ABDM3233 International Business Planning

Tutorial 9
Case Study Question
Based on the case above, explain the costs of foreign direct investment (FDI)
towards the host country, Australia.
(9 marks)
1. Repatriation of earnings: Foreign investors are likely to repatriate earnings
from host country back to their home country. Such capital outflow could
bring impact on Australias balance of payment.
2. Adverse effect on competition: The competition between foreign investors
and local companies may end up with local companies driven out of
business. In order words, kill off competition.
3. National Sovereignty and Autonomy: Key decisions that affect the host
countrys economy may be made by a foreign parent that has no real
commitment to the Australia.
(3 reasons with elaboration X 3 marks =
9 marks)
(b)

Based on your opinion, analyse and suggest ways for the Australian
government to attract and retain foreign investors.
(16 marks)
1. Focus on shifting to service-based industry rather than dependent heavily
on manufacturing and mining industries. With the strong Australian dollars,
government can work on ways to attract investors in financial service sector
to boosts its economy.
2. Simplification of the industrial relations process in engaging between
employer and employee relation is likely to attract investors as oppose to
bureaucracy and complicated process will drive investors away.
3. Availability of world-class research infrastructure and skilled labour to
attract more investment in research and development sector.
4. Public policy of the government such as incentives or proper intellectual
property protection in placed could also attract and retain technology
related investors. It could also promote and improve the image of Australia
as a research and development country.
16

(4 ways with elaboration X 4 marks =

marks)

[Total:
25 marks]
Essay
5. What are the three stages of the strategy-formulation process, and what is
involved at each stage?
Stage one is to identify company mission and goals. This means defining the
business and its main objectives.
Stage two is to identify company core competency and value-creating activities.
This means analyzing a firms unique abilities, primary and support activities, and
the business environment.
Stage three is to formulate strategies. This means selecting a multinational or
global strategy and then formulating corporate-, business-, and department-level
strategies.

6. What are the main differences between the three types of business-level
strategy?
A low-cost leadership strategy exploits economies of scale to have the lowest cost
structure of any competitor in an industry. Example : Tesco, NSK ..
A differentiation strategy designs products that buyers perceive as unique
throughout an industry. Example : LV, Prada,Apple, Samsung.
A focus strategy focuses on the needs of a narrowly defined market segment by
being the low-cost leader, by differentiating its product, or by doing both. Example :
Lenovo, Ikea

7. Describe any three organizational structures that are common for a vast
majority of international companies.
Answer: An international division structure separates domestic from
international business activities by creating a separate international division
with its own manager. In turn, the international division is typically divided
into units corresponding to the countries in which a company is activesay,
China, Indonesia, and Thailand. Within each country, a general manager
controls the manufacture and marketing of the firm's products. Each country
unit typically carries out all of its own activities with its own departments
such as marketing and sales, finance, and production.
Because the international division structure concentrates international

expertise in one division, divisional managers become specialists in a wide

variety of activities such as foreign exchange, export documentation, and
host government relations. By consigning international activities to a single
division, a firm can reduce costs, increase efficiency, and prevent
international activities from disrupting domestic operations. These are
important criteria for firms new to international business and whose
international operations account for a small percentage of their total
business.
An international area structure organizes a company's entire global
operations into countries or geographic regions. The greater the number of
countries in which a company operates, the greater the likelihood it will
organize into regionssay, Asia, Europe, and the Americasinstead of
countries. Typically, a general manager is assigned to each country or region.
Under this structure, each geographic division operates as a self-contained
unit, with most decision making decentralized in the hands of the country or
regional managers. Each unit has its own set of departmentspurchasing,
production, marketing and sales, R&D, and accounting. Each also tends to
handle much of its own strategic planning. Management at the parentcompany headquarters makes decisions regarding overall corporate strategy
and coordinates the activities of various units.
The international area structure is best suited to companies that treat each
national or regional market as unique. It is particularly useful when there are
vast cultural, political, or economic differences between nations or regions.
When they enjoy a great deal of control over activities in their own
environments, general managers become experts on the unique needs of
their buyers. On the other hand, because units act independently, allocated
resources may overlap and cross-fertilization of knowledge from one unit to
another may be less than desirable.
A global product structure divides worldwide operations according to a
company's product areas. For example, divisions in a computer company
might be Internet and Communications, Software Development, and New
Technologies. Each product division is then divided into domestic and
international units. Each functionR&D, marketing, and so forthis thus
duplicated in both the domestic and international units of each product
division.
The global product structure is suitable for companies that offer diverse sets
of products or services because it overcomes some coordination problems of
the international division structure. Because the primary focus is on the
product, activities must be coordinated among a product division's domestic
and international managers so they do not conflict.
8. Discuss the major points of differences between centralization and
decentralization, and explain the differences between an international area

structure and a global product structure.

Answer: A vital issue for top managers is determining the degree to which
decision making in the organization will be centralized or decentralized.
Centralized decision making concentrates decision making at a high
organizational level in one location, such as at headquarters.
Decentralized decision making disperses decisions to lower organizational
levels, such as to international subsidiaries.
In a discussion of centralization versus decentralization of decision making, it
is important to remember two points:
1. Companies rarely centralize or decentralize all decision making. Rather,
they seek an approach that will result in the greatest efficiency and
effectiveness.
2. International companies may centralize decision making in certain
geographic markets while decentralizing it in others. Numerous factors
influence this decision, including the need for product modification and the
abilities of managers at each location.
An international area structure organizes a company's entire global
operations into countries or geographic regions. The greater the
number of countries in which a company operates, the greater the likelihood
it will organize into regionssay, Asia, Europe, and the Americasinstead of
countries. Typically, a general manager is assigned to each country or region.
Under this structure, each geographic division operates as a self-contained
unit, with most decision making decentralized in the hands of the country or
regional managers. Each unit has its own set of departmentspurchasing,
production, marketing and sales, R&D, and accounting. Each also tends to
handle much of its own strategic planning. Management at the parentcompany headquarters makes decisions regarding overall corporate strategy
and coordinates the activities of various units.
The international area structure is best suited to companies that
treat each national or regional market as unique. It is particularly
useful when there are vast cultural, political, or economic differences
between nations or regions. When they enjoy a great deal of control over
activities in their own environments, general managers become experts on
the unique needs of their buyers. On the other hand, because units act
independently, allocated resources may overlap and cross-fertilization of
knowledge from one unit to another may be less than desirable.
A global product structure divides worldwide operations according
to a company's product areas. Each product division is then divided into
domestic and international units. Each functionR&D, marketing, and so
forthis thus duplicated in both the domestic and international units of each

product division.
The global product structure is suitable for companies that offer diverse sets
of products or services because it overcomes some coordination problems of
the international division structure. Because the primary focus is on the
product, activities must be coordinated among a product division's domestic
and international managers so they do not conflict.