ECP 6701
Competitive Strategies in Expanding Markets
International Business: An
Overview
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Readings
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2
Daniels, Radebaugh and Sullivan, International
Business, Chapter 1
International Business: An
Overview
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Why companies engage in international
Business?
Why the growth of international business has
accelerated?
Patterns of international competition
The evolution of international competition and
globalization
Patterns of international expansion and
strategy.
Introduction
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The Field of International Business
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The goal of private business is to increase or to
stabilize profits.
Success is influenced by
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Foreign sales
Foreign resources
Government business (regulated companies or
public companies) may or may not be profitmotivated
Introduction
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Why firms engage in international business?
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To expand their sales
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To obtain resources
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To diversify their sources of sales and supplies
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To minimize competitive risk
Introduction
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Reasons for Recent International Business
Growth
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Expansion of technology
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Business is becoming more global because
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Transportation is quicker
– Communications enable control from afar
– Transportation and communications costs are more conducive
for international operations
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Liberalization of cross-border movements
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Lower governmental barriers to the movement of goods,
services, and resources enable companies to take better
advantage of international opportunities
Introduction
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Development of supporting institutional arrangements
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Institutional arrangements
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Are made by business and government
– Ease flow of goods
– Reduce risk
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Increase in global competition
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More companies operate internationally because
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New products quickly become global
– Companies can produce in different countries
– Domestic companies’ competitors, suppliers, and customers
become international
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Modes of International Business
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Merchandise exports and imports
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Service exports and imports
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Tangible items (e.g., cars, televisions, e.t.c)
Tourism and transportation
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Performance of services
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Use of intangible assets
Modes of International Business
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Investments
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Direct investment : Key features are
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Control
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Access to foreign markets
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Access to foreign resources
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Higher foreign sales than exporting (often)
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Partial ownership (sometimes)
Modes of International Business
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Investments
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Portfolio investment: Key features
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It is used for diversification purposes
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Noncontrol of foreign operations
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Financial benefit (for example, loans)
Patterns of international
competition
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The pattern of international competition differs from
industry to industry.
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Multidomestic industries
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Global industries
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Competition in one country does not affect competition in other
countries.
A firm’s competitive position in one country is significantly
affected by its position in other countries
External Competitive Environment
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Economic forces determine competitive
advantage and comparative advantage.
The role of government is excessive in
international markets.
The competitive environment created by other
companies.
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The next slide illustrates the international business
environment.
International Business: Operations and Influences
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International Strategy Evolution
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Patterns of international expansion:
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Strategies for heavy international commitments usually evolve
gradually from
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Passive to active expansion
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External to internal handling of operations
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Deepening mode of commitment
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Geographical diversification
Leapfrogging of Expansion
The Usual Pattern of Internationalization
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Summary
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Companies engage in international business to
expand sales, acquire resources, diversify
sales and supplies, and minimize competitive
risk.
International business transactions have been
growing rapidly because of technological
improvements and government policies.
Summary
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A company can engage in international
business through exports, imports, foreign
investment.
There is gradual evolution of international
business strategies.