I.B. L-1

Prof. rcmanocha L-1 INTERNATIONAL BUSINESS:

Prof. rcmanocha L-1 INTERNATIONAL BUSINESS Let us discuss: MARKETING (a) DOMESTIC MKTG. (b) INTERNATIONAL TRADE . (c) INTERNATIONAL MKTG. (ii) INTERNATIONAL MKTG TO INTERNATIONAL BUSINESS.

DOMESTIC VS INTERNATIONAL:

DOMESTIC VS INTERNATIONAL WITHIN THE BOUNDRIES OF A NATION. ACROSS THE BOUNDARIES OF A NATION CURRENCY- LOCAL , FOREIGN FIVE MAJOR FACTORS: S L E P T Social & cultural Legal Economy Political Technology

INTERNATIONAL TRADE to INTERNATIONAL MKTG.:

INTERNATIONAL TRADE to INTERNATIONAL MKTG. INTERNATIONAL TRADE Export Import During 1900s, India used to export : Raw-cotton, raw-jute & iron ore. Massive industrialization made it possible to export cotton garments, jute products and steel during 1960s.

Contd.:

Contd. Since 1980s India started developing markets for its products- leather, tea, coffee, textile & electronic products etc. They started taking care of demand of the product , pricing , packaging & distribution channels i.e. taking care of many aspects of marketing ( international marketing)

INTERNATIONAL MARKETING to INTERNATIONAL BUSINESS:

INTERNATIONAL MARKETING to INTERNATIONAL BUSINESS MNCs – multi-national companies, which were producing the products in their home countries and marketing them in various foreign countries before 1980s, started locating their plants and other manufacturing facilities in foreign / host countries. Later they started producing in one foreign country and marketing in other foreign countries. Example : Uni -Lever established its subsidiary company in India i.e. HLL- Hindustan Lever Ltd. It produces its products in India and markets them in B angladesh, Sri-Lanka, Nepal etc. Thus scope of international trade got developed to international business

INTERNATIONAL BUSINESS DEFINED:

INTERNATIONAL BUSINESS DEFINED INTERNATIONAL BUSINESS is the process of focusing on the resources of the globe and the objectives of the organisations on global business opportunities and threats. Today, the concept of ‘global village’ has erased the national political boundaries for the purpose of business. One can’t escape from buying excitement derived from the products like Italian shoe, Japanese car, Brazil coffee, Kenyian tea, Indian garments, American pizza and Chinese toys.

Concept of Globalization:

Concept of Globalization The concept of global village has resulted in exchange of cultures across the globe, location of manufacturing centres in various countries by treating the entire globe as a single country- producing the components in one country, assembling the product in the second country , marketing products in third country, the banks of the forth country provide finance, insurance of the fifth country provide insurance facilities and so on and so forth.

Contd.:

Contd. ARVIND MILLS : M.D.: PRODUCT : DENIM PRODUCE IN 3 DIFFERENT COUNTRIES OF THE WORLD RAW MATERIALS SKILLED PEOPLE FINANCE MARKETING- THROUOUT THE WORLD PREPARING BALANCE-SHEET AT AHMEDABAD

WHY GO INTERNATIONAL?:

WHY GO INTERNATIONAL? To achieve higher rate of profits Expanding production capacities beyond the demand of the Domestic Country. Severe competition in home-market. Limited home market Political stability vs political un-stability Availability of technology. Available of managerial competence High cost of transportation

Contd.:

Contd. Nearness to raw-materials. Availability of human resources at less cost Liberalization & globalization To increase market share To avoid Tariffs & import quotas

STAGES OF INTERNATIONALIZATION:

STAGES OF INTERNATIONALIZATION FIVE STAGES: DOMESTIC COMPANY INTERNATIONAL COMPANY MULTINATIONAL COMPANY GLOBAL COMPANY TRANSNATIONAL COMPANY

Five stages of Internationalization:

Five stages of Internationalization Stage & company 1 Domestic 2 International 3 Multnational 4 Global 5 Transnational Strategy Domestic International Multinational Global Global Model N.A Co- ordinated federation Decentralized Federation Centralized hub Integrated network View of world Home country Extension markets National markets Global markets Global markets & resources Orientation Key-assets Ethnocentric Located in home country Ethnocentric Core centralized, others dispersed Polycentric Decentraized & Self-sufficient Mixed All in home country except marketing or sources Geocentric Dispersed, Interdependent, & Specialized Role of country units Single country Adapting & leveraging competencies Exploiting local opportunities Marketing or sourcing Contributions to worldwide knowledge Home country Created at centre &transferred Retained within operating units Marketing developed jointly or shared All functions developed jointly & shared

INTERNATIONAL BUSINESS APPROACHES:

INTERNATIONAL BUSINESS APPROACHES FOUR ETHNOCENTRIC APPROACH POLYCENTRIC APPROACH REGIOCENTRIC APPROACH GEOCENTRIC APPROACH

ETHNOCENTRIC APPROACH:

ETHNOCENTRIC APPROACH Under this approach , companies market the products in various countries in the same way it does domestically.

ORGANIZATION STRUCTURE OF ETHNOCENTRIC COMPANY:

ORGANIZATION STRUCTURE OF ETHNOCENTRIC COMPANY Managing Director ↓ ↓ ↓ ↓ ↓ ↓⁻⁻⁻⁻⁻ ⁻ ↓⁻⁻⁻⁻⁻↓⁻⁻⁻⁻⁻⁻↓⁻⁻⁻⁻⁻↓ MGR MGR MGR MGR MGR R & D FIN PROD HRD MKTG ↓ ↓⁻⁻⁻⁻⁻ ⁻⁻⁻⁻⁻ ↓ ⁻⁻⁻⁻⁻⁻⁻ ↓ Asstt . Mgr Asstt . Mgr Asstt . Mgr North india South India Exports

POLYCENTRIC APPROACH:

POLYCENTRIC APPROACH Under this approach, the companies customizes the marketing mix to meet the taste, performance and needs of the customers of each international market.

ORGANIZATION STRUCTURE OF POLYCENTRIC COMPANY:

ORGANIZATION STRUCTURE OF POLYCENTRIC COMPANY Managing Director ↓ →→→ C E O ↓ FOREIGN SUBSIDIARY ↓ SOUTH AFRICA ↓ ↓ ↓ ↓ ↓⁻⁻⁻⁻⁻ ⁻ ↓⁻⁻⁻⁻⁻↓⁻⁻⁻⁻⁻⁻↓⁻⁻⁻⁻⁻↓ MGR MGR MGR MGR MGR R & D FIN PROD HRD MKTG

REGIOCENTRIC APPROACH:

REGIOCENTRIC APPROACH Under this approach, the company operating successfully in a foreign country thinks of thinks of exporting other neighbouring countries of the host country. At this stage, the concerned subsidiary considers the regional environment ( such as laws, culture, policies etc) for formulating the policies & strategies.

ORGANIZATION STRUCTURE OF REGIOCENTRIC COMPANY:

ORGANIZATION STRUCTURE OF REGIOCENTRIC COMPANY Managing Director ↓ →→→ C E O ↓ ↓ SOUTH AFRICA ↓ ↓⁻⁻⁻⁻⁻⁻↓⁻⁻⁻⁻⁻⁻↓ ↓ Mktg Mktg Mktg ↓ ( Lesotho) ( Kenya) ( Nambia ) ↓ ↓⁻⁻⁻⁻⁻ ⁻ ↓⁻⁻⁻⁻⁻↓⁻⁻⁻⁻⁻⁻↓⁻⁻⁻⁻⁻↓ MGR MGR MGR MGR MGR R & D FIN PROD HRD MKTG

GEOCENTRIC APPROACH:

GEOCENTRIC APPROACH Under this approach, the company analyses the tastes, preference and needs of the customers in all foreign markets and then adopts a standardized marketing mix for all the foreign markets. Coca-cola adopted this strategy by selling its popular soft drink with the same content, packaging, branding & advertisement themes worldwide Whirlpool designs a world-washer – small, stripped-down automatic washing machine for Mexico, Brazil & India. However, it modified its product for Indain market to wash the delicate “ sarees ”.

ORGANIZATION STRUCTURE OF GEOCENTRIC COMPANY:

ORGANIZATION STRUCTURE OF GEOCENTRIC COMPANY Managing Director Headquarters India ↓ ↓ ↓ ↓ ↓ ↓ ↓⁻⁻⁻⁻⁻ ⁻ ↓⁻⁻⁻⁻⁻ ↓⁻⁻⁻⁻⁻⁻ ↓ Subsidiary Subsidiary Subsidiary Subsidiary India South Africa Kenya Nambia

IMPORTANT THEORIES OF INTERNATIONAL BUSINESS:

IMPORTANT THEORIES OF INTERNATIONAL BUSINESS COMPARATIVE COST THEORY OPPORTUNITY COST THEORY

COMPARATIVE COST THEORY:

COMPARATIVE COST THEORY DAVID RICARDO ( 1817) It is quite common that some countries have the advantage of producing some goods at a lower cost as compared to other countries. For example: Japan has the advantage of producing electronic goods at a lower cost whereas India has similar advantage in producing textiles. According to “ comparative Cost Theory” countries in the long run will tend to specialise in the business( production & marketing)of those goods in whose business, they enjoy comparative low cost advantage and import those goods in which countries have comparative cost disadvantage , if free trade is allowed. This specialization helps in the mutual advantage of both countries participating in the international business.

ASSUMPTIONS OF THE THEORY:

ASSUMPTIONS OF THE THEORY There are only two countries They produce the same two commodities The only element of cost of production is labour All units of labour is homogeneous & supply of labour is unchanged Technological knowledge is unchanged Production is subject to the law of constant returns There are no trade- barriers Trade is free from cost of transportation

ADVANTAGES OF INTERNATIONAL BUSINESS:

ADVANTAGES OF INTERNATIONAL BUSINESS Clearly, there is Portugal’s advantage in producing wine and exporting to England. Again, as cost of producing cloth in England is cheaper as compared to cost of producing wine, hence it should specialise in cloth COUNTRY No. of labour units per unit of cloth No. of labour units per unit of wine Exchange ratio between wine & cloth England 100 120 I wine=1.2 cloth Portugal 90 80 1wine=0.88 cloth

DERIVATIVATIVES OF THE THEORY:

DERIVATIVATIVES OF THE THEORY The advantages desired from the theory are: Efficient utilization of global resources Maximization of global production at lowest cost Product prices become more or less equal among world markets Demand for resources and products shall become optimized among world nations.

OPPORTUNITY COST THEORY:

OPPORTUNITY COST THEORY

PROBLEMS OF INTERNATIONAL BUSINESS:

PROBLEMS OF INTERNATIONAL BUSINESS

COMPETITIVE ADVANTAGE IN GLOBAL SETTING:

COMPETITIVE ADVANTAGE IN GLOBAL SETTING

HOW TO GO GLOBAL?:

HOW TO GO GLOBAL? EXPORT HAVE A RERESENTATIVE/ SET-UP A SMALL OFFICE LICENCING JOINT VENTURE WHOLLY-OWNED ORGANISATION