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INTERNATIONAL BUSINESS

Ilan Bijaoui

2007

ibii@netvision.net.il

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THE POLITICAL SPECTRUM

DEMOCRACY TOTALITARISM

Reactionary Conservative Liberal Radical

Authoritarian Facist Communist Authoritarian

Rule people

Control souls

Economy+Politics

Islam

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COMPARATIVE MEASURES OF FREEDOM

POLITICAL RIGHTS

CIVIL RIGHTS

Fair elections, representatives with power, political parties, rights of minorities

Freedom of press, equality under law, social freedom, government-corruption

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ECONOMIC SYSTEMS

   Market Allocation: Consumers allocate resources. Competition + Consumer Protection (USA)

   Command Allocation: State Planners.

   Mixed Systems: Governmental Expenditures/GDP 32% USA, 64% Sweden

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POLITICS AND MANAGEMENT DECISIONS

• Political risks: Micro (population) and Macro (government)

• Government intervention: Individual-communitarian paradigm

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INDEX OF ECONOMIC FREEDOM 

Source: Heritage foundation www.heritage.org

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Map of countries by GDP (PPP) per capita, based on the 2005 IMF data.

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WTO

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WTO

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Trade with China : 2000-6 NOTE: All figures are in millions of U.S. dollars.

YearExportsImportsBalance

55,185.7 287,774.4 -232,588.6

41,925.3 243,470.1 -201,544.8

34,744.1 196,682.0 -161,938.0

13,111.1 81,788.2 -68,677.12000

2004

2005

2006

SOURCE: U.S. Census Bureau, Foreign Trade Division, Data Dissemination Branch, Washington, D.C. 20233

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Trade with China : 2007 NOTE: All figures are in millions of U.S. dollars.

MonthExportsImportsBalance

January 2007 4,364.2 25,635.0 -21,270.9

February 2007 4,630.7 23,064.5 -18,433.8

March 2007 5,479.4 22,725.4 -17,246.1

April 2007 4,849.4 24,222.9 -19,373.5

TOTAL 19,323.6 95,647.9 -76,324.3

SOURCE: U.S. Census Bureau, Foreign Trade Division, Data Dissemination Branch, Washington, D.C. 20233

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Source: PRC General Administration of Customs, China's Customs Statistics

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Income Gini coefficients in the world

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MOTIVATION PUSHES AND PULLS TO INTERNATIONALIZE

  TRADITIONAL MOTIVATIONS(Bartlett)

  Expand sales, acquire resources, minimize risk

. Secure Key Supplies

  Access Low Cost Factors

  Local Market Saturation-Competition

  Market Seeking Behavior

  Technology – Vernon Product Life Cycle

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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)

40PM 4.4 Natural and technological environments

NATURAL ENVIRONMENT

Energy costs Geography

TECHNOLOGICAL ENVIRONMENT

RegulationImprovement

InfrastructureKnow howChange

Raw materials Pollution

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Spending patternsEconomic

PM 4.3 Demographic and economic environments

ECONOMIC ENVIRONMENT

Age

DEMOGRAPHIC ENVIRONMENT

PopulationFamily Education

42PM 4.5 Political and cultural environments

POLITICAL ENVIRONMENT

Interest groupsEnforcementLegislation

CULTURAL ENVIRONMENT

ShiftsSubculturesValues

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LEGAL ENVIRONMENT

• Public International Law: International conventions, custom

International Court of Justice (ICJ) • Private International Law:

Common Law-tradition-precedent (English) US, India, Singapore- detailed contracts

Civil law(Codified) (Napoleonic Code) Thailand, Japan China. US Uniform Commercial Code.

• Theocratic law : Islamic law Sha’riah

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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

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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

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INTERNATIONAL STRATEGY-EXPORTS

• Local Distinctive Competence

Raw Material

Know how

Manpower

• International risks

Knowledge protection

Investment protection

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?

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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

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INTERNATIONAL STRATEGY OF SELECTED FIRMS

GlobalMultidomesticTransnational

Ethnocentric Ikea 1 Danone Coca Cola

Polycentric Ikea2 Unilever

Regiocentric

Geocentric

60PM 11.2 The generic value chain

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

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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

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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

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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

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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

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PORTER’S DIAMOND

Factor Demand

Conditions Conditions

Chance Firm Strategy

Structure &

Rivalry

Related &

Supporting Government

Industries

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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

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ITALIAN SUPPLIER INDUSTRIES TO FOOTWEAR

Leather Footwear

Parts of Design Footwear Services

Leather Processed working Leather Machinery

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ITALIAN INDUSTRIES RELATED TO FOOTWEAR

Parts of Footwear

Leather Processed working Leather Machinery

Design Services

Leather Leather Leather Athletic Clothing Handbags Footwear Footwear

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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