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International Business

Prof. Amit Shrivastava

amit.shrivastava@thakureducation.org

(+91-22)-97681 29299

mailto:amit.shrivastava@thakureducation.orgmailto:amit.shrivastava@thakureducation.org

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Course Evaluation Criteria

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A Case Study An Introduction

Wal-Mart is all set to enter Indian Market by venturing with Bharti Group.

Wal-Mart is known for very aggressive marketing strategy.

The companys initial internationalization in early 1990s was Mexico & Canada.

By end of decade, they sighted on more complex & lucrative market Europe.

Wal-Mart first entered UK by buying ASDA, with 230 outlets, it meshed well, because

of aggressive marketing strategy & low prices.

British retailers were accustomed to high profit margins, but Wal-marts low prices

have put pressure on rival chains e.g. Tesco, Safeway, Sainsbury & given smaller

stores bigger headache.

Wal-Mart adopted acquisition strategy to enter German market, first acquired 21

store Wertkauf & then bought Spar Handels AG.

It hung an American Flag outside each store to symbolize superior service & selection.

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In continuum.

The companys Always Low Price Policyupset German regulators, fearing smallretailers out of business.

German Cartel Office forced retail giant to raise its prices on loss leaders like flour,

cooking oil & butter, which was sold below cost.

Company did not carry on its expansion plans rather to be cautious & grow slowly.

It kept them in reaching economies of scale to become profitable.

Finally, in mid 2006, it announced ceasing operations in Germany.

Though Wal-Mart failed in Germany, its overall international operations are payingdividends.

Wal-Mart is doing very well in UK, Canada, Mexico & Brazil & have just opened an

office in India.

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International Business Evolution - India

Product Export to neighborCountries, such as, Burma,

Indonesia - Jute, Masale & Iron

Companies are using home

location as production house &

supplying it to the world over

Mere exporting was replaced by

exploring the market of Textiles,

Leather, Tea & Coffee

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Drivers of Globalization

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Trade & Tariff Rate on Manufactured Product

France 21 18 5.9 3.9

Germany 20 26 5.9 3.9

Italy 18 25 5.9 3.9

Japan 30 - 5.3 3.9

Holland 5 11 5.9 3.9

Sweden 20 9 4.4 3.9

United States 44 14 4.8 3.9

Source: Hill International Business. 2005(%)

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Ripple Effects of Globalization

Wages

Management

Wages

JobsWomen atWorkplace

Child Labor

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Employment in Manufacturing

Source: Economic & Political Weekly, January 3, 2004 p. 106

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Stages of Internationalization

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Five Stages of Internationalization

Domestic Operation and MarketingActivities

Infrequent Exports

Exports through Independent

Representatives or Agents

Establishment of Sales Subsidiaries

Foreign Production and

ManufacturingResource Commitment and Returns

Level of Industrialization

Controland

Risk

Flex

ibility

Trade

Contractual

Investment

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Modes of Entry in International Business

Export

Licensing

Franchising

Contract Manufacturing

Joint Venture

Management Contracts

Turn Key Project

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Export

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Difference between Licensing viz-a-viz. Franchising

Investment

Control

Usage of Brand

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Licensing

Licensor Company A

License Fee

Licensee Company B

Manufactures & Markets

Provides the right to use Intellectual

Property & Brand Name

Uses the Intellectual Property to

Produce products & Brand Name

Pays Royalty to the Licensor for

Using Intellectual Property &

Brand Name

Receives Royalty Money

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Franchising

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Contract Manufacturing

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Thank You