This document provides information about an International Business course. It includes the following: - Course objectives and an exam that is 2 hours long. - A group presentation topic on how firms expand internationally and the relationship between a firm's core competencies and foreign market success. - Feedback that essays need to take a clear position and include more references. - Several key decisions firms must make when internationalizing including when, where, scale, and country selection. - Various entry modes like exporting, licensing, and wholly owned subsidiaries. - Sample discussion questions and answers about licensing intellectual property, control of foreign operations, and large vs small scale entry. - A case study analysis of

1. Business and Economics
INTERNATIONAL
BUSINESS MGF2351

2. Objectives
 Group Presentation (20 Minutes, QnA 10 minutes)
 Tutorial Program Week 10
 EXAM IS 2 HOURS
 Essay Feedback

3. Group Presentation
 The Structure & Strategy of International Business: Expanding
operations to foreign locations enables a firm to increase its profitability
and rate of profit growth in ways that is not available for purely domestic
firms. Firms that operate internationally are able to expand their market,
realise location economies and greater cost economies through
experience effects, and generate greater profits by leveraging the skills
of its foreign subsidiaries.
 How do firms expand their market by operating internationally? How
does a firm’s core competence (or competencies) relate to a firm’s
ability to capture a foreign market?
 How do location economies, experience effects, and foreign subsidiary
skills enable a firm to increase its profitability and profit growth?
 How do pressures for cost reductions and local responsiveness
influence a firm’s ability to realise location economies and experience
effects, to leverage products, and transfer competencies and skills
within the enterprise?

4. ESSAY FEEDBACK
 Not listening to me!
 ARGUMENTATIVE ESSAY: YOU HAD TO TAKE A STAND POINT
 Reliance on Textbook
 Not enough references

5. Internationalisation
When?
What
Scale?
Which
Country?
KEY DECISIONS TO MAKE

6. Modes of Entry
Exporting: Dilmah Tea
Turnkey Projects:
Projects such as the construction of airports, dams, roads and factory
complexes such as refineries and chemical plants.
Licensing: Rip Curl,
http://www.ripcurl.com.au/index.php?international
Franchising: McDonalds
Join Ventures: Monash
Wholly Owned Subsidiary: Coca-Cola
Strategic Alliances: Star Alliance
Lets look at an Australian Success story: Boost Juice bars
https://www.youtube.com/watch?v=fpXpc2Zxd0I

7. Q1. Licensing propriety technology to foreign competitors is the best way to give up a
firm's competitive advantage. Discuss.
Risk:
Licensing proprietary technology to foreign competitors does significantly increase the
risk of losing the technology. Therefore licensing should generally be avoided in these
situations.
Use:
 When a licensing arrangement can be structured in such a way as to reduce the risks
of a firm's technological know-how being expropriated by licensees, then licensing
may be appropriate OR
 when a firm perceives its technological advantage as being only transitory, and it
considers rapid imitation of its core technology by competitors to be likely. In such a
case, the firm might want to license its technology as rapidly as possible to foreign
firms in order to gain global acceptance for its technology before imitation occurs.
Such a strategy has some advantages.
 By licensing its technology to competitors, the firm may deter them from developing
their own, possibly superior, technology. And by licensing its technology the firm may
be able to establish its technology as the dominant design in the industry. In turn, this
may ensure a steady stream of royalty payments. Such situations apart, however, the
attractions of licensing are probably outweighed by the risks of losing control over
technology, and licensing should be avoided.
e.g. Rip Curl. Can you think of some organisations where licensing will work and where it will
not?

8. Q2. Discuss how the need for control over foreign operations varies with
firms’ strategies and core competencies. What are the implications of the
choice of entry mode?
 If competitive advantage depends upon control of propriety knowledge
and technical know how: AVOID Licensing and Joint Venture
 If Management skills and know-how are sources of competitive
advantage :combination of JV and Franchising

9. Q3. A small Canadian firm that has developed some valuable new medical products
using its unique biotechnology know-how is trying to decide how best to serve
the European Union. Its choices are given below. The cost of investment in
manufacturing facilities will be a major one for the Canadian firm, but it is not
outside its reach. If these are the firm’s only options, which one would you advise
it to choose? Why?
a. Manufacture the product at home and let foreign sales agents handle marketing.
b. Manufacture the products at home and set up a wholly owned subsidiary in
Europe to handle marketing.
c. Enter into a strategic alliance with a large European pharmaceutical firm. The
product would be manufactured in Europe by the 50/50 joint venture and
marketed by the European firm.

10.  If there were no significant barriers to exporting, then option (c) would seem
unnecessarily risky and expensive. After all, the transportation costs required to ship
drugs are small relative to the value of the product.
 Both options (a) and (b) would expose the firm to less risk of technological loss, and
would allow the firm to maintain much tighter control over the quality and costs of the
drug.
 The only other reason to consider option (c) would be if an existing pharmaceutical firm
could also give it much better access to the market and potentially access to its
products and technology, and that this same firm would insist on the 50/50
manufacturing joint venture rather than agreeing to be a foreign sales agent.
 The choice between (a) and (b) boils down to a question of which way will be the most
effective in attacking the market. If a foreign sales agent can be found that is already
quite familiar with the market and who will agree to aggressively market the product, the
agent may be able to increase market share more quickly than a wholly owned
marketing subsidiary that will take some time to get going. On the other hand, in the
long run the firm will learn a great deal more about the market and will likely earn
greater profits if sets up its own sales force.

11. Q4. Discuss the trade-offs associated with large-scale entry versus small-
scale entry.
LARGE SCALE ENTRY
 Able to capture first-mover advantages associated with demand preemption, scale
economies, and switching costs.
 Identifying how actual and potential competitors might react to large-scale entry into a
market.
SMALL SCALE ENTRY
 Small-scale entry allows a firm to learn about a foreign market while limiting the firm's
exposure to that market.
 Small-scale entry is a way to gather information about a foreign market before deciding
whether to enter on a significant scale and how best to enter. By giving the firm time to
collect information, small-scale entry reduces the risks associated with a subsequent
large-scale entry.
But the lack of commitment associated with small-scale entry may make it more
difficult for the small-scale entrant to build market share and to capture first-mover or
early-mover advantages. The risk-averse firm that enters a foreign market on a small
scale may limit its potential losses, but it may also miss the chance to capture first-
mover advantages.

12. Case: General Electric’s Joint Ventures (Hill, 2013, pp. 511-
512)
In groups of 4: 5 minutes
1) GE used to have a preference for acquisitions or greenfield ventures as an entry mode, rather
than joint ventures. Why do you think this was the case?
2) Why do you think that GE has come to prefer joint ventures in recent years? Do you think that
the global economic crisis of 2008-2009 might have impacted upon this preference in any way?
If so, how?
3) What are the risks that GE must assume when it enters into a joint venture? Is there any way
for GE to reduce these risks?
4) The case mentions that GE has a well-earned reputation for being a good partner. What are
the likely benefits of this reputation to GE? If GE were to tarnish its reputation by, for example,
opportunistically taking advantage of a partner, how might this impact the company going
forward?
5) In addition to its reputation of being a good partner, what other assets do you think GE
brings to the table that make it an attractive joint venture partner?

13. 1) GE used to have a preference for acquisitions or greenfield ventures
as an entry mode, rather than joint ventures. Why do you think this was
the case?
Full control, No Profit Sharing
 Many companies choose acquisitions or greenfield investments as an
entry because they give the company full control and all the profits.
 Firms may also find acquisitions attractive because they can immediately
begin business in the foreign country, while greenfield investments allow
companies to establish operations exactly as they want them.
 Control was very important to GE. The company did not want to share
control with another firm.

14. Q2. Why do you think that GE has come to prefer joint ventures in recent
years? Do you think that the global economic crisis of 2008-2009
might have impacted upon this preference in any way? If so, how?
 For the following reasons:
 lower risk and cost associated with joint ventures.
 The company also believes that by linking with local companies, it
can gain invaluable knowledge of the local market.
 In addition, joint ventures have proved to be an easier route in some
countries where local laws prohibit other types of entry methods.
The recent economic crisis could play a role in future investment decisions by
GE. The shared cost and risk implied by joint ventures may be attractive to
the company in troubled economic times.
 rket, Overcome entry laws in some countries, Troubled Economic times
 General Electric has shifted away from its traditionally preferred method of
entering new markets via wholly owned subsidiaries to entering new
markets through

15. Q3. What are the risks that GE must assume when it enters into a joint
venture? Is there any way for GE to reduce these risks?
Sharing Control, Reaching agreements with venture partners
Joint ventures, while offering firms the opportunity to share costs and risks,
also imply that firms are sharing control. General Electric has run into some
problems with its joint venture approach.
 For example, General Electric could not reach an agreement with
potential British partner Smiths Group, and ended talks with the
company.
 General Electric has also had to settle for minority stakes in some
ventures when it would have preferred to have a majority position.

16. Q4. The case mentions that GE has a well-earned reputation for being a
good partner. What are the likely benefits of this reputation to GE? If GE
were to tarnish its reputation by, for example, opportunistically taking
advantage of a partner, how might this impact the company going forward?
Firm’s innovative management techniques, Strong management
development program, Firms Future Growth
GE is well recognized in the industry as being a good partner. GE’s partners find
the firm’s innovative management techniques and strong management
development program particularly attractive.
If GE were to act opportunistically it would certainly find it more difficult to find
willing partners in the future. Because the firm now relies on joint ventures for a
significant number of its investments, such a situation would be detrimental to the
firm’s future growth.

17. Q5. In addition to its reputation of being a good partner, what other assets
do you think GE brings to the table that make it an attractive joint
venture partner?
 Vast experience of GE, Financial Strength of the company, Flexibility
GE is recognized as being a good partner not only because of the management
knowledge is shares with its partners, but also because of its vast experience
doing business in other countries.
While GE may form a joint venture with a local company to gain knowledge of
foreign markets, it has a long history of being able to deal with different
currencies, different political systems, and different cultures that should help it be
successful in new ventures.
The company’s size is also attractive to partners because of its financial strength.
Furthermore, GE appears to be a flexible partner – another asset that would
make it attractive to partners.

18. Thank you