International Management Combination

Price

used to make product attractable. Plays off competition

Business issue- termination of alliance

-Basic decision to exit -People-related issues -Relations with the host government

Legal Issues- termination of alliance

-Conditions of termination -Disposition of assets and liabilities -Dispute resolution -Distributorship ownership -Protection of proprietary property -Sales territory rights -Obligations to customers

Integrative techniques

-Developing good relations with host government and other local political groups -Producing as much of product locally as possible with use of in-country suppliers and subcontractors -Creating joint ventures and hiring local people to manage and run operation -Doing as much local R&D as possible -Developing effective labor-management relations

The Alliance Challenge- Motivating Factors

-Faster entry and payback -Economies of scale and rationalization -Complementary technologies and patents -Co-opting or blocking competition

Types of Ownership control risks

-Foreign-ownership limitations -Pressure for local participation -Confiscation -Expropriation -Abrogation of proprietary rights

Other strategies for Responding to Political Risk

-Formal lobbying -Campaign financing -Seeking advocacy through the embassy and consulates of home country -Formal public relations and public affairs activities such as grassroots campaigning and advertising -Political interventions designed to shape and influence political decisions prior to impact on firm

Macro Risk Issues

-Freezing the movement of assets out of the host country -Placing limits on the remittance of profits or capital- -Devaluing the currency -Appropriating assets -Refusing to abide by the contractual terms of agreements previously signed with MNC -Industrial piracy (counterfeiters) -Political turmoil -Government corruption

Factors that are typically quantified

-Political and economic environment -Domestic economic conditions -External economic conditions

Types of Operational Risks

-Price controls -Financing restrictions -Export commitments -Taxes -Local sourcing requirements

The risk factor is assigned based on sector, technology, and ownership

-Primary sector industries usually have highest risk factor, service sector industries have next highest; industrial sector industries have lowest -Firms with technology that is not available to the government should the firm be taken over have lower risk than those with technology that is easily acquired -Wholly owned subsidiaries have higher risk than partially owned subsidiaries

Micro Risk Issues

-Some MNCs are treated differently than others -Industry regulation -Taxes on specific types of bsiness activity -Restrictive local laws -Impact of WTO and EU regulations on American MNCs -Government policies that promote exports and discourage imports

Quantifying Political Risk

-Some firms try to quantify political risk as part of their effort to manage it -Each variable is given a minimum or maximum score; scores tallied for overall evaluation of risk

Managing Alliances

-Some partners may be current or former state-owned enterprises; others may be controlled or influenced by government agencies. -MNCs must manage the relationships inherent in their alliances with other organizations including current or former state-owned enterprises. -Alliance and joint ventures can significantly improve the success of MNC entry and operation, especially in emerging economies. -Managing the relationships inherent in alliances, especially when governments are involved, can be especially challenging.

Types of Transfer Risks

-Tariffs on exports and imports -Restrictions on exports -Dividend remittance -Capital repatriation

Expropriation

-The seizure of businesses by a host country with little, if any, compensation to owners. -Greastest risk: extractive, agricultural, infrastructural industries.

Risk with international marketing

-lack of understanding the foreign business culture -lack of understanding foreign customers -lack of understanding of foreign regulation -lacks managers with international experience

5 conditions for an exchanged

1) must be 2 parties 2)each party has something of value to the other party 3)each party is capable of communication and delivery 4)each party is free to accept or reject the exchange offering 5)each party feels its appropriate or desirable to deal with the other party

International Marketing objectives and actions

1)Find global customer needs 2)Satisfying global customers 3)Being better than competitors 4)Coordinating marketing activities 5)Recognizing the constraints of the global environment

Company expand market share

1)attracting new customers 2)increasing business with existing customers 3)retaining current customers

Product lifestyle

1)production in home country 2)importing countries gain familiarity with product 3)importing country gains experience with producing the product 4)importing country has sufficient production experience and does not need the imports

Types of Terrorism

1. Classic 2. Amateur 3. Religiously Motivated

Three sectors of economic activity

1. Primary sector: agriculture, forestry, mineral exploration and extraction 2. Industrial sector: manufacturing 3. Service sector: transportation, finance, insurance, and related industries

Three Basic categories of political risks

1. Transfer risk 2. Operational risk 3. Ownership control risks

Three related corporate political strategies for Responding to Political Risk

1.Relative bargaining power analysis 2.Integrative, protective, and defensive techniques 3.Proactive political strategies

Managing Political Risk and Government Relations

A comprehensive framework can help companies manage their political risk

Conglomerate investment

A type of high-risk investment in which goods or services produced are not similar to those produced at home; high risk

The Alliance Challenge

Alliances are an arena where both value-claiming activities and value-creating activities take place. Value-claiming: competitive, distributive negotiation Value-creating: collaborative, integrative negotiation

Horizontal investment

An MNC investment in foreign operations to produce the same goods or services as those produced at home; not likely to be takeover targets

Micro political risk analysis

Analysis directed toward government politics and actions that influence selected sectors of the economy or specific foreign businesses in the country

Macro political risk analysis

Analysis that reviews major political decisions likely to affect all enterprises in the country

Proactive political strategies

Broadly, strategies may include leveraging bilateral, regional, and international trade and investment agreements, drawing on bilateral and multilateral financial support, and using project finance structures to separate project exposure from overall firm risk.

Protective and defensive techniques

Discourage the host government from interfering in operations -Doing as little local manufacturing as possible and conducting all research and development outside the country -Limiting responsibility of local personnel and hiring only those who are vital to operation -Raising capital from local banks and the host government as well as outside sources -Diversifying production of the product among a number of countries

Marketing

Doing research within a market place to figure out the demands and wants of the consumer and then developing a product to meet those wants and demands. After getting the product out there and attempting to make a profit off of it.

GATT

General Agreement on Tariffs and Trade

Relationship Marketing

focuses on keeping up and improving relationships with current customers

Operational risks

Government policies and procedures that directly constrain management and performance of local operations

Ownership control risks

Government policies or actions that inhibit ownership or control of local operations

Transfer Risks

Government policies that limit the transfer of capital, payments, production, people, and technology in and out of country

The Role of Host Governments in Alliances

Having alliance or joint-venture partners may be advantageous to MNC entry and expansion. -Highly regulated industries such as banking, telecommunications, and health care -Cope with emerging markets environments characterized by arbitrary and unpredictable corruption -May be required by host government -Host government may be unwilling to permit alliance to terminate. -Host governments have a substantial role in the terms under which alliances are initially formed, the way in which they are managed, and even the terms of their dissolution.

MNCs are disinclined to set up operations in countries with high terrorism risk

MNCs must assess political risk, instal modern security, compile crisis plans, and prepare employees for possible situations.

Global Linkages

formed by world trade

Sales seeks profitability

through sales volume

The four P's

Price, Product, Promotion, Place

Marketing Philosophy

Production, Sales, Market, Societal

Indigenization laws

Require nations to hold a majority interest in an operation

G-20

The Group of 20

Relative bargaining power analysis

The MNC works to maintain a bargaining power position stronger than that of host country

Vertical investment

The production of raw materials or intermediate goods that are to be processed into final products; risk of being taken over by the government

Political risk

The unanticipated likelihood that a business's foreign investment will be constrained by a host government's policies

Terrorism

The use of force or violence against others to promote political or social views

External Marketing environmental

Things that are constantly changing. Examples are: social, economic, political and legal

Capital account

Transactions with all countries

Sales

What can we sell more aggressively?

Societal

What do customers want and need, and how can it benefit society?

Market

What do the customers want and need?

WTO

World Trade Organization

Demographic

an external factor that is the study of peoples vital statistics

Sales product aimed

at everyone

Market product aimed

at specific group

social factors

attitudes, values, and lifestyles

needs

basic human requirements

Place

centered around where you want to sell the product

Exchange rate

determine the level of trade

economic factors

directly impact citizens and companies

Commercial policy

established trade laws that favor nationals and discriminate against other countries (tariffs, quotas, exchange control, administrative regulations)

Why international Marketing is needed

globalization, must have a global vision to remain competitive at home as well, global firms offer lower prices and better products, reduces dependency on any one market, customers going abroad need international service

Integrative, protective, and defensive techniques

help overseas operation become part of host country's infrastructure

Promotion

helps sells the product and makes it known

Current account

home country

International trade

how the international market trades because different countries have different resources and production cost due to the differences in supply

Market define business

in terms of benefits its customers seek

Sales define business

in terms of goods and services

Target segments

individuals present similar responses to marketing activities

political and legal factors

laws and restrictions (legislation)

Comparative Advantage

looking at what goods should be imported and what should be exported (export the goods that has the greater comparative advantage and import the goods that have the least comparative advantage) so that it is looking to have the best standard of living

Consumer Price Index

measurement of weighted average of prices of a basket of consumer goods and services

Gross Domestic Product

measures the wealth of the nation by the goods and services produced in a nation in a specific time period

Export>Import

positive good relation

Marketing Management

process of planning and executing the conception, pricing, promotion, and distribution of the products

Sales is mainly

promotional

Quota

quantitative restriction

Currency flows

set exchange rate

Value

strongly held and enduring belief

Balance of Payment

summary statements of all the transactions between 1 country and all other countries over a period of time

Tariff

tax for an imported product

Sales orientation focus

tends to be inward looking

Market orientation focus

tends to be outward looking

Costumer satisfaction

the customers evaluation of the good on the basis of it meeting the needs and expectations

Customer Value

the difference between costs and benefits to the customer

Market is mainly

the four P's

Product

the offerings

Unemployment rate

the percent of the total labor force that is unemployed BUT actively seeking employment and willing to work

International Marketing

the process of planning and conducting transactions across national borders to create exchanges that satisfy the objectives of individuals and organizations

Market sees profitablility

through customer value

Marketers influence

wants BUT do not create needs

demands

wants for specific products backed by an ability to pay

Production

what can we make or do best?

Environmental Management

when a company implements strategies that attempt to shape the external environment

wants

when directed at a specific object that may satisfy you