Initiating international business activities takes the firm in an entirely new direction, quite different from adding a product line or hiring a few more people. Going international means that a fundamental strategic change is taking place. Companies that initiate international expansion effort and success with them, typically begin to enjoy operational improvements-such as positioning strengths in competition- long before financial improvements appear.
The first step in developing international commitment is to become aware of international business opportunities. Management must then determine the degree and timing of the firm’s internationalization.
Proactive motivation to do international business. Profits are the major proactive motivation for international business. Management may perceive international sales as a potential source of higher profit margins or of more added-on profits. Profitability is often linked with international growth-yet many corporate international entry decisions are made based on expectations of market growth rather than actual market growth.
Unique products or a technological advantage can be another major stimulus. Other proactive stimulus is special knowledge about foreign customers or market situations. Tax benefits can also play a major motivating role. A final major proactive motivation involves economies of scale.
Reactive motivations describe stimuli that result in a firm’s response and adaptation to changes imposed by the outside environment. The other words, the firms with reactive motivations go international because they have to. The motivations are competitive pressures, overproduction, declining domestic sales, excess capacity, saturated domestic markets, and proximity to customers and ports.
Going international the firm with new environments, entirely new ways of doing business, and host a new problems. The problems have a wide range. They can consist of strategic considerations, such as service delivery and compliance with government regulations. The firm needs to determine its preparedness for internationalization by assessing its internal strengths and weaknesses.
The alternatives for international business entry are licensing, franchising, and local presence. Under licensing, one firm permits another to use its intellectual property for compensation designated as royalty. The property licensed might include patents, trademarks, copyrights, technology, technical know-how, or specific business skills. The basic advantage is that it does not involve capital investment or knowledge of foreign markets. Its major disadvantage is that licensing agreements typically have limit, are often proscribed by foreign governments, and may result in creating a competitor.
There are many types of strategic alliances such as informal cooperation, contractual agreements, equity participation, joint venture, consortia, and managerial consideration.
1. Informal cooperation. In informal cooperative deals, partners work together without a binding agreement. This arrangement often takes the form of visits to exchange information about new product, processes, and technologies. The relationships are based on mutual trust and friendship.
2. Contractual agreements. Strategic alliance partners may join forces for joint R&D, join marketing, or joint production. Their joint efforts might include licensing, cross-licensing, or cross-marketing activities.
3. Equity participation. Many multinational corporations have acquired minority ownerships in companies that have strategic importance for them to ensure supplier ability and build formal and informal working relationships. The partners continue operating as distinctly separate entities, but each enjoys the strengths the other partner provides. This type is chosen because market entry and support of global operations.
4. Joint venture. Joint venture can be defined as the participation of two or more companies in an enterprise in which each party contribute assets, has some equity, and share risk.
5. Consortia. The consortia pool their resources for research into technologies ranging from artificial intelligence to semiconductor manufacturing.
6. Managerial consideration. The first requirement of inter firm cooperation is to find the right partner. Partner should have an orientation and goals in common and should bring complementary and relevant benefits to the endeavours.
Senin, 18 Januari 2010
CHAPTER 10: BUILDING THE KNOWLEDGE BASE
The tools and techniques of international research are the same as those of domestic research. The difference is in the environment to which the tools are applied. The four primary reasons for this difference are new aparameters, new environmental factors, and increase in the number of factors involved, and a broader definition of competition.
New Parameters
In crossing national borders, a firm encounters parameters not found in domestic business. New parameters also emerge because of differing modes of operating internationally. Managers must therefore obtain information in order to make good business decisions.
New Environmental Factors
When going international, a firm is exposed to an unfamiliar environment. Management needs to learn the culture of the host country understand its political systems and level of stability, and comprehend the existing differences in societal structural and languages.
The Number of Factors Involved
Environmental relationship need to be relearned whenever a firm enters a new international market. The numbers of changing dimensions increase geometrically. Coordination of the interaction among the dimensions becomes increasingly difficult because of their sheer number. Coordination is crucial to the international success of the firm for two reasons. First, in order to exercise some central control over its international operations, a firm must be able to compare results and activities a cross countries. Second, the firm must be able to learn from its international operations and must find ways to apply the new lessons learned to different market.
Broader Definition of Competition
Firm must determine the breadth of the competition, track competitive activities, and evaluate their actual and potential impact on company operations on going basis.
RECOGNIZING THE NEED FOR INTERNATIONAL RESEARCH
A major reason why managers are reluctant to engage in international research is their lack of sensitivity to differences in culture, consumer tastes, and market demands. A second reasons is a limited appreciation for different environments abroad. A third reasons is lack of familiarity with national and international data sources and inability to use international data once they are obtained. Finally, firms often build their international business activities gradually, frequently based on unsolicited orders.
CONDUCTING SECONDARY RESEARCH
Identifying Sources of Data
Secondary data is information that already has been collected by some other organization. The principal ones are governments, international institution, service organizations, trade associations, directories, and other firms.
Selection of Secondary Data
Secondary data should be evaluated regarding the quality of their source, their regency, and their relevance to the task at hand.
Interpreting and analyses of secondary data
Once secondary data have been obtained, the researcher must creatively convert them into information. They can often be used only as proxy information in order to arrive at conclusions that address the research objectives.
Data Privacy
Many societies are increasingly sensitive to the issue of data privacy, and the concern has grown exponentially as result of e-business.
CONDUCTING PRIMARY RESEARCH
Even though secondary data are useful to the researcher, on many occasions primary information will be required. Primary data are obtained by a firm to fill specific information needs.
Industrial Versus Consumer Sources Of Data
The researcher must decide whether research is to be conducted in the consumer or the industrial product area, which in turn determines the size of the universe and respondent accessibility.
Determining The Research Technique
Selection of the research technique depends on variety of factors. First, the objectivity of the data sought must be determined. Unstructured data will require more open-ended questions and more time than structured data. Finally, it must be decided whether to collect historical facts or information about future developments. On the desired data structure is determine, researcher must choose a research technique. Such as : Interview, Focus Groups, Observation, Surveys, and Web Technology.
THE INTERNATIONAL INFORMATION SYSTEM
An information system can provide the decision maker with basic data for most on going decisions. To be useful to the decision maker, the system must have certain attributes. First of all, the information must be relevant. Second, the information must be timely. Third, information must be flexible. Fourth, information contained in the system must be accurate. Fifth, the system’s information must be reasonably exhaustive. Sixth, the collection and processing data must be consistent. Finally, to be useful to managers, the system must be convenient to use. Data gathered through:
Environmental Scanning
Environmental Scanning activities provide continuous information on political, social, and economic affairs internationally; on changes of attitudes of public institution and private citizens, and on possible upcoming alterations.
Delphi Studies
To enrich the information obtained from factual data, corporations and governments frequently resort to the use of creative and highly qualitative-data gathering method. One approach is through Delphi studie
New Parameters
In crossing national borders, a firm encounters parameters not found in domestic business. New parameters also emerge because of differing modes of operating internationally. Managers must therefore obtain information in order to make good business decisions.
New Environmental Factors
When going international, a firm is exposed to an unfamiliar environment. Management needs to learn the culture of the host country understand its political systems and level of stability, and comprehend the existing differences in societal structural and languages.
The Number of Factors Involved
Environmental relationship need to be relearned whenever a firm enters a new international market. The numbers of changing dimensions increase geometrically. Coordination of the interaction among the dimensions becomes increasingly difficult because of their sheer number. Coordination is crucial to the international success of the firm for two reasons. First, in order to exercise some central control over its international operations, a firm must be able to compare results and activities a cross countries. Second, the firm must be able to learn from its international operations and must find ways to apply the new lessons learned to different market.
Broader Definition of Competition
Firm must determine the breadth of the competition, track competitive activities, and evaluate their actual and potential impact on company operations on going basis.
RECOGNIZING THE NEED FOR INTERNATIONAL RESEARCH
A major reason why managers are reluctant to engage in international research is their lack of sensitivity to differences in culture, consumer tastes, and market demands. A second reasons is a limited appreciation for different environments abroad. A third reasons is lack of familiarity with national and international data sources and inability to use international data once they are obtained. Finally, firms often build their international business activities gradually, frequently based on unsolicited orders.
CONDUCTING SECONDARY RESEARCH
Identifying Sources of Data
Secondary data is information that already has been collected by some other organization. The principal ones are governments, international institution, service organizations, trade associations, directories, and other firms.
Selection of Secondary Data
Secondary data should be evaluated regarding the quality of their source, their regency, and their relevance to the task at hand.
Interpreting and analyses of secondary data
Once secondary data have been obtained, the researcher must creatively convert them into information. They can often be used only as proxy information in order to arrive at conclusions that address the research objectives.
Data Privacy
Many societies are increasingly sensitive to the issue of data privacy, and the concern has grown exponentially as result of e-business.
CONDUCTING PRIMARY RESEARCH
Even though secondary data are useful to the researcher, on many occasions primary information will be required. Primary data are obtained by a firm to fill specific information needs.
Industrial Versus Consumer Sources Of Data
The researcher must decide whether research is to be conducted in the consumer or the industrial product area, which in turn determines the size of the universe and respondent accessibility.
Determining The Research Technique
Selection of the research technique depends on variety of factors. First, the objectivity of the data sought must be determined. Unstructured data will require more open-ended questions and more time than structured data. Finally, it must be decided whether to collect historical facts or information about future developments. On the desired data structure is determine, researcher must choose a research technique. Such as : Interview, Focus Groups, Observation, Surveys, and Web Technology.
THE INTERNATIONAL INFORMATION SYSTEM
An information system can provide the decision maker with basic data for most on going decisions. To be useful to the decision maker, the system must have certain attributes. First of all, the information must be relevant. Second, the information must be timely. Third, information must be flexible. Fourth, information contained in the system must be accurate. Fifth, the system’s information must be reasonably exhaustive. Sixth, the collection and processing data must be consistent. Finally, to be useful to managers, the system must be convenient to use. Data gathered through:
Environmental Scanning
Environmental Scanning activities provide continuous information on political, social, and economic affairs internationally; on changes of attitudes of public institution and private citizens, and on possible upcoming alterations.
Delphi Studies
To enrich the information obtained from factual data, corporations and governments frequently resort to the use of creative and highly qualitative-data gathering method. One approach is through Delphi studie
CHAPTER 9: EMERGING MARKETS
Doing Business with Transition Economies
Special concerns must be considered by the international manager when dealing with former centrally planned economies in transition. Although the emerging market economies offer vast opportunities for trade, business practices mat be significantly different from those to which the executive is accustomed.
Many transition economies face major infrastructure shortages. These infrastructure shortcomings will inhibit economic growth for years to come. Capital shortages are also a major constraint. Even though major programs have been designed to attract hidden personal savings into the economy, transition economies must rely to a large degree on attracting capital from abroad.
Firms doing business with transition economies often encounter interesting demand condition. Buyers’ preferences are frequently vague and undefined. Available market information is inaccurate.
Adjusting to Global Change
In the emerging market economies, the key to international business success will be an understanding of the fact that societies in transition require special adaptation of business skills and time to complete the transformation. Due to their growing degree of industrialization, other economies are also becoming part of the world trade and investment picture. In turn, it must be recognized that these global changes will precipitate adjustments in industrialized nations, particularly in the manufacturing and trade sectors. Adapting early to these changes can offer new opportunities to the international firm. Large populations offer new potential consumer demand and production capability. Many opportunities arise out of the enthusiasm with which a market orientation is embraced in some nations.
State Enterprises and Privatization
One other area where the international business executive must deal with a period of transition is that of state-owned enterprises that have been formed in non-communist nations for reasons of national or economic security. These firms may inhibit foreign market entry and they frequently reflect in their transactions the overall domestic and foreign policy of the country rather than any economic rationale. The current global trend toward privatization offers new opportunities to the international firm, either through investment or by offering business skills and knowledge to assist in the success of privatization.
The Role of the Multinational Firm
However, multinational firms have experienced higher rates of success in transition economies for a variety reasons. Multinational corporations are very often the only ones that can realistically make a difference in solving some of the problems in developing markets. Developing new technologies or products is a resource-intensive task and requires knowledge transfer from one market to another. Without multinationals as catalysts, nongovernmental organizations, local governments, and communities will continue to flounder in their attempts to bring development to the poorest nations in the world.
Chapter 8: ECONOMIC INTEGRATION
Economic Integration is best viewed as a spectrum. At one extreme we might envision a truly global economy in which all countries share a common currency and agree to a free flow of goods, services, and factors of production.
Level of Economic Integration:
a. The Free Trade Area
The free trade area is the least restridctive and loosest form of economic integration among countries. In a free trade area, all barriers to trade among member countries are removed.
b. The Customs Union
The customs union in one step further along spectrum of economic integration. Like the members of a free trade area, members of a customs union dismantle barriers to trade in goods and services among themselves.
c. The Common Market
Further still along the spectrum of economic integrations is the common market. Like the customs union, a common market has no barriers to trade among members and has a common external trade policy.
d. The Economic Union
The creation of a true economic union requires integration of economic policies in addition to the free movement of goods, services, and factors of production across borders. Under an economic union, members wolud harmonize monetary policies, taxation, and government spending. In addition, a common currency would be used by all members.
Arguments Surrounding Economic Integration
A number of arguments surround economic integration. They center on (1) trade creation and diversion, (2) the effects of integration on import prices, competition, economics of scale, and factor productivity, and (3) the benefits of regionalism versus nationalism.
European Integration
1. Formation of a free trade area: the gradual elimination of tariffs, and other barriers to trade among members.
2. Formation of customs union: the creation of uniform tariff schedule applicable to imports from the rest of world.
3. Formation of common market: the removal of barriers to the movement of labor, capital, and business enterprises.
4. The adoptional of common agricultural policies.
5. The creation of an investment fud to channel capital from the more advanced to the less developed regions of community.
Economic Integration And The International Manager
Harmonization efforts may result in standardized regulations, which can positively affect rpoduction and marketing efforts. Decisions regarding integrating markets must be assessed from four different perspectives : the range and impact of changes resulting from integration, development of strategies to relate to these changes, organizational changes needed to exploit these changes, and strategies to influence changes in a more favorable direction.
Cartels And Commodity Price Agreements
International commodity price agreements and cartels represent attempts by producers of primary products to control sales revenue and export earnings. The former involves an agreement to buy or sell a commodity to influence prices. The latter is an agreement by suppliers to fix prices, set production quotas, or allocate sales territories. OPEC for example, has had inestimable influence on the global economy during the past 40 years. This system is somewhat analogous to a managed exchange rate system, in which authorities buy and sell to influence exchange rates. International commodity agreements are currently in effect for sugar, tin, rubber, cocoa, and coffee.
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