INTRODUCTIONS

• Name
• Last GPA
• Last Degree and Grade
• Institution attended
• Organization
• Planned Major
• Global Economic Crisis

• Historical Development
• Capitalist Economic System
• Eras of Business
THEORETICAL BASIS OF
GLOBAL BUSINESS
• Absolute Advantage

• Comparative Advantage

• Competitive Advantage
The C
Internation Advanced
P
al Product Countries
Cycle

P
C
Developing
Countries

P
C Less-developed
Countries

New Maturin Standardize

Produc g d Product
t Product
• Country Specific Advantage

• Firm Specific Advantage

• Krugman’s Theory
• Porter’s Five Forces Model
 New Trade Theories
Trade
Theorie
s The Competitive Advantage of Nations by
Michael Porter

Firms Strategy,
Structure and Rivalry

Factor Conditions Demand Conditions

Related and
Supporting Industries
FACTORS OF PRODUCTION

1.Natural Resources
2.Labour
3.Capital
4.Entrepreneur
5.Information
New Trade Theories

Krugman’s Internal and External

Economies of Scale

Internal Economies of Scale

• Economies of scale lead to lower
cost per unit and diversion of
resources from competitors
 Cooking
Oil Glass
OIL

10,000
500

Cement
Plastics
A BC Mobile
D E F manufacturing
New Trade Theories

Krugman’s Internal and External

Economies of Scale

External Economies of Scale

• Cost per unit depends on size of industry
and not the size of the firm
• Many small firms interact to create a large,
competitive critical mass
• Abandoned Product Ranges
 New Trade Theories
Porter’s Five Forces Model

New
Entrants

Industry
Supplier Competitio Customers
s n

Substitute
s
FIRM SPECIFIC ADVANTAGES
(FSA’s)

• Resourced based view of Sustainable

Competitive Advantage
• RBV: Know-how, technology, Products,
Services, Infrastructure, Finances
• Marketing FSA’s
 MARKETING OUTLINE
OPERATION
S Producer/Deliverer
MARKETING 4Ps
AS A FIELD
OF STUDY Distributor
Product/ Wholesaler Customer
Service
Retailer Attitude Behavior

Characteristics

Existing Concept Necessity

/Desire

RESEARCH

CONSUMER
BEHAVIOUR
FIRM SPECIFIC ADVANTAGES
(FSA’s)

• Transferability of FSA’s
GLOBAL COMPETITION

• Extensions to Porter’s Five Forces Model

• Rivalry in industry
• Strategic Groups
• Domestic Competitors
• Foreign Competitors
GLOBAL COMPETITION

• Extensions to Porter’s Five Forces Model

• New Entrants (First Mover
Advantages)
• Higher brand recognition
• More positive brand image
• More customer loyalty
• Better distribution networks
• Longer market experience
GLOBAL COMPETITION

• Hypercompetition
• Cost and Quality
• Timing and Know-how
• Strongholds
• Financial resources
 New Trade Theories
Trade
Theorie
s Theory of Foreign Direct Investment
(Eclectic Paradigm)
• Firms as seekers
• Seeking Resources
• Seeking Factor Advantages
• Seeking Knowledge
• Seeking Security
• Seeking Markets
 New Trade Theories
Trade
Theorie
s Theory of Foreign Direct Investment
(Eclectic Paradigm)
• Firms as Exploiters of Imperfection
• Imperfections in Access
• Imperfections in Factor Mobility
• Imperfections in Management
 New Trade Theories
Trade
Theorie
s Theory of Foreign Direct Investment
(Eclectic Paradigm)

• Firms as Internalizers
 • Low Context Cultures
Culture
• High Context Cultures

Elements I)Religion
of Culture II)Values & Attitudes
III)Manners and Customs
IV)Material Elements
V)Aesthetics
VI)Language
 • Core concepts
• Concept of Destiny
Culture
• Concept of Wealth

• Concept of Blessing
R
I) Effect of Religion
C
• Christianity – Roman Catholics, Protestants, Orthodox
• Islam
C
• Hinduism
R
• Buddhism
• Confucianism
• Judaism
 II) Values and Attitudes
Culture
•Effect of Value on Management Practice

Planning and Scheduling

“Where there is a will there is a way”
“Life follows a periodical course and human
action is determined by the will of God”
Decision making process
“Decisions should be made based on numbers”
“Intuition should guide decision making”
 Planning, Morale and Organizational
Culture Development
“Change is considered an improvement and a
dynamic reality”
“Tradition is revered and the power of the ruling
group is founded on the continuation of a stable
structure”
Assignments of Tasks, Performance and
Organizational Effectiveness
“Get the job done at all costs (one must be
willing to get one’s hands dirty”
“Some work may be below one’s dignity or
place in the organization”
Source: Table 2.2 Pg 48 International Business 7th
Edition
 III) Manners & Customs
Culture
• Names, Gifts, Occasions

IV) Material Elements

• Economic, Social, Financial and
Marketing Infrastructures

V) Aesthetics
• Colours, Shapes, Designs,
Placement of objects
 • Cultural Analysis, Comparison
Culture
• Hofstedes Cultural
Dimensions
• Cultural Characterisitcs and
Clusters
(Table 2.6 Pg 59 International
Business 7th Edition)
 QUANTITY
COUNTRY INDIVIDUALISM POWER UNCERTAINTY OF
  / COLLECTIVISM DISTANCE AVOIDANCE LIFE
G E
         
L N Australia Individual Small Moderate Strong
O V Canada Individual Moderate Low Moderate
England Individual Small Moderate Strong
B I
France Individual Large High Weak
A R Greece Collective Large High Moderate

L O Itlay Individual Moderate High Strong

Japan Collective Moderate High Strong
N
Mexico Collective Large High Strong
M Singapore Collective Large Low Moderate

E Sweden Individual Small Low Weak

US Individual Small Low Strong
N Venezuela Collective Large High Strong
T

Hofstede's Cultural Dimensions

 Guidelines for Business Success
Culture Using Culture
• Embrace Local Culture
• Build Relationships
• Employ locals to gain cultural
knowledge
• Help employees understand the
organization
• Adapt products and processes to
local markets
• Coordinate by region
GLOBAL MARKETING

COUNTRY SELECTION
  Political Risk Research
Country  General Instability: Revolution, External Aggression
Selectio  Expropriation: Nationalization, Contract Revocation
n
 Operations: Import Restrictions, Local Content rules,
Taxes, Export Requirements

 Finance: Repatriation restrictions, Exchange rates

 Environmental Research
 Physical
 Sociocultural
 Economic
 Regulatory
  Country Identification
Country • Trading block , Region
Selectio • General Business Resources, Newspapers, Magazines,
n Reports, TV Programs

Process  Preliminary Selection

• Macroeconomic Data
• Demographic Indicators

 In-Depth Screening
• Market profile, Market size, Market growth, Competitive
Intensity, Trade Barriers
• Industry Associations, Country Specific Reports

 Final Selection
• Personal Experience
  Country Data Sources (macroeconomic)
Country Africa Briefings, Business Environment Risk Intelligence,
Selectio CIA World Factbook, Council of European Science Data
Archives, Economist Intelligence Unit, EIU Country
n Commerce, EIU Country Data, EIU Country Reports,
Process Eurostat, Global Risk Assessment Inc., Global Prospectus
LLC, Internet Center for Corruption Research, PRS Group,
- DATA Transparency International, World Bank Country Data,
SOURCES

 Market Specific Information (Reports & Data)

EIU, Business International, Frost & Sullivan , McKinsey, Gartner,
Euromonitor, Bates Worldwide, US Department of Commerce
(Global Market Surveys)
  Country Sales
Country Country Sales = Industry Sales x Market Share
Selection  PLC
Process
 Industry Sales
FORECASTS  Build-Up Method – Estimates from different
channels
 Forecasting by Analogy
 Judgmental Forecasts
 Jury Technique, Expert Pooling, Delphi Method
 Time Series Extrapolation
 Regression based Forecasts – Eg. Armstrong’s
Regression Model pg 120
  Country Sales
Country Country Sales = Industry Sales x Market Share
Selection  PLC
Process
 Market Share
FORECASTS
 Domestic Competition
 Multinational Competition

 CSA’s and FSA’s

 Competition
10
Country .UK .IRA .SRL
Selection
Growth Potential
.PAK .MAL
.FRA
Process
5

Prioritize

0 5 10

Country Clusters
GLOBAL MARKETING

FOREIGN ENTRY
  Exporting
Entry
Modes for
 Indirect Exporting – piggybacking,
Foreign consortia, EMCs, Trading Companies
Markets
 Direct Exporting – Market Country
agents or Distributors, Own sales
subsidiary

 Direct Sales – Mail Order, ECommerce

  Licensing
Entry
Modes for
 Technical Licensing
Foreign
Markets  Contract Manufacture
 OEM
 Management Contracts
 Turnkey Contracts
 Franchising
  Strategic Alliance
Entry
Modes for
 Distribution Alliance
Foreign
Markets  Manufacturing Alliance
 R&D Alliance
 Joint Venture
  FDI (Foreign Direct Investment)
Entry
(Wholly Owned Manufacturing Subsidiary
Modes for
Foreign
Markets  Assembly
 Full-fledge Manufacturing
 Research and Development Acquisition
 Issues
 Outsourcing
 Greenfield Investment
 Acquisition
  Tariff barriers
Barriers
 Non-tariff barriers
 Government Regulations, Procedures
Distribution Access, Local Monopolies
 Cost of barriers – Gatekeepers
 Exit barriers
  Product Shipment
Export
 Export Pricing
Functions
 Local Distribution
 Payment
 Repatriation of funds
 After-sales support
  Product Shipment
Export
 Transportation to the border
Functions
 Clearing through customs
 Warehousing

Terms of Shipment
1. EXW - Ex-Works
2. FAS – Free alongside ship at a named port of export
3. FOB – Free on board at a named port of export
4. CFR – Cost and Freight to a named overseas port
5. CIF – Cost, Insurance and Freight to a named
overseas port
6. DDP – Delivery Duty Paid to an overseas buyer’s
premises
Export
Functions
 Export Pricing
 Price quotes
 Trade credit
 Price escalation
 Dumping
 Letter of Credit

Export Exporter Advises of L/C

Functions Seller
Presents Documents
Exporter’s Bank
Beneficiary
Remits Payment
Shipment of Goods
Purchase and Agreement

Remits Payment

Document s
Presents

Opens L/C
Pays Bank or Gets Loan
Importer
Sends Documents Importer’s Bank
Buyer
L/C Application
Account
  Local Distribution

Export  Finding a distributor

Functions  Screening distributors
 Personal visit
 Negotiating a contract

Criteria for Choosing Distributors

 Previous experience (products handled, area covered)
 Services offered (inventory, repairs, after-sales service)
 Marketing support (advertising and promotional
support)
 Financial Strength
 Relations with government
 Cooperativeness
 Handling competing products
Export
Functions
 Repatriating the funds
 Export License
 Hiring an agent
 Transfer of title ownership
 Insurance
  Indirect exporting, licensing
Internatio
nalization  Direct exporter, via independent distributor
Sequence
/  Establishing foreign sales and subsidiary

Paths
 Local Assembly

 Foreign Production
  Cultural Distance
Culture
Distance
 International Learning Curve
Effect
Export  Waterfall Strategy
Expansio
n
Strategy  Sprinkler Strategy
 Strategic Product/
Optimal Posture Market
Entry Situation
Mode Emerging High- Mature Services
growth
Incremental Indirect Indirect Direct Licensing/A
exports exports exports lliance
Protected JV Indirect Alliance/Lic Licensing
exports ensing

Control Wholly Acquisition Wholly Franchising

Owned /Alliance Owned /Alliance/Ex
Subsidiar Subsidiary porting
y
CASES Pg 180 - 199
-Toys ‘R’ Us goes to Japan
- Illycafe (A): Internationalization
- Illycafe (B): The Starbucks Threat
- AOL: International Expansion
-
GLOBAL MARKETING

UNDERSTANDING
CUSTOMERS
 Model of Buyer Behaviour

External Influences “Models of Man” Buyer Choices

Politics Politics

Buyer Decision
Characteristics
Technology Technology
Economics Economics

Process
Culture

Buyer
Culture

Local
Marketing
Effort
 Consumer Decision Process

Problem Search Evaluation of Choice Outcomes

Recognition Alternatives
 Extended Fishbein Model
Multiattribute
evaluation εBI

Social Forces
Preference

Social Norms

Motivation to Behavioral
Comply Intent

Situational
factors POP

Choice

B=Beliefs about attributes I= Importance of the belief

 Consumer Research
 Secondary Data
 Qualitative Research
 Consumer Surveys
 Trade Surveys
 Observation
 Experiments
 Causal Models

Research Organizations Exhibit 7.6 Pg

224
Market Environment and Features

Feature Emerging New Growth Mature

Life Cycle Introduction Growth Mature

Stage
Tariff barriers High Medium Low

Nontariff High High Medium

barriers
Domestic Weak Getting Strong
Competition Stronger
Foreign Weak Strong Strong
Competitors
Financial Weak Protected Strong
Institutions
Consumer Embryonic Strong Saturated
Markets
Dominant Marketing Dimensions

Task Emerging New Growth Mature

Industrial Getting Strong Strong

Markets Stronger
Political Risk High Medium Low

Distribution Weak Complex Streamlined

Media Weak Strong In-store

Advertising promotion