summary of international business_ ch 5,7,13,14

8/16/2019 Summary of International Business_ Ch 5,7,13,14

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Summary of InternationalBusiness

Chapters ( 5,7 – 13,14)

Best Wishs By :

oata! " Sha#$ey


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InternationalInternational

%ra&e %ra&e5

• Describe the relation between international trade volume and

world output and identify overall trade patterns

• Describe mercantilism and explain its impact on world powersand their colonies

• Explain the theories of absolute and comparative advantage

• Explain the factor proportions and international product life cycle

theories• Explain the new trade and national competitive advantage

theories


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Int" Business Summary '""Sha#$y

International %ra&e *1+3• urhase, sale or e-han.e of .oo&s an&

ser/ies aross national 0or&ers – eople ha/e lar.er seletion of pro&uts – Important en.ine for o0 reation

3


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%ra&e 2epen&ene an&

In&epen&ene 1++• Countries ran.e from total&epen&ene to total in&epen&ene

•otential eets of &epen&ene: – Infuses nee&e& apital – Creates o0s an& raises #a.es

– Imports tehnolo.y an& s$ills

– onomi pro0lems transferre&

– olitial turmoil an spill o/er

4


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2isussion uestion * 1• What are the patterns of .lo0al an& re.ional

tra&e 6o#s that #e see amon. nations

%ra&e amon. hi.h*inome eonomies aounts forrou.hly + perent of total #orl& merhan&ise tra&e"

%ra&e 0et#een hi.h*inome ountries an& lo#* an&mi&&le*inome nations aounts for a0out 34 perent of#orl& merhan&ise tra&e"

Intra*re.ional tra&e aounts for nearly 7 perent

of urope8s e-ports, 5+ perent of 9sia8s e-ports, an&3 perent of ;orth 9meria8s e-ports"

Some eonomists all this the referrin. to the e-pete& future .ro#th of 9sianeonomies an& e-pete& shift in tra&e 6o#s from the9tlanti to the ai= ?ean" 5


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%ra&e %heory %imeline @1+

+


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Aoun&ations of erantilism

• ;ations aumulate =nanial #ealth 0yenoura.in. e-ports an& &isoura.in. imports

• %hree pillars – aintain tra&e surplus

– o/ernment inter/ention – -ploit olonies

Ala#s of erantilism• Worl& tra&e is !ero*sum .ame• imits olonies8 mar$et potential

• Constrains output an& onsumption

7


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90solute 9&/anta.e

• 90ility of a nation to pro&ue a .oo&more eDiently than any other nation(.reater output usin. same or fe#er

resoures)Eielan&:

1 resoure unit F 1 ton rie or 1'5 ton tea

%ealan&:

1 resoure unit F 1'+ ton rie or 1'3 ton tea

• Speiali!ation an& tra&e allo#s eah topro&ue an& onsume more


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Comparati/e 9&/anta.e 1'G

• Ina0ility of a nation to pro&ue a .oo&more eDiently than other nations, 0utan a0ility to pro&ue that .oo& more

eDiently than it &oes any other .oo&Eielan&:

1 resoure unit F 1 ton rie or 1'G ton tea

%ealan&:

1 resoure unit F 1'+ ton rie or 1'3 ton tea

• Speiali!ation an& tra&e allo#s eah topro&ue an& onsume more

H


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9ssumptions an&

imitations G'G1" ;ations stri/e only to ma-imi!e pro&utionan& onsumption

G" ?nly t#o ountries pro&ue an& onsume

ust t#o .oo&s

3" ;o transportation osts of tra&in. .oo&s

4" a0or is the only resoure use& to pro&ue

.oo&s

5" I.nores eDieny an& impro/ement .ainsfrom pro&uin. ust one .oo&

1


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2isussion uestion * G

When a nation annot pro&ue a .oo&more eDiently than other nations, 0utit an pro&ue that .oo& more

eDiently than it &oes any other .oo&,#e say this is a ase of @@@@@@@@@@"

a" 90solute a&/anta.e

0" Comparati/e a&/anta.e

" erantilism

11

t t


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ator roport ons eory@173

• Countries pro&ue an& e-port .oo&s that reJuire

resoures (fators) in a0un&ane, an& import.oo&s that reJuire resoures in short supply

• %#o fator types : * a0or K * an& an& Capital

Leontief Paradox• Eesearh foun& e/i&ene opposite of that

pre&ite& 0y the fator proportions theory – L"S" e-ports are more la0or*intensi/e than L"S"

imports• ossi0le e-planations

- %heory assumes nation8s pro&ution fators to 0ehomo.eneous

- %heory is 0etter pre&itor #hen e-pen&itures on1G


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2isussion uestion * 3

Brie6y &esri0e the ne# tra&e theory" 2oes its fouson pro&uti/ity put it at o&&s #ith the theory ofomparati/e a&/anta.e an& fator proportions theory

;e# tra&e theory says that:

%here are .ains to 0e ma&e from speiali!ation an&inreasin. eonomies of sale"9 ompany that is =rst to the mar$et an& ahie/es a

=rst*mo/er a&/anta.e an reate 0arriers to entry"9n& .o/ernment may play a role in assistin. its home*

0ase& ompanies"Beause ne# tra&e theory emphasi!es pro&uti/ityrather than a nation8s resoures, it is in line #ith thetheory of omparati/e a&/anta.e 0ut at o&&s #ith fatorproportions theory"

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;ational Competiti/e

9&/anta.e @177• ;ation8s ompetiti/eness in an in&ustry&epen&s on the in&ustry8s apaity toinno/ate an& up.ra&e, #hih in turn

&epen&s on four main &eterminants (plus.o/ernment an& hane)

– Aator on&itions

– 2eman& on&itions

– Eelate& an& supportin. in&ustries

– Airm strate.y, struture, an& ri/alry

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Foreign DirectForeign Direct

InvestmentInvestment

7 M2esri0e #orli&e patterns of forei.n &iretin/estment (A2I) an& reasons for these patternsM2esri0e eah of the theories that attempt to

e-plain #hy forei.n &iret in/estment oursM2isuss the important mana.ement issues in the

forei.n &iret in/estment &eision

M-plain #hy .o/ernments inter/ene in the free

6o# of forei.n &iret in/estment

M2isuss the poliy instruments that .o/ernments

use to promote an& restrit forei.n &iret

in/estment


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Aorei.n 2iret In/estment

(A2I) @G1• urhase of physial assets or si.ni=antamount of o#nership of a ompany inanother ountry to .ain some measure of

mana.ement ontrol• By ontrast, portfolio in/estment &oes not

in/ol/e o0tainin. a &e.ree of ontrol in aompanyEeasons for A2I ro#thM Inreasin. .lo0ali!ationM International mer.ers an& aJuisitions

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• What is the &ierene 0et#een forei.n&iret in/estment an& portfolio in/estment

Foreign direct investment is thepurhase of physial assets or asi.ni=ant amount of the o#nership ofa ompany in another ountry to .aina measure of mana.ement ontrol" 9

portfolio investment is an in/estmentthat &oes not in/ol/e o0tainin. a

&e.ree of ontrol in a ompany" 17


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International ro&ut ifeCyle (NI) @G13

• 9 ompany 0e.ins 0y e-portin. its pro&utan& later un&erta$es forei.n &iretin/estment as a pro&ut mo/es throu.h its

life yle

Source: Eaymon& Nernon an& ouis %" Wells, Or", The Economic Environment of International Business, 5th e&" (Lpper Sa&&le Ei/er, ;"O": rentie Pall, 1HH1), p" 5"

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ar$et Imperfetions

(Internali!ation)• 9 ompany un&erta$es A2I tointernali!e a transation that is ma&e

ineDient 0eause of a mar$etimperfetionM %ra&e 0arriers (e".", taris)

M LniJue a&/anta.e (e".", speial $no#le&.e)

1H


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leti %heory

M 9 =rm un&erta$es A2I #hen loation,o#nership, an& internali!ationa&/anta.es om0ine to ma$e aloation appealin. – oation a&/anta.e (optimal loation)

– ?#nership a&/anta.e (speial asset)

– Internali!ation a&/anta.e (eDieny)

G


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ar$et o#er

• 9 =rm un&erta$es A2I to esta0lish a&ominant presene in an in&ustry

– ar$et po#er F reater pro=ts

– Nertial inte.ration• -ten&s ompany8s ati/ities into sta.es of

pro&ution that pro/i&e its inputs (0a$#ar&inte.ration) or a0sor0 its outputs (for#ar&inte.ration)

G1


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%he eclectic theory says that =rmsun&erta$e A2I #hen loation,o#nership, an& @@@@@@@@@@

a&/anta.es om0ine to ma$e aloation appealin. for in/estment"

a" Internali!ation

0" Airst*mo/er

" ife*yle

GG


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2isussion uestion – 3 @G1H

• What &o #e mean 0y a ountry8s balanceof payments an& #hat is its usefulness

9 ountry8s balance of payments is anational aountin. system that reor&s allpayments to entities in other ountriesan& all reeipts omin. into the nation"

%he system helps a ountry monitor the6o#s of .oo&s, ser/ies, inome, an&transfer of assets 0et#een itself an& othernations" %he 0alane of payments position

sen&s #arnin. si.nals a0out tra&e &e=itsG3


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AnalyzingInternational

Opportunities ( المن (خرج 12

Sreenin. ar$ets an&

Sites

Step 1 : I&entify 0asi appeal

Step G : 9ssess national 0usinessen/ironments

Step 3 : easure mar$et or site

potential


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2isussion uestion• What are the four main steps in the proess of sreenin.

potential ne# mar$ets an& sites for operations

• First , a ompany must i&entify a loation8s 0asiappeal, #hether this 0e pro&ut &eman& or

resoure a/aila0ility" Second, it must assess thenational 0usiness en/ironment, inlu&in. ultural,politial, le.al, an& eonomi fores, as #ell asthe ost of lo.istis an& the ima.e of a ountry"Third, it must measure the mar$et or sitepotential, #hih reJuires olletin. &etaile& &ataon eah mar$et an& site un&er onsi&eration" 9n&fourth, a ompany must selet the sin.le 0estmar$et or site 0y ta$in. =el& trips to sites ma$in.

the =nal uto an& performin. ompetiti/e G5

l i & i


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Seletin.Seletin. an& ana.in.an& ana.in.

ntry o&esntry o&es1•-plain ho# ompanies use e-portin.,importin., an& ountertra&e

•-plain the /arious means of =nanin.

e-port an& import ati/ities•2esri0e the &ierent ontratualentry mo&es that are a/aila0le toompanies

•-plain the /arious types ofin/estment entry mo&es

•2isuss the important strate.i fatorsin seletin. an entry mo&e


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2isussion uestion – 1 @35H

• What are the four steps ompanies anfollo# #hen 0uil&in. an e-port strate.y

• 9 ompany shoul& not simply respon& to

international reJuests for its pro&uts, 0ut shoul&follo# a four*step proe&ure to &e/elopin. ane-port strate.y" First , it shoul& i&entify a potentialmar$et throu.h areful mar$et researh an&

analysis" Second, it shoul& math the nee&s of themar$et to its a0ility to satisfy those nee&s" Third, itshoul& initiate meetin.s #ith potential &istri0utors,0uyers, an& others to 0uil& trust an& ooperation"9n& fourth, it must ommit the ompany8s human,=nanial, an& physial resoures to .ettin. the o0G7


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Aorms of Countertra&e@3+G

• Barter – 2iret e-han.e #ithout money

• Counter purhase – Sale to a nation in return for promise of future purhase

from that nation

• ?set a.reement – ?set a har&*urreny sale to a nation #ith future har&*

urreny purhase

• S#ith tra&in. – Sale 0y a ompany of o0li.ation to purhase from a

ountry

• Buy0a$ – -port of in&ustrial eJuipment in return for pro&uts that

the eJuipment pro&ues

G


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iensin. @3+7

• Company o#nin. intan.i0le property(liensor) .rants another =rm (liensee) theri.ht to use it for a spei= time – 9&/anta.es

• Ainane e-pansion• Ee&ue ris$s• Ee&ue ounterfeits• Lp.ra&e tehnolo.ies

– 2isa&/anta.es

• Eestrit liensor8s ati/ities• Ee&ue .lo0al onsisteny• en& strate.i property

GH


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Aranhisin.

• Company (franhiser) supplies another(franhisee) #ith intan.i0le propertyo/er an e-ten&e& perio&

– 9&/anta.es• o# ost an& lo# ris$

• Eapi& e-pansion

• oal $no#le&.e

– 2isa&/anta.es• Cum0ersome

• ost 6e-i0ility

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• In #hat #ays &oes franhisin. &ierfrom liensin.

• 9lthou.h franhisin. an& liensin. are 0oth

ontratual entry mo&es, se/eral $ey &ierenesset them apart"

• Airst, franhisin. .i/es a ompany .reater ontrolo/er the sale of its pro&ut in a tar.et mar$et

than &oes liensin."• Seon&, franhisin. is primarily use& in the

ser/ie setor, #hereas liensin. is ommon inmanufaturin. in&ustries

• %hir&, franhisin. reJuires on.oin. assistane 31


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ana.ement Contrat@37

• Company supplies another #ithmana.erial e-pertise for a spei=perio& of time

– 9&/anta.es• Ae# assets ris$e&

• ;ations =nane proets

• 2e/elops loal #or$fore

– 2isa&/anta.es• ersonnel at ris$

• Create ompetitor

3G


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%urn$ey roet

• Company &esi.ns, onstruts an&tests a pro&ution faility for a lient

– 9&/anta.es• Airms speiali!e in ompeteny

• ;ations o0tain infrastruture

– 2isa&/anta.es

• olitii!e& proess• Create ompetitor

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Wholly ?#ne& Su0si&iary@37G

• Aaility entirely o#ne& an& ontrolle&0y a sin.le parent ompany

– 9&/anta.es• 2ay*to*&ay ontrol

• Coor&inate su0si&iaries

– 2isa&/anta.es

• -pensi/e• Pi.h ris$

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Ooint Nenture

• Company reate& an& ointlyo#ne& 0y t#o or more entities toahie/e a ommon o0eti/e – 9&/anta.es

• Ee&ue ris$ le/el• enetrate mar$ets• 9ess hannels

– 2isa&/anta.es• artner on6it• ose ontrol

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Strate.i 9lliane

M ntities ooperate (0ut &o not form aseparate ompany) to ahie/e strate.i.oals of eah

– 9&/anta.es• Share proet ost• %ap ompetitors8 stren.ths• ain hannel aess

– 2isa&/anta.es•

artner on6it• Create ompetitor

3+


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9n in/estment entry mo&e that .i/esa ompany the most ontrol o/er &ay*to*&ay ati/ities in a host ountry is

alle& a @@@@@@@@@@"

a" Ooint /enture

0" Strate.i alliane" Wholly o#ne& su0si&iary

37

l i &2 l i &


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2e/elopin. an&2e/elopin. an&

ar$etin. ro&utsar$etin. ro&uts1!

• -plain the impat .lo0ali!ation is ha/in. oninternational mar$etin. ati/ities

• 2esri0e the types of thin.s mana.ers must

onsi&er #hen &e/elopin. international product strate.ies

• 2isuss the fators that in6uene internationalpromotional strate.ies an& the 0len&in. of

pro&ut an& promotional strate.ies• -plain the elements that mana.ers must ta$e

into aount #hen &esi.nin. internationaldistribution strate.ies

• 2isuss the elements that in6uene international

pricing strate.ies

ro ut


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* ro utlo0ali!ation an& ar$etin.

@3+• Stan&ar&i!e& pro&ut an& promotion – Consistent ima.e ' messa.e

– Contain osts

• 9&apte& pro&ut an& ' or mar$etin.

– Eespon& to loal nee&s

– -ploit uniJue ima.e

3H


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• What elements in the national 0usiness en/ironmentin6uene &eisions a0out #hether to stan&ar&i!e ora&apt international mar$etin. eorts

• Laws and regulations of the tar.et mar$et an forepro&ut alteration" Cultural dierences 0et#een homean& tar.et mar$ets an fore a&aptations to 0etter suitloal 0uyers8 pro&ut preferenes" !ational image of theountry in #hih a pro&ut is &esi.ne&, manufature&,or assem0le& an ha/e a stron. in6uene on 0uyers8pereptions of Juality an& /alue" Counterfeit goods an&ama.e 0uyers8 ima.e of a 0ran&" 9n& a&/anementsin .lo0al ommuniations an& the rapi& pae of ne#

pro&ut &e/elopment is shortening product life cycles"4

G* romotion


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G* romotionChoosin. ush or ull @3H1

• ush Strate.y – ressure hannel mem0ers to arry a pro&ut an&

promote it to =nal users

– o#erful hannel mem0ers ma$e push &iDult

• ull Strate.y

– Create 0uyer &eman& that #ill enoura.e hannelmem0ers to sto$ a pro&ut

–Ae#er me&ia outlets in emer.in. mar$ets ma$es pull&iDult

– Bran& loyalty ma$es pull easier

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International 9&/ertisin.

• Consi&er ultural nuanes

• Stan&ar&i!e #here possi0le

• -ploit .lo0al a&/ertisin. outlets• essons from the uropean Lnion

4G


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ar$etin. Communiations

43

3 l


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3* lae2istri0ution Strate.y @3H7

• lannin., implementin., an&ontrollin. the physial 6o# of apro&ut from ori.in to onsumption

– hysial .oo&s

– Consultin. ser/ies

– ;e#s pro/i&ers

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• In #hat #ays &o e-lusi/e an& intensi/ehannels of &istri0ution &ier

• 9n e-lusi/e hannel is one in #hih

a manufaturer .rants the ri.ht tosell its pro&ut to only one or alimite& num0er of resellers, as in the

ase of ne# automo0iles" 9nintensi/e hannel is one in #hih apro&uer .rants the ri.ht to sell itspro&ut to many resellers, as in thease of eneral oDe su lies" 45

4 i


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4* rieriin. Strate.y @3HH

• ust math o/erall =rm strate.y

– o#*ost lea&ership ' 2ierentiation ' Aous

Worli&e riin.• Sin.le sellin. prie for all international mar$ets• 2iDulties

– oal pro&ution ost

– -port an& &istri0ution ost

– oal purhasin. po#er

– -han.e rates

4+


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9 priin. strate.y in #hih a ompany

must $eep its &omesti an&

international 0uyers separate is alle&

@@@@@@@@@@"

a" 2ual priin.

0" Worli&e priin." 9rm8s len.th priin.

summary of international business_ ch 5,7,13,14

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