-BY SARITA DEVI

UNIT-1
 SYLLABUS
 Unit I – The Strategy of International
Business
 Global Expansion, Profitability and Growth;
 Complexities and issues in International
Business Management;
 Approaches to international management;
 Cross-cultural values and business
management;
 International management orientation;
 International business management -A
strategic perspective.
 BASIC CONCEPTS
 International Business??
International business encompasses all
commercial activities that take place to
promote the transfer of goods, services,
resources, people, ideas, and technologies
across national boundaries.

 International vs Multinational??
 Global vs Multinational??
 Strategy??
International vs Multinational??
 International companies are importers and exporters, they have
no investment outside of their home country.

 Multinational companies have investment in other countries, but

do not have coordinated product offerings in each country. More
focused on adapting their products and service to each individual
local market.

 Global companies have invested and are present in many

countries. They market their products through the use of the
same coordinated image/brand in all markets. Generally one
corporate office that is responsible for global strategy. Emphasis
on volume, cost management and efficiency.

 Transnational companies are much more complex

organizations. They have invested in foreign operations, have a
central corporate facility but give decision-making, R&D and
marketing powers to each individual foreign market.
CASE
STUDY
CASE STUDY : FORD’S GLOBAL
STRATEGY
 CEO- Alan Mulally, 2006
• “FORD FOCUS STRATEGY”
1. • EUROPE & AMERICA

• NO ECONOMIES OF SCALE
2. • HIGH COSTS, LOWER PROFITS

• 2008-09 FINANCIAL CRISIS

3. • “ONE FORD STRATEGY”
CASE STUDY : FORD’S GLOBAL
STRATEGY
• 15 Production platforms reduced to 5
4. platforms- Fiesta, Focus, Escape

• Cost reduced by $ 50 billion

5.

• Experience effects
• Entered developing nations with lower
6. prices
STRATEGY AND THE FIRM
REDUCE
COSTS
PROFITABILITY
ADD VALUE
AND RAISE
PRICES
ENTERPRISE
VALUATION
SELL MORE IN
EXISTING
PROFIT MARKETS
GROWTH

ENTER NEW
MARKETS
VALUE AND VALUE CREATION
 V P C
 V-P = Consumer Surplus per unit

 P-C = Profit per unit sold

 V-C= Value created per unit
PORTER’S VALUE CHAIN
MICHAEL PORTER’S STRATEGIES
 LOW COST STRATEGY
 DIFFERENTIATION STRATEGY
CASE STUDY:
 US Based Manufacturer and Distributor of
Eye wear
 By David Glassman
 Gross revenue more than $ 100 million
annually
 Started imports from Hongkong
 Established Manufacturing facility in
Hongkong.
 Then shifted to mainland china.
 Then collaborated with firms producing
designer eye wears
 Clear Vision’s Status Eye Division
WHY COMPANIES NEED TO
EXPAND GLOBALLY??
 Saturated Domestic Markets
 Geographical Advantage
 Risk Diversification
 Competitive parity
 Tax Saving
 Lucrative foreign markets
 Economies of Scale
 Increasing Brand Value
Global Expansion, Profitability
and Growth
1.Expanding the Market: Leveraging
Products and Competencies
 Produce at home, sell internationally –
Pampers, Microsoft
 Success depends on core
competencies
 Core competencies vs competitive
advantage??
 Toyota, McDonald’s
Global Expansion, Profitability
and Growth (contd…)
2. Location Economies
 “economies that arise from performing a value creation
activity in the optimal location for that activity, wherever
in the world that might be”
 Comparative Advantage
 Japan- Automobiles, consumer electronics
 America- computer software, pharmaceuticals,
bio technology products and financial services
 Lower cost plus differentiated products
Global Expansion, Profitability
and Growth (contd…)
3. Experience Effects
 Systematic reductions in production
costs that have been observed to occur
over the life of a product
 Learning effects- Labor productivity and
management efficiency
 Economies of scale- Spread fixed costs
over a large volume, efficient scale of
production, bargaining power with
suppliers increases.
Global Expansion, Profitability
and Growth (contd…)
4. Leveraging Subsidiary skills
 Learning from subsidiaries
Case study- WALMART
CASE STUDY : WALMART FAILURE
IN GERMANY
• TAPPED GERMENY IN 1997 BY ACQUIRING
WERTKAUF, 1998 SPAR CHAIN
1.

• FIRST CEO- RON TIARKS (US CITIZEN). US

MANAGERS- NO KNOWLEDGE OF GERMAN
2. LANGUAGE.

• MISTAKES BY RON TIARKS-

• ENGLISH LANGUAGE, IGNORED COMPLEXITIES
OF RETAILING, LEGAL AND INSTITUTIONAL
3. FRAMEWORK, GERMAN SHOPPING CULTURE,
ADVICES OF WETKAUF EXECUTIVES
CASE STUDY :
• NEXT CEO- ALLAN LEIGHTON (UK BASED)-
NO KNOWLEDGE OF GERMAN
4.

• NEXT CEO-VOLKER BARTH, 2001 –FROM

GERMANY ONLY
5.

• PROBLEMS WITH WALMART-

• LOW WAGE RATES
• TRANSFER POLICIES
6. • FRUGAL BUSINESS TRIPS
• STRONG UNIONS
CASE STUDY :

• PROBLEMS WITH WALMART-LOW VALUE,

LOW-PRICED MERCHANDISE
• AMERICAN JUNK
• QUALITY VALUE CULTURE
7.
• WALMART’S GREETERS WERE NOT
ACCEPTED
• SMILING CLERKS
• BAGGING SERVICE

• AFTER 10 YEARS OF LOSS EXITED IN 2007

8.
 CULTURE??
 A system of values and norms that are
shared among a group of people and
that when taken together constitute a
design for living.

values norms society

• Abstract ideas • Social rules • Group of

• Beliefs of and guidelines people sharing
groups in right • Prescribe common
and wrong appropriate values and
behavior norms
WHY CROSS-CULTURAL LITERACY
IS NECESSARY??
 An understanding of how cultural
differences across and within nations
can affect the way business is
practiced.
 Adaption is required
Determinants of culture
Social
structure

Political
and
Language
economic
philosophy

Religion Education
SOCIAL STRUCTURE
 Basic social organisation
 Individuals vs Groups
 Group- An association of two or more
individuals who have a shared sense of
identity and who interact with each other
in structured ways on the basis of
common set of expectations about each
other’s behavior.
 Social stratification-Caste system, class
system
LANGUAGE
 Enable people to communicate
 and structures the way the world is
perceived.
 SPOKEN LANGUAGE- verbal
communication
 NONSPOKEN LANGUAGE- non-verbal
communication
EDUCATION
 Medium through which individuals learn
many of the language, values norms,
conceptual skills, respect, role, hidden
curriculum etc….
RELIGION
 System of shared beliefs and rituals that
are concerned with the realm of the sacred.
 Ethical systems-set of moral principles or
values that are used to guide behavior
 Christianity
 Islam
 Hinduism
 Buddhism
 Confucianism
POLITICAL AND ECONOMIC
PHILOSOPHY
 Political stability
 Social unrest
 Economic stability and development
 Economic growth
 Economic mismanagement
CULTURAL FRAMEWORK IN
WORKPLACE- GEERT HOFSTEDE
 Management process and practices may
need to vary according to the culturally
determined work-related values.
 Hofstede- psychologist in IBM
 Data on employees attitudes and
values- 1,00,000 individuals from 1967
to 1973- 40 countries.
 Identified 4 dimensions
 Individualism
Power
vs
distance
Collectivism

Uncertainty Masculinity
vs
Avoidance Femininity
CASE STUDY- STARBUCKS TATA
JOINT VENTURE IN INDIA
 TGB and Starbucks coffee company – January
2012- TSL
 OCTOBER 19,2012
 Indian espresso roast
 Chairman and CEO- Howard Schultz
 Highly accessible and approachable from a price
value proposition
 Stores with style and elegance
 Improved the lives of coffee growing communities
in karnataka.
 Supported ‘Swastha’ school
 Promotion of responsible agronomy practices,
training of local farmers, technicians etc.
 FAIRTRADE coffee empowers small-
scale farmers organized in
democratically run cooperatives to
invest in their farms and communities,
protect the environment and develop the
business skills necessary to compete in
business marketplace.
 Began purchasing Fairtrade coffee in
2000