NATURE & SCOPE OF INTERNATIONAL BUSINESS

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NATURE SCOPE OF INTERNATIONAL BUSINESS

• By
• Elisante Ole Gabriel (Tanzania)
• Chartered Marketer
• egabriel_at_edenconsult.net, www.olegabriel.com
• 255-784-455-499

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KEY TOPICS TO BE COVERED

• Nature and Scope of International Business
• International Business Environment
• International Markets entry strategies
• The Role of World Trade Organisation
• Management Tools for International Business
• International Payment systems Risks

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NATURE SCOPE OF IBM

• International Business Management in the context
  of this subject is used synonymously with
  International Marketing management (IMM)
• Deriving from the word International it
  suggests that IBM is about managing business
  between nations.
• These nations could be separated by
  geographical or Political boundaries.

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Globalization

• This is a concept considering the whole world as
  one huge homogeneous market. Globalisation is
  hinged on a number of assumptions. It is however
  on two major dimensions
• Globalization of production
• Globalization of markets

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Domestic marketing and international marketing
decisions
Overseas Environmental Challenges
(Uncontrollables)
Domestic Environmental Challenges
(Uncontrollables)
Political
Marketing Challenges in country Y
Economic
Legal
Competition
Economic
(Controllables) Product
Marketing Challenges in country X
Place
Price
Socio Cultural
Political
Marketing Challenges in country Z
Promotion
Legal
Competition
Infrastructure
Logistics
Geography
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Reasons for entering international markets

• growth
• profitability
• achieving economies of scale
• risk spread
• access to imported inputs
• uniqueness of product or services
• marketing opportunities due to life cycle
• spreading RD cost

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Key issues in export growth

• Developing a proactive approach to international
  
• trade
• Promoting Foreign Direct Investments
• Promoting Competitiveness
• Simplification of procedures
• Encouraging large-scale manufacturers
• Reducing transaction costs
• Infrastructure development

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• Key issues (contd)
• Entrepreneurship facilitation
• Strengthening SEZs
• Encouraging SMEs
• Devolution of power to states
• Abolition of indirect taxes for certain sectors
• Strategy for promoting services export

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Identifying opportunities in international markets

• Extreme focus product strategy
• Products-country matrix strategy
• Growth-share matrix of exports
• Market focus strategies

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MODES OF ENTREING INTERNATIONAL MARKETS

• This is an institutional mechanism by which a
  firm makes its products or services available for
  consumers in international markets.
• Mode of entry is determined by
• - the ability and willingness of the firm to
  commit
• resources
• - the firms desire to have a level of control
  over
• international operations
• - the level of risk the firm is willing to take

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Modes of international market entry
Production in home country Exports production is
carried out in home country and finished goods
are shipped to the overseas markets for
sale indirect exports process of selling
products to an export intermediary in the
companys home country who in turn sells the
products in the overseas markets direct exports
process of selling the firms products directly
to an importer in the overseas market
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Modes (contd)
complementary exporting use of distribution
channels of an overseas firm to make the product
available in the overseas market provide offshore
services to overseas clients with the help of
information and communication technology
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Modes (contd)

• Production in a foreign country
• contractual entry modes
• international licensing process by which a
  domestic company allows a foreign company to use
  its intellectual property and specific business
  skills for a compensation (royalty)
• international franchising transfer of
  intellectual property and other assistance over
  an extended period of time with greater control
  compared to licensing

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Modes (contd)
overseas turnkey projects conceptualize, design,
install, construct, and carry out primary testing
of manufacturing facilities or engineering
structures for an overseas client
organisation types built and transfer (BT),
built, operate, and transfer (BOT), built,
operate, own (BOO) international management
contracts a company provides its technical and
managerial expertise for a specific duration to
an overseas firm
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Modes (contd)
international strategic alliance the
relationship between two or more firms that
cooperate with each other t o achieve common
strategic goals but do not form a separate
company international contract manufacturing a
contractual arrangement under which a firms
manufacturing operations are carried out in a
foreign countries
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Modes (contd)
Investment entry modes assembly in overseas
markets refers to exporting various components
of the product in completely knocked down (CKD)
condition and assembles them overseas internationa
l joint ventures equity participation of two or
more firms resulting into formation of a new
entity
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Factors for selecting partners for cooperation

• the alliance partner should have some strength
  which
• can be translated into business values for the
  alliance
• the alliance partners should be committed to
• cooperative goals
• it is preferable that the alliance partner
  should have
• multi-cultural business environment

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Factors (contd)

• Wholly owned foreign subsidiaries
• to have complete control and ownership of
• international operations a firm opts for
  foreign
• direct investment through
• 1. acquiring a foreign company and all its
  resources in
• a foreign market (acquisition)
• 2. the establishment of production and marketing
  
• facilities by a firm on its own from scratch
  (green field)

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Factors affecting the selection of entry mode

• External factors
• Market size
• Market growth
• Government regulations
• Level of competition
• Level of risk
• political
• economic
• operational
• Production and shipping costs

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Factors affecting the selection of entry mode
(contd)

• Internal factors
• Companys objectives
• availability of company resources
• level of commitment
• international experience
• flexibility

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Benefits of IBM

• More opportunities
• Avenue for learning new concepts and challenges
• Possibility of developing a global brand
• A room to benefit from economies of scale scope
• Spread of risks AND
• Wider scope for innovation and creativity.