-
Why is managing an international business different from managing purely domestic business?
1. Because of different cultural, political,economic, and legal systems, and so on, countries are different.
2. The issues at the international business level are more complex than those at the domestic level.
3. International business transactions involve converting money into different currencies.
4. International business must find ways to work within the limitations and constraints imposed by the various governments.
International economic environment
-
What are the major objectives for the international economic environment scanning? Name the elements of international economic environment that require special attention of the firms. Why?
Understanding of the economic environment is essential for business managers not only at the strategic or planning level, but also at the level of current operations of the firms. Strategic decisions such as expansion and diversification, competitive postures in the form of R& D policy, packaging, advertising and other such policies are affected by the evolving market and economic scenario. Similarly, production, investment, pricing and hiring decisions are dependent on the market structure which itself gets influenced by the structure of the economy and the economic environment.
Objectives:
-
To find out international threats and opportunities
-
To find out major international players,which have high influence
-
To know about major directions of capital flows in the world
-
To know about major trading directions in the world
-
To know about general world economic conditions and their influence on different countries
Elements of International Economic Environment
Countries (nations)
International Industries
International Markets
International Monetary System
International Trade System
Regional Unions
International Organizations
-
What are the stages of the country economic analysis? What are the major objectives of this analysis?
country economic analysis
-
Macroeconomic indicators
-
Economic policies and development plans
-
Trends in production and demand
-
Monetary and fiscal conditions
-
Banks and other financial institutions
-
Sectoral trends
-
Investment climate
Country macroeconomic Indicators
- Gross Domestic Product
- GDP per capita
- Growth Rates
- Inflation
- Unemployment
- Interest Rates
- Exchange Rates
- Industrial Production
- Construction
- Hourly Earnings
- Passenger Cars
- Retail Sales
- Share Prices
- Money
- Foreign Trade
- Balance Of Payments
- Foreign Debt
- Official reserves
Objectives:
-
to forecast macroeconomic indicators, which are important for many business decisions such as market selection, entry mode selection, pricing, finance and costs management
-
identify economic opportunities and threats within the country
- to know conditions of country demand and supply
- banking and investment climate
-
How the exchange rates might be forecasted?
Exchange rates can be forecasted through analyzing economic (balance of payments, interest rates, inflation…), political (Philosophies of political parties and leaders, elections…) and expectative (Forward exchange market prices) conditions in the country.
-
What are the stages of the international industry analysis?
Objective: to determine opportunities and threats, that exist for firms within a
competitive environment.
In the result to make conclusion: about critical success factors and prognose about the future of industry
Stages
1)Description
2)Segments
3)Suppliers
-
Supplier concentration
-
Presence of substitute inputs
-
Differentiation of inputs
-
Importance of volume to supplier
-
Impact of inputs on cost or differentiation
-
Threat of forward or backward integration
-
Access to capital
-
Access to labor
4)Buyers
-
Buyer concentration versus industry concentration
-
Buyer switching costs
-
Buyer information
-
Threat of backward integration
-
Pull through
-
Brand identity of Buyers
-
Price sensitivity
-
Price to total purchases
5) Substitute Products
-
Relative price/performance relationship of substitutes
-
Buyer propensity to substitute
6) Rivalry
-
Degree of concentration and balance amongcompetitors
-
Diversity among competitors
-
Industry growth rate (past &projected)
-
Fixed costs/value added
-
Intermittent overcapacity
-
Product differentiation
-
Growth of foreign competition
-
Corporate stakes
-
Exit barriers
-
What are the differences among the MNCs strategies in global and multidomestic industries?
alliance is an agreement between two or more parties, made in order to advance common goals and to secure common interests.
Centralized: bottom-up approach; decentralized: top-down. (organizational structure)
Foreign direct investment (FDI) is a measure of foreign ownership of productive assets, such as factories, mines and land. Increasing foreign investment can be used as one measure of growing economic globalization.
Joint venture (JV) is an entity formed between two or more parties to undertake economic activity together. The parties agree to create a new entity by both contributing equity, and they then share in the revenues, expenses, and control of the enterprise.
License is "an authorization (by the licensor) to use the licensed material (by the licensee)."
Multi-domestic Strategy
-
Product customized for each market
-
Decentralized control - local decision making
-
Effective when large differences exist between countries
-
Advantages: product differentiation, local responsiveness, minimized political risk, minimized exchange rate risk
Global Strategy
-
Product is the same in all countries.
-
Centralized control - little decision-making authority on the local level
-
Effective when differences between countries are small
Advantages: cost, coordinated activities, faster product development