What is International Business? Business transactions between parties from more than one country...

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What is International Business? Business transactions between parties from more than one country Buying & selling raw materials, finished goods, or services across borders. Operating factories or facilities overseas. Borrowing money in one country to finance operations in another.
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Transcript of What is International Business? Business transactions between parties from more than one country...

Page 1: What is International Business?  Business transactions between parties from more than one country –Buying & selling raw materials, finished goods, or.

What is International Business?

Business transactions between parties from more than one country– Buying & selling raw materials, finished

goods, or services across borders.

– Operating factories or facilities overseas.

– Borrowing money in one country to finance operations in another.

Page 2: What is International Business?  Business transactions between parties from more than one country –Buying & selling raw materials, finished goods, or.

How Does International BusinessDiffer from Domestic?

Currency conversions are required Differing legal systems Cultural differences Economic differences Infrastructure differences

Page 3: What is International Business?  Business transactions between parties from more than one country –Buying & selling raw materials, finished goods, or.

Why Study International Business?

Most of us will work for companies that have international connections.

To develop cultural literacy. To keep in step with management

tools, production techniques, and technology that other countries are developing.

Page 4: What is International Business?  Business transactions between parties from more than one country –Buying & selling raw materials, finished goods, or.

Why Companies Trade

To increase sales & broaden markets To seek cheaper raw materials or to

lower production costs To find goods not available in

domestic markets, or at a lower price than those available domestically

To seek better prices for their products

Page 5: What is International Business?  Business transactions between parties from more than one country –Buying & selling raw materials, finished goods, or.

Comparative Advantage

Produce and export those goods and services for which it is relatively more productive than other countries

Import those goods and services for which other countries are relatively more productive than it is

Page 6: What is International Business?  Business transactions between parties from more than one country –Buying & selling raw materials, finished goods, or.

International Business Activities

Exporting and Importing International Investments Licensing, Franchising, and

Management Contracts

Page 7: What is International Business?  Business transactions between parties from more than one country –Buying & selling raw materials, finished goods, or.

Exporting and Importing

Exporting: selling of products made in one’s own country for use or resale in other countries

Importing: buying of products made in other countries for use or resale in one’s own country

Page 8: What is International Business?  Business transactions between parties from more than one country –Buying & selling raw materials, finished goods, or.

International Investments

Capital supplied by residents of one country to residents of another

2 categories:– Foreign direct investments

– Portfolio investments

Page 9: What is International Business?  Business transactions between parties from more than one country –Buying & selling raw materials, finished goods, or.

Other Forms of International Business Activity

Licensing: firm in one country licenses the use of its intellectual property to a firm in a second country in return for a royalty payment

Franchising: firm in one country authorizes a firm in another country to utilize its operating system and intellectual property

Page 10: What is International Business?  Business transactions between parties from more than one country –Buying & selling raw materials, finished goods, or.

Management Contracts

A firm in one country agrees to operate facilities or provide other management services to a firm in another country for an agreed-upon fee

Common in upper-end international hotel industry

Page 11: What is International Business?  Business transactions between parties from more than one country –Buying & selling raw materials, finished goods, or.

Vital Information in International Business

Basic geography Market characteristics Culture Politics

Page 12: What is International Business?  Business transactions between parties from more than one country –Buying & selling raw materials, finished goods, or.

Political Risk

Ownership risk Operating risk Transfer risk

Page 13: What is International Business?  Business transactions between parties from more than one country –Buying & selling raw materials, finished goods, or.

Examples of Political Risks

Expropriation Confiscation Campaigns against

foreign goods Mandatory labor

benefits legislation Civil wars Inflation

Kidnappings, terrorist threats, and other forms of violence

Repatriation Currency

devaluations Increased taxation

Page 14: What is International Business?  Business transactions between parties from more than one country –Buying & selling raw materials, finished goods, or.

Basic Country Knowledge

Is the country a democracy or dictatorship? Does country rely on free market or

government controls? Does government view foreign firms as

positive influence? Are firm’s customers private or public? Does government act arbitrarily? Is existing government stable?

Page 15: What is International Business?  Business transactions between parties from more than one country –Buying & selling raw materials, finished goods, or.

Insurance against Political Risks

Overseas Private Investment Corporation (OPIC)

Multilateral Investment Guarantee Agency (MIGA)

Page 16: What is International Business?  Business transactions between parties from more than one country –Buying & selling raw materials, finished goods, or.

Elements of Culture

Culture

Social Structure

Language

Values/ Attitudes

Communication

Religion

Page 17: What is International Business?  Business transactions between parties from more than one country –Buying & selling raw materials, finished goods, or.

Hall’s Low-Context, High-Context Approach

Low-context: words used by speaker explicitly convey speaker’s message

High-context: the context in which a conversation occurs is just as important as the words spoken; cultural clues are critical to communication

Page 18: What is International Business?  Business transactions between parties from more than one country –Buying & selling raw materials, finished goods, or.

Figure 4.2 High- and Low-Context Cultures

Ger

man

Sw

iss

Sca

ndin

avia

n

U.S

./ C

anad

ian

Bri

tain

Ital

ian

Spa

nish

Gre

ek

Ara

b

Vie

tnam

ese

Japa

nese

Kor

ean

Chi

nese

LowContext

HighContext

Page 19: What is International Business?  Business transactions between parties from more than one country –Buying & selling raw materials, finished goods, or.

Hofstede’s Five Dimensions

Social Orientation Power Orientation Uncertainty Orientation Goal Orientation Time Orientation

Page 20: What is International Business?  Business transactions between parties from more than one country –Buying & selling raw materials, finished goods, or.

Social Orientation

Individualism Collectivism

Relative importance of theinterests o the individual versus

interests of the group

Page 21: What is International Business?  Business transactions between parties from more than one country –Buying & selling raw materials, finished goods, or.

Power Orientation

Power Respect Power Tolerance

Appropriateness of power/authority within

organizations

Page 22: What is International Business?  Business transactions between parties from more than one country –Buying & selling raw materials, finished goods, or.

Uncertainty Orientation

Uncertainty Acceptance Uncertainty Avoidance

An emotional responseto uncertainty and change

Page 23: What is International Business?  Business transactions between parties from more than one country –Buying & selling raw materials, finished goods, or.

Goal Orientation

Aggressive Goal Behavior Passive Goal Behavior

What motivates peopleto achieve different goals

Page 24: What is International Business?  Business transactions between parties from more than one country –Buying & selling raw materials, finished goods, or.

Time Orientation

Long-term Outlook Short-term Outlook

The extent to whichmembers of a culture

adopt a long-term or a short-termoutlook on work and life

Page 25: What is International Business?  Business transactions between parties from more than one country –Buying & selling raw materials, finished goods, or.

Spectrum of Effects

Free Trade No Trade•Jobs migrate

•Low wages

•Poor conditions

•Fewer jobs in developing countries

•Higher prices

•Fewer products

Trade with Social Responsibility

How? Code of Ethics

Page 26: What is International Business?  Business transactions between parties from more than one country –Buying & selling raw materials, finished goods, or.

Issues on Trade Intervention

Should a national government intervene to protect the country’s domestic firms by taxing foreign goods entering the domestic market or constructing other barriers against imports?

Should a national government directly help the country’s domestic firms increase their foreign sales through export subsidies, government-to-government negotiations, and guaranteed loan programs?

Page 27: What is International Business?  Business transactions between parties from more than one country –Buying & selling raw materials, finished goods, or.

Industry-Level Arguments

National Defense Argument Infant Industry Argument Maintenance of Existing Jobs Strategic Trade Theory

Page 28: What is International Business?  Business transactions between parties from more than one country –Buying & selling raw materials, finished goods, or.

Strategic Alternatives

Global StrategyThe firm views the world assingle marketplace. Primarygoal is to create standardizedproducts

Home ReplicationThe firm uses the core com-petency or firm-specific advantage it developed athome

Multidomestic StrategyThe firm operates as a collection of relativelyindependent Subsidiariesfocusing on domestic market

Transnational StrategyThe firm attempts to combinethe benefits of global scaleefficiencies with the benefitsof local responsiveness

Low HighPressures for Local Responsiveness and Flexibility

Pre

ssur

es f

or G

loba

l E

ffic

ienc

ies

High

Low

Page 29: What is International Business?  Business transactions between parties from more than one country –Buying & selling raw materials, finished goods, or.

Choosing a Mode of Entry

Exporting

InternationalLicensing

InternationalFranchising

Specialized Modes

Foreign Direct Investment

Decision Factors:Ownership advantagesLocation advantagesInternalization advantagesOther factors

Need for controlResource availabilityGlobal strategy

Page 30: What is International Business?  Business transactions between parties from more than one country –Buying & selling raw materials, finished goods, or.

Marketing

Process of planning and executing the conception, pricing, promotion,

and distribution of ideas, goods,and services to create exchanges that satisfy

individuals and organizational objectives

Page 31: What is International Business?  Business transactions between parties from more than one country –Buying & selling raw materials, finished goods, or.

Marketing Mix

How to develop the firm’s products How to price those products How to sell those products How to distribute those products to the

firm’s customers Who is the Target Market?

Page 32: What is International Business?  Business transactions between parties from more than one country –Buying & selling raw materials, finished goods, or.

Figure 16.2 The Elements of the Marketing Mix for International Firms

Product PlacePromotionPricing

Marketing Mix

Page 33: What is International Business?  Business transactions between parties from more than one country –Buying & selling raw materials, finished goods, or.

Standardization versus Customization

Should the firm adopt an ethnocentric approach?

Should it adopt a polycentric approach?

Should it adopt a geocentric approach?

Page 34: What is International Business?  Business transactions between parties from more than one country –Buying & selling raw materials, finished goods, or.

Method of Payment

Payment in advance Open account Documentary collection Letters of credit Credit cards Countertrade

Page 35: What is International Business?  Business transactions between parties from more than one country –Buying & selling raw materials, finished goods, or.

Necessary Skills and Abilities for International Managers

Skills and AbilitiesNecessary to DoThe Job

•Technical•Functional•Managerial

Skills and AbilitiesNecessary to WorkIn a Foreign Location

•Adaptability•Location-specific skills•Personal characteristics

Improved Chances of Succeeding inAn International Job Assignment

Page 36: What is International Business?  Business transactions between parties from more than one country –Buying & selling raw materials, finished goods, or.

Phases in Acculturation

Honeymoon

Disillusionment

Adaptation

Biculturalism

Page 37: What is International Business?  Business transactions between parties from more than one country –Buying & selling raw materials, finished goods, or.

Thanks for a fun quarter!