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

%change

%change

%change

1997 1998 1999 2000 2001 2002 2003

US Exports 12.8 14.3 13.1 16.3 19.2 22.1 28.4

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

21.0 14.1 16.9 22.6 1.6 22 22.3

Total 78.6 89.4 100.9 123.9 128.6 155.6 191.7

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 -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)

PM 4.4 Natural and technological environments

NATURAL ENVIRONMENT

Energy costs Geography

TECHNOLOGICAL ENVIRONMENT

RegulationImprovement

InfrastructureKnow howChange

Raw materials Pollution

Spending patternsEconomic

PM 4.3 Demographic and economic environments

ECONOMIC ENVIRONMENT

Age

DEMOGRAPHIC ENVIRONMENT

PopulationFamily Education

PM 4.5 Political and cultural environments

POLITICAL ENVIRONMENT

Interest groupsEnforcementLegislation

CULTURAL ENVIRONMENT

ShiftsSubculturesValues

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

EstablishmentJuridiction of Host-Home 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

Equity

Ownership&

Strategic Alliances

Joint venture

Licensing Franchising

Management Contract

Ownership ` 100%

Control 100% 0

0

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

      Domestic

      International

      Multi-domestic, Multi National

      Global

      Transnational

INTERNATIONAL STRATEGIES

STAGES OF DEVELOPMENT

Strategy/ Stage

DomesticInternationalMultinationalGlobalTransnational

ModelCoordinatedDecentralizedCentral hub

Integrated

Network

View of the World

Home Country

Extension markets

National markets

Global markets or resources

Global markets and resources

OrientationEthnocentricEthnocentricPolycentric MixedGeocentric

INTERNATIONAL STRATEGY OF SELECTED FIRMS

GlobalMultidomesticTransnational

Ethnocentric Ikea 1 Danone Coca Cola

Polycentric Ikea2 Unilever

Regiocentric Toyota

Geocentric

PM 11.2 The generic value chain

(Source: Michael E. Porter, Competitive Advantage (New York: Free Press, 1985), p.37.)

ILLUSTRATIVE CONFIGURATION ActivitiesUS Canada UK France Germany Japan

Inbound logistics

Operations

Components

Assembly

Outbound logistics

Order processing

Physical distribution

Marketing

Advertising

Sales force

Promotion materials

x x x x

x x x x x

xx x x x x x

x x x x x x x x x x x x x

ILLUSTRATIVE CONFIGURATION

ActivitiesUS Canada UK France Germany Japan

Service

Procurement

Technology Dvt

Human resource

Management

Firm structure

x x x x x x x xx x

x x x x x x

x

ILLUSTRATIVE COORDINATION

ActivitiesConfiguration Coordination

Operations

Marketing & Sales

Service

Procurement

Technology Dvt

Location of Tasks allocation,production Networking, Technology transfer Product line Brand worldwideCountry Sales coordinationAdvertising\Promotion Similar channels Pricing coordination

Location Similar standards

Location Managing suppliersLocation Tasks allocation Knowledge transfer Sequence of products

CONFIGURATION OF ACTIVITIES

High

Low

Coordination

of Activities

Geographic Dispersed Geographic Concentrated

Extensive Coordination among subsidiaries

Simple Global

Strategy

Country-centered strategy by multinationals operating in one country

Export-based strategy, decentralized marketing

PORTER’S DIAMOND

Factor Demand

Conditions Conditions

Chance Firm Strategy

Structure &

Rivalry

Related &

Supporting Government

Industries

PORTER’S DIAMOND DISCUSSION

Factors Conditions• Human, Physical resources, Capital,

Knowledge, Infrastructure

•Hierarchy, factors: Basic-Advanced

• Factor Creation

Demand Conditions• Demand Composition

• Demanding Buyers

• Anticipatory Buyers

• Pattern Growth

Firm Strategy, Structure& Rivalry• Style of Management & Structure

• National Norms

• Rivalry

Supporting & Related Industries• Supplier Industries & Development

• Related Industries & Market

• Related Industries & Production

ITALIAN SUPPLIER INDUSTRIES TO FOOTWEAR

Leather Footwear

Parts of Design Footwear Services

Leather Processed working Leather Machinery

ITALIAN INDUSTRIES RELATED TO FOOTWEAR

Parts of Footwear

Leather Processed working Leather Machinery

Design Services

Leather Leather Leather Athletic Clothing Handbags Footwear Footwear

PARTIAL CLUSTURING IN DANISH ECONOMY

Barley, Malt Food Processing Refrigeration Yeast Equipment Equipment

Pork Beer Dairy Industry

Trypsin Fermentation Purification (Enzyme) Insulin Equipment Technology

Fermented Insulin Fermented

Enzymes