INTERNATIONAL

1

• INTERNATIONAL
• MANAGEMENT

Chapter 1
Understanding International Business Management
2
Understanding International Business Management

• National ----------------------------
  International
• Any sort of business activity that crosses
  national boundaries- International Business.
• Activities relating to industry and commerce
  performed on an international level.
• International Management- Process of applying
  management concepts and techniques in a
  multinational environment.

3
Domestic Business
International Business
Same

• Basic Functions
• Processes
• Techniques

Difference
Environment within which these functions are
performed and processes are carried out.
4
International Business Environment

• Environment- Sum total of all the forces
  surrounding influencing the life and
  development of the firm.
• Why ?

External Environment Business
Opportunity Threats to Business
Internal Environment Strengths Weakness of
the Org.
Business Decision
5
International Business Environment

• 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.

6
Environmental Characteristics

• 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.

7
Components of International Business Environment
Global Environment
Foreign Environment
Domestic Environment
Micro Environment
Internal Environment
8
Internal Environment

• Represent firms business strategy and decision
  with regard to--
• Production
• Finance
• Marketing
• Human Resources
• Research Activities
• Firm can change them, but within the constraints
  of various environmental factors.

9
Micro Environment

• Actors in the firms immediate environment which
  directly influence the firms decisions and
  operations.
• Micro Environment

General Public
Market Intermediaries
Financial Institutions
Suppliers
Competitors
Customers
Are Semi-Controllable-Controllable to some extent
10
Domestic Environment

• Competitive Structure Economic climate
• Political Legal forces
• Uncontrollable
• IMPACT ?

11
Domestic firms venture into international business

• Lack of domestic demand and/or
• Intense Competition
• Export Promotion Measures and/or
• Economic Incentives

12
Foreign Environment

• Geographic
• Economic Conditions
• Social-Cultural Environment
• Political Legal forces
• Technological Environment
• Ecological Environment

13
Differences Exist

• 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.

14
Global Environment

• 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.

15

Global Environment ( Uncontrollables)
International Economic Environment
Domestic Environment ( Uncontrollables) Competiti
ve Structure
Foreign Environment ( Uncontrollable) Geographic
Environment
Ecological Environment
Regional Economic Groups and Agreement
International Financial Institutions and System
Economic and Financial Environment
Social-Cultural Environment
International Trade Organization and Agreements
Legal Environment
Political Environment
16
Relevance of International Business Environment

• Central Issues in entering into international
  business -
• Which market (s) to select?
• How to enter into those markets?
• Decisions are strategic in nature and influenced
  by the environmental forces.
• Target markets should have enough market
  potential.

17
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

18
Exporting is desirable

• 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.

19
In case of import bans or excessive
transportation cost

• 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

20
Environmental forces Functional Tactical
Decisions of a Firm

• 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?

21
Non-Economic Environment
Political Socio-Cultural Legal
Ecological Geographic
22
Political
Form of Government Political Party
System Political Ideology Role of Government
Political Stability
23
Socio-Cultural

• Language Education
• Aesthetics Religions Superstition
• Attitude values Social groups
  Organizations

24

• 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).