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    Seminar In Seminar In Presentation Transcript

    • Seminar in International Business Wagner College MBA Summer 2006
    • IBF
      • Seminar in International Business
      • IB 605 MBA SUMMER 2006
      • SESSION 5 Monday 6:00 – 9:40 PM
      • July 24 th , 2006
      • August Morar
      • © 2006 AMI
      • Course Documents and Information are available at
      • www.wagner.edu/faculty/august.morar/
      World News Country Evaluation Export Import Wagner College Graduate Programs
    • Session 5 IBF
      • Review of the international business and financial news, the Weekly Report
      • The Strategy of International Business
      • Export, Import and Direct Investment
      • CASES
        • The Globalization of eBay
        • Carrefour International Operation
        • Grieve, a Small-Business Export Strategy
        • GE Hungary
      • VIDEO LIBRARY
        • Entry Modes into the Chinese Market
        • EU Regional Policy
    • Session 5 IBF
      • MIDTERM Presentation Session
      • Investment Portfolios
      Wagner College Graduate Programs
    • Session 5 IBF
      • Center for International Strategic Studies
      • Global Markets        July 21, 2006
      •                                   Stock Exchanges                               Commodity Prices                               Currency Cross Rates
      • EUSAS Index             Components and Charts
    • Session 5 IBF
      • Business and Financial
      • World News
    • Business News IBF
      • Online gambling companies suffered losses
      • Backdated stock options investigation
      • Airbus unveils its redesigned midsize A350
      • Russia’s WTO accession delayed
      • Rosneft shares began trading in London
      • Phelps Dodge offer to buy Canadian Inco
      • Yahoo! share price fell to its two year low
      • Microsoft and Nortel Networks alliance
      • Citigroup’s second quarter revenue rose
      • China’s economy grew by 11.3% in Q2
    • Midterm Presentations
      • MIDTERM Presentation Session
      • Investment Portfolios
      Wagner College Graduate Programs
    • Governments and the FDI
      • Video Library
      • Chinese Market
    • Global Strategy IBF
      • The Strategy of
      • International Business
      • Industry, Strategy, and Firm Performance
      • The Firm as a value Chain
      • Geographical Considerations
      • Global Integration versus Local Responsiveness
      • Strategy Types
    • Global Strategy IBF
      • Case Study
      • The Globalization of eBay
    • Global Strategy IBF
      • The Globalization of eBay
    • Country Evaluation IBF
      • Country Evaluation and Selection
      • INTRODUCTION
      • Companies must determine both the order of country entry as well as the rates of resource allocation across countries.
      • CHOOSING MARKETING AND PRODUCTION SITES,
      • AND GEOGRAPHIC STRATEGY
        • where to market and
        • where to produce
      • SCANNING FOR ALTERNATIVE LOCATIONS
      • Perform a detailed analysis of a manageable number of geographic locations.
    • Country Evaluation IBF
      • CASE STUDY
      • Carrefour International Operation
    • Country Evaluation IBF
      • CHOOSING AND WEIGHTING VARIABLES
      • Variables must be weighed against each other to effectively evaluate the potential success of a particular venture and to compare various ventures.
      • Opportunities
      • Market Size
      • Market size is determined by sales potential.
      • Ease and Compatibility of Operations
      • Market located nearby, share the same language and offer similar market conditions.
      • Costs and Resource Availability
      • The cost of labor, the cost of inputs, tax rates, and available capital, utilities, real estate and transportation.
      • Red Tape
      • Difficulty of getting permission to operate the business.
    • Country Evaluation IBF
      • Risks
      • Economic and political risk ratings
      • Risk and Uncertainty
      • Firms usually experience higher risk and uncertainty when they operate abroad.
      • Competitive Risk
      • A firm’s innovative advantage may be short-lived.
      • Monetary Risk
      • A firm’s expansion occurs through foreign-direct investment, foreign-exchange rates and access to investment capital and earnings.
      • Political Risk
      • Look for economic and social conditions that could lead to political instability.
    • Country Evaluation IBF
      • COLLECTING AND ANALYZING DATA
      • Firms perform research to reduce uncertainties in their decision processes, savings.
      • Problems with Research Results and Data
      • Data discrepancies further increase uncertainty in decision-making.
      • Reasons for Inaccuracies
      • Inability of governments to collect the needed information
      • Comparability Problems
      • Comparability problems result from definitional differences across countries.
    • Country Evaluation IBF
      • External Sources of Information
      • The specificity and cost of information will vary by source.
      • Individualized Reports
      • Specialized Studies
      • Service Companies
      • Government Agencies
      • International Organizations and Agencies
      • Trade Associations
      • Information Service Companies
      • The Internet
      • Internal Generation of Data
    • Country Evaluation IBF
      • COUNTRY COMPARISON TOOLS
      • Grids
      • make country comparisons according to a wide variety of relevant factors
      • Matrices
      • Two matrices frequently used when doing country comparisons - Opportunity-Risk Matrix
      • - Country Attractiveness-Company Strength Matrix
      • Environmental Scanning
      • Firms will likely collect economic, competitive, societal and political/legal information.
    • Country Evaluation IBF
      • Opportunity-Risk Matrix
    • Country Evaluation IBF
      • Country Attractiveness-
      • Company Strength Matrix
    • Country Evaluation IBF
      • ALLOCATING AMONG LOCATIONS
      • Most of the value of a firm’s FDI comes from reinvestment activities.
      • Reinvestment vs. Harvesting
      • - Reinvestment Decisions . Reinvestment refers to the use of retained earnings to replace depreciated assets or to add to a firm’s existing stock of capital.
      • - Harvesting. Harvesting refers to the reduction in the amount of an investment
      • Interdependence of Locations
      • It is often difficult to assess the true impact a particular foreign subsidiary has on other operations within a n MNE.
    • Country Evaluation IBF
      • Geographic Diversification vs. Concentration
      • a firm moves rapidly into many foreign countries and then gradually builds its presence in each, versus a firm moves into a limited number of countries and develop a strong competitive position, has to consider a number of variables:
      • - Growth Rate in Each Market
      • - Sales Stability in Each Market
      • - Competitive Lead Time
      • - Spillover Effects
      • - Need for Product, Communication and Distribution Adaptation
      • - Program Control Requirements
      • - Extent of Constraints
    • Country Evaluation IBF
      • MAKING FINAL COUNTRY SELECTIONS
      • firms must make resource allocation decisions.
      • For new investments
      • Firms will need to develop detailed estimates of all costs and expenses and
      • Consider whether to enter a particular venture alone or with a partner.
      • For acquisitions
      • Firms will need to examine financial statements in great detail.
      • For expansion
      • Country managers will most likely submit capital budget requests that include details of expected returns.
      • To maximize expected gains, decisions must be made in a timely fashion.
    • Country Evaluation IBF
      • Issues With Emerging Economies
      • Advantages may be short-lived
      • Competitors follow leaders into low-wage areas
      • Little first-in advantage for this type of production migration
      • Comparability problems
      • Foreign costs rise quickly due to wage pressures and exchange rates
      • Extent of “red tape”
      • Risk and uncertainty
      • Lack, obsolescence, or inaccurate data/information to base decisions on
    • Country Evaluation IBF
      • Flowchart for Choosing Where to Operate
    • Country Evaluation IBF
      • Video Library
      • EU Regional Policy
    • Global Operations IBF
      • INTERNATIONAL OPERATIONS
      • Strategies for Managing Business Functions
      • EXPORT AND IMPORT STRATEGIES
      • Export Strategy
      • Import Strategy
      • Third Party Intermediaries
      • Export Financing
      • Countertrade
    • Export Strategy IBF
      • CASE STUDY
      • Grieve – A Small-Business
      • Export Strategy
    • Export and Import IBF
      • EXPORT STRATEGY
      • the decision to export must fit a company’s overall strategy and take into account global concentration , global synergies and global strategic motivations ).
      • Characteristics of Exporters
      • - the probability of exporting
      • - export intensity
      • Why Companies Export
      • Stages of Export Development
      • - export to more countries and
      • - expect exports to grow as a percentage of total sales.
    • Export and Import IBF
      • EXPORT STRATEGY (cont)
      • Potential Pitfalls of Exporting
      • Designing an Export Strategy
      • To design an effective export strategy, managers must:
      • - assess the company’s export potential
      • - Obtain expert counseling on exporting
      • - select target markets
      • - formulate and implement an effective export strategy.
    • Export and Import IBF
      • IMPORT STRATEGY
      • There are two basic types of imports :
      • - extracompany imports and
      • - intracompany imports
      • The three basic types of importers are those that:
        • look for any product around the world that will generate a positive cash flow
        • look to foreign sourcing as a means to minimize product costs
        • use foreign sourcing as part of their global supply chain strategy.
    • Export and Import IBF
      • The Role of Customs Agencies
        • The primary duties of a customs agency are the assessment and collection of all duties, taxes and fees on imported products.
        • A customs broker can help an importer minimize duties.
      • Import Documentation
        • Are those that determine whether customs will release the shipment, and
        • those that contain the information necessary for duty assessment and data gathering purposes.
    • Export and Import IBF
      • THIRD-PARTY INTERMEDIARIES
      • They may perform any or all of the following functions:
      • Stimulate sales, obtain orders and conduct market research
      • Perform credit investigations and payment-collection activities
      • Handle foreign traffic arrangements and shipping details
      • Provide support for a client’s sales, distribution and promotion staff.
      • While services are more likely to be exported on a direct basis, goods are exported via both avenues.
    • Export and Import IBF
      • Direct Selling
      • Whereas a sales representative usually operates on a commission basis, a distributor is a merchant who purchases goods from a manufacturer and resells them at a profit.
      • Direct Exporting through the Internet and Electronic Commerce
      • It is especially important for small and medium-size firms that wish to reach distant markets.
      • Indirect Selling
      • is carried out via export management companies and export trading companies.
      • Export Management Companies
      • Export management companies specialize according to product, function and/or market area.
    • Export and Import IBF
      • Export Trading Companies
      • its primary purpose in becoming involved in international trade as an independent broker is to match domestic exporters to foreign customers..
      • Non-U.S. Trading Companies
      • There are no U.S. trading companies that rank among the Fortune Global 500 companies; only Japan, South Korea, Germany and China have firms on that list.
      • Foreign Freight Forwarders
      • Some may specialize in the type of mode used, others in the geographical area served. s.
      • Export Documentation
      • An export license allows the exporter to ship goods to particular countries. Other key export documents are the: pro forma invoice, commercial invoice, consular invoice, bill of lading, certificate of origin, shipper’s export declaration, export packing list.
    • Export and Import IBF
      • EXPORT FINANCING
      • From the exporter’s point of view, four major issues relate to export financing:
      • Product Price
      • Method of Payment
        • cash in advance
        • a letter of credit
        • a draft or bill of exchange
        • an open account
      • Financing Receivables
      • funds through factoring, and forfeiting
      • Insurance
    • Export and Import IBF
      • Letter-of-Credit Relationships
    • Export and Import IBF
      • COUNTERTRADE
      • when a firm (or government) does not have sufficient convertible currency to pay for imports, or it simply does not have sufficient funds.
      • Barter
      • represents a non-monetary transaction.
      • Buybacks, offsets and counterpurchase
      • all of which are used to impose reciprocal commitments.
    • Enterprise IBF
      • VIDEO LIBRARY
      • The Innovation Relay Centers
    • Direct Investments IBF
      • Direct Investments and
      • Collaborative Strategies
      • INTRODUCTION
      • collaboration and strategic alliance
      • MOTIVES FOR COLLABORATIVE ARRANGEMENTS
      • basic objectives for operating internationally with a partner.
      • Motives for Collaborative Arrangements: General
      • Spread and Reduce Costs
      • Specialize in Competencies
      • Avoid Competition
      • Secure Vertical and Horizontal Links
      • Gain Market Knowledge
    • Direct Investments IBF
      • Motives for Collaborative Arrangements:
      • International
      • Gain Location-Specific Assets
      • Overcome Legal Constraints
      • Diversify Geographically
      • Minimize Exposure in Risky Environments
    • Direct Investments IBF
      • Strategic Alliances & Objectives
    • Direct Investments IBF
      • TYPES OF
      • COLLABORATIVE ARRANGEMENTS
      • Collaborative arrangements allow a greater spreading of assets across countries.
      • Some Considerations in
      • Collaborative Arrangements
      • Two critical variables that influence the choice of collaborative arrangement ventures.
      • Control
      • The loss of control over flexibility, revenues and competition is critical.
      • Prior Expansion of the Company
      • The advantages of collaboration may not be attractive.
    • Direct Investments IBF
      • Licensing
      • Licensing agreement .
      • Intangible property may be classified as:
      • patents, inventions, formulas, processes, designs, patterns
      • copyrights for literary, musical, or artistic compositions
      • trademarks, trade names, brand names
      • franchises, licenses, contracts
      • methods, programs, procedures, systems.
      • Major Motives for Licensing
      • Payment. Agreement-specific and environment-specific factors may affect the value of a license.
      • Sales to Controlled Entities. A license may be required in order to transfer intangible property.
    • Direct Investments IBF
      • Franchising
      • The two partners act like a vertically integrated firm because they are interdependent.
      • Organization of Franchising in a country or region.
      • Operational Modifications The higher the costs the less the control by the franchisor.
      • Management Contracts
      • when a firm believes a partner can manage certain operations more efficiently and effectively than it can itself.
    • Direct Investments IBF
      • Turnkey Operations Customers most often are government agencies or large MNEs.
      • Joint Ventures and Consortiums
      • Other forms of joint ventures include:
      • two firms from the same country joining together in a foreign market
      • a foreign firm joining with a local firm
      • firms from two or more countries establishing an operation in a third country
      • a private firm and a local government
      • a private firm joining a government-owned firm in a third country.
      • Equity Alliances The purpose is to solidify a collaborating contract, thus making it more difficult to break.
    • Direct Investments IBF
      • Alternative Operating Modes for
      • Foreign Market Expansion
    • Direct Investments IBF
      • PROBLEMS OF
      • COLLABORATIVE ARRANGEMENTS
      • Problems arise for a number of reasons:
      • Collaboration’s Importance to Partners
      • blame the other for poor decisions.
      • Differing Objectives
      • performance standards may evolve quite differently over time.
      • Control Problems
      • both may be held responsible for problems.
      • Partners’ Contributions and Appropriations
      • may lead to the dissolution of the agreement.
      • Differences in Culture
      • may cause problems with collaborative arrangements , especially joint ventures. from similar cultures.
    • Direct Investments IBF
      • MANAGING FOREIGN ARRANGEMENTS
      • partners need to reassess certain decisions changes.
      • Dynamics of Collaborative Arrangements
      • Finding Compatible Partners
      • Negotiating Process
      • Contractual Provisions
      • Performance Assessment
    • Direct Investments IBF
      • CASE STUDY
      • International Airline Alliances
    • Organization IBF
      • THE ORGANIZATION OF
      • INTERNATIONAL BUSIENSS
      • PLANNING
      • The Planning Loop
      • Strategic intent and strategic plan. The six steps in the international planning process include:
      • determining long-range strategic intent
      • analyzing internal corporate resources
      • setting international corporate objectives
      • analyzing host country conditions
      • identifying alternatives and priorities
      • implementing the international strategy.
      • Uncertainty and Planning
    • Organization IBF
      • Control Difficulties in International Business
      • Distance
      • Diversity
        • Market size
        • Type of local competition
        • Nature of product
        • Labor cost
        • Currency
      • Uncontrollables
      • Degree of uncertainty
    • Organization IBF
      • CASE STUDY
      • GE Hungary
    • Organization IBF
      • ORGANIZATIONAL STRUCTURE
      • a firm’s choice of a multi domestic, global, or transnational strategy
      • Separate versus
      • Integrated International Structures
      • Most companies will follow one of the following structures:
      • International Division Structure
      • Functional Division Structure
      • Product Division Structure
      • Geographic Division Structure
      • Matrix Division Structure
    • Organization IBF
      • Dynamic Nature of Structures
      • Change as the level and type of international activities change.
      • Mixed Nature of Structures
      • Most firms exhibit a mixed structure
      • Nontraditional Structures
      • new organizational structures continue to evolve
      • Network Organizations.
      • Network alliance, heterarchy, keiretsus
      • Lead Subsidiary Organizations
      • A firm may choose to locate divisional headquarters in a strategic foreign country.
    • Organization IBF
      • LOCATION OF DECISION-MAKING
      • Pressures for Global Integration versus
      • Local Responsiveness
      • Resource Transference
      • Standardization
      • Systematic Dealings with Stakeholders
      • Transnational Strategy
      • Capabilities of Headquarters vs.
      • Subsidiary Personnel
      • Decision Expediency and Quality
      • A poor decision may be better than a good one that comes too late.
        • Cost and Expediency
        • Importance of the Decision
    • Organization IBF
      • CONTROL IN THE
      • INTERNATIONALIZATION PROCESS
      • Level of Importance
      • should change over time to reflect the firm’s increased involvement in foreign activities.
      • Changes in Competencies
      • The increasing importance of a firm’s foreign operations to total global performance may dictate a greater need for headquarters to be actively involved.
      • Changes in Operating Forms
      • To minimize obstacles when responsibilities shift from one group to another, a firm should plan carefully and create organizational mechanisms that ensure the complementarily of activities.
    • Organization IBF
      • CONTROL MECHANISMS
      • to maximize operation performance
      • Corporate Culture
      • Coordinating Methods
      • Reports
        • Types of Reports
        • Visits to Subsidiaries
        • Management Performance Evaluation
        • Cost and Accounting Comparability
        • Evaluative Measurements
        • Information Systems
    • Organization IBF
      • CONTROL IN SPECIAL SITUATIONS
      • Acquisitions
      • Attempts to centralize decision-making or change operating methods may be met with resistance from foreign personnel and host governments alike.
      • Shared Ownership
      • Effective control can be achieved by spreading the ownership across many shareholders, dividing equity into voting and non-voting stock.
      • Changes in Strategies
      • It is difficult to take control away from country subsidiaries when managers have become accustomed to operational autonomy.
    • Organization IBF
      • THE ROLE OF LEGAL STRUCTURES IN
      • CONTROL STRATEGIES
      • Branch and Subsidiary Structures
        • Foreign branch
        • Foreign subsidiary. The concept of limited liability
      • Types of Subsidiaries and Their Effects on Control Structures
        • the ability of the parent to sell its ownership
        • the number of stockholders required to establish a subsidiary
        • the percentage of foreigners allowed to serve on a board of directors
        • the amount of required public disclosure
        • whether equity may be acquired by non-capital contributions
        • the types of eligible businesses
        • the minimum capital requirements for establishing a subsidiary
    • Business Plan IBF
      • FINAL PROJECT
      • Discussion of the proposed International Market Research Studies
    • Business Plan IBF
      • Final Project
      • Requirements and Recommendations
      • Sample Market Research
      • FOOD PROCESSING OPERATION IN CENTRAL EUROPE INTERNATIONAL MARKET RESEARCH
      • © 2004 AMI
    • IBF
      • Next Session
      • Wednesday July 26 th , 2006
      • International Business and Financial News
      • Global Manufacturing, Marketing and Supply Chain Management
      • CASES Avon International
      • NeoPets - Play Games
      • Samsonite’s Global Supply Chain
        • Denso Corp and Supplier Relations
    • Session 5 IBF
      • Acknowledgements
      • This Power Point Presentation is based on
      • International Business :
      • Environments and Operations
      • by John D. Daniels, Lee H. Radebaugh, Daniel P. Sullivan, 11 th Edition
      • © 2006 Prentice Hall, Inc.
      • Comparative Economic Studies
      • Center for International Strategic Studies
      • © AMI CISS 2006
      • Culture Quest International Business Videos
      • © 2004 Prentice Hall, Inc.
      • European Commission Audiovisual Library
      • © European Community 2006