International Business

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International Business
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International Business

• virtually all firms, irrespective of size,
  industry or national origin, are now confronted
  with the consequences of a new commercial reality
  that choosing not to participate in global
  markets may no longer be an option. (Balabanis,
  2004)
• International business is challenging because
  the basic management responsibilities are much
  more difficult to carry out when a business
  operates in several markets scattered around the
  globe. (127)

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Purpose of Todays Class

• To introduce
• A driving force in Canadian business
• Key elements of international business
• Managers perspective of international business
  and the key questions to resolve

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Overview of Topics

• How is international business different?
• Why should the firm go international?
• Which markets?
• How does the firm go international?
• What management implications?
• See also Figure 5.1, p. 128 for similar coverage

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In the past, complex international transactions
were the domain of diplomats and international
policy and business experts. Today a converging
set of powerful economic, technological,
demographic and geopolitical trends will demand
that all citizens, not just the elite, have that
kind of global fluency. Knowledge of the world
is no longer a luxury, it is a necessity.
Nicholas Platt
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Globalization
Process by which the world economy is becoming a
single interdependent system (120) - more
integrated and interdependent world in terms of
national politics, inter-national economics and
culture
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Expanding trade by collectively reducing
barriers is the most powerful tool that countries
working together can deploy to reduce poverty and
raise living standards Horst Kohler and James
Wolfensohn
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How is international business different?

• Political (135)
• Risk of government intervention, regulatory
  variations, documentation, legal risks
• Political risk
• Economic (135)
• Different economic systems affects nature of
  markets
• Currency fluctuations
• Social (133)
• Culture (and language)

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Marketing Mistranslations
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How is international business different?

• Differences creates opportunities and threats
• Ignorance of these differences creates barriers
  to success
• Affects interaction with customers, govt,
  suppliers, employees, managers, partners, agents
• Business relationships can be different
• Formation (how businesses come together)
• Timeframe (long-term / short-term)
• Interaction (face-to-face vs. virtual)
• Transactions (product specifications, payment
  terms, shipping terms)

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Why go international?

• Market
• Customers, investments, financing
• Production
• Access to labour, resources, knowledge
• Regulatory environment
• Competition
• Supports overall firm strategy, develop
  competitive knowledge
• Pre-empt or respond to actions of competition
• A firm should have good reasons for going abroad
  due to the risks created by international
  differences

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Which markets and how?

• Market selection
• Demand, supply/competition, factors
• Marketing analysis
• Product, pricing, promotion, distribution
• Market entry (pp 129-132)
• Method
• Export (including agents, distributors and branch
  offices)
• Licensing, franchising
• Strategic alliance / Joint Venture
• Foreign Direct Investment
• Levels of involvement or resource commitment
  (timeframe, money, people, risk (i.e. impact of
  differences))

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Concept Review

• Buying or establishing assets in another country
  is an example of
• Independent agent
• Branch office
• Foreign direct investment
• Export

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Concept Review

• Tariffs, embargos and quotas are examples of
• Protectionism
• Legal and political differences
• Barriers to Trade
• All of the above

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Concept Review

• What does the reduction of tariffs and trade
  barriers mean for Canadians
• Broader selection of goods
• Opportunities to export products to other
  countries
• More competition for Canadian firms
• Lower prices of goods
• Answers 1 and 4
• All of the above

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Exports Video Case Study

• Cretors Co.
• Small, manufacturer of popcorn machines
• Sales of U.S. 10, 000, 000.
• 36 of sales come from export markets
• The company faces export-related
  finance, marketing and operations
  challenges

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How manage international operations?

• Standardize (home country approach) vs customize
  (host country approach) to maximize
  value-attractiveness
• Efficiency (cost) vs effectiveness (quality)
• For example
• Management (expatriate vs. local)
• Marketing (Cretors examples)

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Takeaways

• Globalization is the context for I.B.
• Political, economic and social interaction
• Creates opportunities and threats
• Several key questions for the international
  manager
• What are the differences of doing I.B?
• Why should a firm go international?
• Which markets?
• How does a firm go international?
• How manage an international firm?
• Only those firms that can compete internationally
  should venture forth, but all firms should expect
  international competition in home markets.

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Admin

• Next Class
• Valley Farms International available online
• Questions
• Why did VFI go international?
• What differences did it encounter?
• What factors influenced VFIs choice of market?
• What method of entry did VFI employ? Why? Was
  it appropriate?

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