International Business Model:
- the basis of the model is formed by the relationships of the forces in the three environments
- the external or uncontrollable forces in both the domestic and the foreign environments surround the internal forces controlled by management
- the domestic environment of the international firm’s home country is surrounded by as many sets of foreign environments as there are countries in which the company does business
- solid lines connecting the internal forces at the home office to the internal forces in the foreign affiliates indicate the lines of control
- the orange areas indicate the international environment in which personnel in the
headquarters of the international firm work
- light orange is the domestic environment
- blue the foreign environment
Questions:
Why international business differs from domestic business?!
How many environments help to international company to operate?
What kind of international companies can you name in your country?
Lecture #3 Developing a business growth strategy and growing your business
When you're looking to grow your business, it's essential to have a clear strategy and plot what you're going to do and when. There are various options when it comes to building a growth strategy, including increasing market share or entering into a joint venture or partnership. Read our guide to find out more.
Increasing market share
Joint venture
Factors affecting business growth
Increasing market share
Assess your core customer base and look to tap into other groups, including those of your competitors. Look at the characteristics of your product or service - is there anything that marks it out from the competition that you could use to attract new customers and make your existing ones more loyal? How effectively are you matching your product or services to customers' needs? If you find that you are losing customers, carry out some research to see why this is happening.
Consider your core customer base - can you increase levels of loyalty?
If customers are leaving or only buying once, find out why
Joint venture
Joining forces with another business, either through a joint venture or partnership, can help you tap into new markets and customers. You'll also have more resources available and have access to a larger skills base. If you choose this route, you'll need to think carefully about who your partner with and ensure you have a contract or agreement drawn up. Both parties need to benefit, and most joint ventures are carried out by those businesses that offer complementary services or products.
Joint ventures can give you access to new markets and customers
Look to link up with a business that has services or products that are complementary to your offering
Factors affecting business growth
Developing a growth strategy often requires additional finance, but there are other factors you'll need to consider. These include whether you are likely to need more staff, and if so, what skills they need to possess. You might need to identify new training opportunities to help existing staff to meet your growth plans. On a more practical level, you might need to look at larger premises or new IT systems.
Carry out an assessment of your business' existing resources - are they able to match your growth plans?
Are staff experienced enough to deliver on your growth strategy?
Economic factors affecting business
Both international and domestic businesses are often affected by the dynamic economic conditions prevalent in the market. Factors like demand and supply, interest rates, recession, inflation, etc. often have an impact on the businesses. Let us take a brief look at these economic factors.
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Every business has one goal, to maximize its profit. This can be done by analyzing the demand of consumers, providing appropriate supply, along with maintaining quality of goods and services. However, there are many factors that affect this simple operation. Owing to these economic elements, the sales, production, and procurement of a business get adversely impacted. Here, we have provided you with a list of economic factors that affect the working of business organizations. All these factors are interconnected.
Economic Factors That Influence Businesses
Demand and Supply
The demand and supply are two principal factors that affect the working of any business model. The demand is the will and ability of consumers to purchase a particular commodity, while supply is the ability of the business to provide for the demand of consumers. Suppose, a mobile phone infused with latest technology is introduced in the market, it will have a higher price because of its demand in the market. Its prices will continue to increase if the supply does not meet the demand. For instance, in the year 2000, weather played havoc with the sugar crops of Brazil, which is the largest sugar producer in the world. This led to a decrease in the supply of sugar, which in turn resulted in a steep rise in the sugar prices. However, after the initial price rise, the market forces came into play and the demand for sugar became equal to the supplied sugar.
Marginal and Total Utility
Utility is the amount of satisfaction, that is derived by consumers from the consumption of goods. It so happens that after continuous and successive consumption of units of the same goods, the satisfaction that is experienced by a consumer starts decreasing. This often results in short-term or long-term fall in sales. Some organizations prepare for the launch of another brand, before the fall in utility and sales is experienced. The launch of new brand ensures that the revenue trend of the business does not fall. Diminishing utility is among the external factors affecting business.
For example, when we buy a pizza, the first few slices give us immense satisfaction. However, there is a fall in the satisfaction levels, when we are eating the rest. Let's assume, the marginal utility derived on the consumption of the first slice was 90. However, due to diminishing utility, the second slice had the score of 80 and the third slice was just 70. The satisfaction derived on consumption will be in a decreasing order.
Money and Banking
Banking facilitates monetary and fiscal policies that affect business and also the customers of the business. Money in circulation dictates the purchasing power or rather the demand of the consumers. On the other hand, the banking facility dictates the borrowing capacity of individuals as well as the business. The banking policies play a decisive role in affecting the prices of goods and interest rates along with investment and asset prices. The monetary polices of countries also influence the economic activities and inflation. This whole dynamic process is also known as monetary policy transmission mechanism.
Economic Growth and Development
Economic growth dictates the amount of finances that the society at large is earning and development indicates the volume of money that is being invested into channels of long-term upgradation. Among all the economic factors, development is the most important one, as a business has to cater to the demands of an economically dynamic society. For example, the luxury brands perform well during an economic upturn, much more than the companies which produce essential offerings.