthemembercount
ri
es,

c)Toreducetari
ffoft
heproduct
spr
oducedi
nASEANcount
ri
es.AFTAwasf
ormed
i
nthey ear(
September1994)
.

8)Mer
cosur
:

Mercosur,the Sout
h Amer i
can tradi
ng bl
ock,known as Mer cosurisSpanish and
MercosurinPor t
ugueseincludesBrazil
,Ar
gentina,ParaguayandUr uguay.Twomor e
count
ries–ChileandBolivia–ar eintheprocessofj oi
ningthetradi
ngblock.I
tcame
i
ntoforceonJanuary1,1995.Ithasthree

Obj
ect
ives:

1.Est
abl
i
shmentofaf
reet
radezone,

2.Acommonext
ernal
tar
if
f(acust
omsuni
on)
,and

3.Fr
eemov
ementofcapi
tal
,l
abor
,andser
vices.

9)Asi
aPaci
fi
cEconomi
cCooper
ati
on(
APEC)
:

I
twasf or
medi n1989i nresponsetothegr owi
ngint
er dependenceamongt heAsi
a-
paci
fi
ceconomi cs.APEC isamuchl oosereconomicgr oupingbutisuniquefori
ts
member s,t
hehugedifferencesint
heireconomicsandst ageofdev el
opment,andf
or
thej
uxtaposi
ti
onofalmostev er
ysyst
em alongthepol
it
icalspectrum.

10.Eur
opeanFr
eeTr
adeAssoci
ati
on:(
EFTA)

I
twasf ormed i
n 1959.The membercountri
esofEFTA incl
ude:Austri
a,Norway,
Portugal,Sweden,andSwit
zerl
and.Theassoci
atemember
sar eFinl
andandI cel
and,
GreatBr i
tai
n and Denmark.The EFTA counci
lmakes poli
cy deci
sions of the
or
gani zati
on.

11.Lat
inAmer
icanI
ntegr
ati
onAssoci
ati
on:(
LAI
A)

Itwasf ormedin1960.Thecount riessi

gnedtheLAI AagreementwereArgent
ina,Br
azi
l
,
Chile,Mex i
co,Par aguay
,Peru,Ur
uguay,Col
ombi a,Ecuador
,Venezuel
a,andBoli
vi
a.The
councilofmi nistersisassi
stedbyaconf erenceofcont ract
ingpar
ti
eswhichmakes
discussionsoni ssuesrequi
ri
ngajointr
esol
utionofthemember s.

12.Economi
candSoci
alCommi
ssi
onf
orAsi
aandt
hepaci
fi
c(ESCAP)
:

I
thas48membercount
ri
esand10associ
atemember
s.TheESCAP’
sgeogr
aphi
cal
cov
ersasf
oll
ows:

i
) East
:CookI
slands

i
i
) West
:Azer
bai
j
an

i
i
i) Nor
th:
Mongol
i
a

i
v) Sout
h:Aust
ral
i
aandNewZeal
and

13)AndeanPact
:

Itwasformedin1969i ncl
udesBoli
vi
a,Chil
e,Ecuador,Col
ombi
a,andPeru.I
thav ehad
todealwithl
ow economi cgrowt
h,hyper
infl
ati
on,highunempl
oyment,pol
it
icalunr
est
andcrushi
ngdebtburdens.

14)Cent
ralAmer
icanCommonMar
ketandCARRI
COM:

Itr
eferredtoasCARRI COM, i
twasestabl
ishedi
n1973.However
,ithasr
epeatedlyf
ail
ed
to make any pr ogr
ess t owar
ds economi ci
ntegr
ati
on.A formalcommi t
mentt o
economi candmonet aryunionwasadopt edbyCARRICOM’smemberst atesin1984,
butsincethenli
tt
leprogresshasbeenmade.

UNI
TII
IINTERNATI
ONALSTRATEGI
CMANAGEMENT

Strat
egicCompul
sions– Standardi
zati
on vs.Di f
fer
ent
iat
ion – Strategi
cOpt ions–
GlobalPor
tfol
i
oManagement–Gl obalEntr
yStrategy–Diff
erentFormsofI nt
ernational
Business – Advantages– Organi
zati
onal Issues of Internat
ional Business –
Organizat
ionalStr
uct
ures– Cont
rol
l
ing ofI
nternat
ionalBusi
ness– Appr
oachest
o
Control–Perfor
manceofGl
obalBusi
ness–PerformanceEval
uati
onSy
stem.

Fr
amewor
kforI
nter
nat
ionalSt
rat
egi
cManagement

I
nter
nati
onalst
rat
egicmanagementbui
ldsonfiv
ephasesofpl
anni
ngandanal
ysi
sthat
pr
ovideafr
amewor kfordepl
oyi
ngr
esourcesandapl
anofacti
on.

 Recogni
zi
ngant
ecedent
s

 Ext
ernal
andi
nter
nal
anal
ysi
s

 St
rat
egi
canal
ysi
sandchoi
ce

 Lev
eragi
ngcompet
it
iveadv
ant
ageandpr
ocess

 I
mpl
ement
ati
onandi
ntegr
ati
on

I
nter
nat
ionalst
rat
egi
cpl
anni
ng

Int
ernati
onalstrat
egi
cpl anni
ngisaprocessofeval
uat
ingtheint
ernalandexternal
envir
onmentbymul t
inati
onalor
gani
zati
ons,thr
oughwhichtheysetthei
rlong-t
erm and
short-
ter
m goalsandt hentheyi
mplementaspecifi
cpl
anofact i
oninordertoachieve
thoseobject
ives.

St
rat
egi
ccompul
sions

Itmeansthatt hecompani esfacethecompulsiontobegl obaliftheywantt ogainthe

globalmarketandmor ev al
ues.Butinthemoder ncontextst
rategi
cmanagementf aces
manycompul sions.The presentand futur
e developmentoft he fiel
d ofstrat
egic
managementi sl i
kelyt
obedr i
venbycompul si
onsl i
kecontempor arydevelopmentsin
socialandeconomi ctheoryandr ecentchangesint henat ureoft hebusinessand
economiccontext .

I
nter
nat
ional
/gl
obalst
rat
egi
cmanagement

Str
ategi
c managementi st he process ofsy stemat i
cal
ly anal
yzi
ng var
ious
opport
unit
ies and threat
s vis-à-
vis organiz
ational strengths and weaknesses,
for
mulati
ngandarrivi
ngatstr
ategicchoicesthroughcr i
ti
calev al
uati
onofalter
nat
ives
andimplementi
ngthem tomeetthesetobjecti
vesoft heorganizat
ion.

Ar
eaofst
rat
egi
ccompul
sions

1.Or
ient
ati
onf
orgl
obal
i
zat
ion
 2.Emer
gingE-
commer
ceandI
nter
netcul
tur
e

3.Cut
-t
hroatcompet
it
ion

4.Di
ver
sif
icat
ion

5.Act
ivepr
essur
egr
oups

6.Mot
ivef
orcor
por
atesoci
alr
esponsi
bil
i
ty(
CSR)andet
hics.

St
andar
dizat
ionv
ersusDi
ff
erent
iat
ion

Accor
dingtoLevi
tt,represent
slocalmarket
ingversusglobalmar
keti
ngandf ocuson
thecentr
alquest
ionofwhet herast andar
dized (gl
obal
)oradi ff
erent
iat
ed (l
ocal
),
count
ry-
speci
fi
cmar keti
ngapproach.

Per
spect
ivesonst
andar
dizat
ionv
ersusDi
ff
erent
iat
ion:

1)Regi
onal
per
spect
ive

2)Mar
ket
ingpr
ocesspr
ospect
ive

3)Mar
ket
ingcomponent
s/mar
ket
ingmi
xper
spect
ive.

Fact
orsFav
ori
ngSt
andar
dizat
ionandDi
ff
erent
iat
ion

Factor
sf avor
ing Fact
orsf
avor
ingdi
ff
erent
iat
ion
Standardizat
ion

Economics of scal
e. I
n Local env
ironment
-i
nduced adaptati
on..
,
R&D, pr oduct
ion and gover
nmentandregulat
oryi
nfl
uences,l
egal
market
ing. i
ssues.

Gl
obal
compet
it
ion Local
compet
it
ion

Convergenceoft
astesand Vari
ati
on in consumer needs( consumer
consumerneeds(
consumer needsarehet
erogeneous)
pref
erences are
homogeneous)

Cent
ral
i
zedmanagementof Fr
agment
edanddecent r
ali
zedmanagement
i
nter
nat
ional
oper
ati
on. wi
thi
ndependentcount
rysubsi
dies
A standar
dized concepti
s Anadopt
edconcepti
susedbycompet
it
ors
usedbycompet i
tors

St
rat
egi
copt
ions

Str
ategi
copti
ons/
choicei
nvolvesthesel ect
ionofast
rat
egyorsetofst
rat
egi
est
hat
hel
psinachi
evi
ngorgani
zat
ionalobject
ives.

1.Gl
obalst
rat
egy

2.I
nter
nat
ionalst
rat
egy

3.Tr
ansact
ionalst
rat
egy

4.Mul
ti
-domest
icst
rat
egy

1.Globalst
rat
egy:Itv i
ewstheworl
d asa singl
emar ket.Tight
lycont
rol
sgl
obal
oper
ati
onsfr
om headquart
erst
opr
eser
vefocusonstandar
dizat
ion.

2.Int
ernati
onalstr
ategy
:Inthi
sstr
ategycompanyext
endsmar
ket
ing,manuf
act
uri
ng
andotheracti
vi
ti
esoutsi
dethehomecount
ry.

3.Mul t
i-
domesti
cstr
ategy:t
heint
ernat
ionalcompanydiscov
ersthatdi
ff
erencesi
n
marketsaroundtheworlddemandanadapt at
ionofit
smar ket
ingmixinor dert
o
succeed.

4.Transacti
onalstr
ategy
:t hi
siscompanythatt
hinksgl
obal
lyandactslocal
l
y.The
tr
ansacti
onalcorpor
ati
onismuchmor ethanacompanywi t
hsales,i
nvest
mentsand
oper
ationsi
nmanycount r
ies.

Fact
orsaf
fect
ingst
rat
egi
copt
ions:

1)Ext
ernal
const
rai
nts

2)I
ntr
a-or
gani
zat
ional
for
cesandmanager
ial
power
-r
elat
ions

3)Val
uesandpr
efer
encesandmanager
ial
att
it
udesr
isk

4)I
mpactofpastst
rat
egy

5)Ti
meconst
rai
ntsi
nchoi
ceofst
rat
egy
.

6)I
nfor
mat
ionconst
rai
nts

7)Compet
it
or’
sreact
ion
Gl
obalpor
tfol
iomanagement

Globalpor t
fol
ioinv estmentmeanst hepurchaseofst ocks,bonds,andmoneymar ket
i
nstrument sbyf oreignersforthepur
poseofr eal
i
zingaf inanci
alretur
nwhi chdoesnot
resulti
nf orei
gnmanagement ,owner
shi
p,orcontrol.Port
f ol
i
oinvestmentispartofthe
capitalaccountont hebalanceofpay mentsst at
isti
cs.Ani nternat
ionalport
fol
iois
designedt ogivethei nvest
orexposuret
ogr owthinemer gingandinternat
ionalmar
kets
andpr ovi
dedi ver
sificat
ion.

Fact
orsaf
fect
inggl
obalpor
tfol
ioi
nvest
ment
:

1)Taxr
atesoni
nter
estordi
vi
dends

2)I
nter
estr
ates

3)Exchanger
ates

Pr
obl
emsofgl
obalpor
tfol
ioi
nvest
ment
:

1.Unf
avor
abl
eexchanger
atemov
ement

2.Fr
ict
ionsi
nint
ernat
ional
financi
almar
ket

3.Mani
pul
ati
onofsecur
it
ypr
ices

4.Unequal
accesst
oinf
ormat
ion

Gl
obalent
ryst
rat
egi
es

Lev
elofi
nvol
vement
:

 Whol
l
y-ownedsubsi
diar
y

 Companyacqui
sit
ion

 Assembl
yoper
ati
ons

 Joi
ntv
ent
ure

 St
rat
egi
cal
l
iance

 Li
censi
ng

 Cont
ractmanuf
act
ure

 Di
rectmar
ket
ing

 Di
str
ibut
orsandagent
s
  Sal
esf
orce

 Tr
adi
ngcompani
es

 Expor
tmanagementcompani
es

 Pi
ggy
backoper
ati
ons

 Domest
icpur
chasi
ng

 Fr
anchi
sing

Modesofent
ry:For
msofI
nter
nat
ionalbusi
ness

I
)Expor
ti
ngasanent
ryst
rat
egy
:

1)Expor
ti
ng:

Export
ingist
hemosttradit
ionalmodeofent
eri
ngthefor
eignmar
ket.Export
ingisthat
whichall
owsmanufactur
ingoperati
onstobeconcent
rat
edinasingl
el ocat
ion,which
mayleadtoscal
eeconomics.

a)Indi
rectexpor
ting:Forfi
rmsthatli
tt
lei
ncl
i
nat
ionorf
ew resourcesforint
ernat
ional
market
ing,thesi
mpl estandlowestcostmet
hodofmarketentr
yi sforthem tohave
thei
rpr
oductssoldov er
seasbyother
s

b)Di
rectexpor
ti
ng:

Export
ingi sthemostpopularappr
oachforf
ir
msasitrequi
resf
ewerresources,has
l
it
tleeffectonexi
sti
ngoper
ationandinv
olv
esl
owinv
est
mentandfi
nanci
alri
sks.

I
I)Manuf
act
uri
ngst
rat
egi
eswi
thoutf
orei
gndi
recti
nvest
ment
:

1)Li
censi
ng:

Underal i
censi
ng agreement,acompany( t
heli
censor
)grant
sr i
ghtstointangi
ble
propert
ytoanothercompany( theli
censee)foraspeci
fi
edperi
od;inexchange,t
he
l
icenseeor
dinar
il
ypaysar oy
alt
yt ot
heli
censor.

2)Fr
anchi
sing:

I
tmeansofmarketi
nggoodsandser vi
cesi
nwhicht
hef r
anchi
sergr
ant
sthelegalri
ght
t
ousebrandi
ng,
trademarksandproduct
sandthemethodofoper
ati
oni
stransf
erredto
t
hir
dpar
ty–thefranchi
se–inret
urnforafr
anchi
sef
ee.

3)Cont
ractmanuf
act
ure:

Af
ir
m whi
chmar
ket
sandsel
l
spr
oduct
sint
oint
ernat
ionalmar
ket
smi
ghtar
rangef
ora
l
ocal
manuf
act
urert
opr
oducet
hepr
oductf
ort
hem undercont
ract
.

4)Tur
nkeypr
oject
s:

I
tisacont ractunderwhi chaf i
rm agr eestoful
l
ydesi gn,constr
uctandequipa
manufact
uri
ng/busi
ness/serv
icef
acil
ityandtur
ntheproj
ectovertothepur
chaserwhen
i
tisr
eadyforoperat
ionforremunerat
ion.

5)Management
scont
ract
s:

Iti
sanagr eementbetweent wocompanies,wherebyonecompanyprovi
desmanager
ial
assist
ance,techni
calexperti
seandspeciali
zedserv
icest
othesecondcompanyofthe
argumentforacertai
nagr eedper
iodi
nret ur
nformonetar
ycompensati
on

I
II
)Manuf
act
uri
ngst
rat
egi
eswi
thFDI
:

1)Joi
ntv
ent
ures:

Itoccurswhenacompanydeci desthatshar
edownershi
pofaspeci
all
ysetupnew
companyf ormarket
ing and/ormanufact
uri
ng i
sthe mostappr
opr
iat
e met
hod of
expl
oiti
ngabusi
nessopportuni
ty.

2)St
rat
egi
cal
li
ances:

SI
Ai sabusi
nessrel
ati
onshipestabli
shedbytwoorcompaniest
oco-
oper
ateoutof
mutual
needandtoshar
eriskinachievi
ngacommonobject
ive.

3)Mer
ger
:

I
tisacombi
nat
ion(
othert
ermsar
eamal
gamat
ion,consol
i
dat
ionori
ntegr
ati
on)oft
wo
ormor
e

organi
zati
onsi
nwhi choneacqui
rest
heasset
sandl
i
abi
l
iti
esoft
heot
heri
nexchange
forshar
esorcash.

4)Acqui
sit
ion:

I
tisprocessofacqui
ri
ngandpurchasi
nganexi
sti
ngv ent
ure.I
tisoneoft heeasy
meansofexpandi
ngabusi
nessbyent
eri
ngnewmar
ketsornewproductar
eas.

5)whol
ly
-ownedsubsi
diar
y:

Thecommonr easonf
oroperat
ingwhol
l
y-ownedsubsi
diar
ysepar
atel
yfr
om t
he owner
companycoul
dbenamev al
ue.

Oft
en,
awel l
-knownandrespect
edcor
porati
oni
sacqui
redbyanot
herent
it
ythathasno
namerecognit
ioni
nthatpar
ti
cul
armarket
.
6)Assembl
yoper
ati
ons:

Aforei
gnownedoperati
onmightbesetupsi
mpl yt
oassemblecomponentswhichhave
beenmanufact
uredinthedomesti
cmarket
.Ithastheadv
antageofreduci
ngtheeff
ect
oftar
if
fbar
ri
erswhicharenor
mall
yloweroncomponentsthanonfi
nishedgoods.

Fact
orsaf
fect
ingt
hesel
ect
ionofent
rymode

Ext
ernalf
act
ors

1)Mar
ketsi
ze

2)Mar
ketgr
owt
h

3)Gov
ernmentr
egul
ati
ons

4)Lev
elofcompet
it
ion

5)Lev
elofr
isk

I
nter
nalf
act
ors

1)Companyobj
ect
ives

2)Av
ail
abi
l
ityofcompanyr
esour
ces

3)Lev
elofcommi
tment

4)I
nter
nat
ional
exper
ience

5)Fl
exi
bil
i
ty

Or
gani
zat
ionst
ruct
ureanddesi
gn

Or
gani
zat
ionalst
ruct
ure:

I
ti sthe formalarrangementofr ol
es,responsi
bil
it
ies and rel
ati
onships wit
hin an
organi
zati
on.Int
ernati
onalcompani
esspecifythest
ructur
et hatgr
oups,indi
vidual
sand
operat
ionaluni
tsinwaysthatmanager
sbelievebestsupportthestr
ategyofthefir
m.

Or
gani
zat
ionaldesi
gn:

I
tdeals wit
h struct
uralaspect
s oforgani
zat
ions;itaims atanal
yzing r
oles and
r
esponsi
bil
i
tiessothatcol
l
ecti
veeff
ortcanbeexpl
ici
tl
yorgani
zedt
oachieveends.

Desi
gni
ngor
gani
zat
ionalst
ruct
ure:
Iti
ncl
udesananal
ysi
soft
hef
oll
owi
ngaspect
s;

1)Ext
ernal
env
ironment
 2)Ov
eral
lai
msandpur
poseoft
heent
erpr
ise

3)Obj
ect
ives

4)Act
ivi
ti
es

5)Deci
sions

6)Rel
ati
onshi
ps

7)Or
gani
zat
ionst
ruct
ure

8)Jobst
ruct
ure

9)Or
gani
zat
ioncl
i
mat
e

10)
Managementst
yle

11)
Humanr
esour
ce

Ty
pesofor
gani
zat
ional
str
uct
ure

1)I
nter
nat
ionaldi
vi
sion’
sst
ruct
ure:

Grouping each int

ernati
onal business act
ivi
ty i
nto it
s own di vi
sion, put
s
i
nternati
onall
yspeci
ali
zedpersonneltogethert
ohandlesuchdi
ver
semat t
ersasexpor t
document at
ion,
for
eign-
exchangetransacti
onsandrel
ati
onswit
hfor
eigngovernments.

2)Funct
ionaldi
vi
sion’
sst
ruct
ure:

I
temphasizesonspeci
fi
cfuncti
onssuchasmanuf act
uri
ng,mar
ket
ing,f
inanceandso
on.I
tismoresui
tabl
ewheretheproduct
sandcust
omer saref
ewandhomogeneous.

3)Pr
oductdi
vi
sionst
ruct
ure:

Itismorecommoni nint
ernati
onalbusi
nessandmor esui
tableincaseofamulti
ple
brandsyst
em.Inthi
scase,ther
earediff
erentpr
oductdi
vi
sions,i
neachdiv
isi
on,t
here
aresub-
div
isi
ons.

4)Geogr
aphi
c(Ar
ea)di
vi
sionst
ruct
ure:

I
ncaseofareastr
uct
ure,or
gani
zat
ioni
sbasedonthegeographi
car
eas,namel
y,Asi
a,
Afr
ica,
andLat
inAmer
icaandsoonandtheoper
ati
oni
sdivi
dedaccor
dingl
y.

5)Mat
ri
xdi
vi
sionst
ruct
ure:

Theglobalmatri
xstruct
urei
smor
ecompl
exwheni
tcombi
nesal
lthet
hreeaspect
s–
product
,ar
ea,andfuncti
on.
Thisisfoundi nmul t
i-
productfi
rmswhereonegroupofpr oduct
sneedsar eastr
ucture
oforganizat
ion,whil
et heothergr
oupofpr
oductsneedsfuncti
onalst
ruct
ure,andforyet
anothergroup,productstr
ucturei
sfoundmoreappropr
iat
e.

6)Mi
xedst
ruct
ure:

Mostf i
rmsallow t
hehy bri
ddesignwhi
chbestsui t
sthei
rpurposeasdi ct
atedbysize,
str
ategy,andtechnology
,envi
ronmentandcultur
e.Thisist
her easonwhyt hefamous
sayi
ng“struct
urefol
lowsstrat
egyhasemerged.Ex:Phi
li
psandUni l
ever

Cont
rol
li
ngofi
nter
nat
ionalbusi
ness

Accor
dingtoChil
d,“
Contr
oli
sessent
ial
l
yconcernedwi
thregul
ati
ngtheact
ivi
ti
eswit
hin
anorgani
zati
onsot hatt
heyareinaccor
dwi t
hexpectat
ionsestabl
i
shedinpoli
cies,
pl
ansandpracti
ces.

Ty
pes/
Met
hodsofcont
rolsy
stems:

1)Per
sonalcont
rol
s:I
tiscont
rol
byper
sonal
cont
actwi
thsubor
dinat
es.

2)Bureaucrati
ccontrol
s:Thecontr
olthr
oughasy
stem ofr
ulesandpr
ocedur
es
thatdi
rectstheact
ionsofsub-
uni
ts.

3)Outputcontrol
s:I
tinvol
vessetti
nggoal sf
orsubsidi
ari
estoachieve;expr
essing
these goal
si nt er
ms ofr elati
vely obj
ecti
ve cri
ter
ia such as profi
tabi
l
ity
,
product
ivi
ty,
growt
h, mar
ketshare,andquali
ty.

4)Cult
uralcontr
ols:I
texi
stswhenempl
oyees“
buyi
nto”t
henor
msandv
alue
syst
emsoft hefi
rm.

Appr
oachest
ocont
rol
:

1)Mar
ketappr
oach

2)Rul
esappr
oach

3)Cor
por
atecul
tur
eappr
oach

Cont
rolmechani
sms:

1)Repor
ts

2)Vi
sit
stosubsi
diar
ies

3)Managementper
for
manceev
aluat
ions

4)Costandcompar
isons
 5)Ev
aluat
ivemeasur
ement
s

6)I
nfor
mat
ionsy
stems

Pr
ocessofper
for
mancemeasur
ement

Est
abl
i
shst
andar
dsofper
for
mance

Measur
eact
ual
per
for
mance

Anal
yzeper
for
manceandcompar
eitwi
thst
andar
ds

Const
ructandi
mpl
ementanact
ionpl
an

Rev
iewandr
evi
sest
andar
ds

Per
for
manceev
aluat
ionsy
stem

I
tcanbedefi
nedas,“t
heperi
odi
crevi
ewofoper
ati
onst
oensur
ethatt
heobj
ect
ivesof
t
heent
erpr
isear
ebeingaccompl
i
shed”.

Var
iousper
for
mancei
ndi
cat
ors:

1)Fi
nanci
almeasur
es

a)Ret
urnoni
nvest
ment
(ROI
)

b)Budgetasasuccessi
ndi
cat
or

2)Non-
fi
nanci
almeasur
es.

Ty
pesofper
for
manceev
aluat
ionsy
stem

1)Budgetpr
ogr
ammi
ng

2)Managementaudi
t

3)PERT(
Progr
am ev
aluat
ionr
evi
ewt
echni
que)

4)Managementi
nfor
mat
ionsy
stem

UNI
TIVPRODUCTI
ON,
MARKETING,
FINANCI
ALANDHUMANRESOURCE
MANAGEMENTOFGLOBALBUSI
NESS

Gl
obal Product
ion–Location–Scal
eofOperat
ions–CostofPr oducti
on–MakeorBuy
Deci
sions– Gl obalSuppl
yChainIssues– Quali
tyConsiderat
ions– Globali
zat
ionof
Markets,Marketi
ngStrat
egy–Challengesi
nProductDevelopment,Pri
cing,Pr
oducti
on
and ChannelManagement– I
nvest
mentDecisi
ons– Economi
c– Pol i
ti
calRisk–
Sour
cesofFund– ExchangeRat eRiskandManagement– St
rat
egi
cOr i
entat
ion–
Sel
ecti
onofExpat
riat
eManager
s–Traini
ngandDevel
opment–Compensati
on.

Cont
ent
s:

Gl
obal
product
ionandsuppl
ychai
nmanagement

Gl
obal
mar
ket
ing

I
nter
nat
ional
financi
almanagement

I
nter
nat
ional
humanr
esour
cemanagement

Gl
obalpr
oduct
ionandsuppl
ychai
nmanagement
:

Gl
obalpr oducti
onprovi
desanunparal
lelopport
unit
yforcompaniestogrow i
ntonew
marketswhi l
eatthesamet i
meboostingtheircompeti
ti
veness.Compani
esglobal
i
ze
t
hepr oducti
onfaci
li
ti
esduetothef
oll
owingreasons:

1.I
mpor
trest
ri
cti
ons

2.Rawmat
eri
al

3.I
nput
s

4.Humanr
esour
ce

5.Laborl
aws

6.Logi
sti
csmanagement

7.Expor
t

8.Di
ff
erentconsumer
s.

For
cesaccel
erat
inggl
obalpr
oduct
ion:

1)Hugef
act
orcostdi
ff
erences

2)Hi
ghgr
owt
hinemer
gingmar
ket
s

3)Lowert
ransact
ioncost
s

Gl
obalpr
oduct
ionst
rat
egy
:

1)Whent
omanuf
act
ureandwhent
oout
sour
ce?
 2)Whatquant
it
yisant
ici
pat
edf
oreachpr
oduct
?

Bondbet
weent
hemanuf
act
uri
ngst
rat
egyandt
hebusi
nessst
rat
egy

Locat
iondeci
sioni
ngl
obalpr
oduct
ion

1.Count
ryf
act
ors

2.Technol
ogi
cal
fact
ors

3.Pr
oductf
act
ors

Scal
eofoper
ati
on:

Thi
sinvolvesdecidi
ngexactl
ywhatgoodsandser
vicesshoul
dbeproducedatt
hat
l
ocati
on(i.
e.thev ar
iet
yofi t
soutput
)andwhatquanti
ti
esofthosegoodsandservi
ces
shoul
dbepr oduced(i.
e.thevol
umeofit
soutput
)

Costpr
oduct
ion:

1)Laborcost
s
 2)Capi
tal
cost
sanddepr
eci
ati
on

3)Costofmat
eri
als

Makeorbuydeci
sion:

Thi
sdeci
sionr
elat
est
otwoaspect
s:

1.Whattasksandfunct
ionsshouldbeper
for
medwi
thi
nthef
ir
m andwhi
chones
shoul
dbesourcetooutsidesuppl
ier
s?

2.Whatt
ypeofr
elat
ionshipshoul
dbedevel
opedwi
tht
hesuppl
yi
ngcompani
esf
or
t
heact
ivi
ti
esi
toutsourcestoot
herf
ir
ms?

Gl
obalsuppl
ychai
nmanagement

Accor
dingtoJonesandRil
ey;
“Suppl
ychai
nmanagementdeal
swi
tht
het
otal
flowof
mater
ialf
rom suppl
i
erthr
oughenduser
.

Appr
oachest
ogl
obal
izat
ion:

1.Mul
ti
nat
ional
fir
m

2.I
nter
nat
ional
fir
m

3.Gl
obal
fir
m

4.Tr
ansnat
ional
fir
m

Gl
obalsuppl
ychai
nst
rat
egy
:

1)Mul
tidomest
icsuppl
ychai
ns

2)Mul
ti
plei
nter
nat
ional
suppl
ychai
ns

3)Gl
obal
net
wor
kofsuppl
yanddemand

4)Fl
exible,
int
erdependent
,bal
anceofl
ocal
l
yresponsi
veandgl
obal
l
yef
fi
cient
supplychai
ns

Gl
obaldi
ver
sit
y:

1)Pol
i
tical

2)Cul
tur
al

3)Economi
c

Gl
obalenv
ironment
alf
act
ors:
 1.Uncer
tai
nty

2.Compl
exi
ty

3.Asy
mmet
ry

Suppl
ychai
npr
ocesses:

1.CRM

2.Cust
omerser
vicemanagement

3.Demandmanagement

4.Cust
omeror
derf
ulf
il
lment

5.Manuf
act
uri
ngf
lowmanagement

6.Pr
ocur
ementmanagement
/suppl
i
err
elat
ionshi
pmanagement

7.Pr
oductdev
elopmentandcommer
cial
i
zat
ion

8.Ret
urnsmanagement

Qual
it
ychar
act
eri
sti
cs:

Techni
cal
:l
engt
h,f
requency
,di
amet
er,
viscosi
tyet
c

Psy
chol
ogi
cal
:sensor
yqual
i
tiessuchast
ast
e,odorandbeaut
y

Ti
mebasedi
tems:r
eli
abi
l
ity
,mai
ntai
nabi
l
ity

Cont
ract
ual
:guar
ant
ee,
saf
ety

Et
hical
:honest
yandi
ntegr
it
yet
c

Qual
it
yconsi
der
ati
ons:

1)Cont
rol
byempl
oyees

2)Cont
rol
bysampl
i
ng

3)Cont
rol
bymoni
tor
ingcompl
aint
s

4)Cor
rect
ingdef
ici
enci
es

TQM:(
Tot
alqual
it
ymanagement
)

Accor
dingt
oISO 8402,qual
i
tymanagementcanbedef
inedasf
oll
ows;“al
l
activ
iti
esoft heoveral
lmanagementf uncti
ont hatdeter
minethequal
i
typoli
cy,
objectiv
esand responsi
bil
i
tiesand i
mpl ementthem bymeanssuch asqualit
y
planning,qual
it
ycontrol
,qualit
yassurance and qual
i
tyimprov
ementwithi
nthe
qualit
ysy st
em.

Gl
obal
izat
ionofmar
ket
s

Itrefer
stothepr ocessofint
egrati
ngandmer gi
ngofthedi
sti
nctworldmarket
s
i
ntoasi ngl
emar ket.Itincl
udestheident
if
icat
ionofcommonnor ms,v al
ue,t
aste,
pref
erence,convenienceandsl owlyenabl
esthecultur
alshi
ftt
owardstheuseofa
commonpr oductorservice.

Feat
uresofgl
obal
izat
ionofmar
ket
s:

1.Si
zeoft
hecompanydoesnotmat
ter

2.Di
sti
nct
ionsofnat
ional
mar
ket
sst
il
lexi
st

3.For
eignmar
ket
sar
ethemar
ket
sofnon-
consumergoods

4.Compet
it
ionamonggl
obal
fir
ms

Reasonsf
orgl
obal
izat
ionofmar
ket
s:

1.Masspr
oduct
ion

2.Ri
skr
educt
ion

3.I
ncr
easepr
ofi
ts

4.Adv
ersebusi
nesscondi
ti
onsofhomecount
ry

5.Tocat
ert
hedemandoft
hef
orei
gnmar
ket

6.Unf
ulf
il
ledneedsoft
hecust
omer
sbyt
hedomest
iccompani
es

Char
act
eri
sti
csofgl
obalmar
ket
ing:

1.Lar
gescal
eoper
ati
ons

2.Domi
nanceofmul
ti
nat
ional
s

3)I
nter
nat
ional
rest
ri
cti
onsandt
radi
ngbl
ocs

4)Sensi
ti
vechar
act
er

5)Mar
ket
ingr
esear
ch
 6)I
mpor
tanceofadv
ancedt
echnol
ogy

7)Longt
erm pl
anni
ng

Funct
ionsi
ngl
obalmar
ket
ing:

1)Choosi
ngt
hebasi
crout
e

2)Mar
ketsel
ect
ionandpr
oductsel
ect
ion

3)Sel
ect
ionofdi
str
ibut
ionchannel
s

4)Pr
ici
ng

5)Mar
ket
ingcommuni
cat
ions

6)Mast
eri
ngt
hepr
ocedur
alcompl
exi
ti
es

7)Or
gani
zat
ional
adapt
ati
ons

8)Handl
i
ngbusi
nesset
hics

Gl
obalmar
ket
ingst
rat
egi
es:

1.Mar
ket
ingor
ient
ati
on

 Pr
oduct
ionor
ient
ati
on

 Sal
esor
ient
ati
on

 Cust
omeror
ient
ati
on

 St
rat
egi
cmar
ket
ingor
ient
ati
on

 Soci
etal
mar
ket
ingor
ient
ati
on

2.Tar
get
ingandsegment
ingmar
ket
s

Gl
obal
/I
nter
nat
ionalmar
ket
ingor
ient
ati
on:
Mar
ket
ing-
mixdeci
sions
Pr
oductpol
icy
:

I
tcanbet er
medaslong-
ter
m pl
anningandmanagementofi
tspr
oduct-mixbya
market
ingcompanyinor
dertoachi
evemaxi
mum consumersati
sfact
ion.

Obj
ect
ives:

1.Sur
viv
al

2.Fl
exi
bil
i
ty

3.Gr
owt
h

4.Maxi
mum r
esour
ceut
il
izat
ion

Reasonsf
ormaki
ngpr
oductal
ter
ati
ons:

1.Legal
reasons

2.Cul
tur
alr
easons

3.Economi
creasons
Pr
oductmi
x(al
socal
ledpr
oductassor
tment
):

I
tisasetofal
lpr
oductl
i
nesandi
temst
hatapar
ti
cul
arsel
l
erof
fer
sforsal
etobuy
ers.I
t
hasf
ourmain

Char
act
eri
sti
cs;

1.Pr
oductl
engt
h

2.Pr
oductwi
dth

3.Pr
oductdept
h

4.Pr
oductconsi
stency

Pr
oductdev
elopment
:

Accor
dingtoWil
l
iam J.Stanton,“Productdev
elopmentencompassest
het
echni
cal
act
ivi
ti
esofpr
oductresearch,engineeri
nganddesign

Fact
orcont
ri
but
ingt
opr
oductdev
elopment
:

1)Changi
ngcust
omerpr
efer
ences

2)Technol
ogi
cal
changes

3)I
nter
nat
ional
lawsandgov
ernmentpol
i
cy

4)Pr
oductl
i
fecy
cle(
PLC)

Chal
lengesi
npr
oductdev
elopment
:

1)I
nnov
ati
vei
mper
ati
ve

2)Newpr
oductsuccess

3)Newpr
oductf
ail
ure

Pr
ici
ng:

I
tr ef
erstotheval
uedeter
minat
ionprocessforagoodorserv
iceandencompassesthe
determinat
ionofi
nter
estr
atesf
orloans,chargesf
orr
ental
s,f
eeforser
vicesandpri
ces
forgoods.

Gl
obalpr
ici
ngst
rat
egi
es:

1.Skimmingstr
ategi
es:r
efer
stot
hef
ir
m’sdesi
ret
oski
mthemar
ketbysel
l
ingata
premi
um pri
ce.
 2.Penet
rat
ionpr
icingst
rategi
es:itusesdel
i
ber
atel
owpr
icest
ost
imul
atemar
ket
gr
owthandcapturemarketshar
e.

3.Di
ffer
enti
alpri
cingst
rat
egi
es:i
nvol
vesaf
ir
m di
ff
erent
iat
ingi
tspr
iceacr
oss
di
ff
erentmar
ketsegment
s.

4.Geographi
cprici
ngstrategi
es:af ir
m maychargeapremium inonemar
ket
,
penet
rati
onpr
iceinanothermarketandadi
scount
edpr
icei
nthethi
rd.

5.Pr
oductli
neprici
ngstr
ategi
es:ar
easetofpr
ici
ngst
rat
egi
es,whi
chamul
ti
-
pr
oductf
ir
m canusef
ull
yadopt.

i
) Pr
icebundl
i
ng

i
i
) Pr
emi
um pr
ici
ng

i
i
i) I
magepr
ici
ng

i
v) Compl
ement
arypr
ici
ng

v
) Capt
ivepr
ici
ngst
rat
egy

v
i) Lossl
eaderst
rat
egy

v
ii
) Two-
par
tpr
ici
ng.

Gl
obalpr
ici
ngi
ssues:

1)Gov
ernmenti
nter
vent
ions

2)Gr
eat
ermar
ketdi
ver
sit
y

3)Pr
iceescal
ati
oni
nexpor
ti
ng

4)Cur
rencyv
alueandpr
icechanges

5)Fi
xedv
ersusv
ari
abl
epr
ici
ng

Di
str
ibut
ion:

I
tist
hepr
ocessofdel
i
ver
ingt
hepr
oductt
othemar
ket
ingchannel
sandconsumer
s.

Pr
oduct
ionandchannelmanagement
:

Amar ket
ingchannel
canbedef
inedasagroupofexchangerelat
ionshi
ps,
whichcreat
e
cust
omerv al
ueinacqui
ri
ng,
consuminganddi
sposi
ngofpr oductsandserv
ices.

Channelmember
s:
Ty
pesofi
nter
medi
ari
es:i
ndi
rectchannel

a)Domest
icagent
s:

i
)Agent
swhol
ook-
aft
ert
hei
nter
est
sofmanuf
act
urer
s:

1)Expor
tbr
oker

2)Manuf
act
urer
’sexpor
tagentorsal
esr
epr
esent
ati
ve

3)Expor
tmanagementcompany

4)Cooper
ati
veexpor
ter

5)Webb-Pomer
eneassoci
ati
on

i
i
)Agent
swhol
ook–af
tert
hei
nter
est
sofbuy
ers:

1)Pur
chasi
ng/Buy
ingagent

2)Count
rycont
rol
l
edbuy
ingagent

3)Resi
dentbuy
er

b)Domest
icmer
chant
s:

1)Expor
tmer
chant

2)Expor
tdr
opshi
pper

3)Expor
tdi
str
ibut
or

4)Tr
adi
ngcompani
es

Ty
pesofi
nter
medi
ari
es:di
rectchannel

1)For
eigndi
str
ibut
or

2)For
eignr
etai
l
er

3)St
atecont
rol
l
edt
radi
ngcompany

4)Enduser

Channeldeci
sions:

1.Fact
orsr
elat
ingt
opr
oductchar
act
eri
sti
cs
 2.Fact
orsr
elat
ingt
omar
ketorconsumerchar
act
eri
sti
cs

3.Fact
orsr
elat
ingt
ocompanychar
act
eri
sti
cs

4.Fact
orsr
elat
ingt
omi
ddl
emenconsi
der
ati
ons

5.Fact
orsr
elat
ingt
oenv
ironment
alchar
act
eri
sti
cs.

I
nter
nat
ionalf
inanci
almanagement

Int
ernati
onalfi
nancialmanagementi
sthemanagementofaf
ir
m’sasset
sandl
i
abi
l
iti
es
consider
ingtheglobaleconomyi
nwhichthef
ir
m oper
ates

Scopeofi
nter
nat
ionalf
inanci
almanagement
:

1.Foreignexchangemarket:i
tistheplacewheremoneydenomi natedi
nonecurr
ency
i
s boughtand sol d with money denominated in anot
hercur rency
.Itfaci
l
itates
conversionofcurr
enci
es,provi
descreditf
orinter
nati
onaltransacti
onsandmini
mi zes
exposuretotheri
sksofexchangerat
efluct
uati
ons.

2.Curr
encyconvert
ibi
li
ty:acountr
y’scurr
encyissai
dtobefreel
yconv
ert
ibl
ewhent
he
count
ry’
sgovernmentallowsbothr esi
dentsandnon-r
esi
dentstopur
chaseunl
i
mit
ed
amountsoff
oreigncur
rencieswit
hthelocalcur
rency
.

3.Inter
nat
ionalmonetar
ysyst
em:everycount
ryneedsto haveit
sown monet ary
syst
em andanauthori
tytomai
ntai
nor
derinthesy
stem.Monetar
ysy st
em f
aci
l
itates
tr
adeandinvest
ment.

4.Bal
anceofpayments:i
tisast
ati
sti
calst
atementt
hatsy st
emati
call
ysummar i
zes,f
or
aspecif
iedper
iodoft i
meaboutthef i
nanci
altr
ansacti
ons.Thet r
ansact
ionsincl
ude
expor
tsandimpor
tsofgoodsandservi
ces,i
ncomeflows,capit
alf
lowsandgift
s.

5)I
nter nationalf
inanci
almar
ket:i
tcanbecompartment
ali
zedi
ntot
wosegments.One
i
sthei nt er
nati
onalmoneymarketwhichi
srepr
esent
edbythefl
owofshor
t-
ter
mf unds.
Ex:
Inter nati
onalbanks

Ontheot
herhand,t
hei
nter
nat
ionalcapi
talmar
ketwher
emedi
um andl
ong-
ter
mfunds
fl
ow.

Chal
lengesi
nint
ernat
ionalf
inanci
almanagement
:

Fol
l
owi
ngkeycat
egor
iesofemer
gingchal
l
engescanbei
dent
if
ied:

1)I
nter
rel
ati
onshi
psbet
weenr
elev
antenv
ironment
alv
ari
abl
esandcor
por
ater
esponses.

2)Adaptf
inancef
unct
iont
ofi
rm’
sownst
rat
egi
cpost
ure
3)Tot
akei
nst
ri
depastf
ail
uresandmi
stakes.

4)Todesi
gnspeci
fi
csol
uti
ons

5)Knowl
edgeofmacr
o-economi
cenv
ironment

6)Cul
tur
e

7)Technol
ogy

I
nvest
mentdeci
sions:

Adeci si
ontoi nvestinact ivi
tiesinagivencount r
ymustconsi
dereconomi c,pol
i
tical
,
cul
turalandst rategi
cv ar
iables.Thisfactorinfluencest
heinv
estmentdeci si
on.The
poli
ti
cal,economi c,legaland cul tur
alenv i
ronmentofa count r
ycan i nfl
uencet he
benefi
ts,costsandr isksofdoi ngbusinesst hereandthusit
sat t
ract
ivenessasan
i
nvestmentsite.

Therearenumberoffactor
sthatdet
ermi
net
heeconomi
cat
tract
ivenessofaf
orei
gn
di
recti
nvest
mentopport
unit
y.

Capi
talbudget
ing:

Thef undament algoalofthefi

nanci
almanageristomaximi
zesharehol
der
’sweal
th.
Shareholders wealt
hi s maxi
mized when the f
irm,outofa listofprospect
ive
i
nvestment s,select
sacombi nati
onofthoseproject
sthatmaxi
mizethecompany’s
val
uet oitssharehol
ders.

I
nternat
ionalcapit
albudgeti
nginvolv
essubstanti
alspending(
capi
tali
nvest
ment
)
i
nproj
ectsthatarelocatedi
nf or
eign(host)count
ri
es,r
atherthaninthehomecountr
y
oft
heMNC.

Appr
oachesofcapi
talbudget
ing:

Pay
backper
iod:i
tist
hel
engt
hoft
imer
equi
redt
orecov
ert
hei
nit
ial
costoft
hepr
oject
.

Netpr
esentv
alue:

TheNPVofaprojecti
sthepr
esentval
ueofallcashi
nfl
ows, i
ncl
udi
ngt
hoseatt
heend
oft
hepr
oject
’sl
i
fe,minust
hepresentv
alueofal
lcashoutf
lows.

I
nter
nalr
ateofr
etur
n:(I
RR)

Theidenti
fi
cat
ionoft
her
elev
antexpect
edcashf
lowst
obeusedf
ort
heanal
ysi
soft
he
proposedproj
ect
.

Capi
talbudget
ingaspect
sdur
ingf
orei
gnpr
ojectassessment
:
 1.Pr
ojectv
ersuspar
entcashf
lows:

Proj
ect(E.
g.Hostcount
ry)cashf
lowsmustbedi
sti
ngui
shedf
rom Par
ent(
E.g.Home
count
ry)cashf
lows.

2.Par
entcashf
lowst
iedt
ofi
nanci
ng:

Parentcashf
lowsdepend,i
npart,
onfinanci
ng.Unl
i
ket
hedomest
icsi
tuat
ion,
financi
ng
cannotbekeptsepar
atef
rom oper
ati
ngcashf l
ows.

3)For ei
gn exchange f
orecast
s needed:an expl
i
citf
orecasti
s needed f
orf
utur
e
exchangerat
es.

4)Long-
rangei
nfl
ati
onmustbeconsi
der
ed

5)Subsi
dizedf
inanci
ngmustbeexpl
i
cit
lyt
reat
ed

6)Pol
i
tical
riskmustbeconsi
der
ed.

Count
ryr
iskanal
ysi
s:

1)Macr
ori
sks:

2)Mi
cror
isks

Macr
ori
sks:

1.For
ceddi
sinv
est
ment

2.Un-
wel
comedr
egul
ati
on

3.I
nter
facewi
thoper
ati
ons

4.Soci
alst
ri
fe

Mi
cror
isks:

1.Goal
conf
li
ctswi
theconomi
cpol
i
cy

2.Economi
cpol
i
ciesandgoal
conf
li
ctsoft
heMNC’
s

a)Monet
arypol
i
ciesandgoal
conf
li
cts

b)Fi
scal
pol
i
ciesandt
hegoal
conf
li
cts

c)Tr
adepol
i
ciesandeconomi
cpr
otect
ioni
sm

d)Bal
anceofpay
mentpr
obl
ems
e)Economi
cdev
elopmentpol
i
ciesandgoal
conf
li
cts

f
)Cor
rupt
ionandbur
eaucr
ati
cdel
ays

Techni
quest
oassesscount
ryr
isk:

1)Debtr
elat
edf
act
ors

2)Bal
anceofpay
ment
s

3)Economi
cper
for
mance

4)Pol
i
tical
inst
abi
l
ity

5)Checkl
i
stappr
oach

Ty
pesofcount
ryr
isk:

1)Pol
i
tical
risks

2)Economi
cri
sks

3)Compet
it
iver
isks

4)Oper
ati
onal
risks

Poli
ti
calri
sk– iswheni nt
ernat
ionalcompaniesfearthatt
hepoli
ti
calcl
imateina
for
eigncount
rywi
ll
changeinsuchawayt hatt
heiroper
ati
ngposi
ti
onwil
ldet
eri
orat
e.

Ty
pesofpol
it
icalr
isk:

1)Gener
ali
nst
abi
l
ityr
isk

2)Owner
shi
pri
sk

3)Oper
ati
onr
isk

4)Tr
ansf
err
isk

Managi
ngpol
it
icalr
isks:

1)Av
oidi
ngi
nvest
ment

2)Adapt
ati
on

3)Thr
eat
 4)Lobby
ing

5)Ter
ror
ism consul
tant
s

6)I
nval
uabl
est
atus

7)Ver
ti
cal
int
egr
ati
on

8)Local
bor
rowi
ng

9)Mi
nimi
zi
ngf
ixedi
nvest
ment
s

10)
Pol
i
tical
riski
nsur
ance

Economi
cri
sk:

Acount
ry’
sabi
l
ityori
ntent
iont
omeeti
tsf
inanci
alobl
i
gat
ionsdet
ermi
nesi
tseconomi
c
r
isk.

Ty
pesofeconomi
cri
sks:

1.Conv
ert
ibi
l
ityr
isk

2.For
eignexchanger
isk

3.Tr
ansl
ati
onr
isk

Met
hodsofanal
yzi
ngeconomi
cri
sk:

1.Quant
it
ati
vemet
hod

2.Qual
i
tat
iveappr
oach

3.Checkl
i
stappr
oach

Sour
cesoff
unds:

1)I
nter
nalsour
cesoff
unds:

a)Fundsf
rom t
hepar
ent

Equi
tycont
ri
but
ions

Par
ent
/Di
rectl
oans

Par
entguar
ant
ees

b)Fundspr
ovi
dedbyoper
ati
ons
c)Loansf
rom si
stersubsi
diar
ies

d)Gl
obal
cashmanagement

e)Mul
ti
lat
eral
net
ti
ng

2)Ext
ernalsour
cesoff
unds:

a)Debtf
inanci
ng

b)Vent
urecapi
tal

c)Equi
tyf
inanci
ng

d)Fact
ori
ng

e)For
fei
ti
ng

f
)Equi
pmentl
easi
ng

For
eignexchanger
iskmanagement
:

Iti
sdesi
gnedt opreser
vethev al
ueofcur
rencyinf
lows,i
nvest
ment
sandl
oans,whi
l
e
enabl
i
ngint
ernati
onalbusi
nessestocompl
eteabr
oad.

Forei
gnexchange(For
ex)andexchangerat
e–i ti
ssy
stem oft
radi
ngi
nandconv
ert
ing
thecurr
encyofonecount
ryi
ntothatofanot
her
.

For
eignexchangeexposur
e:

1)Tr
ansact
ionexposur
e

2)Tr
ansl
ati
onexposur
e

3)Economi
cexposur
e.

I
nter
nat
ionalhumanr
esour
cemanagement

Def
ini
ti
on:

Accor
dingt
o“Ivancev
ichandGlueck”HRM isconcer
nedwi
tht
hemostef
fect
iveuseof
peopl
etoachi
eveorgani
zati
onalandindi
vi
dualgoal
s.

I
tisprocessofsourci
ng,al
l
ocat
ing,andef
fect
ivel
yut
il
izi
nghumanr
esour
cesi
na
mul
ti
nati
onalor
gani
zati
on.

Obj
ect
ivesofI
HRM:

1.Tor
educet
her
iskofi
nter
nat
ional
humanr
esour
ce
 2.Toav
oidcul
tur
alr
isks

3.Toav
oidr
egi
onal
dispar
it
ies

4.Tomanagedi
ver
sif
iedhumancapi
tal

5.Tor
emai
ncompet
it
ivet
hroughoutt
hewor
ld

I
mpor
tanceofI
HRM:

1.Gi
v engl
obali
zat
ionofeconomy,busi
nessi
scr
ossi
ngcount
rybor
der
stobecome
i
nternat
ional
business,
whi
chisdynamic

2.Alar
gepropor
ti
onofwor kf
orcei
slocat
edi
not
hercount
ri
esawayf
rom t
hei
r
homesandhomecount
ri
es

3.Fi
ndi
ngandnur t
uri
ngthesui
tabl
eandcapablehumanresour
cesi
nthecont
extof
hi
ghcompetit
ionatbothdomesti
candint
ernati
onall
evel
sarehi
ghontheli
stof
pr
ior
it
iesoft
hetopmanagement s

4.Qual
it
y human r
esour
ces ar
e a mustf
ori
mpl
ement
ing gl
obalcompet
it
ive
st
rat
egies.

St
rat
egi
cor
ient
ati
onofI
HRM:

Itcanbeasour ceofcreati
ngsuper
iorval
ueandcompet i
ti
veadv ant
ages.Superi
or
human resour
ces can sustai
n hi
gh pr
oduct
ivi
ty,compet
it
ive adv
antage and v
alue
creat
ionf
ortheinter
nat
ional
company.

Bar
ri
erst
oef
fect
iveI
HRM:

1)Var
iat
ion

2)Per
cept
ionofHR

3)At
ti
tudeandact
ionsofheadquar
ter
stowar
dHR

4)Resi
stancet
ochange

5)Cul
tur
aldi
ff
erencesi
nlear
ningandt
eachi
ngst
yles.

Gl
obalchal
lengesi
nIHRM:

1)Managementofcul
tur
aldi
ver
sit
y

2)Managementofcompl
exi
tyoft
hewor
kfor
ce

3)Managementofcommuni
cat
ionchannel
s
 4)Managementofdi
ver
genteconomi
csy
stems

5)Managementofl
egal
andl
aborr
elat
ionsi
ssues.

Expat
ri
ates:

AccordingtoAy canandKar t
ungo,“ Expatr
iatescanbedef i
nedast heemployeesof
businessandgov er
nmentorganiz
ationswhoar esentbythei
rorgani
zat
iontoarelat
ed
uni
ti nacountrywhichisdi
ff
erentfr
om t hei
rown, toaccompl
ishajobororgani
zati
on-
rel
atedgoalforapre-desi
gnat
edt empor ar
yt i
me.

I
nshor
tExpat
ri
atemaybe;

1.Anempl
oyeewhoi
swor
kingandt
empor
ari
l
yresi
dingi
naf
orei
gncount
ry.

2.Theyar
eal
socal
l
ed“
Int
ernat
ional
Assi
gnees”

Ty
pesofexpat
ri
ateassi
gnment
s:

1.Shor
t-t
erm assi
gnment
s

2.Dev
elopment
alassi
gnment
s

3.St
rat
egi
cassi
gnment
s

4.Long-t
erm assi
gnment
s

Sel
ect
ionofexpat
ri
atemanager
s:

1.I
dent
if
icat
ionofpot
ent
ial
pool
ofcandi
dat
es

2.AssessmentofI
Q(I
ntel
l
igentQuot
ient
)compet
enci
esofexpat
ri
atecandi
dat
es

3.Cogni
ti
veI
Q

4.Emot
ional
IQ

5.Pol
i
tical
IQ

6.Cul
tur
alI
Q

7.Or
gani
zat
ional
IQ

8.Net
wor
kIQ

9.I
nnov
ati
veI
Q

10.
Int
uit
iveI
Q
3)Det
ermi
nat
ionofl
ear
ningst
ylesofexpat
ri
atecandi
dat
es

4)Det
ermi
nat
ionoft
hinki
ngst
ylesofpot
ent
ial
expat
ri
atecandi
dat
es

5)Det
ermi
nat
ionofassi
gnmentt
askandi
tsenv
ironment
s(I
nter
nal
/Ext
ernal
)

6)Assessmentoff
ami
l
ychar
act
eri
sti
cs

7)Dev
elopmentofr
epat
ri
ati
onpr
ogr
am pr
iort
oexpat
ri
ati
on

8)Sel
ect
ionofexpat
ri
atecandi
dat
esandassi
gnment
s

Fact
orsi
nsel
ect
ionofexpat
ri
atemanager
s:

1.Techni
cal
compet
ence/Abi
l
ity

2.Adapt
iveness

3.Leader
shi
pabi
l
ity

4.Cr
oss-cul
tur
alsui
tabi
l
ity

5.Fami
l
yrequi
rement
s

6.MNEr
equi
rement
s

7.Count
ry/
cul
tur
alr
equi
rement
s

8.Language

Expat
ri
atet
rai
ninganddev
elopment
:

Humanr esour
cedepar
tmentpreparest
hewholedataaboutthei
remployeesandthei
r
abi
li
ti
estoacceptt
heforei
gnenvir
onment,
geographi
cpref
erencesorf
oreignl
anguage
qual
if
icat
ions.

1.Tr
aini
ngai
mst
oimpr
ovecur
rentwor
kski
l
lsandbehav
ior
.

2.I
tcani
nvol
vet
hechangi
ngski
l
ls,
knowl
edge,
att
it
udesorbehav
ior

3.I
tmaychangewhatemploy
eesknow,howtheywork,t
hei
rat
ti
tudest
owar
dwor
k
ort
hei
rint
eract
ionwi
tht
hei
rco-
worker
sorsuper
visor
.

4.I
tshoul
dbeconsi
der
edasal
i
fe-
longendeav
ort
olear
naboutot
hercul
tur
es.
Expat
ri
atecompensat
ion:

I
tistheonlyfact
orwhichinf
luencest
hesuccessandf
ail
ureoft
hewor
kassi
gnedat
i
nter
nat
ionall
evelt
otheexpat
riat
e.

Ty
pesofcompensat
ionpl
ans:

1)Homebasedmet
hod

2)Headquar
ter
smet
hod

3)Host
-basedmet
hod

Expat
ri
ater
emuner
ati
onpl
ans:

1.Thepol
i
cyshoul
dbeconsi
stentandf
airi
nit
str
eat
ment
.

2.Thepoli
cymustwor ktoat
tractandr
etai
nper
sonneli
nthear
easofgr
eat
est
needandoppor
tuni
ti
es.

3.Thepol
i
cyshoul
dser
vet
omot
ivat
eempl
oyees.

4.I
tshoul
dbeconsist
entwi
tht
heov
eral
lst
rat
egy
,st
ruct
ure,
andbusi
nessneedsof
t
hemulti
nat
ional
.

5.I
tmustgi
vedueconsi
der
ati
ont
oequi
tyandeaseofadmi
nist
rat
ion.

Keyaspect
s/El
ement
sofExpat
ri
atecompensat
ion:

1.Basi
cpay

2.Benef
it
s

i
) Housi
ng

i
i
) Ut
il
it
ies

i
i
i) Car

i
v) Hel
per
s

v
) Cl
ubsubscr
ipt
ions

v
i) Educat
ional
benef
it
s

3)Al
lowances

i
) Costofl
i
vingal
l
owance(
COLA)
 i
i
) Rel
ocat
ional
l
owance

i
i
i) Har
dshi
pal
l
owance

i
v) Separ
ati
onal
l
owance

v
) Cl
othi
ngal
l
owance

v
i) Addedr
esponsi
bil
i
tyal
l
owance

v
ii
) Homel
eav
eal
l
owance

v
ii
i) Spouseassi
stanceal
l
owance

4)I
ncent
ives

UNI
TVCONFLI
CTMANAGEMENTANDETHI
CSINI
NTERNATI
ONAL
BUSI
NESSMANAGEMENT

Disadv
antagesofI
nternat
ionalBusi
ness–Conf l
icti
nInternat
ionalBusi
ness–Sour ces
andTy pesofConf
li
ct–Conf li
ctResolut
ions–Negot i
ati
on–TheRol eofInt
ernat
ional
Agencies–Ethi
cal
IssuesinInter
nat
ionalBusi
ness–Et hi
calDecisi
on-Maki
ng.

Cont
ent
s

 Conf
li
cti
nint
ernat
ional
busi
ness

 Negot
iat
ion
  I
nter
nat
ional
busi
nesset
hics

Conf
li
cti
nOr
gani
zat
ions

Def
ini
ti
on

– Opposi
ti
on

– I
ncompat
ibl
ebehav
ior

– Ant
agoni
sti
cint
eract
ion

– Bl
ockanot
herpar
tyf
rom r
eachi
ngherorhi
sgoal
s

Rangeofconfl
ictbehavi
or
Doubtorquesti
oning
Anni
hil
ati
onofopponent

 Keyel
ement
s

– I
nter
dependencewi
thanot
herpar
ty

– Per
cept
ionofi
ncompat
ibl
egoal
s

 Conf
li
ctev
ent
s

– Di
sagr
eement
s

– Debat
es

– Di
sput
es

– Pr
event
ingsomeonef
rom r
eachi
ngv
aluedgoal
s

Funct
ionalandDy
sfunct
ionalConf
li
ct

Funct
ionalconf
li
ct:wor
kst
owar
dthegoal
sofanor
gani
zat
ionorgr
oup

Dy
sfunct
ionalconf
li
ct:bl
ocksanor
gani
zat
ionorgr
oupf
rom r
eachi
ngi
tsgoal
s

1.Dy
sfunct
ionalhi
ghconf
li
ct:whaty
out
ypi
cal
l
ythi
nkaboutconf
li
ct
2.Dy
sfunct
ionall
owconf
li
ct:At
ypi
cal
view.Lev
elsv
aryamonggr
oups

Funct
ionalconf
li
ct

– “
Const
ruct
iveConf
li
ct”
--
Mar
yPar
kerFol
l
ett(
1925)

– I
ncr
easesi
nfor
mat
ionandi
deas

– Encour
agesi
nnov
ati
vet
hinki
ng

– Unshackl
esdi
ff
erentpoi
ntsofv
iew

– Reducesst
agnat
ion

Dy
sfunct
ionalhi
ghconf
li
ct

– Tensi
on,
anxi
ety
,st
ress

– Dr
ivesoutl
owconf
li
ctt
oler
antpeopl
e

– Reducedt
rust

– Poordeci
sionsbecauseofwi
thhel
dordi
stor
tedi
nfor
mat
ion

– Excessi
vemanagementf
ocusont
heconf
li
ct

Dy
sfunct
ionall
owconf
li
ct

– Fewnewi
deas

– Poordeci
sionsf
rom l
ackofi
nnov
ati
onandi
nfor
mat
ion

– St
agnat
ion

– Busi
nessasusual

Lev
elsandTy
pesofConf
li
ct

Lev
elofconf
li
ct Ty
peofconf
li
ct

Or
gani
zat
ion Wi
thi
nandbet
weenor
gani
zat
ions

Gr
oup Wi
thi
nandbet
weengr
oups

I
ndi
vi
dual Wi
thi
nandbet
weeni
ndi
vi
dual
s

Lev
elsandTy
pesofConf
li
ct

I
ntr
a-or
gani
zat
ionconf
li
ct
 – Conf
li
ctt
hatoccur
swi
thi
nanor
gani
zat
ion

– Ati
nter
facesofor
gani
zat
ionf
unct
ions

– Canoccural
ongt
hev
ert
ical
andhor
izont
aldi
mensi
onsoft
heor
gani
zat
ion

 Ver
ti
cal
conf
li
ct:bet
weenmanager
sandsubor
dinat
es

 Hor
izont
alconf
li
ct:bet
weendepar
tment
sandwor
kgr
oups

I
ntr
a-gr
oupconf
li
ct

– Conf
li
ctamongmember
sofagr
oup

– Ear
lyst
agesofgr
oupdev
elopment

– Way
sofdoi
ngt
asksorr
eachi
nggr
oup'
sgoal
s

I
nter
groupconf
li
ct:bet
weent
woormor
egr
oups

I
nter
per
sonalconf
li
ct

– Bet
weent
woormor
epeopl
e

– Di
ff
erencesi
nvi
ewsaboutwhatshoul
dbedone

– Ef
for
tst
ogetmor
eresour
ces

– Di
ffer
encesinor
ient
ati
ont
owor
kandt
imei
ndi
ff
erentpar
tsofan
or
ganizat
ion

I
ntr
aper
sonalconf
li
ct-Occur
swi
thi
nani
ndi
vi
dual

 Thr
eatt
oaper
son’
sval
ues

 Feel
i
ngofunf
airt
reat
ment

 Mul
ti
pleandcont
radi
ctor
ysour
cesofsoci
ali
zat
ion

 Rel
atedtot
heTheor
yofCogni
ti
veDi
ssonanceandnegat
ive
i
nequit
y

I
nter
-or
gani
zat
ionconf
li
ct

– Bet
weent
woormor
eor
gani
zat
ions

– Notcompet
it
ion
 – Examples:suppl
i
ersanddi
str
ibut
ors,
especi
all
ywi
tht
hecl
osel
i
nksnow
possi
ble

Conf
li
ctEpi
sodes

Si
mpl
econf
li
ctepi
sode

Lat
entconf
li
ct

Mani
festconf
li
ct

Conf
li
ctaf
ter
mat
h

Conf
li
ctr
educt
ion

Lat
entconf
li
ct:ant
ecedent
sofconf
li
ctbehav
iort
hatcanst
artconf
li
ctepi
sode

Mani
festconf
li
ct:obser
vabl
econf
li
ctbehav
ior

Conf
li
ctaf
ter
mat
h

– Endofaconf
li
ctepi
sode

– Of
tent
hest
art
ingpoi
ntofar
elat
edepi
sode

– Becomest
hel
atentconf
li
ctf
oranot
herepi
sode

Conf
li
ctr
educt
ion:l
owert
heconf
li
ctl
evel

Lat
entconf
li
ct

Theant
ecedent
sofconf
li
ct

Exampl
e:scar
cer
esour
ces

Somel
atentconf
li
cti
nthel
i
vesofcol
l
egest
udent
s

– Par
kingspaces

– Li
brar
ycopy
ingmachi
nes

– Comput
erl
abor
ator
y

– Booksi
nthebookst
ore

– School
andot
herpar
tsofy
ourl
i
fe
 – Uni
ver
sit
ypol
i
cies

Mani
festconf
li
ct

– Obser
vabl
econf
li
ctbehav
ior

– Exampl
e:di
sagr
eement
,di
scussi
on

Conf
li
ctaf
ter
mat
h

– Resi
dueofaconf
li
ctepi
sode

– Exampl
e:compr
omi
sei
nal
l
ocat
ingscar
cer
esour
ces

– l
eav
esbot
hpar
ti
eswi
thl
esst
hant
heywant
ed

Per
cei
vedconf
li
ct

– Becomeawar
ethatonei
sinconf
li
ctwi
thanot
herpar
ty

– Canbl
ockoutsomeconf
li
ct

– Canper
cei
veconf
li
ctwhennol
atentcondi
ti
onsexi
st

– Exampl
e:mi
sunder
standi
nganot
herper
son’
sposi
ti
ononani
ssue

Fel
tconf
li
ct

– Emot
ional
par
tofconf
li
ct

– Per
sonal
i
zingt
heconf
li
ct

– Or
alandphy
sical
host
il
it
y

– Har
dtomanageepi
sodeswi
thhi
ghf
eltconf
li
ct

– Whatpeopl
eli
kel
yrecal
laboutconf
li
ct

Conf
li
ctFr
amesandOr
ient
ati
ons

Conf
li
ctf
rame

– Rel
ati
onshi
p-Task

– Cooper
ate-
Win

– Emot
ional
Int
ell
ect
ual
Conf
li
ctf
ramedi
mensi
ons

Rel
ati
onshi
p-Task

 Rel
ati
onshi
p:f
ocusesoni
nter
per
sonal
rel
ati
onshi
ps

 Task:
focusesonmat
eri
alaspect
sofanepi
sode

Emot
ional
-I
ntel
lect
ual

 Emot
ional
:focusesonf
eel
i
ngsi
ntheconf
li
ctepi
sode(
fel
tconf
li
ct)

 I
ntel
l
ect
ual
:focusesonobser
vedbehav
ior(
mani
festconf
li
ct)

Cooper
ate-
Win

 Cooper
ate:emphasi
zest
her
oleofal
lpar
ti
est
otheconf
li
ct

 Wi
n:want
stomaxi
mizeper
sonal
gai
n

Conf
li
ctf
rames

Li
mit
edr
esear
chr
esul
ts

 Endanepisodewitharel
ati
onshi
pori
ntel
l
ect
ual
frame:
feel
good
aboutr
elat
ionshi
pwithot
herpart
y

 Cooper
ati
on-f
ocusedpeopl
eendwi
thmor
eposi
ti
ver
esul
tst
han
thosef
ocusedonwinni
ng

Conf
li
ctor
ient
ati
ons

Domi
nance:want
stowi
n;conf
li
cti
sabat
tl
e

Col
labor
ati
ve:want
stof
indasol
uti
ont
hatsat
isf
iesev
ery
one

Compr
omi
se:spl
i
tst
hedi
ff
erences

Av
oidance:backsaway

Accommodat
ive:f
ocusesondesi
resofot
herpar
ty

Reduci
ngConf
li
ct

Lose-
losemet
hods:par
ti
est
otheconf
li
ctepi
sodedonotgetwhatt
heywant

Wi
n-l
osemet
hods:onepar
tyacl
earwi
nner
;ot
herpar
tyacl
earl
oser

Wi
n-wi
nmet
hods:eachpar
tyt
otheconf
li
ctepi
sodeget
swhatheorshewant
s
Summar
y

Lose-
losemet
hods:compr
omi
se

Wi
n-l
osemet
hods:domi
nance

Wi
n-wi
nmet
hods:pr
obl
em sol
vi
ng

I
nter
nat
ionalBusi
nessNegot
iat
ion

Negot
iat
ioni
stheact
ionandt
hepr
ocessofr
eachi
nganagr
eementbymeansof
exchangi
ngideaswiththeint
ent
ionofdi
spel
l
ingconf
li
ctsandenhanci
ngr
elat
ionshi
pto
sati
sfyeachother
’sneeds.

Char
act
eri
sti
csofnegot
iat
ion:

(
1)Ev
erynegot
iat
ioni
nvol
vest
woormor
epar
ti
es.

(
2)Theobj
ect
iveofanegot
iat
ionmustbedef
ini
te.

(
3)Negot
iat
ionmustbeconduct
edonanequal
basi
s.

(
4)Aconsensusmustbebui
l
tont
hebasi
sofmut
ual
concessi
on.

(
5)Negot
iat
ioninvol
vesexchangeofideas,
communi
cat
ion,
per
suasi
on,
compromiseandsuchli
ke(process)
.

TheDualConcer
nsModel

Businessnegot i
ati
oni sapr ocessofconfer
ri
nginwhicht
hepart
icipantsofbusi
ness
acti
vit
iescommuni cate,discuss,andadj
ustthei
rvi
ews,sett
ledi
fferencesandfi
nall
y
reachamut ual
lyacceptabl
eagr eementi
nordert
ocloseadealorachi ev
eaproposed
fi
nancialgoal.
Char
act
eri
sti
csofBusi
nessNegot
iat
ion:

(
1)Theobj
ect
iveofbusi
nessnegot
iat
ioni
stoobt
ainf
inanci
ali
nter
est

(
2)Thecor
eofbusi
nessnegot
iat
ioni
spr
ice

(
3).I
tspr
inci
plei
sequal
i
tyandmut
ual
benef
it

(
4).I
temsofcont
ractshoul
dkeepst
ri
ctl
yaccur
ateandr
igor
ous.

Pr
inci
plesofbusi
nessnegot
iat
ion:

 Equal
i
typr
inci
ple

 Cooper
ati
onpr
inci
ple

 Fl
exi
bil
i
typr
inci
ple

 Posi
ti
ons-
subj
ect
ed-
to-
int
erest
spr
inci
ple

 Deper
sonal
i
zingpr
inci
ple(
Separ
ati
ngt
hepeopl
efr
om t
hepr
obl
em)

 Usi
ngobj
ect
ivecr
it
eri
on

I
nter
nat
ionalBusi
nessNegot
iat
ioni
st hebusi
nessnegoti
ati
ont
hatt
akespl
ace
bet
weentheint
erestgr
oupsf
rom di
ff
erentcount
ri
esorregi
ons.

Feat
uresofI
nter
nat
ionalBusi
nessNegot
iat
ion:

(
1)Languagebar
ri
er

(
2)Cul
tur
aldi
ff
erences

(
3)I
nter
nat
ional
lawsanddomest
icl
awsar
ebot
hinf
orce

(
4)I
nter
nat
ional
pol
i
tical
fact
orsmustbet
akeni
ntoaccount

(
5)Thediff
icul
tyandt
hecostar
egr
eat
ert
hant
hatofdomest
icbusi
ness
negot
iati
ons

For
msofI
nter
nat
ionalBusi
nessNegot
iat
ion:

Cl
assi
fi
cat
ionbychi
efnegot
iat
or

Cl
assi
fi
cat
ionbynegot
iat
ionobj
ect

Cl
assi
fi
cat
ionbyf
orm

Cl
assi
fi
cat
ionbypr
ocedur
e
Cl
assi
fi
cat
ionbychi
efnegot
iat
or

(
1)Gov
ernment
-to-gov
ernment
’snegot
iat
ion

(
2)Gov
ernment
-to-Busi
ness’
snegot
iat
ion

(
3)Pr
oducer
-to-Pr
oducer
’snegot
iat
ion

(
4)Pr
oducer
-to-Tr
ader
’snegot
iat
ion

(
5)Ret
ail
er-t
o-Pr
oducer
’snegot
iat
ion

(
6)Busi
ness-t
o-Busi
ness’
snegot
iat
ion

(
7)Busi
ness-t
o-Consumer
’snegot
iat
ion

Cl
assi
fi
cat
ionbynegot
iat
ionobj
ect

(
1)Pr
oductt
radenegot
iat
ion

(
2)Technol
ogyt
radenegot
iat
ion

(
3)Ser
vicet
radenegot
iat
ion

(
4)I
nter
nat
ional
proj
ectnegot
iat
ion

Cl
assi
fi
cat
ionbyf
orm:

(
1)One-t
o-onenegot
iat
ion

(
2)Team negot
iat
ion

(
3)Mul
ti
lat
eral
negot
iat
ion

Cl
assi
fi
cat
ionbypr
ocedur
e

(
1)Hor
izont
alNegot
iat
ion

(
2)Ver
ti
cal
Negot
iat
ion

TheBasi
cFor
msofI
nter
nat
ionalBusi
ness

Negot
iat
ion:

HostCour
t”negot
iat
ionand“
GuestCour
t”negot
iat
ion

Or
alnegot
iat
ionandwr
it
tennegot
iat
ion

For
mal
andi
nfor
mal
negot
iat
ion
“
HostCour
t”negot
iat
ionand“
GuestCour
t”negot
iat
ion:

(
1)Host
-Cour
tnegot
iat
ion

(
2)Guest
-Cour
tnegot
iat
ion

(
3)Changi
ng-Cour
tnegot
iat
ion

(
4)Thi
rd-pl
acenegot
iat
ion

Or
alnegot
iat
ionandwr
it
tennegot
iat
ion

(
1)Or
alnegot
iat
ion

(
2)Wr
it
tennegot
iat
ion

For
malandI
nfor
malnegot
iat
ion:

(
1)For
mal
negot
iat
ion

(
2)I
nfor
mal
negot
iat
ion

I
NTERNATI
ONALNEGOTI
ATI
ON:

 Mor
ecompl
ext
handomest
icnegot
iat
ions

 Di
ffer
encesinnat
ionalcul
turesanddiff
erencesinpol
i
tical
,l
egal
,andeconomi
c
sy
stemsoftenseparat
epot ent
ialbusi
nesspartner
s

STEPSI
NTHEI
NTERNATI
ONALNEGOTI
ATI
ONPROCESS

THESUCCESSFULI
NTERNATI
ONALNEGOTI
ATOR:PERSONALCHARACTERI
STI
CS

 Tol
eranceofambi
guoussi
tuat
ions

 Fl
exi
bil
i
tyandcr
eat
ivi
ty

 Humor

 St
ami
na

 Empat
hy

 Cur
iosi
ty

 Bi
l
ingual
BASI
CNEGOTI
ATI
ONSTRATEGI
ES:

 Compet
it
ive

– Thenegot
iat
ionasawi
n-l
osegame

 Pr
obl
em sol
vi
ng

– Sear
chf
orpossi
blewi
n-wi
nsi
tuat
ions
Et
hicsi
nInt
ernat
ionalBusi
ness

Busi
nessEt
hics:

Businessethi
csar eprinci
plesofri
ghtorwr onggov er
ningtheconductofbusi
ness
people.Thetextsays,
“Theacceptedpri
nci
plesofr ightandwrong”Butther
ear
emany
di
fferencesofopini
onamonghi ghl
yethi
cal
busi nesspeople.

Et
hicalI
ssuesi
nInt
ernat
ionalBusi
ness

 Manyethi
cal
issuesanddi
lemmasareroot
edi
ndiff
erencesi
npoli
ti
calsyst
ems,
l
aw,economi
cdev el
opment,
andcul
tur
e.Somekeyethi
cali
ssuesi
nint
ernati
onal
busi
ness…

 Empl
oymentPr
act
ices

Whenworkcondi
ti
onsinahostnat
ionar
ecl
ear
lyi
nfer
iort
othosei
na
mul
ti
nati
onal’
shomenati
on,whatst
andar
dsshoul
dbeappli
ed?Howmuchdiv
ergence
i
saccept
able?
Det
ermi
nant
sofEt
hical
Behav
ior
:

 Or
gani
zat
ioncul
tur
e

 Per
sonal
ethi
cs

 Deci
sionmaki
ngpr
ocesses

 Leader
shi
p

 Unr
eal
i
sti
c/r
eal
i
sti
cper
for
mancegoal
s

TheRoot
sofUnet
hicalBehav
ior

Et
hicalDeci
sionMaki
ng

Fi
vet
hingst
hatani
nter
nat
ional
busi
nessandi
tsmanager
scando

t
omakesur
eet
hical
issuesar
econsi
der
ed

– Favorhi
ri
ngandpr
omot
ingpeopl
ewi
thawel
l
-gr
oundedsenseofper
sonal
ethi
cs
 – Buil
danorgani
zat
ionalcul
tur
ethatpl
acesahi
ghv
alueonet
hical
behavi
or

– Makesurethatl
eaderswit
hint
hebusi
nessnotonl
yarti
cul
atetherhetor
ic
ofethi
cal
behavi
or,butal
soactinamannert
hatisconsi
stentwit
ht hat
rhet
ori
c

– Implementdeci
sion-
maki
ngprocessest
hatr
equi
repeopl
etoconsi
dert
he
ethi
caldi
mensionofbusi
nessdecisi
ons

– Dev
elopmor
alcour
age

Whati
scul
tur
e?

“
Asyst
em ofv
aluesandnor
mst hatareshar
edamongagr
oupofpeopl
eandt
hatwhen
t
akent
oget
herconst
it
uteadesi
gnf orl
iv
ing.
”

Di
ff
erentcomponent
sofcul
tur
e:

 Values:
Abstr
acti
deas/
assumpt
ionsaboutwhatagr
oupbel
i
evest
obegood,
ri
ghtanddesi
rabl
e

 Norms:
soci
al r
ulesandgui
del
i
nest
hatpr
escr
ibeappr
opr
iat
ebehav
iori
n
par
ti
cul
arsi
tuati
ons

 Fol
kway
s:Rout
ineconv
ent
ionsofev
ery
dayl
i
fe.

 Li
tt
lemor
alsi
gni
fi
cance

 Gener
all
y,soci
alconvent
ionssuchasdr
esscodes,
soci
almanner
s,and
nei
ghbor
lybehavior

es:
 Mor Nor
mscent
ral
tot
hef
unct
ioni
ngofsoci
etyandi
tssoci
all
i
fe

 Gr
eat
ersi
gni
fi
cancet
hanf
olkway
s

 Viol
ati
oncanbr
ingser
iousr
etr
ibut
ion,
Thef
t,adul
ter
y,i
ncestand
canni
bali
sm

Det
ermi
nant
sofcul
tur
e
I
mpr
ovi
ngGl
obalBusi
nessEt
hics

Sev
enMor
alGui
del
inesf
orMNCs

 I
nfl
i
ctnoi
ntent
ional
ordi
recthar
m

 Pr
oducemor
egoodt
hanbadf
ort
hehostcount
ry

 Cont
ri
but
etohostcount
ry’
sdev
elopment

 Respectt
hehumanr
ight
soft
hei
rempl
oyees

 Payt
hei
rfai
rshar
eoft
axes

 Respectl
ocal
cul
tur
albel
i
efst
hatdonotv
iol
atemor
alnor
ms

 Cooper
atewi
tht
hegov
ernmentt
odev
elopandenf
orcebackgr
oundi
nst
it
uti
ons

TheRol
eofEt
hicsi
nInt
ernat
ional
Busi
ness

Internat
ionalbusi
nessethicshasanumberofopenquest i
onsanddilemmas.Todayiti
s
char act
eri
zedbyt hefoll
owingelements:Ever
ycul
tureandnat i
onhasi tsownv al
ues,
history,customs and t r
adit
ions,thus i
thas developed own et hi
calval
ues and
under st
andingofethicalpri
ncipl
es;Ther
eisnointer
nationalet
hicalcodeofconduct,
acceptedandf ol
l
owedbyal lt
hecountr
ies;Thereisalackofgovernment s’i
nit
iat
iveto
creat
e et hicalcooperati
on framework and t hus t
o enhance ethicalbehav i
ori n
i
nternationalbusiness;Itis hardto outli
ne those et
hicalval
ues which woul d be
understandable,acceptabl
eandi mpor
tantf orrepr
esentati
vesofallt hecont i
nents
si
mul t
aneousl ywithi
ndiff
erentty
pesofinter
nati
onalcooperat
ionproj
ects.

Foll
owi ng approach toi nternationalbusi ness ethics:Ev eryi ndi
vi
dualand ev ery
corporatebodymustout l
ineitset hi
calvalues;Ev eryi ndivi
dualandcompanyshoul d
ensureunderstandingofet hi
calvaluesandbel iefi
nt heireffectiv
enessandi mpor t
ance;
Empl oyeesofev eryor ganizati
onmustpar ti
cipat
ei ncr eating acor porat
ecodeof
conduct ,whichint hi
scasedef init
elyrepresentscor poratecul t
ure,ratherthanonl y
personalv i
ewsofacompany ’
sleader;Ev eryindi
v idualandcompanymustmoni tor
compl i
ancewi t
htheout l
inedv al
uesatall t
imes.

Alltheet hicalvaluesmustbedi vi
dedi ntwocategor
ies–r igidandf l
exi
ble.Rigidare
thosev alueswhi chcannotber enouncedunderanycircumst ances(honesty
,integr
it
y,
professionalism),andf l
exibl
eones,whi charethosemor alpr i
nci
pleswhichmaybe
i
nterpretedi ndifferentwaysindi ff
erentsit
uati
ons(wil
ltounder standothercultur
es’
values,remuner ati
onpolici
es).