E V

UL
OD
M

International Business
Management
 International Business
m a n a g e m e n t

Module V

International business functional strategies:

International production strategy
international financing strategy
international human resources strategy and
international marketing strategy.
 International Business
m a n a g e m e n t

Strategy:
actions that managers must take to
attain the goals of the firm
 A Testable Framework of Product and Promotion Adaptation
Product and Industry
Technology
Cultural Specificity
Orientation of Product Uniqueness Type of Product
of Product
Industry

EXPORT MARKET
COMPANY

Firms International Similarity of Legal

Experience Regulations
Product Adaptation
Export Sales Goal - Upon Entry Competitiveness Of
for the Venture - After Entry Export Market

Promotion Adaptation Product Familiarity Of

Entry Scope
- Positioning h Export Customers
- Packaging/Labeling
- Promotional Approach

Source: S.T. Cavusgil, Shaoming Zou, and G.M. Naidu. “ Product and Promotion Adaptation in Export Venturs: An Empirical Investigation,”
Journal of International Business Studies 24, no 3, (1993,485.
 The View from
International Business
m a n a g e m e n t

• Our global strategy used to center on

“world cars,” which we would modify
slightly to accommodate demand in
different markets. Today our focus is
shifting to models that we develop and
manufacture especially for selected
regional markets.
 International Business
m a n a g e m e n t
The View from Honda
“We are the most international of the Japanese
companies. At the moment we are the most
diversified, and we will be more diversified in
the future. Still, I think it would be very hard to
build a one-type world car. In the end, I don’t
think it would be very efficient.”

---Nobuhiko Kawamoto
President and CEO, Honda Motor Company
Production Strategy International Business
m a n a g e m e n t

Essential to achieving objectives

Reflects overall firm strategy

Low-cost
Low-cost leadership
leadership

Differentiation
Differentiation

Focus
Focus
Capacity Planning International Business
m a n a g e m e n t

Assessing a company’s ability to produce

enough output to satisfy market demand

1. Number of work shifts

2. Number of employees
3. Size of facilities
4. Subcontracting
 Facilities Location Planning
Selecting the location for production facilities
Location
Centralized Decentralized
economies

Economic
Economicbenefits
benefits Centralized
Centralizedproduction
production Decentralized
Decentralizedproduction
production
derived
derivedfrom
fromlocating
locating tends
tendstotobe
bewell-suited
well-suited tends
tendstotobe
bewell-suited
well-suited
production
productionactivities
activities totoglobal
globalstrategy
strategy totomultinational
multinationalstrategy
strategy
ininoptimal
optimallocations
locations
 Process Planning
Deciding the process that a company will
use to create its product

Standardization
• Suits low-cost leadership

Adaptation
• Suits differentiation and focus
Facilities Layout Planning
Deciding the spatial arrangement of
production processes within
facilities

• Reflects business-level strategy

• Location’s geography also a factor

Make-or-Buy Decision
Raw materials
Intermediate components
Availability
Needed modifications
Cost considerations
 Decision to Make
Vertical integration
Extend control over inputs (backward integration)
or output (forward integration)

Reasons to make
Lower cost

Greater control
 Decision to Buy
Outsourcing
Outsourcing Reasons
Reasons to
to buy
buy
Lower
Lowerrisk
risk
Buying
Buyingfrom
fromanother
another
company
companyaagood
goodoror Greater
Greaterflexibility
flexibility
service
servicethat
thatis
isnot
not
central
centralto
toaacompany’s
company’s Market
Marketpower
power
competitive
competitiveadvantage
advantage
Barriers
Barriersto
tobuying
buying
 Quality Improvement
Total Quality
ISO 9000
Management (TQM)

International Standards
Continuous quality improvement
Organization 9000 is a
to meet or exceed customer
certification a firm gets when
expectations through
it meets the highest quality
quality-enhancing processes
standards in its industry
 Other Production Issues

Just-in-time
Shipping Inventory
(JIT)
costs costs
manufacturing
 Decision to Reinvest or Divest
Reinvest Divest

• Promising outlook
• Unprofitable outlook
• Growing market
• Social unrest
• Highest return
Financing Business Operations
Financial resources needed to:
 Pay operating expenses
 Expand production capacity
 Enter new geographic markets
 Develop and reward employees
 Invest in new projects
and much more…
Borrowing
Difficulties:
 Exchange-rate risk

 Currency inconvertibility

 Restricted capital flows

Back-to-Back Loan
American Depository Receipts
Certificates traded in the U.S. that represent a
specific number of shares in a non–U.S.
company

 No currency-conversion fees
 No minimum purchase amounts
 Attractive to U.S. mutual funds
 Emerging Stock Markets
Hot money:
Liquid
Liquid investments
investments that
that
Extreme can
can be
be quickly
quickly withdrawn
withdrawn

volatility Patient money:

Holdings
Holdings of
of factories,
factories,

Poor equipment,
equipment, and
cannot
cannot be
and land
be quickly
land that
that
quickly withdrawn
withdrawn
regulation
 Internal Funding

Equity,
Equity, debt,
debt, Revenue
Revenue from
from
and
and fees
fees operations
operations
Subsidiaries
Subsidiariesfinanced
financedby by Money
Moneyearned
earnedfromfrom
parents,
parents,who
whoarearelater
later sales
salesisisthe
thelifeblood
lifeblood
rewarded
rewardedfinancially
financially ofofevery
everycompany
company
 Capital Structure
Mix of equity, debt, and internal funds used to finance activities
 Small Business Financing
Tips for entrepreneurs to find funds:
 Contact business schools with strong international programs
 Consult your country’s commerce department
 Leverage your contacts
 Attend industry events in other countries
 Consider hiring an intermediary
 International Business
m a n a g e m e n t
Three approaches to IHRM
• Cross-cultural management approach
– Examines human behaviour within organisations from an
international perspective.
• Comparative HRM
– Seeks to describe, compare and analyse HRM systems in various
countries.
• HRM in multinational enterprises (MNEs)
– Explores the implications of the process of internationalisation
on HRM activities and policies.
 Figure 14.1 Model of IHRM

Source: Adapted from P.V. Morgan, ‘International human resource management: Fact or fiction?’, Personnel Administrator, 31(9),
1986, p.44.
 International Business
m a n a g e m e n t
Types of employees in an MNE
• Parent-country nationals (PCNs) 
– Employees who were born and live in a parent country.
 A parent (or home) country: the country in which a company’s corporate
headquarters is located.
• Host-country nationals (HCNs) 
– Employees born and raised in a host country.
 Host country: a country in which the MNE seeks to locate or has already
located a facility.
• Third-country nationals (TCNs) 
– Employees born in a country other than a parent or host country.
 International Business
m a n a g e m e n t
Types of international work
• Expatriates
– An employee sent by his/her company in one country
to work in a different country.

• Global team project

– Bringing together employees from different locations
to complete a specific team project.

• Short-term assignments
– Sending employees on assignments, such as a three-month assignment, to a foreign location.

• Virtual assignment.
– Assignments requiring employees in different locations
to use information technology to communicate on job projects and tasks.
 International Business
m a n a g e m e n t

Factors which differentiate international from domestic HRM

• More HR activities
• The need for a broader perspective
• More involvement in employees' personal lives
• Changes in emphasis with variable mix of expatriates and
locals in workforce
• Risk exposure
• More external influences
 Variables that moderate differences between domestic and
international HRM

Source: P.J. Dowling, University of Canberra. Used with permission.

International Business
m a n a g e m e n t
 THE INTERNATIONAL MARKETING TASK
Foreign environment
(uncontrollable)
Political/legal 1 Economic
forces Domestic environment forces
(uncontrollable) 2
7 Competitive
Political/
Cultural legal (controllable) structure Competitive
Forces
forces forces Price Product Environmental
7 uncontrollables
3 country market A
Promotion Channels of
distribution
6

Geography Level of
Economic climate Technology
and
Infrastructure 4
5
Structure of
distribution
 International Business
m a n a g e m e n t

INTERNATIONAL MARKETING CONCEPTS

1. Domestic market only

2. Domestic market extension
3. Multidomestic market concept
4. Global marketing concept
 International Business
m a n a g e m e n t

ALTERNATIVE MARKET ENTRY STRATEGIES

• exporting
• internet
• licensing
• franchising
• joint ventures
• wholly owned subsidiaries (acquisitions, green field)
• strategic alliances
 MARKET ENTRY STRATEGIES
DECISION CRITERIA FOR MODE OF ENTRY:
Environment
Firm specific specific

• need ofsize
market control
and growth
• risk
company objectives
• government
internal resources,
regulation
assets and capabilities
• competitive environment
• local infrastructure
 International Business
m a n a g e m e n t
LEVELS OF SEGMENTATION
• macrosegmentation
(grouping the countries)

• microsegmentation
(develop segments at country level
- derived microsegmenation
- cross-country segmentation)
 International Business
m a n a g e m e n t

Segmentation variables for consumer markets

Geographic Demographic
* region * age, sex
* city size * family size
* urban/rural * income, occupation
* education, religion

Psyhographic Behavioural
* social class * buying occasions
* lifestyle * benefits sought
* personality * user status
* usage rate
* loyalty status
* attitudes towards product
 Segmentation variables for industrial markets

Demographic Operating variables

* industry * technology
* company size * user/non user status
* location * customer capabilities

Purchasing approaches Other factors

* purchasing function organization * situational factors: urgency, size of
* power structure order
* general purchase policies * personal characteristics: attitudes
* purchasing criteria towards risk, loyalty
 TARGET MARKETING STRATEGIES
• universal (global ) segments = cross-border segments that
transcend national bounderies

• national segments = local segments that differ from country

to country

• mixed segments = pursue both universal and local segments