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International Business Followers
THURSDAY, JANUARY 22, 2009
dimensions & mode sof IB, Risk in IB Lecture No. - 3 International business Dimensions & modes of IB Introduction · When any business across the border of its domestic country & reach foreign countries for carrying out their business, then it is called that, this firm is indulging in International business. · International markets provide a wide range of opportunities compared to the domestic markets. But global business is inherently more risky than the domestic business. However, the firms prefers to go international, if the perceived benefits outweigh the anticipated risks. · International business firms, have the fundamental goals of expanding market share, sales revenue & increase in profits. · Expanding markets in oversees countries is one of the strategies to achieve these fundamental goals. · The firms have alternative forign markets & alternative modes to enter that countries. Firstly the country is selected, & for the sake of it, the firms have to (1) Analyse alternative foreign markets (2) Evaluate the respective costs, benefits & risks & select one that hold the most potential for entry. The firms haas to analyses the alternative foreign markets by taking the following factors into consideration: Current & potential size of alternative markets ,which include following factors i. Size of the population of the country/market ii. GDP of the country & per capita GDP iii. Urban / rural areas iv. Purchasing power of potential customer level of competition the firm will face in each of theseb alternative markets Legal & political environment socio-cultural environment The next step in entering foreign markets is the assessment costs, benefits & risks associated with carrying out business in a particular country, which includes Costs: direct cost , opportunity cost Benefits: high sales profits, lower acquisition & manufacturing costs, competitive advantage, access of new technology, cheap labour & other resources in host country, foreclosing of markets to competitors, opportunity to achieve synergy Risks: exchange rate fluctuations, operating complexity, direct financial losses due to misassessment of market potential, Govt. seizure of property
DIMENSIONS & MODES OF ENTRY IN FOREIGN MARKETS Dimensions of International Business (1) Trading : exporting & importing (2) Manufacturing & Marketing : manufacturing at home country & marketing in foreign country (3) Sourcing & Marketing: manufacturing at foreign country & marketing in home & foreign country (4) Global Sourcing & Production: manufacturing at global level through sourcing from different forign countries & production at home or host country (5) Services : telecommunication, banking, tourism & transportation services (6) Investments : portfolio investment, setting wholly owned manufacturing facility in abroad, investment in foreign countries etc.
Modes of Entry in Foreign Markets: Dimensions in international business show the presence of business firm in foreign market & quantity of foreign investment needed for each routes of globalization. The usual routes of globalization on the basis of their dimensions are following: Exports & Imports Tourism & Transportation: including industries like shipping, airlines, hotel & travel agency Use of assets: licensing & franchising Performance of services: turnkey operations & management contracts Direct investment: joint venture, wholly owned subsidiary, portfolio investment
Direct Investment Performance of Services Use of Assets Tourism & Transportation
Exports & Imports High
Foreign Investment
Low Low Presence in High Foreign Market
ROUTES OF GLOBALISATION
Lecture No. -4 Topic- STRUCTURE OF IB ENVIRONMENT Lecture OutcomeInternal Environment, external Environment, Types of External Encironment STRUCTURE OF IB ENVIRONMENT Environment of International business includes basically four environments These are: (1) POLITICAL-LEGAL ENVIRONMENT (2) TECHNOLOGICAL ENVIRONMENT (3) ECONOMY ENVIRONMENT (4) SOCIO-CULTURAL ENVIRONMENT
Lecture No. -5 Topic-Risk in IB Lecture Outcome(a) Different types of risk political risk, legal risk, culture risk, economic risk , technology risk, other risk (b) components of each risk © management of all type of risk (1) POLITICAL RISK: corporate face political risk when they conduct business with the outside world. Political risk is any governmental action or politically motivated event that could adversely affect the long term profitability or value of firm. (a) Macro Political Risk e.g. Barriers to repatriation of profits, Confiscation of properties, Loss of technology & other intellectual property Campaigns against foreign goods Mandatory labour legislation Civil wars Inflation Currency devaluations (b) Micro political Risk e.g. · kidnapping, · terrorist, threats, · increased taxation, · Official dishonesty MANAGING POLITICAL RISKS (1) Avoid Investment (2) Adaptation (3) Host country has no option (4) Influence local politicians- (lobbying) (5) Terrorism consultants (2) LEGAL RISK LEGAL SYSTEM (1) Islamic Law (2) Common Law (3) Marxist Law (4) Civil or code law AREAS OF CONCERN FOR MNCs (a) Protection of IPRS (b) Product liability & safety (c) Computation law (d) Bribery & corruption (e) Environmental law (f) Labour laws (g) Contracts law (h) Shipping of goods (i) Advertisement& sales promotion laws (2) TECHNOLOGICAL RISK IMPACT OF TECHNOLOGY (a) social implication (b) economic implication (c) plant level changes Implication & MNCs MNCs E-Commerce Telecommunication Transportation Technology Transfer Markets Production Technology & MNC’s
(3) CULTURAL RISK Elements of culture: (1) LANGUAGE (2) EDUCATION (3) RELIGION’ (4) AESTHETIC (5) ATTITUDES (6) CUSTOMS & MANNERS IMPLECATIONS FOR IB
Multi-culture Sread cross cultural literacy Cultural & competitive advantage Compatibility between strategy & culture Managing diversity (5) ECONOMIC RISK COMPONENTS : (b) income classification of countries · Developing Countries · Developed Countries (c) economic system classification · Pure market Economy · Pure centrally planned Economy · Mixed Economy (d) region wise classification of countries (e) economic trade policies · Outward & Inward looking policies (6) OTHERS (a) Huge forign indebtness (b) Exchange rate risk (c) Entry requirements (d) Tariff, Quatas & trade barrier (e) Corruption (f) Bureaucratic practices of Govt. (g) Technological pirating (h) High cost Posted by meenusharmamba at 1:55 AM
2 comments: mohan raju October 9, 2011 at 5:21 AM very clear and easy to understand Reply MOVIE CAFE November 5, 2017 at 6:10 PM Gud Reply
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