International Business

Management

International Business
M a n a g e m e n t

Module 1

Introduction to international business Local, regional, national, international, and global business Management orientation of overseas business ethno centric, poly centric, region centric, and geo centric orientation Reasons for internationalization of business factors restricting internationalization of business major global companies in the world

International Business
M a n a g e m e n t

Present scenario of business

International Business
M a n a g e m e n t

What is

International Business
M a n a g e m e n t

International business consists of transactions that are devised and carried out across national borders to satisfy the objectives of individuals, companies, and organizations.

International Business
M a n a g e m e n t

Definitions 1) IB field is concerned with the issues facing international companies and governments in dealing with all types of crossborder Transactions.

International Business
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Definitions 2) IB involves all business transactions that involve two or more Countries.

International Business
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Definitions 3) IB consists of transactions that are devised and carried out across borders to satisfy the objectives of individuals and Organizations.

International Business
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Definitions 4) IB consists of those activities private and public enterprises that involve the movement across national boundaries of goods and services, resources, knowledge or skills.

International Business
M a n a g e m e n t

Need for International Business International business :

causes the flow of ideas, services, and capital across the world offers consumers new choices permits the acquisition of a wider variety of products facilitates the mobility of labor, capital, and technology provides challenging employment opportunities reallocates resources, makes preferential choices, and shifts activities to a global level

International Business
M a n a g e m e n t

Types of International Business

Export-import trade Foreign direct investment

Licensing

Franchising Management contracts

International Business
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Internation al b u s i n e s s

q u e s t i o n s

How will an idea , good , or service fit into the international market? Should trade or investment be used to enter a foreign market? Should supplies be obtained domestically or abroad? What product adjustments are necessary to be responsive to local conditions? What are the threats from global competitors , and how can these threats be counteracted?

International Business
M a n a g e m e n t

Types
Importing and Selling and buying goods Exporting and services with organizations in other countries Multinational An organization with Enterprise operating units located in (MNE) foreign countries. Global An organization having Organization corporate units in a number of countries integrated to operate worldwide.

International Business
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I n t e r n a t i o n a l

busines s trad e arketi m ng
are related but not same

International Business
M a n a g e m e n t

International trade

as it indicates pertains to only bilateral or multilateral trade activities

International Business
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Trade activities between two or more countries can be understood both at

macro level

micro

ie country level, level ie firm or company
,

International Business
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International business International trade

Macro level

Micro level

International marketing

International Business
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International and national business
Three fundamental difference are in terms of

market , competition currency

International Business
M a n a g e m e n t

factor Business horizon competition

international global global

national National Local /regional/ national Free access

Regional formation Trade blocks / / segmentation agreement currency Risk and uncertainity Role of agent

Foregin excahange Local currency (unstable) (stable) unpredictable More predictable

Primary can be a More predictable catalyst Secondary

International Business
M a n a g e m e n t

Orientation of management:

Perlmutter (1967) identified distinctive "orientations"
of management of international organisations.

His "EPRG" scheme identified four types of attitudes or orientations associated with successive stages in the evolution of international operations.

International Business
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ETHNOCENTRIC MANAGEMENT ORIENTATION

home country is superior to any other country in the world regardless of any evidence to the contrary . “ since a product or a service performed well at home , it should also perform well abroad . Since this is so obvious , no further research is necessary on foreign markets and no adaptations need to be made to the products or services to

International Business
M a n a g e m e n t

•Ethnocentrism - home country orientation exporting surplus

International Business
M a n a g e m e n t

each country is unique and therefore it allows its subsidiaries to have more control in developing strategies that will work in a particular country . “ Since each country is so unique , complete control should be given to local managers since they obviously know what is best for the company in that country .” As long as these subsidiaries are profitable , headquarters is apt to leave them alone . “ Let the Romans do it their way . We really don ’ t understand what is going on here , but we have to have confidence in them . As long as they earn a profit , we want to remain in the background ” ( Perlmutter , 2001 ). Though an improvement over a purely ethnocentric view , a purely polycentric one has its flaw viewpointheadquarters and the polycentric in that often leads to subsidiaries are somewhat cut region where ethnocentricity within each off from one the company another . operates

POLYCENTRIC MANAGEMENT ORIENTATION

International Business
M a n a g e m e n t

• Polycentrism - host country orientation subsidiary operation

International Business
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•Regiocentrism - regional orientation world market strategies

International Business
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GEOCENTRIC MANAGEMENT ORIENTATION

geocentric orientation believes that the entire world is a potential market and strives to develop strategies that will work in every market . In geocentrically oriented companies , authority is not simply placed with headquarters at home or with subsidiaries abroad , but rather a is dispersed more equally between the two so that a collaboration is formed . Also , a view of superiority is not based on nationality .

International Business
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•Geocentrism - world orientation world market strategies

International Business
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The four stages are as follows:
1.Stage one: domestic in focus, with all activity concentrated in the home market. Whilst many organisations can survive like this, for example raw milk marketing, solely domestically oriented organisations are probably doomed to long term failure..

International Business
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The four stages are as follows:
2. Stage two: home focus, but with exports (ethnocentric). Probably believes only in home values, but creates an export division. Usually ripe for the taking by stage four organisations.

International Business
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The four stages are as follows:
3. Stage three: stage two organisations which realise that they must adapt their marketing mixes to overseas operations. The focus switches to multinational (polycentric) and adaption becomes paramount.

International Business
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The four stages are as follows:
4. Stage four: global organisations which create value by extending products and programmes and focus on serving emerging global markets (geocentric). This involves recognising that markets around the world consist of similarities and differences and that it is possible to develop a global strategy based on similarities to obtain scale economies, but also recognises and responds to cost effective differences. Its strategies are a combination of extension, adaptation and creation. It is unpredictable in behaviour and always alert to opportunities. There is no time limit on the evolution process. In some industries, like horticulture, the process can be very quick.

International Business
M a n a g e m e n t

Stages of domestic to global evolution
Management Stage one emphasis Domestic Focus Marketing strategy Structure Domestic Domestic Domestic Stage two Stage three Stage four International Multinational Global Ethnocentric Extension International Polycentric Adaption Worldwide area Geocentric Extension Adaption creation matrix/mixed

Management Domestic style Manufacturing Mainly stance domestic Investment policy Performance evaluation Domestic Domestic market share

Centralised top Decentralised Integrated down bottom up Mainly domestic Host country Lowest cost worldwide

Domestic used Mainly in each Cross worldwide host country subsidization Against home Each host Worldwide country market country market share share

International Business
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1 Domestic

View of Model the world
Home country Extension market

Controlled federation Coordinated federation

orientatio Strategy n
Ethnocentric domestic Ethnocentric International

2 International

3 Multinational National market Decentralised federation 4 Global Global market or resources

polycentric

Multidomestic

Centralized hub geocentric

Global

5 transnational Global markets Integrated network

geocentric

transnational

International Business
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STAGE 2

International Business
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STAGE 3

International Business
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STAGE 4

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STAGE 5

International Business
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high

GLOBAL STRATEGY

TRANSNATIONAL STRATEGY

Cost pressure
INTERNATIONAL STRATEGY

MULTIDOMESTIC STRATEGY

low

low

Pressure for local responsiveness

high

International Business
M a n a g e m e n t

When Coca - Cola has an increase of 2 % in sales , it might well translate into 500 , 000 additional cases for the month

International Business
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The old adage

Local

Think Global , Act

is fine for businesses selling nationally distributed consumer products and services

majority of small business

Think Local , Act Local .

For example , why would a locally - owned real estate agency need to spend money on internet Search Optimization?

International Business
M a n a g e m e n t

1)

Minority Supplier Commitments Foster a climate of entrepreneurial opportunity through targeted minority supplier identification and a new supplier mentoring program . 2) Urban Economic Partnerships A commitment to strengthen local economies through urban economic partnerships and increased marketing investments with local retailers and entrepreneurs . 3) Opportunities for Minority Financial Institutions 4) Task Force to Review Value Chain 5) Increased Community Contributions

International Business
M a n a g e m e n t

ITC IBD ( International Business Division ) is the country ’ s second largest exporter of agri products

International Business
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In the year 1990 , the company leveraged its agri – sourcing competency & thus set up the agri business division for export of agri - commodities . The Division is today one of India's largest exporters . ITC's unique and now widely acknowledged e - Choupal initiative began in 2000

International Business
M a n a g e m e n t

E - Choupal services today more than 4 million farmers wide range of crops soabean , coffee , wheat , rice , shrimp tc Over 40 , 000 villages 7000 kiosks across nine states MP , Haryana , Utharanchal , Karnataka , AP , Up , Maharashra , Rajasthan and kerala

International Business
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International Business
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International Business
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International Business
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International Business
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How to analyse a case

theory are tools . One one needs to know which tool to be selected and how it can be used . Only some of the tools or a small portion of the theory is applicable here . One needs to have creativity and analytical skill to translate the theory to the real life situation

International Business
M a n a g e m e n t

According to Raymond , the analyst should try to seek answers to following questions : 1.  What’s actual problem involved in the case 2.  What are the relevant facts 3.  What are the crucial unknown aspects of the scene 4.  What are the major critical questions related to each specific event 5. In what ways can logic and reasoning be used lo determine crucial inferences, connections and relationships 6. In what manner can contradictory facts and arguments be weighed in making decisions 7.  What should be the proper timing of decisions 8.  In what ways can those decisions be best executed

International Business
M a n a g e m e n t

Schnell ’ s ten - point model
1. Identification of the problem. 2. Determination of facts. 3. Ascertainment of alternative courses of action. 4. Analysis of advantages and disadvantages of the alternatives. 5. Assessment of advantages and disadvantages of the alternatives. 6. Prediction of concurrent advantages and disadvantages. 7. Selection of best alternative. 8. Execution of the decision. 9. Filing the problem solution.                                                      ‘ 10. Comparing expected results with the actual results of the decision.

International Business
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1 2 3

Coco cola Third stage company multinational ITC Stage two, evaluation is based on home country Bajaj Third stage adapted to local situation Coco cola fourth stage company using local resurces Itc stage two, concentraing hiome market Bajaj stage three Suggestion geo centric ,adapting global resources, eco frindly bajaj to market , Coco cola itc poly centric give more importance CSR, efluent treatment plant, ITC diversfy d product, awareness at all level to b improved Bajaj geocentric orientation Coca Cola ITC Bajaj moving to now poly centric, earlier geo centric ethnocentric, Geo centric, From scooter to bike, developing countries polycentric funny ad with

4

5

Coca cola MNC local stars, ITC Bajaj monopoly???????

Multi domestic strategy international, ethnocentric international company,

International Business
M a n a g e m e n t

How a multinational company strives for business / market expansion with local strategy Focuses mostly on exports of agri products

Direct exports of two and three wheelers . Joint ventures and strategic alliances

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