The document discusses various modes of international business collaboration such as outsourcing, turnkey contracts, franchising, licensing, and joint ventures. It also examines factors that influence collaboration between international firms like costs, core competencies, risks, capacities, and government policies. Finally, it provides examples of management contracting, technological alliances, and commodity agreements between countries.
International Business (BBA MBA) advantages & disadvantages of international busine, approaches of international business, entry strategy, imf, international business (bba mba) entry policy, international organization, nature & scope & feature of international business, need for international business, reasons for recent growth in international busines, what is international business ?university of solapur
modes of market entry of pizza hut,nissan motors and vodafoneStudent
This ppts deals with the modes of market entry and the positioning strategy of the following company has adopted when they entered Indian Market..............
International Business (BBA MBA) advantages & disadvantages of international busine, approaches of international business, entry strategy, imf, international business (bba mba) entry policy, international organization, nature & scope & feature of international business, need for international business, reasons for recent growth in international busines, what is international business ?university of solapur
modes of market entry of pizza hut,nissan motors and vodafoneStudent
This ppts deals with the modes of market entry and the positioning strategy of the following company has adopted when they entered Indian Market..............
Charles Hills defines globalization as "The shift towards a more integrated and interdependent world economy". Globalization has two main components - the globalization of markets and the globalization of production.
According to International Monetary Fund, globalization means "the growing economic interdependence of countries worldwide through increasing volume and variety of cross border transactions in goods and services and of international capital flows and also through the more rapid and widespread diffusion of technology. Interdependency and integration of individual countries of the world is also called as globalization”.
298
Chapter 10
Foreign Investment:
Researching Risk
“The outcome of any serious research can only be to
make two questions grow where only one grew before.”
—Thorstein Veblen
Chapter ObjeCtives
this chapter will:
• Look at the forces and opportunities that support foreign investment by
multinational corporations
• Discuss the role political risk plays in counterbalancing the benefits or
opportunities of investing abroad
• Describe the various ways host governments control foreign investment
• Present management techniques that can be used to reduce political risk when
investing abroad
Why invest aBroad?
Every firm that considers investing abroad must weigh the potential advantages against
the potential risks. To do that, in-house analysis must identify and evaluate key factors.
There are several reasons to consider initially why firms should invest abroad, and a few
general factors can be linked to the overall level of risk a particular host country holds
for an MNC making a foreign direct investment. These factors include the attitude of
the host country’s government, the political system in place, the level of public discon-
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AN: 929355 ; Ajami, Riad A., Goddard, G. Jason.; International Business : Theory and Practice
Account: s8987890.main.ehost
Why Invest Abroad? 299
tent or satisfaction, the unification or fragmentation of the local society on cultural and
religious lines, the kind of internal and external pressures faced by the government, and
the history of the country in the past few decades. In the pages that follow, we address
each of these concerns in turn.
A recent publication by the Economist ranked the countries of the world according
to the friendliness of the business environment. The rankings reflect the opportuni-
ties for, and the hindrances to, the conduct of business, as measured by the countries’
rankings in ten categories, including market potential, tax and labor market policies,
infrastructure, skills, and the political environment.1 The top twenty countries are listed
in Table 10.1.
bigger MarketS
Many international firms decide to invest overseas to tap larger foreign markets. To keep
growing, a firm must increase its sales, which may not be possible in the domestic market.
Domestic markets, however large, are limited to a particular size and rate of growth and
are the target of competition from other domestic firms with similar products and mar-
keting capabilities. In such situations, a move overseas is a logical step for a company
wanting to tap a larger market. Apart from the fact th ...
The term globalization derives from the word globalize, which refers to the emergence of an international network of economic systems. Globalisation refers to rapid increase in the share of economic activity taking place across national borders. It goes beyond the international trade includes goods and services, delivered &sold & movement of capital.
Globalization or globalisation is the trend of increasing interaction between people or companies on a worldwide scale due to advances in transportation and communication technology, normally beginning with the steamship and the telegraph in the early to mid-1800s. With increased interactions between nation-states and individuals came the growth of international trade, ideas, and culture. Globalization is primarily an economic process of integration that has social and cultural aspects, but conflicts and diplomacy are also large parts of the history of globalization.
Senior Seminar in Business Administration BUS 499Internation.docxklinda1
Senior Seminar in Business Administration
BUS 499
International Strategy
Hitt, M.A., Ireland, R.D., & Hoskisson, R.E. (2009). BUS499: Strategic management: Competitiveness and globalization, concepts and cases: 2009 custom edition (8th ed.). Mason, OH: South-Western Cengage Learning.
Welcome to Senior Seminar in Business Administration.
In this lesson we will discuss International Strategy.
Please go to the next slide.
Objectives
Upon completion of this lesson, you will be able to:
Identify various levels and types of strategy in a firm
Upon completion of this lesson, you will be able to:
Identify various levels and types of strategy in a firm.
Please go to the next slide.
Supporting Topics
Identifying international opportunities: incentives to use an international strategy
International strategies
Environmental trends
Choice of international entry mode
Strategic competitive outcomes
Risks in an international environment
In order to achieve this objective, the following supporting topics will be covered:
Identifying international opportunities: incentives to use an international strategy;
International strategies;
Environmental trends;
Choice of international entry mode;
Strategic competitive outcomes; and
Risks in an international environment.
Please go to the next slide.
Overview
International strategy
Demand develops in other countries
Secure needed resources
An international strategy is a strategy through which the firm sells its goods or services outside its domestic market. One of the primary reasons for implementing an international strategy is that international markets yield potential new opportunities.
Typically, a firm discovers an innovation in its home-country market, especially in an advanced economy such as that of the United States. Often demand for the product then develops in other countries, and exports are provided by domestic operations. Increased demand in foreign countries justifies making investments in foreign operations, especially to fend off foreign competitors.
Another traditional motive for firms to become multinational is to secure needed resources. Key supplies of raw material, especially minerals and energy, are important in some industries. Other industries, such as clothing, electronics, watch making, and many others, have moved portions of their operations to foreign locations in pursuit of lower production costs.
Please go to the next slide.
Overview, continued
Increased market size
Return on investment
Economies of scale and learning
Location advantages
When international strategies are successful, firms can derive four basic benefits:
Increased market size;
Greater returns on major capital investments or on investments in new products and processes;
Greater economies of scale, scope, or learning; and
A competitive advantage through location.
Firms can expand the size of their potential market by moving into international markets.
The primary reason for investing in inter.
International Business Dynamics module 2 by Nagarjun ReddyPNagarjunReddyReddy
Complete detail of Second Module International Business Dynamics contents, Globalization – Supporting Institutions in International Conflict Resolution
International strategic business managementHasan Furqan
International Strategic Management
Motives of Globalization
Strategic Objectives & Sources of Competitive Advantages
Strategic Orientation of International Firms
Strategies for International Firms
Conclusion
2. Computers- Produced in USA
Television- Produced in Japan
Electronic Items- From Japan
Beverages (Coca-Cola, Amul Cool, Etc.)
Bikes & Cars- From Other Countries
Perfumes- Manufactured in France.
Buying products from internet.
Clothing's-
Footwear, Casuals, Capri, Bermuda, etc.
3. First began in the year 1870 and ended in
1919 (end of World War-I).
Main objective was to import raw materials
and export finished goods. GDP was 22.1.
Drawbacks: Imposition of trade barriers by
the government, to protect domestic
producers. GDP fell to 9.1.
This phase has been described as
“BEGGAR-MY-NEIGHBOUR”.
4. Growth Strategy- Leads to geographical
expansion.
Managing Product life-cycle- Shifting of the
market.
Technology Advantages- Core competencies.
New business opportunity- entering new
market.
Proper use of resources- proper utilization of
natural resources of countries
(material, labor, etc.)
Conti.
5. Availability of quality product- Foreign
companies market latest products at reasonable
price.
Earning foreign exchange- Foreign exchange
may be required for importing many products
(crude oil, equipments, etc.)
Helps in Mutual growth- India depends on
gulf countries for its crude oil supplies.
Investment in infrastructure- Investment in
roads, etc.
6. Advanced countries felt a severe set back.
Production increased more than Demand.
Decline in International Trade.
Breakdown of Gold Standard (Bretton Woods
System).
Decline in trade/investment barriers.
Increase in FDI.
Technology changes and growth of MNC’s.
7. Due to the above limitations, a need for the international
co-operation was felt.
It led to the establishment of institutions such as:
IMF, IBRD, ITO,GATT/ WTO, etc.
Establishment of these institutions led to
globalization, and many new trends took place.
Shifting from exporting & importing to international
marketing.
Shifting from international marketing to international
business.
8. Establishment of WTO, IMF and IBRD.
Regional integration
(NAFTA, SAARC, ASEAN, APEC, EFTA, etc.
)
Decline in trade/investment barriers.
Increase in FDI/FII/QDII.
Technology changes and growth of MNC’s.
9. Stage 1-
Domestic
Company
Stage 5- Stage 2-
Transnational International
Company Company
Stage 4- Stage 3-
Global Multinational
Company Company
10. Focus on domestic market/suppliers/financial
companies/customers/etc.
Motto- if it is not happening in home
country, it is not happening.
Selects diversification strategy for domestic
market.
Does not select the strategy of
expansion/penetrating into international
market.
11. Growth of domestic company leads to
internationalization.
Exploits the opportunities outside the
domestic country.
These are Ethnocentric- domestic country
oriented.
Extends the domestic
product/price/promotion/practice to the
foreign market.
12. International company turn MNC when they
start responding to the needs of the different
country.
They shift from ethnocentric to polycentric
(i.e. company establishes foreign
subsidiary).
They manufacture product as per the
demand of the specific country.
Example: Toyota’s Toyopet car’s in USA.
13. Produces in a home/single country.
Markets the same product globally.
They have global marketing strategy.
Produces for the global market but focuses
domestically.
Example: Harley Davidson- Produced in
USA, Focused globally.
Dr. Reddy’s Lab- Produces in India but
market globally.
14. Produces in almost all countries.
Markets the product in all countries.
Operates across world.
Example: Coca-cola.
15. • Analysis of existing mission and goal.
Step 1 • Example- GE: Attracting & Developing people.
• Organizational analysis of a global business firm
Step 2 • Example: Org’n structure; Marketing; Finance; HR.
• Analysis of International Environment
Step 3 • Political; Economic; Technological; Social; etc.
16. • Formulation of alternative corporate level strategy
• Stability; Growth; Retrenchment; Combination;
Step 4 Turnaround
• Formulation of alternative business level strategy
• Low cost leadership; Niche strategy; Differentiation.
Step 5
• Selection of best among the alternative strategies
• BCG matrix; Directional policy; 9 cell matrix.
Step 6
17. • Strategy Implementation
• Partner selection, Behavioral
Step 7 implementation, market, finance.
• Strategy evaluation and control
Step 8
18. International business firms either perform
their business operations on their own or
collaborate with other countries/companies.
Sometimes, companies collaborate with their
competitors also.
Factors affecting collaboration:
physical, economical, scale of
operation, make or buy, or competitive
environment.
19. Spread and reduced cost- reducing the start up cost
and reducing the time by outsourcing.
Specialize in core competency: companies perform
the activities concerning core competencies most
efficiently compared to other activities.
Avoid or counter competencies: Some market are not
large enough to accommodate competitors.
Minimize exposure in risky environment:
Political/economic and security factors create risky
business environment in different countries.
20. Vertical or horizontal integration: Linkage or integration
allow companies to concentrate on the core-
competencies, operate on small scale and emphasize on a
portion of supply chain.
Sharing capacities: Companies can jointly share their
production/service/HR and other capacities in order to
operate on optimum scale.
Gain location: Sometimes it is difficult for MNC’s to conduct
business in some countries on their own.
Overcome governmental constraint: Imposing limit on
foreign ownership or prohibit exclusive foreign companies.
Diversify globally: Diverse culture and geographical
location temp companies to collaborate.
23. Firm providing management know-how may not have
any equity stake in the enterprise.
Low-risk, and starts yielding income from the very
beginning.
Helps in commercializing he existing know-how built up
with significant investment.
Supports in reducing fluctuations in business volume.
Brings additional benefit for managing company.
Example: Tata tea, Harrison malayalam and AVT have
contract to manage the number of plantations in Sri
Lanka.
24. Mostly fund in supply, erection and
commissioning of plants.
Example: Oil refinery, steel mills, cement and
fertilizer plant, etc.
Agreement by the seller to supply a buyer with
a facility fully equipped and ready to be
operated by the buyer’s personnel.
Fast-food franchising- when a franchiser agrees
to select a store site, build the store, equip
it, train the franchisee and employees and
sometimes arrange the finance.
25. Also known as “entete & coalition”.
Enhances the long term competitive advantage by
forming alliance with its competitors (existing or
potential).
Example: A firm may enter the foreign market by
forming alliance with a firm in te foreign market for
marketing or distributing the former’s products.
A US pharmaceutical company may use the
promotion and distribution infrastructure of
Japanese pharmaceuticals to sell its product in
Japan.
It is a type of competitive strategy rather than an
entry strategy.
26. Technological development alliance:
research consortia, simultaneous
engineering agreement, liasioning or joint
venture.
Marketing, sales and service alliance.
Multiple activity alliance.
Cross-Border alliance
Examples:
Tata & TFR, Tata & Tetley,
27.
28.
29. Tariff Barriers- Specific Tariffs and Valorem
Tariffs.
Non-Tariff Barriers-
Quotas, Licensing, Voluntary Export
Restraint (VER), Subsidies, Local Content
Requirement.
30. Tariff is the tax imposed on imports.
Specific tariff- it refers to a fixed charge
levied on the units of the product imported.
Example: Rs. 1000/- levied on each T.V.
imported.
Ad-Valorem tariff- Tariff levied as a
proportion of the value of the imported goods
(30% on the Total value).
32. Govt. of importing country (revenue in the
form of import duty).
Industries of importing country (Market
share).
Jobs are saved of domestic country.
Protection of business- ancillary
industry, servicing, market
intermediaries, etc.
33. Consumer pay higher price (due to the
inefficiency of domestic producers).
Exporting country looses the demand, sales
and profit for its product.
34. Motive is to encourage domestic production
and to protect domestic producers from
foreign competitors.
Govt. pays to domestic producers by
reducing their operation cost.
Forms of subsidies- cash grants, loan and
advances, tax holidays, govt. procurement of
output at a higher rate, equity participation
and supply of input at lower prices.
35. Merits:
International competitiveness of domestic
industry.
Provide large scale economies.
Low cost production.
Early entry to foreign market.
First mover advantage.
Demerits:
Protect inefficiency & lethargy of the domestic
firms
Do not enhance international competitiveness.
36. Direct restriction on quantity of goods
imported.
License are issued to certain firms and
individuals.
License are issued for importing certain
quantity of goods.
Example: Car, Bikes, Milk, etc.
Merits
Protect domestic produces from foreign
competition.
37. Opposite form of import quotas.
It is a quota on exports of the domestic
firms, imposed by the exporting country.
Imposed on the request of the imorting
country.
Merits:
Its violation leads to imposition of tariff.
Protect from foreign competitors.
Makes domestic goods cheap.
38. Some specific portion/fraction of a product
imported to be produced domestically.
Requirements can be (50% of the
component should be from the domestic
country).
In value terms (50% of the value of the
product should be produced domestically).
Merits:
Employment opportunities
Utilization of local resources and economic
activities
39. It is a type of inter-governmental
arrangement.
Concerned with the production of , and trade
in, certain primary products.
Objective was to stabilizing the prices.
It takes place in three forms:
Quota
Buffer stock and
Bilateral or Multilateral contract.
40. Objective is to prevent a fall in commodity
prices by regulating the supply.
Countries undertake to restrict export or
production by a certain percentage of the
basic quota decided by the central
committee or council.
Example:
Coffee agreement among the major
producers of Latin America and
Africa, limited the amount that could be
exported by each country.
41. Seeks to stabilize commodity prices by
maintaining accurate demand and supply.
Stabilizes the prices by increasing the
market supply.
When the price tends to rise and absorbing
the excess supply to prevent a fall in the
prices.
42. Bilateral-
Purchase & sale certain quantities of a
commodity at agreed prices (between major
importer & exporter).
Upper & lower prices are specified.
If the market price remain within this
limit, agreement becomes inoperative.
Editor's Notes
WTO: World Trade Organization; IMF- International Monetary Fund; IBRD- International Bank For Reconstruction And Development; NAFTA- North American Free Trade Agreement; SAARC- South Asian Association For Regional Cooperation; ASEAN- Association Of South East Asian Nation; APEC- Asia Pacific Economic Co-operation; EFTA- European Free Trade Association; FDI- Foreign Direct Investment; FII- Foreign Institutional Investments; QDII- Qualified Domestic Institutional Investment.