International Business Managent (UC3M)
What should a business look for in an intermediary?
- Size of firm - Physical facilities - Willingness to carry inventories - Knowledge/use of promotion - Reputation with supplier, customers, and banks - Sales performance record - Cost of operations - Overall experience - Knowledge of English or other relevant languages - Knowledge of business methods in manufacturer's country
Terms of Sale; INCOTERMS: FAS
Free alongside ship, port of call
What are the 6 key indicators in macroeconomics? (PESTLE: Economic)
The 6 key indicators in macroeconomics are 1. real GDP 2. the unemployment rate 3. the inflation rate 4. the interest rate 5. the level of the stock market 6. the exchange rate
What are the three phases in Economic Globalization?
1st Globalization 1870 - 1914 United Kingdom Sea Transport Development 2nd Globalization 1960-2007 United States Technology 3rd Globalization - Deglobalization? World Crisis 2008-2020 China/India/Brazil Delocalization, Protectionism?
What are takeovers?
Takeovers = host-government actions that result in a firm's loss of ownership or direct control An expropriation is a formal seizure of an operation A confiscation is an expropriation without compensation
What are the advantages and disadvantages of licensing?
Advantage - Low development costs and risks - quick expansion (entry) when capital is scarce - allowing host country to gain technology and create jobs - allowing host country and licensee to keep most profit - circumventing trade barriers Disadvantages - Lack of control over technology - Inability to realize location and experience curve economies - Inability to engage in global strategic coordination - very low-medium profit - licensee becoming future competitor - licensee's poor performance - difficulty in terminating licensing agreement - Breach of contract
What are the advantages and disadvantages of joint ventures?
Advantages - Access to local partner's knowledge - Sharing development costs and risks - Politically acceptable Disadvantages - Lack of control over technology - Inability to engage in global strategic coordination - Inability to realize location and experience economies
What are the advantages and disadvantages of wholly owned subsidiaries?
Advantages - Protection of technology - Ability to engage in global strategic coordination - Ability to realize location and experience economies Disadvantage - High costs and risks
Has there been more growth in mobile advertising/promotion campaigns in Europe or Africa?
Africa Why: Proven growth driver, high-growth geography 'New' digital marketing campaigns
What makes a strategic alliance vulnerable?
Alliance vulnerability if the link is weak (Honda-Rover) and variability within it (Vips-Starbucks)
What must a business be aware of in the political and legal environment?
Be aware of: - Legislation regulating business - The effects of government agencies such as the FDA, FCC, or EPA on your company - Growth of public interest groups that positively or negatively affect your business
What are the top emerging-market hazards?
Breach of contract Regulatory changes Transfer and convertibility restrictions Non-honoring of sovereign guarantees Civil disturbance Expropriation Terrorism War
What is market segmentation?
Breaking down the market for a particular product or service into segments of customers which differ in terms of their response to marketing strategies. The firm can tailor its marketing policies to the need of each specific segment, hoping to obtain greater profits than are possible by following a uniform strategy aimed at the entire market. (Switzerland, USA)
What are multinational or trans-national corporations (MNCs or TNCs)?
Businesses with a headquarters in one country but with business operations in a number of others. No matter where you go in the world, certain businesses will always have a presence.
What does "BAT" stand for?
Baidu - El Google Chino Alibaba - El Amazon Chino Tencent - El Whatsapp Chino
Who is a distributor and an agent?
DISTRIBUTOR - independent company that stocks manufacturer's product - has freedom to choose own customer and price - Profit from the differences between seller and buyer price - Exclusive representatives = sole distributors in a country - Buy on their own accounts - Usually represents the manufacturer in all aspect of sales and servicing AGENT - Independent company that sells on behalf of manufacturer - Usually it will not see or stock the product - Exclusive, semi-exclusive, non-exclusive - Commission on a pre-agreed basis - Sells to wholesalers and retailers - Gathering some market and financial information- but not always - depends on contract
What are four research methods?
Desk research - Country: origin - Type: secondary - Tool: online, DB, reports, etc. - Performed by: company Field research - Country: other - Type: primary - Tool: in-depth interview - Performed by: consultant Surveys - Country: other - Type: primary - Tool: questionare - Performed by: consultant Focus groups (test) - Country: other - Type: primary - Tool: focus groups - Performed by: consultant
What are some trends in urbanization? (opportunities and threats)
Developing strategies to plan for long-term growth Creating more energy-efficient environments Improving their infrastructure Keeping citizens safe
What are some topics to keep in mind with business on the internet? (cyberlaw and unresolved issues) (International Legal Environment)
Domain names Collection of sales tax or duties Contracts, jurisdiction, validity issues
What are the levels of international business & marketing?
Domestic Marketing - Least international commitment - Domestic focus Export Marketing - Limited international commitment - Involves direct or indirect export - Ethnocentric International Marketing - Substantial international commitment - Focus on individual countries or regions - Polycentric or regiocentric Global Marketing - Extensive international commitment - Focus on segments, rather than countries or regions - Geocentric
What are the internal and external factors that determine a firm's ability to exploit the market?
External Factors - Legal Barriers - Cultural Barriers - Other contextual limitations - Competitive intensity Internal Factors - Financial Resources - Manufacturing capacity - Organization structure/Human Resources
(T/F) International markets tend to be more homogeneous than domestic markets.
False Because of differences in the economic, cultural and political environments between countries, international markets tend to be more heterogeneous than domestic markets.
What are the different types of political risk?
Firm Specific Risks → Governance Risks (Goal conflict; reasonable goals of government and firms diverge) Country Specific Risks → Expropriation (directed toward ownership of foreign firms) → Ethnic Strife (foreign firms are only bystanders, but get hurt) →Transfer Risk (Blocked funds) →Cultural and Institutional Risks → (ownership structure, human resource norms, nepotism and corruption, intellectual property rights, protectionism) Global Specific Risks → → terrorism and war, anti-globalization movement, environmental concerns, poverty, cyber attacks
What are the advantages and disadvantages of being a first mover?
First-mover advantage - Preempt rivals and capture demand - Build sales volume - Mode down experience curve before rivals and achieve cost advantage - Create switching costs Disadvantages: - First-mover disadvantage - pioneering costs - Changes in government policies
Terms of Sale; INCOTERMS: FOB
Free on Board
What are export marketing groups (Export Management Companies - EMC)? (Cooperative exporting)
Functions: - exporting in the name of the association - consolidating freight, negotiating rates and chartering ships - performing market research - appointing selling agents abroad - obtaining credit information and collecting debts - setting prices for export - allowing uniform contracts and terms of sale - allowing cooperative bids and sales negotiation Usually SMEs - more effective
Products and Foreign Markets Matrix
GDP High / Consumption and brand health high - Group 1: No/limited products, wealthy countries GDP Low / Consumption and brand health low - Group 2: No/limited products, developing & emerging markets GDP Low / Consumption and brand health high - Group 3: Established products, developing & emerging markets GDP High / Consumption and brand health low - Group 4: Established products, wealthy countries
What are four other ways to apply criteria to select target countries?
General (applied to all products) - ex. Growth perspective (GDP) Specific (applied to the analyzed product) - ex. wine; Wine culture in the country, appreciate quality wines Market potential - ex. Purchasing Power Parity; PPP Accessibility and Risk - ex. trade barriers; accessibility and corruption
What are three bases of segmentation?
General market indicators - ex. demographic and population characteristics Specific product indicators - ex. economic and legal constraints Company/competitive strength - ex. product quality
Why is International Marketing & Business important?
Globalization, the differences in foreign markets, and the supremacy of the marketing approach (Market Orientation)
What are some sources of first-mover advantage in emerging markets?
Government relations Pent-up demand Marketing productivity Marketing resources Learning
What are the four types of international legal disputes? (International Legal Environment)
Jurisdiction Conciliation (mediation) Arbitration Litigation
What are the three parts of the Selection Method for the selecting international markets to enter?
PRE-SELECTION OF MORE FAVORABLE MARKETS → Potential , Accessibility, Risks → IN DEPTH RESEARCH → "Matching Product with Market Needs" → FINAL SELECTION
What is globalization?
The expansion of economic and social ties between countries through the spread of corporate institutions and the capitalist philosophy that leads to the shrinking of the world in economic terms Growing economic interdependence between different countries and their economies
What does it mean, the "integration of economics"?
The increasing reliance of economies on each other The opportunities to be able to buy and sell in any country in the world The opportunities for labor and capital to locate anywhere in the world The growth of global markets in finance
What is export market selection?
The process of opportunity evaluation leading to the selection of foreign markets in which to compete
Is speed and fast changes that important in business today?
The question now as a business is not whether or not you want to change, but how fast "It is not the strongest of a species that survive nor the most intelligent, but the one most responsive to change" - Charles Darwin
What is the main problem with international business management?
Psychic distance
What are the international marketing information considerations of the final selection?
Size of the market worthy of the effort and preferable in the growth phase (not maturity or decline) Sustainable competitive advantage (quality, service, price, design, etc.) Find a suitable partner (mode of entry)
What is Self-Reference Criterion (SRC)?
The conscious and unconscious reference to one's own national cultural values, experiences, and knowledge as a basis for decisions while operating in a host country
What is measurability?
Is the degree to which segments can be identified and to which the size and purchasing power of the segments can be measured
Terms of Sale; INCOTERMS: CFR
cost and freight, foreign port
What is the transnationalization index? (formula)
((Foreign sales / Total sales) + (Overseas assets / Total assets) + (Employees abroad / Total employees)) / 3 = I.T.
What are the 10 selection criteria for international markets?
1. Country economic growth 2. Purchasing Power Parity 3. Volume of imports 4. Growth of imports 5. Exports from the country of origin 6. Trade barriers 7. Non trade barriers 8. Commercial risks 9. Ease of doing business 10. Transparency and corruption
What are the five indirect export modes?
1. Export buying agent (export commission house) - resides in the exporter's home country. Acts in the interests of the buyer, it is the buyer that pays a commission. 2. Broker - to bring a buyer and seller together; performs a contractual function; does not actually handle the products sold or bought; the broker is paid a commission (cca 5%); commodity specialist 3. Export management company (export house) - „export department" for a range of companies; conduct business in the name of each manufacturer it represents; knowledge of the market!!!; specialization by geographical area, product or customer type; paid a commission; competitive products, interest in high profitable products, lower specialization... 4. Trading company - colonial times, but still important in Africa and East Asia, in Japan over 50% of whole export; barter - or counter trade, financing 5. Piggyback - non-competitive but related and complementary products; SME with a larger exporting company - full utilization of export facilities of a larger company
In international market research, you Identify-Gather-Analyze information to help decision-making on:
1. Foreign markets with the greatest potential 2. Entry barriers and access regulations 3. Competitors 4. Modes of entry and structure of the distribution 5. Adaptation of the product / service to the demand 6. Intermediary margins and retail price PROBLEM: Greater complexity, extension and cost SOLUTION: Selection methods (scrutiny-reduction) CLARIFICATION: Country vs. Market (homogeneous environment, i.e. PEST)
Summarize the "International Export and Marketing Plan"
1. Goal Setting - Define long-term goals - Define short-term goals - Develop an action plan with timelines to reach your short-term goals 2. Identifying Products with Export Potential - Consider the products/services and reasons for export success - Decision point: determine which products have export potential - 1. Select the most exportable products to be offered internationally - 2. valuate the products to be offered internationally based on 1. what about the product would be attractive to the overseas market and 2. why do you believe international buyers will purchase your product 3. Determining Your Company's Export Readiness - List the pros and cons of market expansion 4. Marketing Your Product/Service - 1. Define international pricing strategy, 2, define promotional strategy, 3. define customer services 5. Sales Forecast - 1. Fill in units-sold line for the different markets for each year on the worksheet - 2. Fill in sales price per unit for products sold - 3. Calculate the total sales for each of the different markets (units sold * sales price per unit) - 4.
What are the 4 key differences between trade agents and distributors?
1. Ownership of Goods (Agents do not take ownership of goods, distributors purchase goods and resell them to local consumers/retailers) 2. Revenue Model (The agent is paid by the supplier (exporter) through a commission on the sales value generated. Distributors add a margin on top of the products' prices, generally higher than agents' fees.) 3. In-market Operations (Customers' orders come to the exporter through the agent, but they will then deliver, invoice, and collect payments directly from the customers. Distributors take care of inventory - they hold stock in the market which reduces order lead time. They also extend credit for customers, and help pay and undertake marketing and promotion for the product abroad; carry most of the in-market risks) 4. Product Sales and Risk of Cannibalization (Agents usually have smaller product ranges and are sole proprietorships or small structures. Most distributors represent and sell multiple products, so it is difficult to identify distributors with 100% complementary product ranges (may face cannibalization). As they have other ranges of products, attention might be distracted from your product.)
What are the "Key Success Factors" of international business?
1. Pick the right entry strategy 2. Get - and get to - customers 3. Talent - Bringing in mid level expatriates - Insisting on global rotations - Buying talent 4. Manage risks - Building partnerships - Wooing the influentials - Putting key stakeholders on their boards
What are the two market expansion strategies?
1. by market concentration: drawn by power of market specialization - scale&market peretration - greater market knowledge - higher degree of control 2. by market spreading: based on greater flexibility - less dependence on patricular export markets - lower perception of risks and uncertainity
What are the advantages and disadvantages of turnkey contracts?
Advantage - Ability to earn returns from process technology skills in countries where FDI is restricted Disadvantages - Creating efficient competitors - Lack of long-term market presence
What are the advantages and disadvantages of exporting?
Advantage - Ability to realize location and experience curve economies - Relatively low financial exposure - Permit gradual market entry - Acquire knowledge about local market - Avoid restrictions on foreign investment Disadvantages - High transport costs - Trade barriers; vulnerability to tariffs and NTBs - Problems with local marketing agents; potential conflicts with distributors - Logistical complexities
What are the advantages and disadvantages of franchising?
Advantage - Low development costs and risks Disadvantages - Lack of control over quality - Inability to engage in global strategic coordination
What are three types of laws affecting business?
Commercial Laws - Company formation - Marketing laws - Antitrust laws - Green marketing issues Foreign Corrupt Practices Act (FCPA)-extraterritoriality of U.S. laws Export restrictions - Laws, procedures change, get updated from the Department of Commerce
What are the four main bases of legal systems? (International Legal Environment)
Common Law Code Law Theocratic Law (e.g., Islamic law) Marxist-Socialists Tenets
What are some political risks and models?
Common political risks: Confiscation, expropriation, and domestication Economic Risks: Exchange controls, local-content laws, import restrictions, tax control, prices control, labor problems Risks from Civil Violence, NGOs, Terrorism, Cyber Crime Assessing political vulnerability/risk-forecasting risk Lessening political vulnerability Models: Freedom House, Fraser Institute, Heritage Foundation, and International Country Risk Guide
What is direct exporting?
Company A sells directly to Company C (foreign customer) Manufacturer sells directly to the importer located in the foreign market - Direct exporting through its export department, and also online. Besides, the company can use Distributors and Agents
What are intra-corporate transfers?
Company A sells to Company A (sells to an affiliated company)
What is indirect exporting?
Company A sells to Company B (sells to domestic customer) who THEN sells to Company C (foreign customer)
What are some drivers of international expansion?
Competition Regional Economic and Political Integration. Growth of economic cooperation - trading blocs (EU, NAFTA, etc.) Technology. Improvements in Transportation and Logistics Communication networks & Internet access Economic Growth Transition to Market Economy (collapse of Communism) and growth of Emerging Markets...and emerging market Multinationals Converging Consumer Needs
What are ways of preventing corruption and developing an ethical culture?
Consistent Enforcement and Deterance 1. Corruption Control Plan 2. Code of Ethics / Code of Conduct 3. Corruption risk management 4. Detecting corrupt practices & compliance breaches 5. Responding to corrupt conduct & compliance breaches 6. Education and sensitisation Strong leadership, adequate allocation of resources, sufficient political will
Terms of Sale; INCOTERMS: CIF
Cost, insurance, freight, foreign port
Terms of Sale; INCOTERMS: EXW
Ex-Works - Risk passes at factory door
What are the three types of export intermediaries?
Export management company - Acts as client's export department - Can be commission agent for the exporter - May take title to the goods and resell them Associations - An association of firms in same industry - Promotes industry exports overseas - May buy products of members and resell International trading companies
What is actionability?
Is the degree to which separate effective programs can be formulated for attracting and serving the segments
What is profitability?
Is the degree to which the resulting segments are large / profitable enough to be worth considering for separate marketing attention
What is accessibility?
Is the degree to which the resulting segments can be effectively reached and served
What is the importance of the inflation rate? (3rd of 6 Major Economic Variables)
It is a measure of how fast the overall price level is rising hyperinflation occurs when the price level is rising by more than 20% per month
What is PESTLE?
It is an analysis of the impact of variables (politics, economy, social, technology, legal, environment) on the business plan (scale: very negative, negative, indifferent, positive, very positive)
What is polycentric orientation?
Marketing orientation guided by the multidomestic market concept: - Focuses on the importance and uniqueness of each international market - Likely to establish businesses in each target country - Fully decentralized, minimal coordination with headquarters - Marketing strategies are specific to each country - Result: no economies of scale, duplicated functions, higher final product costs
Evaluation for export market segmentation should be done by means of:
Measurability Accessibility Profitability Actionability
What is International Philosophy?
Like a puzzle, these things all fit together to create the company and all represent the companies principles and values: 1. Human Resources 2. Marketing & Sales 3. Manufacturing & Distribution 4. Finance 5. Corporation & Business Lines (center)
How does international business management compare to domestic?
Major business concepts and principles are universally applicable, but they are adapted to the different international environments There is more complexity, different risk levels, new and unknown problems, and different national environments
What does an "international philosophy" affect?
Management internationalization philosophy affects all functional areas of the corporation.
What is geocentric orientation?
Markeitng orientation guided by the global marketing concept: - The world is perceived as a total market with identifiable, homogeneous segments - Targeted marketing strategies aimed at market segments, rather than geographic locations - Achieved position as low-cost manufacturer and marketer or product line - Provides standardized product or service throughout the world
What are the drivers of a market's strategic importance?
Market potential and learning potential Market potential - Market size growth (e.g., China vs. Taiwan) - Demand - Population - Level of Economic Development - Costs: Customer acquisition, infrastructure - Capital spending - Potential Local and Foreign Competition - Distance: - Cultural, administrative, geographic, economic (Comparisons - Wal-Mart in Mexico) Learning potential - Sophisticated/demanding customers? - Pace of technology?
What is ethnocentric orientation?
Marketing orientation guided by domestic market extension concept: - Domestic strategies, techniques, and personnel are perceived as superior - International customers are considered as secondary - International markets are regarded primarily as outlets for surplus domestic production - International marketing plans are developed in-house by the international division
What is regiocentric orientation?
Marketing orientation guided by global marketing concept: - World regions that share economic, political, and/or cultural traits are perceived as distinct markets - Divisions are organized based on location - Regional offices coordinate marketing activities
What are the 6 Variables of PESTLE Analysis?
Politic - Government type and policy - Funding, grants and initiatives Economy - Inflation and interest rates - Labour and energy costs Social - Population, education, media - Lifestyle, fashion, culture Technology - Emerging technologies, Web - Information & communication Legal - Regulations and standards - Employment laws Environment - Weather, green & ethical issues - Pollution, waste, recycling
What are some firm-specific drivers for international expansion?
Product Life Cycle Considerations: opportunity to prolong product life cycle by entering growing markets High New Product Development Costs: Firm must look beyond home-country market to recover investment costs Experience Transfers: Experience in one country serves as basis for strategies in new international markets
Why should a business consider exporting?
Reasons to export To serve markets where the firm has no or limited production facilities To satisfy a host government's requirement that the local subsidiary have exports To remain price-competitive in the home market To test foreign markets and foreign competition inexpensively Domestic market saturation To offset domestic markets' cyclical sales To achieve additional sales To extend a product's life cycle To respond strategically to foreign competitors To serve/follow international clients (follow-up effect) To improve the efficiency of manufacturing equipment
What is the principal obstacle of international business management?
Self-Reference Criterion (SRC) To counter the impact of the self-reference criterion, the corporation must select appropriate personnel for international assignments and engage in sensitivity training
What are some obstacles to internationalization?
Self-reference Criterion Government Barriers - Restrictions placed on foreign corporations by imposing tariffs, import quotas, and other limitations, such as restrictive import license awards
What are three forms of import controls?
Tariffs Voluntary restraint agreements Quota systems - Administrative problems - Monetary and social costs to consumers while benefiting protected groups. - Downstream change in the composition of imports to circumvent narrowly defined protectionist measures. - The failure of protected firms to become more efficient and competitive.
What is exporting?
The simplest mode of internationalization, and the most common market entry mode
What are some areas that export intermediaries can specialize in?
Transport customs documentation taking title of goods Financing marketing
What are some reasons NOT to export/internationalize?
Two major reasons: - Preoccupation with or focusing on the vast European Market - Reluctance to become involved in a new, unknown and therefore risky operation Not active in international markets due to - Lack of knowledge...? - Locating foreign markets - Payment and financing procedures - Export procedures
What is partner mindshare (exporting)?
the measurement of the strength of a relationship between manufacturer and export-partner in terms of trust, commitment, and cooperation ... drivers: (1) commitment and trust; (2) collaboration; (3) mutuality of interest and common purpose + product, brand and profit
What are INCOTERMS?
Universal trade terminology developed by the International Chamber of Commerce The INCOTERMS are rules about the delivery conditions of the goods that divide the costs and responsibilities of international operations between the importer and exporter The International Chamber of Commerce has regulated them since 1936 (with revisions in 1953, 1980, 1990, 2000 and 2010) Simplify, clarify and standardize the "buy-sell" international contract. After the last revision there have been 11 incoterms that are
What is the importance of the unemployment rate? (2nd of 6 Major Economic Variables)
to be unemployed, a person must want to work and be actively looking for a job (but have not yet found one) the labor force consists of those who are employed and those who are unemployed the unemployment rate is equal to the number of unemployed people divided by the labor force frictional unemployment occurs because workers and firms spend time searching for the best match cyclical unemployment occurs during recessions and depressions the unemployment rate is the best indicator of how well the economy is doing relative to its productive potential
What are the three types of exporting?
a) indirect export - through usually another domestic company - export house, trading company that performs exporting activities b) direct export - company performs exporting activities (majority of or all) itself c) cooperative export - collaborative agreements with other organizations - some exp. activities
What does management internationalization philosophy affect?
all functional areas of the corporation
How are TARIC codes designed?
designed to show the various rules applied to specific products when imported into the EU
What is the importance of the exchange rate? (6th of of 6 Major Economic Variables)
governs the terms on which international trade and investment take place nominal exchange rate is the rate at which monies of different countries can be exchanged for one another real exchange rate is the rate at which the goods and services produced in different countries can be exchanged for one another if domestic currency appreciates - its value in terms of other currencies increases - foreign-produced goods are relatively cheap for domestic buyers - imports are likely to be high - domestic-made goods are relatively expensive for foreigners - exports are likely to be low if domestic currency depreciates - its value in terms of other currencies declines - domestic-produced goods are relatively cheap for foreign buyers - exports are likely to be high - foreign-made goods are relatively expensive for domestic buyers - imports are likely to be low
What is the importance of real GDP? (1st of 6 Major Economic Variables)
is corrected for changes in the price level (real) includes the replacement of worn-out and obsolete equipment and structures as well as new investment (gross) represents the production of final goods and services (product) often divided by the number of workers in the economy measures how well the economy produces goods and services that people find useful does not indicate the relative distribution of the nation's economic product is an imperfect measure of economic well being
What is the importance of the stock market? (5th of 6 Major Economic Variables)
is heard about most often (every day) is an index of expectations for the future - a high value means that investors expect economic growth to be rapid, profits to be high, and unemployment to be low
What is the importance of the interest rate? (4th of 6 Major Economic Variables)
is important because it governs the redistribution of purchasing power across time the many different interest rates in the economy vary by duration and degree of risk nominal interest rate is the interest rate in terms of money does not take into account the effects of inflation real interest rate is the interest rate in terms of goods and services - does take into account the effects of inflation
