International Business

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International Business
International Business 10e Daniels/Radebaugh/Sulli
van

• Global Corporate Strategy
• Global Sourcing
• and Investment Strategies

2004, Prentice Hall, Inc
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Today is just past the midpoint in Global
Corporate Strategy

• What are the big decisions in international
  business?
• How do we make them wisely for our firms?

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Dealing with global strategy

• Oct. 19 Organization and Control
• Oct. 26 The Porter diamond at work (video)
• Oct. 31 The diamond and Silicon Valley
• Nov. 2 (today) Country selection (global
  sourcing and investment)
• Nov. 7 Marketing Standardization vs.
  differentiation
• Nov. 9 Marketing Distribution strategies

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Using the Porter diamond helps us understand our
firms environments

• Is our firm part of a cluster of organizations
  with special skills?
• Do we provide support for firms that are part of
  a cluster?

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Perhaps the most fundamental global strategy
question Where?

• We need to decide
• Where to locate our major offices
• Where to seek to purchase components, products,
  and services
• Where to try to sell

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When our firms expand abroad, the diamond helps
us analyze

• Do we want ?
• specialized factor conditions
• demanding local customers
• related and supporting industries
• challenges from local firms
• Strategy ambitious firms
• Structure ways of operating that are suitable
  to our industry
• Rivalry competition in the industry

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We dont always want to be part of a cluster

• Many firms seeking manufacturing abroad will
  avoid a local cluster to slow the creation of
  competitors

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The diamonds elements are among many issues in
location decisions

• You can rarely do everything that might be
  profitable
• You never have time to consider all alternatives
• Therefore, you may never truly optimize
• You have to make an educated guess about where to
  spend time collecting data

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Chapter ThirteenCountry Evaluation and Selection
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Choosing new locations for market-oriented
investments (sales)

• Scan for alternatives
• Choose and weight variables
• Opportunities
• Market size
• Ease and compatibility
• Cost and resource availability in the country
• Collect and analyze data for variables
• Use tools to narrow alternatives and compare
  variables

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Dangers of making decisions based on available
statistics

• Profit estimates are never reliable
• Even data about past profits tell only part of
  how good an investment is
• Some investments require vast amounts of
  management time
• manufacturing in low-wage location
• Others cannibalize profits from other units
• sales unit replaces exports

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Should you diversify or concentrate international
investments?

• Diversification strategy means entering many
  markets at once
• Concentration strategy means focusing on a few so
  you will do well there
• Note There are other uses of the terms
  diversification and concentration that youll
  use in other courses

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Key factors to consider

• Analyze growth rate and sales stability in each
  market
• Research expected lead time over competitors
• Estimate any spillover effects
• Measure degree of need for
• your product
• localization necessary to sell it in different
  countries

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Companies prefer countries that

• Are located nearby
• Share the same language
• Have market conditions like those in the home
  country
• Firms often eliminate proposals to enter
  countries unless they
• offer size, technology, and other factors
  familiar to company personnel
• allow an acceptable percentage of ownership
• permit sufficient profits to be easily remitted

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Decisions on sourcing or building a factory are
even more complex

• Youre going to trust your partners with
  something thats the heart of your business

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Sources of Information

• Individualized reports
• Specialized studies
• Service companies
• Government agencies
• International organizations and agencies
• Trade associations
• Information service companies
• Internet

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But what does your source really tell you?

• Many researchers and publishers arent reliable
• Definitions of terms vary from country to country
• An electrical engineer in one country may have
  completely different skills from in another
• Literacy may mean true literacy or just ability
  to write your own name
• Family income may mean something different

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Issues with Emerging Economies

• Foreign costs rise quickly due to wage pressures
  and exchange rates
• Extent of red tape and corruption
• Risk and uncertainty
• Obsolescence or inaccuracy of data

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Data Analysis
Table 13.2
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Making Final Country Decisions

• Make lengthy site visits
• Construct detailed estimates of costs
• Be skeptical!
• Decide whether to invest alone or with a partner

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• For acquisitions, examine financial statements
  and other data in detail
• Spend time in the country with foreigners to get
  to know what these data really mean

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Allocating Among Existing Locations

• Once you have an operation in a country, youll
  consider your people in that country to be
  experts on it

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• But reinvestment versus harvesting is a
  continuous choice
• Harvesting taking as much money out as possible
• Local managers will oppose
• Appraise effects of the operation on other
  locations as well as bottom-line performance

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Chapter Objectives

• Discuss strategies for sequencing penetration of
  countries and committing resources
• Explain clues from the environmental climate that
  helps managers limit geographic alternatives
• Examine major variables companies can consider
  when deciding whether and where to expand abroad
• Overview methods and problems of collecting and
  comparing information internationally
• Describe simplifying tools for determining global
  geographic strategy
• Introduce how managers make final investment,
  reinvestment, and divestment decisions

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