INTERNATIONAL
Chapter 1
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National ---------------------------International
Any sort of business activity that crosses national boundaries- International Business.
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Activities relating to industry and commerce performed on an international level.
International ManagementProcess of applying management concepts and techniques in a multinational environment.
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Domestic Business International Business
Same
 Basic Functions
 Processes
 Techniques
Difference
Environment within which these functions are performed and processes are carried out.
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International Business Environment
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Environment - Sum total of all the forces surrounding & influencing the life and development of the firm.
Why ?
Internal Environment
Strengths
Weakness of the Org.
External Environment
Business Decision Business Opportunity
Threats to Business
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International Business Environment
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Business Dynamics to a large extent depends on the environmental dynamics.
Environmental understanding becomes more important in the area of international business in which the environmental forces of the home country interact with the foreign environment.
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Environmental Characteristics
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Factors and Forces are external to the firm.
Essentially uncontrollable.
Environmental factors are dynamic-they continuously change over time.
NEED ?
Anticipate, respond and adapt to the complexity and rapid pace of various environmental forces changes globally.
Being international environmental factors are given, the firms should adapt its business strategy to suit the environmental factors.
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Components of International Business Environment
Global Environment
Foreign Environment
Domestic Environment
Micro Environment
Internal
Environment
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Internal Environment
Represent firm’s business strategy and decision with regard to--
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Production
Finance
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Marketing
Human Resources
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Research Activities
Firm can change them, but within the constraints of various environmental factors.
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Micro Environment
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Actors in the firm’s immediate environment which directly influence the firm’s decisions and operations.
Micro Environment
General Public
Financial
Competitors
Customers
Are Semi-Controllable-Controllable to some extent
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Domestic Environment
Competitive Structure Economic climate
Political & Legal forces
Uncontrollable
IMPACT ?
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Domestic firms venture into international business
Lack of domestic demand and/or
Intense Competition
Export Promotion Measures and/or
Economic Incentives
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Foreign Environment
Geographic
Economic Conditions
Social-Cultural Environment
Political & Legal forces
Technological Environment
Ecological Environment
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Differences Exist
1.
2.
Between domestic & foreign environments.
Among the environments prevailing in different foreign markets.
Business Strategies that are successful in one nation might fail miserably in another nation.
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Global Environment
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World Economic Condition
International Financial Systems
Working of WTO, IMF, WB..
International Agreements & Treaties
Regional Economic Groupings
World-wide Economic Recession
Initiatives of Regional levels
European Union (EU)
North American Free Trade Association (NAFTA)
Association of South East Asian Nations ( ASEAN)
Exerts influence over domestic as well as foreign
Countries.
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Global Environment ( Uncontrollables)
International Economic Environment
Foreign Environment ( Uncontrollable)
Geographic Environment
Domestic Environment
( Uncontrollable)
Competitive Structure
(Controllable)
International Business
Domestic Environment
( Uncontrollables)
Competitive Structure
- Human Resource
- Marketing
Political Environment
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Relevance of International Business
Environment
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Central Issues in entering into international business -
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Which market (s) to select?
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How to enter into those markets?
Decisions are strategic in nature and influenced by the environmental forces.
Target markets should have enough market potential.
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How to enter (Mode) of entry?
(Market Entry and Operating Forms)
Exporting
-Direct
-Indirect
Licensing/
Franchising
Strategic Alliance
Production/
Assembly Facility
-Contract Manufacturing
- Assembly operations
- Wholly-owned manufacturing facility
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Exporting is desirable
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If economical to produce in the home country.
No legal restrictions on import of given product in the foreign markets.
May take either the form of direct and indirect exporting.
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In case of import bans or excessive transportation cost
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Set up manufacturing subsidiaries abroad
Assembly operations
Contract manufacturing
Feasible,
1. If foreign governments allow FDI
2. Raw materials & labor are locally available at competitive prices.
In case FDI is disallowed..
- GO for either licensing/franchising
- Joint Venture
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Environmental forces & Functional &
Tactical Decisions of a Firm
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What should be the scale of production?
Should the firm employ labor or capital intensive techniques?
How to finance firm's foreign operations?
How much to repatriate?
What marketing mix should the firm use?
Should the firm hire local persons or employ foreign nationals?
What should be their compensation package?
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Non-Economic Environment
Political Socio-Cultural
Ecological
Legal
Geographic
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Political
Form of Government Political Party System
Political Ideology Role of Government
Political Stability
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Socio-Cultural
Language
Aesthetics
Attitude & values
Education
Religions & Superstition
Social groups &
Organizations
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Myths versus Reality
(Japanese Management styles and techniques – some major findings)
All Japanese workers are not laborious/industrious as is commonly believed.
Company loyalty among many Japanese may not be as high as is expected.
Many Japanese managers are tend to be autocratic .
(Discussions- refer page 20).
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