Uploaded by Miguel Rolo

International Management Summary

Today’s world:
Today’s world: closely intertwined across many markets sector, companies, institutions, and
Tastes and consumer behaviours converge rapidly, irrespective of geographies and cultures.
Companies, to grow and survive, must adapt the constantly changing international
environment and embrace the opportunities that a globalizing world is offering.
Most businesses today compete against products and services that come from abroad (their
competitors do exist beyond the national space). To stay domestic is not an option for a
company in today´s world.
International Business VS Domestic Management
IB has…
Longer distances à + costs; + difficult control
Wide diversity of political and legal environments à complexity; transaction costs
Wide diversity of social, cultural and economic environments à market heterogeneity;
different consumer groups; different languages and currencies; variety of business cycles
The Environment
International managers: must be prepared to accept and understand the different
environments where a company operates. Blindness to environmental differences in business
is a common cause of non-success and failure. à Understanding the environment is key to
Basic concepts in IB
Companies can engage in IB by taking either a controlling or a non-controlling interest in a
foreign company.
Company takes a controlling interest: investment is known as a foreign direct investment (FDI)
If 2 or + companies share ownership of the investment, it is referred to as a joint venture
Non-controlling interest: portfolio investment
Ø DIRECT INVESTMENT (investor takes a controlling interest in a foreign company – a
subsidiary, a joint venture)
Inward Investment (FDI) – a country receives a company’s direct investment
from abroad
Outward investment – a country sends a company’s direct investment abroad
Ø PORTFOLIO INVESTMENT (non-controlling financial interest in another entity –
investment funds, pension funds, hedge funds). Ownership of a foreign property in
exchange for a financial return, such as interest and dividends.
Two types: Non-controlling interest of a foreign operation; Extension of loans
General note: Payments are dividends or interest; Companies make CAPEX when investing
Companies can also engage in IB by exporting or importing, either goods (merchandise) or
services – services is the fastest growth sector in international trade (tourism and
transportation, service performance, asset use)
Ex:1 Main products exported in 2021 Portugal – machinery, mechanical appliances, vehicles,
base meals, plastics, rubbers, agricultural products…
Ex2: Industrial companies’ usual mode of operations – import raw materials and export goods
Exports and imports are a major source of international revenues and expenditures for most
Trade Balance –strength of a country’s economy in relation to other countries
Trade Deficit: Imports > Exports (borrowing money to purchase goods and services)
Trade Surplus: Exports > Imports (the opposite)
Organizations for IB:
An International company operates in + than 1 country through different modes of operation:
Export/Import or invest abroad
Direct Presence
Collaborative Arrangements (joint venture, licensing agreement, management
contract, minority ownership, long term contractual arrangement, strategic alliance)
A Multinational Enterprise (MNE) has direct investment in some minimum number of
countries apart from home country. It takes a global approach to markets and production and
has operations in + than 1 country.
Companies with FDI may be referred as: MNCs (Multinational corporations); MNEs
(multinational enterprises); Transnational companies (TNCs)
According to the United Nations (UNCTAD): Transnational corporation (TNC) is generally
regarded as an enterprise comprising entities in + than 1 country which operate under one
system of decision making that permits coherent policies and a common strategy.
The entities (subsidiaries) are so linked (by ownership or otherwise) that one or + of them
(generally one – the HQ or parent company) may be able to exercise a significant influence
over the others and, in particular, to share knowledge, resources and responsibilities with the
Why companies engage in IB? (IB Operations) à Sales expansion; Resource acquisition; Risk
Physical factors (geographic, demographic)
Institutional factors (political policies, laws & regulations, behavioural factors,
economic forces)
Competitive factors (company IB/product strategy, company resources, competitors
in each market)
Ø Physical Factors:
Geographics (factors related to geography): location, weather, natural resources,
geographic barriers, chance of natural disaster
Demographics (factors related to population): population density, education/literacy,
age distribution, life expectancy
Ø Institutional Factors:
Political Policies (rules a how a country is governed): political learning/systems;
political/trade disputes
Legal policies (laws and regulations): domestic law VS international laws; legal
systems; law enforcement vs non-enforcement
Behavioural policies (how people think and behave): values, beliefs, attitudes
Economic forces (economic differences between countries): salaries, currency
Ø Competitive Factors (Competitive Environment):
Product Strategy – cost strategy vs differentiation strategy; mass market vs niche
Company resources and experience – size and resources; leadership
Competitors faced in each market – type of competition in each market (international
or local); Nº and strength of competitors; market share concentration
à A GLOBALIZING WORLD – How Globalization shapes today’s business
The context of Globalization
Deepening relationships and wider interdependence among people from different countries
and parts of the world. In all areas of life: Business, Art, Culture, Education, Science, Media,
Lifestyles, Diseases, Crime.
Uniformization of Tastes and behaviour of consumer – “high touch” products and the
role of the media. “Think global, act local”; uniform tastes and consumer
behaviour/global brand positioning with local adaptation
The Digital Economy (information technology, multimedia, and world-wide-web):
Born-global companies; ability and desire to access global market immediately
Decrease of Transportation and Telecom costs – increased business connectivity,
advances in transportation and communication
Development of Global Financial Markets – access to global network of financing and
Globalization of Corporate Strategies à Networks of production; World sourcing;
Global Marketing; Inter-firm cooperation (to capture scale economies)
Work diversity – increasing work teams diversity
To capture scale economies: production – manufacturing; marketing – global brand/global
advertising; R&D – collaboration; logistics – distribution centres; sourcing – buying worldwide
Factors in Increased Globalization:
Technological advances and global value chains
Increased competitive pressures
Changes in political situations and Government policies
Expansion of cross-national cooperation
Consumer preferences
Ø Advantages of Globalization:
Foreign Direct Investment (technology transfer, higher productivity, and growth of
global companies)
Job creation in host countries (countries that receive FDI)
Technological innovation (+ info and + tech development)
Economies of scale (enables large companies to reduce costs, improve profits and
reduce prices)
Development of weaker economies (poor countries also sell their goods and services
to other richer countries which open them up for development and prosperity)
Ø Criticisms of Globalization:
Threats to national sovereignty (national interest vs proliferation of international
agreements; worker and environmental protection vs competing with countries with
less protection; small economies’ overdependence and inadequate capacity to deal
with globalization; cultural homogeneity – merchandise, social structures, language,
satellite TV, internet)
Environmental stress (+ use of natural resources and carbon footprint vs eco-friendly
technologies and global cooperation)
Growing income inequality and personal stress (+ access to low cost labour in poor
countries à - real wage growth of labour in rich countries and job opportunities)
FUTURE OF GLOBALIZATION: Further globalization is inevitable (even with the pandemic); IB
will grow primarily along regional rather than global lines; forces working against further
globalization will slow down the trend.
Behaviour of national governments (Institutional responses and cooperation due to
public health concerns, protectionism, tariffs, bailouts, production subsidies)
Attitudes of consumers (living/housing/location preferences, consumption &
investment habits, social habits)
The trend of Globalization will depend on how each of these mechanisms evolve and respond
in the short-term vs. medium/long-term
• Mindset of executives and key stakeholders in multinational companies (work location,
work life balance/well-being, investment priorities)
• Economics of business globalization and supply- chain management (transportation and
logistics, adjustments to locations of production, production safeguards, accelerated
technology implementation, rise/return of local marketplaces)
• Emergence of Political and Trade conflicts (China vs US, Russia vs. Ukraine, China vs. Taiwan,
EU vs. Big Tech, Return to subsidy economics – Chip industry)
Political Risk
Government, Legal, Economic
Cultural factors: Cultural awareness; Identification and dynamics of cultures; Behavioural
practices affecting business; Strategies for dealing with cultural differences
Culture: Norms based on values, attitudes, and beliefs of a group of people. Culture can be
based on nationality, ethnicity, gender, religion…
IB activities incorporate people from all different groups and backgrounds, thus, every
business function is subject to cultural differences. Culture is an integral part of a nation’s
operating environment.
Cultural diversity à Nationalities come together with diverse perspectives and experiences,
with deeper knowledge of how to create and deliver products and services (different
backgrounds and experience), which can be difficult to manage. Fostering cultural diversity
can allow a company to gain global competitive advantage.
Cultural collision à Contact among divergent cultures creates problems, which may result in
companies’ implementation of practices that are less effective and to employees’ distress bc
of difficulty in accepting or adjusting to foreign behaviours.
Problem areas that can hinder (impeder) managers’ cultural awareness: the assumption that
all societal subgroups are similar; difficulty in accepting that one’s culture is not superior to
Nation à Useful definition of society. Similarity among people is a cause and effect of
national boundaries; (Laws apply primarily along national boundaries; language and values
are shared within borders; rites and symbols are shared along national boundaries)
Language à A shared language between nations facilitates IB
Major behavioural practices affecting business:
Issues in social stratification (determined by individuals’ achievements and talents
and groups memberships – ethic and racial groups, gender-based groups; ae based
groups, family-based groups)
Work motivation (differences in perception of chances of success and reward; live to
work vs work to live; reward preferences)
Relationship preferences (preferences of interactions between superiors and
subordinates – power distance; individualism (ex: USA) vs collectivism (ex: China)…)
Risk taking behaviour (uncertainty avoidance, trust, future orientation, fatalism)
Information and task processing (difference in perception, how to obtain and process
info; idealism vs pragmatism…)
Rule of Man à Ultimate power in the hands of one person and is the cornerstone of
totalitarian governments (ex: China)
Rule of Law à Hallmark of democratic governments and holds that authority comes from
written and transparent laws
Company and Management Orientations:
Polycentrism (act abroad like local companies do); high response to cultural
Ethnocentrism (own practices are superior to those of other countries); low response
to cultural differences
Geocentrism (integrates home and host-country practices, introducing new ones);
balances response to cultural differences
Ex: Context of the Retail Sector
Drivers of IB in Modern Retail: Scale (scale is critical – economies of scale and efficiency
from source to consumer is critical in modern retail); Online (is becoming critical and is
already a relevant source of revenue amongst younger generations) but understanding the
local culture is basic (consumer preferences, perceptions of value for money, CSR context,
location & licensing)
Ex: Jeronimo Martins
Ambition: market leadership by country; to be perceived as a local brand à proximity with
the customer and the community
Political Risk à Risk that political decisions or political/administrative events in a country
negatively affect the probability or sustainability of an investment.
Represents a very real threat for companies, especially in certain emerging markets where
weak legal systems, improvised institutions, volatile political systems, and fragile regimes
complicate the business environment.
Global crisis in 2008 and recent changes in political spectrum in USA and Europe à + political
risk (both developed and developing markets)
Types of political risk:
Systemic risks (risks that impact all firms that operate in a particular political system)
Procedural risks (risk evolving for the daily movement of people, products, and funds
in the global market. Each move à procedural transaction between the units
involved. Political actions sometimes create frictions that interfere with these
Distributive risks (result of the profits generated by foreign companies in the local
economy. Fair share of growing profits to host country – distribute justice?)
Catastrophic risks (random political developments that adversely affect the
operations of every company in a country. Typically arises from specific dramatic
events – ethnic unrest, illegal regime change, civil disorder…Disrupts the business
environment in a way that affects every firm in the country)
Ex: Portugal à Medium political risk; USA à high political risk; Sweden à very high political
risk; Niger à Very low political risk
Ex: Russia – Ukraine conflict
Russia à large state intervention, excessive regulation, weak governance, poor
infrastructure, corruption, low levels of voice and accountability à Inequality and Political
à Different legal systems worldwide (Civil Law, Common Law, Muslim Law, Customary Law,
Mixed System)
à Legal issues: Operational concerns (tax, labor, admin); Strategic concerns (product safety
and liability, marketplace behavior, product origin, legal jurisdiction, arbitration); Intellectual
property rights
à Government Spectrum (from Democracy to Totalitarianism)
à Economic elements: type of economic environment, degree of economic freedom,
drivers of economic performance, orientation of economic system
Economic factors impacting on managerial decisions at international level: Exchange
rates; Currencies; Inflation; Public Debt; Purchasing power; Saving rates…
Types of Economic systems in the world: Market Economy; Mixed Economy;
Command Economy; Traditional systems (families, tribes…)
Command System (low economic freedom) à Government owns most or all
resources; Centralized, large-scale, capital-intensive production. Communism
Market System (high economic freedom) à Mostly private (indiv or business)
ownership of resources; Decentralized, entrepreneurial innovation. Capitalism
Mixed System (mix) à Government and private ownership of economic
resources mixed in varying proportion. Socialism
CONCLUSION: Environmental differences impact all functional areas of companies, although
with different intensity. Company + involved in international activities à + it has to deal with
environmental differences
Business ethics à accepted principles of right or wrong governing the conduct of
Ethical issues are a function of differences in economic development, politics, legal systems,
and culture.
Managers working in international companies need to be particularly sensitive to ethical
issues, since they are of great concern to the markets and the public opinion where the
company operates.
Moral issue, values and beliefs of the managers and the company’s stakeholders à good
ethical behavior (or lack of it) à Direct impact on company’s reputation
Most common ethical issues when managing in a global context:
Employment practices (auditing of foreign subsidiaries and subcontractors)
Environmental pollution (developed vs developing country regulations)
Human Rights (respect the person, freedom of speech, freedom of movement, of
political association…)
Corruption (ethical dilemma – speed money and facilitating paymets?)
Moral obligations (large successful businesses need to give something back to
societies that made their success possible “noblesse oblige” – Corporate Philanthropy)
Corporate Responsibility (CR) à Companies integrate social and environmental concerns in
their business operations and in interaction with their stakeholders on a voluntary basis.
+ Globalization à + aware that CR can be of direct economic value
Integrating CR into their core business strategies and operations, companies can contribute
to social and environmental objectives
Triple Bottom Line (TBL): People (Social); Planet (Environmental); Profit (Economic)
Stakeholders: Shareholders, employees, investors, consumers, suppliers, public authorities
and regulators, NGOs
CR is not philanthropic, since interest underpins its implementation; CR strives to be a winwin solution for companies’ management and their stakeholders.
CR objectives are not only boundaries, but also business opportunities. CR targets start where
compliance with enforced sustainable practices end.
CR = CSR = Sustainability (Corporate Responsibility = Corporate Social Responsibility =
BUT: CSR is different from Corporate Philanthropy
E- Environmental
S – Social
G – Governance
ESG standards apply to companies’ strategy and operations. They are used by socially
conscious investors in screening their investments and building their investment portfolios.
Environmental standards à Assess how companies relate and care for nature and the
sustainability of the planet (Ex: Climate change and carbon emission; air and water pollution;
Social standards à Evaluate how the companies engage with their stakeholders, namely
communities where they operate, employees, customers, suppliers, NGOs, Governments
(customer satisfaction; data protection and privacy; employee engagement…)
Governance standards à Deal with shareholder rights, Boards, leadership, executive pay,
internal controls, risk assessment and audit. (Board composition; Audit committee structure,
Bribery and corruption…)
CORPORATE GOVERNANCE of a company à Includes ESG, Corporate Responsibility,
Sustainability, Citizenship, Corporate Ethics (imbedded in the Strategy and culture of the
Socially Responsible Investment Ethical Funds and Sustainability Indices
Ethical MNE – adopts right business conduct. Positive impact on reputation
Socially Responsible MNE – integrates social and environmental concerns in business
operations (voluntary), aims to create win-win solutions between company and stakeholders
Philanthropical MNE - promotes wellness of others with no direct link with business
operations (ex: donation to humanitarian causes)
Ethics & Social Responsibility not “straight-forward” because:
Companies must satisfy stakeholders’ interest, but there are trade offs
MNEs are also exposed to tradeoffs in different regions of the world
Economic Value of Ethics & Social Responsibility
Minimum: Avoid the risk of negative image; Perception of an unethical behavior can “kill” the
Optimal: Build a source of competitive advantage (environmentally friendly and socially
responsible products can make consumers opt for the brand); Align with global initiates that
improve standards and mitigate price impact.
Foundations of Ethical Behavior:
1. Organizational (role of conduct)
2. Cultural (Relativism VS Normativism; Framework of standards)
3. Legal
Ex: Becoming faster at acting based on ethical standards à Companies announcing their exit
from Russian market since the beginning of the war
Fraudulent activity à Very serious variant of unethical behavior. MNEs should be prepared
to deal with it
Corporations must have strong mechanisms of internal regulation and continuous practice
(code of conduct, recruitment, corporate certification and reporting…); Example from the Top
MNEs are gradually increasing adoption of ESG standards, which ca be associated with certain
benefits and externalities
Promotion and adoption of ESG à Investors look for growth, opportunities, and reduced risk
in ESG investing à Investors invest in companies that adopt ESG/raise capital to grow; MNEs
adopt ESG goals and report progress to attract investors
Attitudes towards IB
E-P-G model (Howard Perlmutter) à Attitudes of managers inside a corporation related to
their company’s international business. The dominant E-P-G attitude in a company defines its
management orientation and affects its international strategy
E-P-G Model: Ethnocentric (Home-oriented); Polycentric (Host oriented); Geocentric
ETHNOCENTRIC à Complex organization structure in the home country and simple in
subsidiaries. Authority/Decision making concentrated in HQ. Domestic patters applied across
the subsidiaries. Incentive structure is high in HQs and low in subsidiaries. Dense volume of
info inflows to the subsidiaries. Identity: nationality of the shareholders or HQ. HR policy:
recruitment and development in the home country to key positions abroad.
POLYCENTRIC à Complexity of the organization is varied and independent. Decision making
is dispersed by subsidiaries. Evaluation and control defined locally. Wide variation in incentive
structure. Small volume of info flows to and from the parent corporation. Small volume
among subsidiaries. Identity: Nationality of the host country. Recruitment and development
in the host countries for key positions in those countries.
GEOCENTRIC à Complexity of the organization is increasingly complex and interdependent.
Decision making collaborative approach between HQs and subsidiaries. Universal and local
standards simultaneously. Managers are compensated for local and global objectives. Info
flows in both directions and among subsidiaries. Identity: True international corporation.
Recruitment and development of the best irrespective of their origin. Opportunities are
independent of nationality.
Typology of International Company
Gradual process of international involvement (before being global, a company evolves
Pure domestic à Exporter à 1st FDI à International company à increases international
footprint à Multinational company à presence covers a fairly large part of the word, then
it is à Global corporation
Impact of Technological Development
Evolution of Industry 1.0 to 4.0 à Mechanical Production, Science Mass Production, Energy
Electronic Telcos, Digital Transformation
Industry 4.0 à Cyber physical systems; Internet of things: On-demand availability of
computer system resources; Cognitive computing. Allow for interconnection, technical
assistance, decentralized decisions
Benefits of Industry 4.0 for MNE: + productivity; - costs; + quality control; + fast innovation
Necessary conditions for a company’s successful internationalization
Existence of a product/service in whose competitiveness the company believes
Willingness and determination of top managers who may lead the company into international
expansion leveraging energies within the organization
Existence of competitive advantages in relation to competitors, in one or several domains
(management know how, tech, R&D, innovation, marketing expertise…)
International Strategies: Model of Strategic Forces
Resources of firm: Tangible + Intangible
Strategic pressures (2 conflicting pressures when developing international strategy):
Global Integration (pressure to standardize and concentrate configuration)
Local Responsiveness (pressure to disperse configuration and adapt coordination)
Global Integration à Is driven by globalization (standardize consumer preferences); markets
globalizing; technology and mass standardization; economies of scale
Local responsiveness à pressures include: consumer divergence; cultural specify and
historical legacy; nationalism; host government policies
Strategies best adapted to the Model of Strategic Forces:
International: leverage a company’s core competencies into foreign markets; critical
elements of the value chain are centralized at HQ
This strategy works well when: the firm has core competencies that foreign rivals lack;
there are no significant economic pressures for global integration; local
responsiveness is not crucial. [Low for the 2 pressures – low pressure for local
responsiveness & low pressure for global integration]
Drawbacks: Too much concentration at HQ an little input from foreign subsidiaries –
opportunities may be missed.
Ex: Apple, P&G, Tesco
Multidomestic: Emphasizes responsiveness to the unique circumstances of a country’s
market; value added activities are adapted to local markets
This strategy works well when: companies are relatively string at subsidiary level;
capacity to respond locally is important and there are no significant economic
pressures for global integration. [Low pressure for Global Intg, High pressure for local
Drawbacks: Costly strategy to implement due to the need of adaptation to local
market characteristics.
Ex: Nestlé, McDonalds
Global: makes standardized products that are marketed with little adaptation to local
conditions; Exploits location economies and captures scale economies
This strategy works well when: the MNE is a cost leader; worldwide standardization is
possible; there are large scale economies available to be captures; local
responsiveness is not crucial. [Low Pressure for local responsiveness and high pressure
for global integration]
Drawbacks: Cost reductions and standardization do not allow for adaptation in local
Ex: Walmart, Cisco
Transnational: Leverages core competencies worldwide, reduces costs by exploiting location
economies and adapts to local conditions.
This strategy works well when: Global learning is emphasized; knowledge flows within
the company; There are sophisticated internal management and control systems;
Capacity to respond locally is important; There are large scale economies available to
be captured. [High on 2 pressures]
Drawbacks: Complicated and difficult to implement.
Ex: IBM, GE, Zara
Cybercorp à The connectivity network of the Internet defines its operational boundaries, not
national borders. Ex: Farfetch
Micro-Multinational à Born-global firms, operate internationally with powerful platforms
and less than 250 people. Ex: Uniplaces
Glo-Re-Calized MNE à Global vision and local tactics to exploit location economies within a
regional network. Ex: Jerónimo Martins (Pingo Doce, Biedronka & Ara)
Metanational à Innovate on its existing multinational operation to build competitive
advantage. Ex: McDonalds
Globally Integrated Enterprise à Companies have no centers, business flows in every
direction, internet connects everything, everywhere. Ex: IBM
Country scanning (look for unacceptable conditions) à Data-driven analysis on the range od
Detailed country analysis (analyze risk and opportunities – market dimension and sales
growth potential & cost of resource acquisition + political, legal and competitive landscape;
make a feasibility study with clear-cut decision points before escalation of commitment and
investment; Quantitative and qualitative)
Market Entry – The Modes of Internationalization:
Classic Internationalization process
The motivations
An exception
Ø Classic Internationalization process:
From a passive exporter to an active marketeer: Gradual process with a learning and
experience curve.
Influences on the choice of an export market à Vicinity; Cultural identification; Past
Experience; Opportunity; Rational Analysis – market research
From a passive exporter to an active marketeer = To export to markets VS To sell in markets
(knowing the consumer, the competitors, understanding distribution, anticipating trends…
Ø The Motivations
Traditional motivations à Need to secure key suppliers; Market seeking behavior; Access to
low-cost factors
Emerging motivations à Scale economies; Increasing R&D investments; shortening product
life cycles (global interconnected structures); scanning opp and learning in a global scale;
competitive positioning (cross subsidization)
Ø An Exception:
Some companies are born multinational – the nature of their business (ex: internet
distribution) or their ownership, or past legacy makes them international right from the start.
Ex: Ebay, Google, Critical Software
The Born-Global Phenomenon à Some companies initiate exporting as a born-global (instant
international, micronational or international new venture).
Evaluation of countries for international operations:
Modes of Entry
Location factors
Where to locate
Information for decision
Ø Purpose: MNEs can enter foreign countries through various modes.
Ø Modes of Entry: Greenfield, Acquisition, Licensing, Startup, Joint Venture
Ø Where to locate: Normally a result of a spurious factor (knowing a local partner,
cultural identification, geographic proximity, past experience). The decision must be
taken with some systematization and assessment – most used techniques: scanning,
detailed analysis.
Scanning à Comparing among several countries through statistics and taking
into account business critical variables. Quantitative info.
Detailed analysis à Concentrates on the short list of countries and deepens
the analysis. Visits to the countries with local distributors, interviews with
analysts, evaluation of possible partners. Qualitative info.
Escalation of commitment: the longer and + resources invested in the analysis
of a given alternative, the + probable it becomes to choose it, regardless of its
merit. (should be avoided)
Ø Information for decision: The assessment of alternative countries/markets must
contemplate opportunities for sales expansion, needs of allocation of resources, risks,
Location factors: Where to locate sales, production, logistics, support & admin services?
Which Country – Region – City; Sequence of entry in diff countries/regions (resource
allocation decision for internationalization); How much effort and what resources to allocate
to each country/region
Resource allocation decision à Essential to the success of internalization (HR,
technical resources, financial resources, company infrastructure)
Compare Market Opportunities: Estimated size of market in country A * Estimated market
share in country A = Projected revenues in country A
A purely domestic firm risks of losing competitive advantage to key competitors à Market
dimension; Sales growth potential; Cost of resource acquisition
Lowe sales, lowed fixed cost dilution, - profitability, + exposure to domestic economic cycles,
+ cost of resource acquisition
(But staying domestic works for some companies)
Alternative gradual commitments (Intermediates VS M&A; Export VS Local
Production; One country VS One region)
Geographical diversification vs concentration (Diversification à rapid movement to
several countries and gradual commitment in each. Ex: Revolut, Uber;
Concentration à Moving to one and not going elsewhere until it develops a very
strong competitive position. Ex: JM, Sumol Compal)
Reinvestment vs Harvesting (Reinvestment à a company may have to make new
commitments in a location to maintain competitiveness; Harvesting à Divesting
underperforming operations usually take too long with fear of individual
consequences and bad publicity)
Procedures of expedition and freight forwarding
Incoterms à intended to establish world standard norms relative to the obligations of sellers
and buyers in international transactions
Incoterms in Maritime Transportation
Incoterms in any means of transportation
Countertrade à Classic barter (pagamento em espécie); Counter-purchase (compra
recíproca); Compensation Arragements or Buy Back (acordos de compensação); Switch Trade
Cash Collection and Trade Finance à Cash in advance (pagamento adiantado); Open Account
(conta aberta); Consignment (consignação); Letter of credit (carta de crédito)
Collection of Sales
In any sales contract there is a collection risk involved. If the transaction is cross-border, this
risk is significantly increased.
Forms of payment and respective need to hedge the risk of default associated:
Cash in advance: no need to hedge (pagamento adiantado)
Consignment: moderate need to hedge (consignação)
Open Account: only used where there is complete trust among the parties – no need to hedge
Sale with deferred payment (30/45 days): Need to hedge depending on the creditor quality
and the risk associated to the specific foreign location
Letter of Credit (Trade Finance): Most used instrument of hedging against the risk of default
(lack of payment of an invoice); Also a finance instrument since it has associated to it the
capacity to finance the transaction through the involvement of banks in the trade operation.
Letter of Credit: “Confirmed” (VS unconfirmed)
Letter of Credit: “Irrevocable” (VS not)
Types of Export Documents
Bill of Landing (carta de porte); Certificate of Origin; Commercial Invoice; Electronic Export
Information (EEI); Export Packing List; Pro Forma Invoice
Guest Speaker: Fernando Oliveira (President of Sumol Compal Mozambique) + Edfonso
“Conformism doesn´t rhyme with ambition”
Internationalization across geographies
Why Export & Import may not be sufficient
When it is cheaper to produce abroad (ZARA – Brazil, Turkey, Asia)
When transportation costs are too high (RENOVA – France, Mexico, Canada)
When domestic capacity isn’t enough (Volkswagen – Germany, PT, USA)
When products and services need altering (Whirlpool – USA, Europe)
When trade restrictions hinder imports (SUMOL COMPAL – Angola)
When country of origin becomes an issue (FREZITE GROUP – Germany)
Why companies opt for FDI
When the business is the “experience” and location is critical (physical retail, hospitality &
tourism, physical restaurants…)
Invest in Location à M&A Investment; Leasing; Greenfield Investment
Alternative Modes of Operating à Collaborative arrangements (why companies
collaborate? à spread and reduce costs; specialize in competencies; avoid or counter
competition; learn from others; gain location specific assets…)
Higher level of production, GDP, and fiscal income
Sources of new jobs
Improves Balance of payments equilibrium
Improves local competitiveness, innovation and efficiency
Might contribute to increase exports and foreign currency earnings
Enables transfer of knowledge and technology, being particularly important for emerging
FDI increases future capital outflows from the host country
Foreign ownership of companies in key industries can contribute for lowr comparative
advantage of the country ( - R&D and innovation in the country)
Non-efficient domestic companies might suffer due to increased local competition
Sometimes it is intended for the appropriation of knowledge and technology from the host
Control and decision making moving abroad
Foreign Investment Policy and Negotiation à Address challenges of attracting FDI and
reducing Capital Account volatility
Dependencia theory à Emerging countries have practically no power in their dealings
with MNEs
Examples: Transportation, Mass Media, Energy Production and Distribution, Defense,
Healthcare [Strategic industries vary from country to country]
Governments have used powerful foreign companies to influence policies in the countries
where they operate
Foreign companies have used their home governments as instruments ti improve their
interests in a country
Bargaining school theory à the terms for a foreign investor’s operations depend on
how much the investor and host country need the other’s assets
Countries and foreign companies need each other, and both will lose if limitations are placed
on foreign control.
Local staff and executives have the power of influencing the strategy of the MNE in host
MNEs need to adhere to local laws and regulations.
Preventing foreign control may lead to the protection of inefficient performance
FDI brings important FX liquidity for the company
When privatizing companies in strategic sectors, often countries sell stakes in the stock
market to spread the shareholder base as much as possible
Supply chain and logistics concepts:
Supply chain à the network that links together the different aspects of the value chain,
coordinating materials, info, and funds from the initial raw material supplier to the
ultimate customer
Global sourcing à the process of materials management (includes sourcing), inventory
management, and transportation between suppliers, manufacturers, and customers
Contract manufacturing à when the manufacturing process is being handled by another
Manufacturing configurations
Offshoring à Manufacturing outside home market anywhere in the world based on cost
Nearshoring à Manufacturing outside home market but regionally close/ + favorable market
Reshoring/onshoring à Manufacturing moving back to home country as a result of improved
operational efficiency or legal/regulatory/trade constraints
Factors influencing International Production
1. Compatibility à Degree of consistency between the foreign investment decision and
the company’s competitive strategy
2. Manufacturing configuration à requires the company to consider whether to
centralize manufacturing in one country, establish regional operations or set up
multidomestic production
3. Coordination à involves integrating activities into a unified system
4. Control à involves measuring performances so the company can respond
appropriately to changing conditions
Global Sourcing –WHY do companies do it?
To reduce costs (cheaper labor, + flexible work rules, lower land and facilities costs) and
increase competitiveness
To increase exposure to worldwide technology and improve quality
To gain access to materials abroad (exclusive raw materials)
To improve the delivery of supplies process (and strengthen reliability of supply –
supplementing domestic suppliers with foreign suppliers)
To establish presence in a foreign market and react to competitors’ foreign location strategies
Modes of Global Sourcing (major sourcing configurations):
Vertical Integration à Company owns the entire international supply chain or at least a
significant part of it
Industrial Clusters à Buyers and suppliers locate close to each other somewhere in the
world, to facilitate business
Keiretsu à Group of independent companies work together to manage the flow of goods
(typical Japonese chains)
Foreign Ttade Zones (FTZs) à Areas in which domestic and imported merchandise can be
stores, inspected, and manufactured free from formal customs procedures until the goods
leave the zones (ex: SDM in Madeira)
Transportation à A crucial part of logistics; link together suppliers, companies, and
customers (sea, air, land)
INNOVATION IN ORGANIZATIONS à Strategic Innovation; Operational Innovation
Too many companies avoid embracing innovation due to the fear of change. So,
Change Management and New Business Development are necessary divers in
Outsource innovation:
CONS à Protect what is core intellectual property to avoid/delay becoming a
commodity; Competitive advantage often depends on trade secrets that set a firm
apart from its rivals; Third party manufacturers can always become competitors
themselves; The company loses focus on innovation
PROS à Reduce costs and increase R&D productivity (R&D activity is not for all
companies – 3rd party developers can dilute costs and leverage R&D expertise);
Accelerate innovation with business partners specialized in investing in the early stage
of product development (new products and/or upgrade mature products; R&D, design
and manufacturing of prototypes, conduct quality tests, put together user manuals
and select past vendors)
Open Innovation à Can be a unique source of competitive advantage depending on
how each company interacts with all its supply chain interfaces. It is state of mind and
process. Ex: B2B collaboration, knowledge transfer
Environmental differences are key in International Marketing. Differences between the
domestic and international environment tend to force managers to apply marketing rules in
a different manner.
Major problems arise from: Neglecting differences between the different environments;
Interpret incorrectly the detected differences
Global Brand VS Global Company
Global companies à Normally manage their brands globally. However, they may sustain their
business on local brands
International companies (not global) may have global brands
Promotion Policy
The types of messages, those to whom they are addressed and the way they are presented,
can differ significantly according to country, company, and product.
Push-Pull Strategy à The mix push-pull is influenced by: the type of distribution system; the
cost and availability of media to reach target segments; consumer attitude towards the
information source; product prices as a % of income
Standardization à cost reduction; prevents international customer of getting confused from
exposure to different messages; usually accelerates the product’s penetration rate on target
Several factors against standardization:
Message translation, legal constraints, moral standards, message content
Branding Policy
“Brand” = label used to identify products/services
Companies’ typical decisions on branding policy:
à To have or not to have a brand
à Producer brand or independent brand (ind. brand - + protection for company
à Only one brand or several brands (+ fit to market segments but + investment)
à One international brand or several local brands
Factors against branding policy harmonization:
à Linguistic factors (words with diff meanings in diff languages)
à Acquired brands
à The CoO (Country of origin) effect [MADE IN X]
à Generic or almost generic names
- International Marketing Strategies | Common Marketing Orientations
Production Orientation à Efficiency, Quality, Capacity
Product/Customer Orientation à Focus on customer needs in a particular market
Sale Orientation à Global customers reasonably similar
Strategic Marketing Orientation à Incremental product adaptations to satisfy local
Social Marketing Orientation à Preserve and enhance the well-being of all stakeholders
Segmenting Global Markets
Geographic approach à Countries; Regions
Consumer approach à Global Segment; Mixing the marketing mix (maintain some variables
such as promotion, branding, distribution and adapting others); Mass market VS niche
market (depending on the size of the market in a specific country compared to other)
Standardize advertising à Some advantages, but also some considerations
Potential issues in pricing:
Government intervention
Market diversity
Export price escalation
Fluctuations in currency
Fixed VS variable pricing
Push and Pull Promotion decisions à definition and factors in these decisions
Working with Product Distribution à Internationalization of distribution?; Factor to
determining an internationalization strategy; Distribute partnerships as an option
Decisions on International Marketing Strategy, Branding and Local Marketing Mix
cannot be dissociated!
International MKT Strategy à The different marketing orientations
Branding à Language/Phonetics; Legal considerations; Brands resulting from
M&A; Local perception of country of origin; Protected origin; Generic name
Local MKT Mix à Product adaptation; Pricing complexities; Promotional
approach; Distribution practices and complications; advertising and
Reasons for Global Branding:
Consistency of brand image
Larger customer base
Higher international brand notoriety
Economies of scale in marketing investment
Possible economies of scale in production
Reasons for Local Branding:
Flexibility to adapt to local needs
Home country specific conditions to compete
Origin recognition as domestic brand
Lack of transferability of comp. advantage
Legal constraints to business model
Hard to target specific segments abroad
Uniqueness to consumers and sense of urgency
considerations; cultural considerations; Economic considerations
GLOBAL BRAND STRATEGY à Global Vision; Global notoriety; (some) local responsiveness
Ex Global Brands: Apple, Coca Cola, Farfetch, Ronaldo
INTERNATIONAL BRAND STRATEGY à Global Vision; Regional Notoriety; Local
Ex International brand: Delta, Sumol Compal, Pestana Hotels, JM
DOMESTIC BRAND STRATEGY à Global Vision; National Notoriety; Local responsiveness
Potential to become international/export if they explore digital marketing and online
Ex Domestic brand: Cantê, Pasteis de Belém
Diversified brand strategy – managing a portfolio of brands (ex: ABInBev – portfolio of global,
international and local brands)
HR Policy in the E-P-G Model
Ethnocentric à Recruitment and development in the home country to key positions abroad
Polycentric à Recruitment and development in the host countries for key positions in those
Geocentric à Recruitment and development of the best irrespective of their origin.
Opportunities are independent of nationality.
International Careers | Rising to the top
Expatriate: executive sent to work temporarily in a country that is not his/her legal
Skills for expatriate jobs (employees sent to work abroad) à Global mindset; cultural
intelligence/sensitivity; Adaptability to change; Emotional intelligence; language skills;
prior global experience [all more valued than technical skills]
Explaining what are companies looking for in expat positions: Technical competence
(skills not available in the country); Self orientation (drive, self-reliance, purpose);
Others orientation (understand the culture and connect with others); Resourcefulness
(flexibility and adaptation to odd situations); Global Mindset (see opportunity where
others see threats and complexity)
Successful Expatriate Appointment à Analysis of job requirements; Analysis of country
of assignment and evaluation of candidate. Preparation of candidate/family; adequate
length of assignment; repatriation preparation à Successful expatriate
Good HR management in an MNC à getting the right people in the right jobs, in the right
places at the right times and at the right cost
Mobility pyramid à Evaluate managers regarding their willingness to move to new
location as well as their ability and experience. Should be constantly reassessed.
Practical tips for assessing whether MNCs have a true international HR strategy
à Check the organizational chart (should have different nationalities in several hierarchical
levels of the organization)
à Check the official and unofficial language used in the company (English is the most common
language at all levels in a truly global MNC. It is the working language in the company? The
language used when people socialize?)
International careers in practice
Expatriates are like marathonists à travel a lot; hard work and dedication; involves sacrifices
(it is not a job for all). Role and ambition: they should bring people together and develop
them. They choose to go further
Challenges in becoming an expatriate à Re-establishing a social life abroad; Family and
friends; Relocation and visa processes; Tension between locals and expats