International Business

- ocean transport - cheap, time consuming, 90 % of global volume

- land transport - costly, flexible, 9 % of global volume

- air transport - most expensive, quickest, highly predictable (berechenbar), 1 % of global volume

- Job losses in the home country but creation of new jobs in other countries for those who may otherwise face poverty

- Reduced national competitiveness (losing skills, know-how and experience)

- Reduction of the organizations capability for creative organizational development

- Long held knowledge and skills could drain away to other countries

- Lower labour costs improves companies proftis but the lower the wages abroad could pull down wages in the home country and reduce standard of living

- MNE's may be ineffective or indifferent about:

> protecting the environment

> promoting human rights

> labour practices and working conditions abroad

Governments should strive to

- keep the costs of doing business low

- ensure a strong educational system

- maximize worker flexibility to help those who lose jobs find other positions

- implement rules to guarantee minimal ethical behaviour over the supply chain

1. Segmentation by income level, lifestyle, demographic profile or desired product benefits

2. Segmentation by macro-level variables, such as level of economic development or cultural dimensions

3. Global market segment (homogeneous markets) - Customer groups who share similar characteristics across many national markets

Adaption: A firm modifies one or more elements in its marketing program to accommodate specific customer requirements in a particular market.

Standardization: A firm creates uniform elements in its marketing program, with a view to targeting entire regions, or even the global marketplace, with the same product or service

1. By standardizing aspects such as design and core manufacturing, and adapting packaging, pricing and promotion, they take advantage of efficiencies that allow them to have more resources left for the expenses of adaption.

2. It's rarely practical to produce one product for the whole world

- A key outcome of a global positioning strategy is the development of a global brand

- A global brand is a product or a service that is perceived similarly in all of the firms international markets

- Consumers prefer global branded products because branding provides a sense of trust and confidence in their purchasing

- Brand equity measures the strength, or market value of a global brand

- Global products emphasize their commonoalities rather than their differences

- Many products have some standardized components that can be assembled in various configurations to meet the needs of different markets

- A global new product planning team is a group within a firm that determines which elements of the product will be standardized and which will be determined locally and wheter to launch simultaneously (global products) or sequentially (locally adapted)

- At what price should the firm sell its product in the foreign market?

- What type of market positioning does the company want to convey from its pricing structure?

- Does the export price reflect the product quality?

- Is the price competitive?

- Should the firm pursue market penetration or skimming pricing objectives abroad?

- What type of disount and allowances (advertising) should the firm offer its foreign customers?

- Should prices differ by market segment?

- What should the firm do about product line pricing?

- What pricing options are available if the firms cost increase or decrease? Is the demand in the product elastic or inelastic?

- Are the prices going to be viewed by the foreign government as reasonable or exploitative?

- Do the foreign country's antidumping laws pose a problem?

- How to deal with fluctuating exchange rates?

- Given the lower income in much of the world, firms often feel the pressure to lower prices or reduce sizes/volumes

- Conversely prices tend to escalate because of tariffs, taxes and higher markups by foreign intermediaries

- Price variations among different markets can lead to grey market activity: legal importation of genuine products into a country by intermediaries other than authorized distributors (also known as parallel imports)

- The root cause of grey market activity is a large enough difference in price of the same product between two countries

- A tarnished brand image

- Strained (angespannt) manufacturer-distributor relations

- Disruptions in company planning

1. Aggressively cutting prices in countries targeted by grey markets

2. Reducing the amount of shipment to the country where grey market brokers purchase the product

3. Designing products with exclusive features that strongly appeal to customers in that market

4. Publicizing the limitations of grey market channels. Trademark owners publicize the disadvantage of buying grey market goods to potential buyers

Rigid cost-plus pricing: (Set a fixed price for all exports markets by adding a flat percentage to the domestic price to compensate for the added costs of doing business abroad

Flexible cost-plus pricing: Set price to accommodate local market conditions, such as customer purchasing power, demand and competitors prices

Incremental pricing: Set price to cover only variable costs, not fixed costs. This assumes that fixed costs are already paid from sales in the home or other countries

It leads to high prices because every intermediary has its margin

- Shorten the distribution channel 

- Redesign product to remove costly features

- Ship products unassembled (in Einzelteilen), as parts and components, to qualify for lower import tariffs

- Have product reclassified using a different tariff classification to qualify for lower tariffs

- Move production or sourcing to another country

- Transfer pricing is also known as intra-corporate pricing, or the pricing of intermediate or finished products exchanged among subsidairies of the same corporation located in different countries

- May be used to repatriate (zurückführen) profits from countries that restrict MNEs from taking their earnings out of the country

-May be used to shift profits out of high corporate tax country into a low corporate tax one, thereby increasing company-wide profits

- Lower corporate income tax rate

- High tariffs for the product in question

- Favourable accountin rules for calculating corporate income

- Political stability

- Little or no restriction on profit repatriation

- Strategic importance to the MNE 

- Home country based agency with international expertise

- Local agency based in the target market

- Global advertising agency that has offices in the target market

No they are forbidden in some (Spain) or restricted (Switzerland). Giveaways can be considered unethical in some cultures.

Serving a key customer in a consistent and standardized manner. For example walmart is a key customer for P&G

- Country Risks

- Currency (Financial) Risks

- Cross cultural risks

- Commercial risks

- Cultural differences

- Different negotiaton patterns 

- Weak partner

- Competitive intensity 

- Timing of entry

- Inflationary and transfer pricing

- Foreign taxation

- Losses because of exchange rates

- Unstable political system

- Bureaucracy

- Unfavourable laws and regulations for foreign firms

- Corruption

- Government intervention

Multinational Entreprises (MNE)

Increased risk exposure of internationally operating companies.

They often function as the backbone of large MNE's efficiently providing goods and services, efficiently providing goods and services that are integrated into the production process of larger MNE's.

- Reduction of barriers to trade and investment

- Industrialization, economic development and modernization

- Integration of world financial markets

- Advances in technology

- Interdependence (gegenseitige Abhängigkeit) of national economies

- Growth of global investments and financial flows

- Convergence of buyers lifestyle and preferences

- Globalization of production activities

- Globalization of services

- Rapid spread of financial or monetary crisis from one country to another.

- Offshoring and the flight of jobs

- Effect on the poor

- Effect on natural environment

- Effect on natural culture

- New business opportunities for internationalizing firms

- New risk and intense rivalry from foreign competitors

- More demanding buyers who source from suppliers worldwide

- Internationalization of firms value chain

- Absolute advantage principle

- Comparative advantage principle

- New trade theory

Trade will not only arise from countries which are different but als from countries which are identical through

- economies of scale

- increased product variety and lower prices

- Michael Porters Diamond Model

- Theory of competitive advantage of nations