International Business Environment and

Strategic Management
• Nature and complexity of IB
• Doing business across cultures
• Current trends in political system
• International Strategic Management
• Strategic Choice in International Business
• Entering and operating in International Markets
• Developing Competitive Strategy in IB
 Nature and Complexity of International
Business Environment
• All the factors influencing the internationally
operated firm in its development and performance
• International business environment can be
operating/industry and remote environment
• Business environment analysis is indispensible for
formulating and implementing the proper strategy to
sustain in the international market
 Nature and Complexity of Business
Across Cultures
• Varying communication implication
• Varying impact of social behavior
• Varying standard of CSR and business ethics
• Varying customer reaction to marketing
 Communication Issues

• Non-verbal communications
• (kinesics,
• proxemics,
• paralanguage,
• physical context
• Haptics( touch language etc shaking hands with
subordinates)
 Customer reaction

• When customer buy?

• When people buy?
• Who does purchasing ?
• How/who makes purchase decision?
• How to promote??
 Managing Socio-Cultural Differences

• Harmonizing cross-culture behaviors

• Making little or No adjustment
• Making Communication Effective
• Managing ‘Culture Shock’
• Managing company and management orientation
• Implementing strategies for instituting cultural
change
 Harmonizing cross-culture behaviors
 be aware of cultural backgrounds of all colleagues and
stakeholders and assess how deep rooted the cultural beliefs
into the people
 Provide the all team members preliminary cross-cultural
orientation and training that covers different communities
culture and the organization’s culture
 Create the forum of multicultural team building
 Ensures that the team members all sensitive to several
cultures and sub cultures
 Use tactful facilitator periodically to coach top team leaders
 Making communication effective

 Verbal communication( translation issue)

 Non-verbal communication(perceptual clues, body
languages)
 Cultural shock and Reverse Shock

 It is the state of frustration when entering a different

cultures
 Its very hard to learn and cope with a vast array of
new cultures
 Reverse shock if a person stays in cross culture long
enough in some case people encounter culture shock
when they return to home country after long gap of
time
 Current Trends in World Politics

 Widespread democratization
 Pluralist form of democracy
 Recognition and incorporation of human rights
 Power devolution and decentralization
 Erosion of centralized system
 Liberalization of economic set up
 Actors of world political system

 Constitutional organ and bodies

 Constitution and state structure
 Political parties
 Power centers and transition
 Supranational/International organization
 Competitors
 Regional trading blocks
 Political risk and their Assessment

1. General Political Risk

 Government takeover(expropriation and
domestication)
 Operational Restriction
 Agitation, War, Armed Conflict, Violence
 Terrorism
 Blockade of Fund
2.Government intervention in Economic Activities
• Individualistic Paradigm
• Communitarian Paradigm
 Legal Forces
 Major Legal systems
1. Common Law system
2. Civil Law(Code Law) System
3. Social and Religious Law System
 Actors in Legal System
• Government
• Constitution and National Laws
• Judiciary and court system
• Religious Power Groups
• Special Interest Groups
• International Organizations
 Managing Political Risk
1. Identifying the existence of Political Risk and its
Accompanying
2. Developing Plans, Strategies and Programmes
3. Maximizing compensation in the event of
expropriation and mitigating other types of risk
 Identifying Existence of Political Risks
 Country Specific Risk
 Firm Specific Risk
 Size and visibility
 Company Attitude S
 Developing Plans, Strategies and
Programmes
 Pre Investment Strategies
• Avoidance
• Insurance
• Negotiating the Environment
• Structuring and Investment
 Concurrent Strategies
• Planned Divestment
• Short term profit maximization
• Developing local shareholders
• Adaptation
 Strategy and Assessment of International
Market Opportunities
 Analyzing Organization Readiness to Internationalize
 Assessing the Suitability of products and services for
foreign markets
 Screening Countries to identify target markets
 Assessing industry market potential
 Choosing foreign business partners
 Estimating company sales potential
 Tools for estimating market potential and
opportunities
 Gross National Product
 Population
 Personal Income
 Obsolescence
 Cultural Factors
 Costs
 Income Elasticity
 Substitution
 Income Inequality
 Buyers Behavior
 Methods of Estimating Industry Market
Potential
 Simple Trend Analysis
 Monitoring key industry specific indicators
 Monitoring key competitors
 Following key customers around the World
 Tapping into supplier networks
Strategic Choice in International Business

Two pressures determine the strategy

 Cost reduction pressures(CR)
 Pressure of Local Responsiveness(LR)
Four Strategies based on two pressures
1. International Strategy(CR↓,LR↓)
2. Multi-domestic(localization)Strategy (CR↓,LR↑)
3. Global Strategy (CR ↑, LR↓)
4. Transnational strategy(CR ↑, LR ↑)
 Entering and Operating in International
Market
1. Exporting and Importing
2. Collaborative ventures and strategic alliance
 Strategic alliance
 Joint ventures
 Consortia
 Management contracts
 Trunkey Operations
 Equity alliance
 Foreign Manufacturing alliances
 Contd..
3. Licensing and Franchising
4. Wholy owned subsidiary
 Exporting and Importing
 Most common way for entering the foreign markets
 Exporting requires use of marketing channels to
reach to the buyers
 Exporting generally through export agents or
overseas marketing subsidiaries
 Exporting indirectly through trading companies,
export management companies etc
 Strategic Alliances
 Two or more companies collaborate to cope with risk
or to exploit the opportunities or to comply the laws
through strategic alliance
 Strategic alliance can be formal joint ventures or as
short term contractual agreements
 Eg. In 1998/98 there is contractual agreement
between Nokia, Ericsson and Motorola which jointly
accounted about 75 of mobile phone sales
 Joint Ventures
 Collaboration sharing various resources while
remaining independent entities
 May have various combinations of ownership
 Companies mostly form joint venture to achieve
specific objectives
e.g.
 Consortia
 Similar to joint ventures but differ in two terms
a. Consortia typically involves large number of
participants firm
b. Frequently operate in a country or market in which
none of the participants is currently active
 Management contract
 Sign a contract with the companies of another
country to manage its assets for certain till that time
it develops its HR and technical aspects of the
companies
 Nepal government bank goes under these types of
agreement
 Trunkey Operations
• Foreign companies establish, own and operate the
companies and transfer it to the local companies
after certain time period
• This is most popular in government organization