1

2

International business

International Business  The exchange of products and services among countriesTransaction that are carried out across national borders to satisfy the objectives of individuals and organization

3

Motivation to do international Business

4

Motivation to do international

Business

1. Proactive: to increase profit to take advantage of product life cycle to achieve Economies of scale

2. Reactive: Competitive pressures Overproduction and excess capacity Declining domestic sales saturated domestic markets

5

Considering International Expansion

1. Gauging international demand• Is there any demand for the

company’s products abroad?

2. Adapting to customer needs• If so, must those products be

adapted for international consumptions?

3. Entry strategies• How to entry into foreign markets?

6

Going international

7

Gauging international demand

1. Preliminary screening for attractive country markets

2. Assessment of industry market potential

3. Identify the potential demand for the company products and services

4. Forecasting the company selling5. Assessment of the company market

share

8

Adapting to customer needs

1. Products and Services should meet to foreign market

2. Price adjustments by considering the cost of foreign trade, such as transportation, taxes, exchange rate

3. Distribution system through existing transportation system, suppliers and stores

4. Promotion should be modified based on different languages, law, and culture from country to country

9

Barriers to International Business

1. Cultural and social barriers2. Legal and political barriers3. Economic barriers:

• Tariff and trade restrictions• Quotas and embargo• Exchange control• Subsidy

10

Entry strategies

1. Exporting – firms that distributes and sells products to foreign countries

• indirect - through an intermediary• direct - deal with foreign customer and firms

2. Licensing • an agreement in which a licensor gives to a

licensee the right • in using the licensor’s patent, trademark,

copy right, technology, production processes, and product

• in return for licensee’s fee

11

Entry strategies

2. Franchising the granting of the right by franchisers to

franchisee in prescribed manner; selling its products using its name, production, brand,

marketing approaches

3. Foreign Assembly a firm exports components parts to

subsidiary for local assembly into finished products

12

Entry strategies

4. Turnkey Operation an arrangement in which a supplier

designs, builds, and trains the staff of an operating facility

for foreign buyer

5. Foreign production subsidiary a subordinate company established in

another country by parents company for the purpose of production

13

Entry strategies

6. Foreign production subsidiary a subordinate company established in

another country by parents company for the purpose of production

7. International Firm Conduct a significant portion of its

business In foreign countries

14

Entry strategies

8. Multinational Corporation a firm that is based in one country (parent

country) has production and marketing activities spread

in one or more foreign country (host country)

9. Joint Venture a partnership of two or more parties who share

ownership and control for the venture’s operations and property rights

15

Entry strategies

10. Foreign Direct Investment Arrangement in which a firm buys or

establishes tangible assets In another country Through direct investment By buying a company stock in capital

markets

16

International Organization

General agreement on Tariff and trade (GATT) – an international organization formed to reduce or eliminate tariff and other barrier to international tradeInternational Monetary Fund (IMF) – an international financial organization that lend money to countries in conducting international trade

17

International Organization

World Bank – an international financial organization that lend money to underdeveloped and developing countries for developmentEconomic Communities – the creation of common economic policies

World Trade Organization (WTO) European Community (EC) North American Free Trade Agreement

(NAFTA) Asian Free Trade Agreement (AFTA)