International Business


International Business m a n a g e m e n t
Module V International business functional strategies: International production strategy international financing strategy international human resources strategy and international marketing strategy.

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

Strategy: actions that managers must take to attain the goals of the firm

A Testable Framework of Product and Promotion Adaptation
Product and Industry
Technology Orientation of Industry Product Uniqueness Cultural Specificity of Product Type of Product

COMPANY Firms International Experience Export Sales Goal for the Venture Entry Scope Product Adaptation - Upon Entry - After Entry Promotion Adaptation - Positioning h - Packaging/Labeling - Promotional Approach

EXPORT MARKET Similarity of Legal Regulations Competitiveness Of Export Market Product Familiarity Of Export Customers

Source: S.T. Cavusgil, Shaoming Zou, and G.M. Naidu. ³ Product and Promotion Adaptation in Export Venturs: An Empirical Investigation,´ Journal of International Business Studies 24, no 3, (1993,485.

The View from
International Business m a n a g e m e n t

‡ Our global strategy used to center on world cars, which we would modify slightly to accommodate demand in different markets. Today our focus is shifting to models that we develop and manufacture especially for selected regional markets.

The View from Honda
We are the most international of the Japanese companies. At the moment we are the most diversified, and we will be more diversified in the future. Still, I think it would be very hard to build a one-type world car. In the end, I don t think it would be very efficient.
---Nobuhiko Kawamoto President and CEO, Honda Motor Company

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

Production Strategy

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

Essential to achieving objectives Reflects overall firm strategy
Low-cost leadership Differentiation Focus

Capacity Planning

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

Assessing a company¶s ability to produce enough output to satisfy market demand
1. 2. 3. 4. Number of work shifts Number of employees Size of facilities Subcontracting

Facilities Location Planning
Selecting the location for production facilities
Location economies Centralized Decentralized

Economic benefits derived from locating production activities in optimal locations

Centralized production tends to be well-suited to global strategy

Decentralized production tends to be well-suited to multinational strategy

Process Planning
Deciding the process that a company will use to create its product
‡ Suits low-cost leadership

‡ Suits differentiation and focus

Facilities Layout Planning
Deciding the spatial arrangement of production processes within facilities

‡ Reflects business-level strategy

‡ Location¶s geography also a factor

Make-orMake-or-Buy Decision
Raw materials Intermediate components Availability Needed modifications Cost considerations

Decision to Make
Vertical integration
Extend control over inputs (backward integration) or output (forward integration)

Reasons to make
Lower cost Greater control

Decision to Buy
Buying from another company a good or service that is not central to a company s competitive advantage

Reasons to buy
Lower risk Greater flexibility Market power Barriers to buying

Quality Improvement
Total Quality Management (TQM)
Continuous quality improvement to meet or exceed customer expectations through quality-enhancing processes

ISO 9000
International Standards Organization 9000 is a certification a firm gets when it meets the highest quality standards in its industry

Other Production Issues

Shipping costs

Inventory costs

Just-inJust-in-time (JIT) manufacturing

Decision to Reinvest or Divest
‡ Promising outlook ‡ Growing market ‡ Highest return


‡ Unprofitable outlook ‡ Social unrest

Financing Business Operations
Financial resources needed to: 

Pay operating expenses Expand production capacity Enter new geographic markets Develop and reward employees Invest in new projects
and much more


ExchangeExchange-rate risk Currency inconvertibility Restricted capital flows



Back-toBack-to-Back Loan

American Depository Receipts
Certificates traded in the U.S. that represent a specific number of shares in a non±U.S. company 
No currency-conversion fees  No minimum purchase amounts  Attractive to U.S. mutual funds

Emerging Stock Markets
Hot money:

Extreme volatility Poor regulation

Liquid investments that can be quickly withdrawn

Patient money:
Holdings of factories, equipment, and land that cannot be quickly withdrawn

Internal Funding
Equity, debt, and fees
Subsidiaries financed by parents, who are later rewarded financially

Revenue from operations
Money earned from sales is the lifeblood of every company

Capital Structure
Mix of equity, debt, and internal funds used to finance activities

Small Business Financing
Tips for entrepreneurs to find funds: 

Contact business schools with strong international programs Consult your country¶s commerce department Leverage your contacts Attend industry events in other countries Consider hiring an intermediary

Three approaches to IHRM

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

‡ Cross-cultural management approach
± Examines human behaviour within organisations from an international perspective.

‡ Comparative HRM
± Seeks to describe, compare and analyse HRM systems in various countries.

‡ HRM in multinational enterprises (MNEs)
± Explores the implications of the process of internationalisation on HRM activities and policies.

Figure 14.1 Model of IHRM

Source: Adapted from P.V. Morgan, µInternational human resource management: Fact or fiction?¶, Personnel Administrator, 31(9), 1986, p.44.

Types of employees in an MNE
‡ Parent-country nationals (PCNs)

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

± Employees who were born and live in a parent country.
A parent (or home) country: the country in which a company s corporate headquarters is located.

‡ Host-country nationals (HCNs)
± Employees born and raised in a host country.
Host country: a country in which the MNE seeks to locate or has already located a facility.

‡ Third-country nationals (TCNs)
± Employees born in a country other than a parent or host country.

Types of international work
‡ Expatriates ‡ Global team project

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

± An employee sent by his/her company in one country to work in a different country. ± Bringing together employees from different locations to complete a specific team project.

‡ Short-term assignments
± Sending employees on assignments, such as a three-month assignment, to a foreign location.

‡ Virtual assignment.
± Assignments requiring employees in different locations to use information technology to communicate on job projects and tasks.

International Business m a n a g e m e n t Factors which differentiate international from domestic HRM

More HR activities The need for a broader perspective More involvement in employees' personal lives Changes in emphasis with variable mix of expatriates and locals in workforce ‡ Risk exposure ‡ More external influences ‡ ‡ ‡ ‡

Variables that moderate differences between domestic and international HRM

Source: P.J. Dowling, University of Canberra. Used with permission.

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

Foreign environment (uncontrollable) Political/legal forces


Cultural forces

Domestic environment (uncontrollable) (controllable)

Economic forces Competitive structure Competitive Forces


Political/ legal forces


Channels of distribution




Environmental uncontrollables country market A

Geography and Infrastructure

Economic climate

Level of Technology


Structure of distribution

International Business m a n a g e m e n t INTERNATIONAL MARKETING CONCEPTS

1. Domestic market only 2. Domestic market extension 3. Multidomestic market concept 4. Global marketing concept

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

‡ ‡ ‡ ‡ ‡ ‡ ‡

exporting internet licensing franchising joint ventures wholly owned subsidiaries (acquisitions, green field) strategic alliances


Environment specific
‡ ‡ ‡ ‡ ‡ market size and growth risk government regulation competitive environment local infrastructure

Firm specific
‡ need of control ‡ company objectives ‡ internal resources, assets and capabilities

‡ macrosegmentation
(grouping the countries)

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

‡ microsegmentation
(develop segments at country level - derived microsegmenation - cross-country segmentation)

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

Segmentation variables for consumer markets
* region * city size * urban/rural

* age, sex * family size * income, occupation * education, religion

* social class * lifestyle * personality

* buying occasions * benefits sought * user status * usage rate * loyalty status * attitudes towards product

Segmentation variables for industrial markets
* industry * company size * location

Operating variables
* technology * user/non user status * customer capabilities

Purchasing approaches
* purchasing function organization * power structure * general purchase policies * purchasing criteria

Other factors
* situational factors: urgency, size of order * personal characteristics: attitudes towards risk, loyalty

‡ universal (global ) segments = cross-border segments
that transcend national bounderies

‡ national segments = local segments that differ from country
to country

‡ mixed segments = pursue both universal and local segments

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