INTERNATIONAL BUSINESS
Ilan Bijaoui
2005
ibii@netvision.net.il
ECONOMIC SYSTEMS
· Market Allocation: Consumers allocate
resources. Competition + Consumer
Protection (USA)
· Command Allocation: State Planners.
· Mixed Systems: Governmental
Expenditures/GDP 32% USA, 64%
Sweden
INDEX OF ECONOMIC FREEDOM
Source: Heritage foundation www.heritage.org
China's Trade with the United States ($ billion
1997 1998
1999
2000
2001
2002
2003
US Exports
12.8
14.3
13.1
16.3
19.2
22.1
28.4
% change
6.7
10.9
8.0-
24.4
18.3
14.6
28.5
US Imports
65.8
75.1
87.8 107.6 109.4
133.5
163.3
% change
21.0
14.1
16.9
1.6
22
22.3
Total
78.6
89.4 100.9 123.9 128.6
155.6
191.7
% change
18.4
13.7
12.9
22.8
3.8
21
23.2
US Balance 53.0- 60.8-
74.7-
91.3-
90.2-
22.6
111.4- 134.8-
SOURCES: US International Trade Commission, US Department
of Commerce
MOTIVATION PUSHES AND
PULLS TO INTERNATIONALIZE
·
·
·
·
·
TRADITIONAL MOTIVATIONS(Bartlett)
Secure Key Supplies
Access Low Cost Factors
Local Market Saturation-Competition
Market Seeking Behavior
Technology – Vernon Product Life Cycle
·
·
·
·
·
EMERGING MOTIVATIONS
Economic, Technological, Social
Developments
Amortization of R&D Expenditures(public
telephone switching systems)
Shortening Product Life Cycle
Scanning & Learning Capabilities
Competitive Positioning (Cross
Subsidization)
NATURAL ENVIRONMENT
Raw
materials
Energy costs
Pollution
Know how
Change
Geography
Infrastructure
TECHNOLOGICAL ENVIRONMENT
Improvement
PM 4.4 Natural and technological environments
Regulation
DEMOGRAPHIC ENVIRONMENT
Age
Family
Population
Education
ECONOMIC ENVIRONMENT
Economic
PM 4.3 Demographic and economic environments
Spending
patterns
POLITICAL ENVIRONMENT
Legislation
Enforcement
Interest
groups
CULTURAL ENVIRONMENT
Values
Subcultures
PM 4.5 Political and cultural environments
Shifts
POLITICAL ENVIRONMENT
• Sovereignty of Nation States: Regulations, Law
& Support
• Political Risk: Expropriation Restrictions,
Controls, Currency, War, National Buyers
• Taxes: Bi lateral tax treaties
• Equity Control & Expropriation
LEGAL ENVIRONMENT
• Public International Law: International
conventions, custom
International Court of Justice (ICJ)
• Private International Law:
Common Law (English) US, India, Singapore
versus Code Law (Napoleonic Code) Thailand,
Japan China. US Uniform Commercial Code
Establishment
Juridiction of HostHome Country
Intellectual Property
Paris Union, Right of
Priority
Antitrust: US
Sherman Act (1890)
EU Competition law
Licensing:
Law-Competition/
Competitors
Champagne perfume
(YSL)France-US
Counterfeiting
Bribery: Foreign
Corrupt Practice Act
(197)7
Patent Cooperation
Treaty(PCT) 39
European Patent
Office
OWNERSHIP AND CONTROL
. Licensing: Risk New Competitor (AT&T
Bells –Sony small batteries transistors,
Cardin
· Investment – Joint Ventures (T92)
· Ownership Investment
OWNERSHIP & CONTROL
Ownership
`
Ownership &
Strategic Alliances
100%
Equity
Joint venture
Licensing Franchising Management Contract
0
0
Control
100%
ENTRY STRATEGIES
Exports
Sourcing
Licensing
Joint Venture
.
Equity
Ownership
Alliances
ORIENTATION OF MANAGEMENT &
COMPANIES
Ethnocentric
Home Country Superior, Similarities
Regiocentric
Geocentric
Similarities & Differences
Similarities & Differences
In a world region
In home & host Countries
Polycentric
Each Host Country is Unique, Differences
INTERNATIONAL STRATEGIES
·
·
·
·
·
Domestic
International
Multi-domestic, Multi National
Global
Transnational
STAGES OF DEVELOPMENT
Strategy/
Stage
Domestic
Model
International Multinational
Global
Coordinated Decentralized Central
hub
View of the
World
Home
Country
Orientation
Ethnocentric Ethnocentric Polycentric
Extension
markets
National
markets
Transnational
Integrated
Network
Global
Global
markets
markets and
or
resources
resources
Mixed
Geocentric
INTERNATIONAL STRATEGY OF SELECTED FIRMS
Global
Multidomestic Transnational
Ethnocentric
Ikea 1
Danone
Polycentric
Ikea2
Unilever
Regiocentric
Geocentric
Coca Cola
Toyota
(Source: Michael E. Porter, Competitive Advantage (New York: Free Press, 1985), p.37.)
PM 11.2 The generic value chain
ILLUSTRATIVE CONFIGURATION
Activities
Inbound logistics
Operations
Components
Assembly
US Canada UK France Germany Japan
x
x
x
x
x
x
x
x
x
Outbound logistics
Order processing
Physical distribution
Marketing
Advertising
Sales force
Promotion materials
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
ILLUSTRATIVE CONFIGURATION
Activities
Service
Procurement
Technology Dvt
Human resource
Management
Firm structure
US Canada UK France Germany Japan
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
ILLUSTRATIVE COORDINATION
Activities
Operations
Marketing & Sales
Service
Procurement
Technology Dvt
Configuration
Location of
production
Coordination
Tasks allocation,
Networking,
Technology transfer
Product line
Brand worldwide
Country
Sales coordination
Advertising\Promotion Similar channels
Pricing coordination
Location
Similar standards
Location
Location
Managing suppliers
Tasks allocation
Knowledge transfer
Sequence of products
CONFIGURATION OF ACTIVITIES
High
Extensive
Coordination
among
subsidiaries
Simple Global
Strategy
Coordination
of Activities
Country-centered strategy
by multinationals
operating in one country
Low
Geographic Dispersed
Export-based
strategy,
decentralized
marketing
Geographic Concentrated
PORTER’S DIAMOND
Chance
Firm Strategy
Structure &
Rivalry
Factor
Demand
Conditions
Conditions
Related &
Supporting
Industries
Government
PORTER’S DIAMOND DISCUSSION
Factors Conditions
Demand Conditions
• Human, Physical resources, Capital,
Knowledge, Infrastructure
•Hierarchy, factors: Basic-Advanced
• Factor Creation
• Demand Composition
• Demanding Buyers
• Anticipatory Buyers
• Pattern Growth
Firm Strategy, Structure&
Rivalry
Supporting & Related
Industries
• Style of Management & Structure
• National Norms
• Rivalry
• Supplier Industries & Development
• Related Industries & Market
• Related Industries & Production
ITALIAN SUPPLIER INDUSTRIES TO
FOOTWEAR
Leather
Footwear
Parts of
Footwear
Leather
working
Machinery
Processed
Leather
Design
Services
ITALIAN INDUSTRIES RELATED TO
FOOTWEAR
Leather
Clothing
Leather
Handbags
Leather
Footwear
Athletic
Footwear
Parts of
Footwear
Leather
working
Machinery
Processed
Leather
Design
Services
PARTIAL CLUSTURING IN DANISH
ECONOMY
Barley, Malt
Yeast
Food Processing
Equipment
Refrigeration
Equipment
Pork
Beer
Dairy Industry
Trypsin
(Enzyme)
Insulin
Fermented
Insulin
Fermentation
Equipment
Purification
Technology
Fermented
Enzymes