Introduction to international business management

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Management International Business

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Module 1 Introduction to international business Local, regional, national, international, and global business Management orientation of overseas business ethno centric, poly centric, region centric, and geo centric orientation Reasons for internationalization of business factors restricting internationalization of business major global companies in the world management International Business

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What is management International Business

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SOME DO CONVENTIONAL WAY SOME DO CREATIVE management International Business GLIMPSES ………………………..

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management International Business

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best is yet to come. management International Business better models are available with us and the

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management International Business

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management International Business

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The first funding for Google as a company was secured in August 1998, in the form of a US$100,000 contribution from Andy Bechtolsheim , co-founder of Sun Microsystems, given to a corporation which did not yet exist management International Business

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20% of their work time (one day per week) management International Business

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management International Business

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Apple iPhone Sales Surpass Nokia Sales

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Apple iPhone Sales Surpass Nokia Sales

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Apple iPhone Sales Surpass Nokia Sales

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Apple iPhone Sales Surpass Nokia Sales

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Apple iPhone Sales Surpass Nokia Sales

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Michael Dell was 18 when he founded his company in 1984. His goal was to take on the mighty IBM and Compaq, who dominated the PC business. management International Business

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management International Business g roup discussion

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to satisfy the objectives of individuals, companies, and organizations. management International Business International business consists of transactions that are devised and carried out across national borders

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Definitions 1) IB field is concerned with the issues facing international companies and governments in dealing with all types of crossborder Transactions. management International Business

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Definitions 2) IB involves all business transactions that involve two or more c ountries. management International Business

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Definitions 3) IB consists of transactions that are devised and carried out across borders to satisfy the objectives of individuals and Organizations. management International Business

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Definitions 4) IB consists of those activities private and public enterprises that involve the movement across national boundaries of goods and services, resources, knowledge or skills. management International Business

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International business Need for International Business management International Business causes the flow of ideas, services, and capital across the world offers consumers new choices permits the acquisition of a wider variety of products facilitates the mobility of labor, capital, and technology provides challenging employment opportunities reallocates resources, makes preferential choices, and shifts activities to a global level

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Types of International Business Export-import trade Foreign direct investment Licensing Franchising Management contracts management International Business

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b usiness How will an idea, good, or service fit into the international market? Should trade or investment be used to enter a foreign market? Should supplies be obtained domestically or abroad? What product adjustments are necessary to be responsive to local conditions? What are the threats from global competitors, and how can these threats be counteracted? questions International management International Business

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Types Importing and Exporting Selling and buying goods and services with organizations in other countries Multinational Enterprise (MNE) An organization with operating units located in foreign countries. Global Organization An organization having corporate units in a number of countries integrated to operate worldwide. management International Business

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International business are related but not same trade marketing management International Business

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International trade as it indicates pertains to only bilateral or multilateral trade activities management International Business

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Trade activities between two or more countries can be understood both at macro level , ie country leve l micro level ie firm or companyc management International Business

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International business International trade Macro level Micro level International marketing management International Business

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International and national business Three fundamental difference are in terms of market, competition currency management International Business

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factor international national Business horizon global National competition global Local /regional/ national Regional formation / segmentation Trade blocks / agreement Free access currency Foregin excahange (unstable) Local currency (stable) Risk and uncertainity unpredictable More predictable Role of agent Primary can be a catalyst More predictable Secondary management International Business

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Orientation of management: Perlmutter (1967) identified distinctive "orientations" of management of international organisations. His "EPRG" scheme identified four types of attitudes or orientations associated with successive stages in the evolution of international operations. management International Business

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ETHNOCENTRIC MANAGEMENT ORIENTATION home country is superior to any other country in the world regardless of any evidence to the contrary. “since a product or a service performed well at home, it should also perform well abroad. Since this is so obvious, no further research is necessary on foreign markets and no adaptations need to be made to the products or services to tailor them to global customer preferences and needs.” management International Business

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Ethnocentrism - home country orientation exporting surplus management International Business

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POLYCENTRIC MANAGEMENT ORIENTATION each country is unique and therefore it allows its subsidiaries to have more control in developing strategies that will work in a particular country. “Since each country is so unique, complete control should be given to local managers since they obviously know what is best for the company in that country.” As long as these subsidiaries are profitable, headquarters is apt to leave them alone. “Let the Romans do it their way. We really don’t understand what is going on here, but we have to have confidence in them. As long as they earn a profit, we want to remain in the background” (Perlmutter, 2001). Though an improvement over a purely ethnocentric view, a purely polycentric one has its flaw in that headquarters and subsidiaries are somewhat cut off from one another. the polycentric viewpoint often leads to ethnocentricity within each region where the company operates management International Business

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Polycentrism - host country orientation subsidiary operation management International Business

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Regiocentrism - regional orientation world market strategies management International Business

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GEOCENTRIC MANAGEMENT ORIENTATION geocentric orientation believes that the entire world is a potential market and strives to develop strategies that will work in every market. In geocentrically oriented companies, authority is not simply placed with headquarters at home or with subsidiaries abroad, but rather a is dispersed more equally between the two so that a collaboration is formed. Also, a view of superiority is not based on nationality. management International Business

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Geocentrism - world orientation world market strategies management International Business

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The four stages are as follows: Stage one: domestic in focus, with all activity concentrated in the home market. Whilst many organisations can survive like this, for example raw milk marketing, solely domestically oriented organisations are probably doomed to long term failure.. management International Business

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The four stages are as follows: 2. Stage two: home focus, but with exports (ethnocentric). Probably believes only in home values, but creates an export division. Usually ripe for the taking by stage four organisations. management International Business

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The four stages are as follows: 3. Stage three: stage two organisations which realise that they must adapt their marketing mixes to overseas operations. The focus switches to multinational (polycentric) and adaption becomes paramount. management International Business

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The four stages are as follows: 4. Stage four: global organisations which create value by extending products and programmes and focus on serving emerging global markets (geocentric). This involves recognising that markets around the world consist of similarities and differences and that it is possible to develop a global strategy based on similarities to obtain scale economies, but also recognises and responds to cost effective differences. Its strategies are a combination of extension, adaptation and creation. It is unpredictable in behaviour and always alert to opportunities. There is no time limit on the evolution process. In some industries, like horticulture, the process can be very quick. management International Business

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Management emphasis Stage one Domestic Stage two International Stage three Multinational Stage four Global Focus Domestic Ethnocentric Polycentric Geocentric Marketing strategy Domestic Extension Adaption Extension Structure Domestic International Worldwide area Adaption creation matrix/mixed Management style Domestic Centralised top down Decentralised bottom up Integrated Manufacturing stance Mainly domestic Mainly domestic Host country Lowest cost worldwide Investment policy Domestic Domestic used worldwide Mainly in each host country Cross subsidization Performance evaluation Domestic market share Against home country market share Each host country market share Worldwide Stages of domestic to global evolution management International Business

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View of the world Model orientation Strategy 1 Domestic Home country Controlled federation Ethnocentric domestic 2 International Extension market Coordinated federation Ethnocentric International 3 Multinational National market Decentralised federation polycentric Multidomestic 4 Global Global market or resources Centralized hub geocentric Global 5 transnational Global markets Integrated network geocentric transnational management International Business

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STAGE 2 management International Business

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STAGE 3 management International Business

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STAGE 4 management International Business

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STAGE 5 management International Business

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Pressure for local responsiveness Cost pressure high low low high GLOBAL STRATEGY INTERNATIONAL STRATEGY TRANSNATIONAL STRATEGY MULTIDOMESTIC STRATEGY management International Business

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When Coca-Cola has an increase of 2% in sales, it might well translate into 500,000 additional cases for the month management International Business

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The old adage Think Global, Act Local is fine for businesses selling nationally distributed consumer products and services majority of small business Think Local, Act Local. For example, why would a locally-owned real-estate agency need to spend money on internet Search Optimization? management International Business

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1) Minority Supplier Commitments Foster a climate of entrepreneurial opportunity through targeted minority supplier identification and a new supplier mentoring program. 2) Urban Economic Partnerships A commitment to strengthen local economies through urban economic partnerships and increased marketing investments with local retailers and entrepreneurs. 3) Opportunities for Minority Financial Institutions 4) Task Force to Review Value Chain 5) Increased Community Contributions and Support management International Business

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ITC IBD( International Business Division) is the country’s second largest exporter of agri products management International Business

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In the year 1990, the company leveraged its agri – sourcing competency & thus set up the agri business division for export of agri-commodities. The Division is today one of India's largest exporters. ITC's unique and now widely acknowledged e-Choupal initiative began in 2000 management International Business

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E-Choupal services today more than 4 million farmers wide range of crops soabean, coffee, wheat, rice, shrimp tc Over 40,000 villages 7000 kiosks across nine states MP, Haryana, Utharanchal, Karnataka, AP, Up, Maharashra, Rajasthan and kerala management International Business

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management International Business

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How to analyse a case theory are tools . One one needs to know which tool to be selected and how it can be used. Only some of the tools or a small portion of the theory is applicable here. One needs to have creativity and analytical skill to translate the theory to the real life situation management International Business

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According to Raymond, the analyst should try to seek answers to following questions: 1.  What’s actual problem involved in the case 2.  What are the relevant facts 3.  What are the crucial unknown aspects of the scene 4.  What are the major critical questions related to each specific event 5. In what ways can logic and reasoning be used lo determine crucial inferences, connections and relationships 6. In what manner can contradictory facts and arguments be weighed in making decisions 7.  What should be the proper timing of decisions 8.  In what ways can those decisions be best executed management International Business

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Schnell’s ten-point model 1. Identification of the problem. 2. Determination of facts. 3. Ascertainment of alternative courses of action. 4. Analysis of advantages and disadvantages of the alternatives. 5. Assessment of advantages and disadvantages of the alternatives. 6. Prediction of concurrent advantages and disadvantages. 7. Selection of best alternative. 8. Execution of the decision. 9. Filing the problem solution. ‘ 10. Comparing expected results with the actual results of the decision. management International Business

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How a multinational company strives for business / market expansion with local strategy Focuses mostly on exports of agri-products Direct exports of two and three wheelers. Joint ventures and strategic alliances management International Business

Yesterday’s Globalism: 

Yesterday’s Globalism In yesterday’s one-size-fits-all world, big companies could often migrate something that was a hit in the U.S. or Europe by tweaking the language and advertising . Examples: Mercedes-Benz , traded on its reputation for building highly engineered automobiles to drive into foreign markets. Coca-Cola Co . and Marlboro cigarettes traded on their “American-ness” to create large overseas followings. Sony Corp . found that compact, economical, and reliable electronics like the Walkman, struck a chord with people everywhere.

Today’s Globalism: 

Today’s Globalism Things have changed. No company can safely assume there will be viable foreign markets for an existing product. Any company seeking to expand globally needs to ask if its offerings are culturally and socially appropriate for its targeted market.

Problems faced by Global brands: 

Problems faced by Global brands Companies find it difficult to succeed in new markets that are culturally unfamiliar. They often underestimate differences in the patterns of daily life in the new markets. This makes it difficult to develop products and services that fit peoples’ lives, It is difficult to extend their brand, and manage culturally diverse teams. Western companies are now paying a great deal of attention to the growing number of people with expendable income in China, India, and other developing regions where the cultures are very different from those in the West.

Coca-cola : Global is Out, Local is In : 

Coca-cola : Global is Out, Local is In Initial set backs in 80s the benefits of global integration are sought and the need to adapt products to local markets is largely ignored. Coke is instituting a strategy of ‘think local, act local’ by putting increased decision making in the hands of local managers . Make model citizen by reaching out to the local communities and getting involved in civic and charitable activities. Better understanding and appealing to local differences.

Disney: Learning to Say Oui Not Yes : 

Disney: Learning to Say Oui Not Yes Before : workers were required to speak English, even if most people in attendance were French. liquor was not sold in the park, they have a drink with lunch or dinner. many of the exhibits and rides did not have a local theme, they were the same as those in Disneyland USA and thus did not appeal to Europeans. After : began creating European-specific attractions Started to serve alcoholic beverages series of changes, abandoning its global approach, and substituting one that appealed to local tastes.

P&G: Regional Focus and Global Coordination : 

P&G: Regional Focus and Global Coordination Procter & Gamble (P&G) with annual sales of almost $40 billion has operations in virtually every country of the world. Trick: the firm employs a strategy that combines high national responsiveness with high economic integration. strategies being developed and implemented locally and/or regionally. In particular, product delivery and marketing are local. the ‘back office’ of payroll, financing, human resource management and other general services and processes is coordinated on a more global basis, in order to achieve internal economies of scale. Result: economic efficiency and localization.

Kingfisher: Where Retail is Detail : 

Kingfisher: Where Retail is Detail The Kingfisher Group, a British retail enterprise with annual sales of over $10 billion, was founded in 1989. ‘retail is detail’ and ‘local knowledge is vital.’ The approach that is used in managing these geographically dispersed operations