International Business

+ Less time consuming and quicker to execute, immediate grab of market share

+ pre-empt competitors

- Complex task involving bankers, lawyers, M&A specialists

- Restrictions on foreign acquisitions in host countries

- Often overpay the assets! (too much goodwill)

- clash of cultures

- Integrating the operations of both companies takes to long or doesn't happen

+ Reduce risk of losing control over core competencies

+ Tight control over operations

+ Location and experience curve economies

+ Less potential for unpleasant surprise than with M&A

- Most costly and risky

- Slower to establish (potential to lose market share because to late)

Technological know-how - avoid licencing or JV to minimize risk for theft go for wholly owned company

Management know-how - brand must be well protected, wholly owned or JV

- The greater the pressure the more likely the cost of combination of export and wholly owned companies

- Firms pursuing global standardization and transnational strategies tend to prefer wholly owned company

Licensing, franchising, JV as well as exports are lower cost entry modes that allow for high local responsiveness

- Transport costs

- high weight (high transportation cost)

- perishable (verderblich) goods

- Export if liberalized and deregulated markets

- Joint venture in case of export or foreign direct investment restrictions

- Wholly owned subsidiaries if high trade barriers or disadvantageous legal requirements in HOME market

The procurement of selected value adding activities or processes from independent suppliers

The procurement of products or services from independent suppliers or company-owned subsidiaries located abroad for consumption in the home country or a third country.

Captive sourcing - firms-owned product facilities

Contract manufacturing - independent supplier

The relocation of business processes or entire manufacturing facilitiy to a foreign country

- Technological advance

- Lower costs of international business

- Rapid economic transformation in emerging markets

- Lower costs 

- Reduce delivery time 

- Focus on core competencies

- Advantages relative to competitors

- Ability to achieve strategic goals (faster corporate growth, access to qualified personnel, access to new markets etc.)

- Large-scale manufacturing whose primary competitive advantage is efficiency and low costs 

- Industry with high labor intensity in product and service production

- Companies serving uniform customer needs, standardized technologies and processes in production and other value-chain activities

- Firms offering established products with predictable pattern of sales 

- Firms with information intensity whose functions and activities can be easily transmitted via the internet

Outsource or not? Make or buy? Internalize or externalize?

Core competence or activites that involve that use of valuable intellectual property

- Countrys financial structure

- Availability and skill of people

- Business environment

Low control strategy (manufactoring contracts)

High control strategy (captive sourcing, company owned subsidiaries)

Outsourcing of business functions to independent suppliers such as accounting, human resources, IT services and customer services

- Lower than expected cost savings

- Environmental factors, such as exchange rate fluctuations, trade barriers and labour strikes 

- Weak legal environment

- Inadequately or low-skill workers

- Overreliance of suppliers

- Risk of creating competitors

- Erosion of morale and commitment among home-country employees due to outsourcing jobs

- Lack of coordination between the suppliers in multiple tier networks

- Natural disruptions (earthquake, ash clouds, flooding)

- man-made disruptions (armed conflict, labour unrest, terrorism)

- innovation (technology, organization, business model)

- customer dynamics (local tastes, disposable income levels, attitudes towards social/environmental impact

- macroeconomics (financial crises, demographic shifts)

- state (regulation, financial policy, fiscal policy, trade policy)

- Go offshore for the right reason 

- Get employees on board

- choose carefully between a captive operation and contracting with outside suppliers)

- choose suppliers carefully

- emphasize effective communication with suppliers

- invest in supplier development and collaboration 

- safeguard interest

- higher coordination between the different parts of the supply chain at all levels

The more intermediaries the higher the overproduction, because every new produces a bit too much because of a too optimist forecast if coordination is bad!

- Incentive obstacles (misalignment of total supply chain objectives and individual supply chain objectives) - solution: aligning goals and objectives

- information processing obstacles (lack or delay of information) - solution: improving information accuracy

- operational obstacles (orders not aligned with deliveries) - solution: improving operational perfomance

- pricing obstacles (pricing decisions, price fluctuation) - solution: designing pricing strategies to stabilize orders

- behavioral obstacles (each stage views its action locally) solution: building strategic partnership and trust

- Packing

- Labeling

- Documentation

- Insurance requirements

- 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)