international business

International Business

The study of transactions taking place across national boarders for the purpose of satisfying the needs of individuals and organisations.

Multinational Enterprises (MNE’s)

a multinational plant firm that controls and coordinates operations in at least two

Trade

the exchange of goods and services between countries.

Imports

goods and services produced in one company and brought into another.

Exports

goods and services produced in one country and sold to another.

Foreign Direct Investments

Equity funds invested in other nations/ abroad investments.

Economic globalisation

the growing interdependence of locations and economic actors across countries and regions 

21st centruy impact on globalisation

sped up, economy are becoming more similar and intertwined,

Does globalisation equally benefit?

no, some more than others

Triad countries

North America, Europe and Japan

Major impact in the IB environmental changes

Technology/Innovation, Socio-political and the shifting balance of economic power

major shifts in economic power

rise of Triad, Asian Tigers, new order of emerging and transitional economies.

Rise of Triad

Post 2nd World War, North America, Europe and Japan benefited from War

Asian Tigers

1950-1990’s, Hong-Kong, Singapore, Taiwan and South Korea

BRICS

brasil, russia, india, china and south africa

base pyramid

those that didn’t benefit from globalisation, approx 4 billion people

modulisation

the idea that parts are made in different places and then brought together to be created

SME’s importance

importance across the economy has increased

Globalisation

the process by which firms develop international influence or start operating at an international scale.

timeline of globalisation

on the rise after the second world war, 1990’s big globalisation boom, 2008 GFC put an end to it

Principle trading partners and trends

Largest = China, then Aus, then USA and then japan

Strategic planning

the process of evaluating the enterprises internal and external environment, identifying objectives, and implementing a plan of action.

SWOT

Strengths, Weaknesses, Opportunities and Threats

External Environment analysis

information gathering and assessment (Opportunities and Threats)

Internal Environment analysis

generic strategies and physical resources/personnel competencies (Strengths and Weaknesses)

Porter’s Five Forces

a form of external assessment

4 common external assessment methods

asking experts, using historical industry knowledge, asking knowledgeable managers for anticipated scenarios, using computers to simulate likely future development

What are Porter’s Five Forces?

Threat of New Entrants, Bargaining power of suppliers, Bargaining power of consumers, Threat of Substitutes, Intensity of rivalry.

Threat of New Entrants

Barriers to entry determine how easy/hard it is for new entrants to enter the market

Bargaining power of Suppliers

concentration, uniqueness of inputs, suppliers ability to forward integrate vs our ability to backwards integrate

Bargaining Power of Buyers

Buyer concentration, buyer volume, Ability to shop around, need for quality etc.

threat of substitute

relative price of substitutes and switching costs

intensity of rivalry

barriers to exit, industry growth, number/power of companies

internal assessment

help to pinpoint mnes strengths and weaknesses

two specific areas mne should focus on in their internal assessment

physical resource/human competencies and generic strategy

physical resources

the assets the MNE will use to carry out its strategic plan

vertical integration

to obtain control over supply and reduce costs

Human Competences

the abilities and talents of people

Basis of Resourced Based View (RBW)

competitive advantages come from strategic bundles of resource capabilities which should be Valuable, Rare, Inimitable and Organisation Wide

Generic Strategies

Cost, Differentiation and Focus Strategies

Cost strategy

relies on low cost price after pursuing cost reductions

Differentiation Strategy

strategy directed towards creating something that is perceived to be unique

Focus strategy

a strategy that concentrates on a particular buyer group or segments

major policy objective in china

boost high technology industry sectors

European union

most developed trading block in the world

origins of the eu

germany and france wanted to unite after second world war in 1952

1957

six founding memebers, France, west germany, luxemburg, the netherands, belgium and italy

1973

denmark, UK and ireland joined

1981

Greece joined

1986

portugal and spain

1995

austria, finland and sweden, was named EU 15 both politically and economically integrated

1998

ECB (european central bank) was created

2002

euro was created

2004-2013

10 more countries

2020

Brexit

European Free Trade Association

countries that remain out of the EU but have strong ties

obejectives of the EU

Free trade, elimination of customs duties and free movement of people and capital within members

2008 GFC

pressured the euro, countries had to be bailed out by the ECB and European Commission

Eurozone Crisis

result of demographic decline and low growth ending in economic and financial instability

responses to the GFC

economic stimulus, bank and economic restructuring

contemporary issues of the EU

mainly due to getting too big, Brexit/grexit (disagreements on national laws), Terriorism, enlargement to include new countries makes it harder to make policies.

EU Business Strategy Matrix

pressures are opposed, national pressues sayin gthey should respond to what their country wants, globalisation pressures saying they should standardise products

EU MNE’s strategic direction

heading towards globalisation and standardisation

6 EU organisational structures

European parliment, european commision, council of the eu , european council, court of justice and court of auditors

European Parliment

Elected, shares in law making and represents the people

European Commission

proposing legislation, managing budget and ensuring law is upheld

Council of the EU

policy and decision maker

European Council

head of states, set the general political direction and priorities

Eu contemporary issues

Grexit, Security threats, social security and enlargement

Business Strategy Matrix

Pressures are opposed,

• national responsiveness, make it unique to the countries customer tastes and regulations,

• economic integration, pressure to standardised product, reduce costs and competitive prices

Where are MNE’s heading in the EU

towards standardisation and centralisation

Exporting to the EU

manufactured goods from outside have common customs duties at entry point, countervailing duties protect EU producers, common product standards and regulations, many US exporters partner with EU companies to overcome barriers.

Culture

sum of beliefs, rules and techniques that characterise human populations

Language

main way to transmit information or ideas, knowledge is important to help pick up implied meanings etc.

Religion

influences

• lifestyles, beliefs, values and attitudes

• how they treat and interact with others

• work habits, customs and politics

values

basic convictions people have regarding right and wrong, good and bad

attitude

tendency to feel/behave in a particular way toward something (short term and changeable)

customs

common established practices that vary from country to country

manners

behaviours regarded by society as polite (can vary)

organisational culture

behaviours that managers and employees of particular companies tend to display

used by management to proactively shape particular types of behaviour

enhances a sense of community/shared identity

Hofstede four dimensions of culture

Power distance, Uncertainty avoidance, individualism vs collectivism, masculinity vs femininity.

Power Distance

degree to which less powerful members accept the fact that power is not equally distributed

Uncertainty avoidance

extent to which people feel threatend by ambigious situations and have created ways to avoid these situations

Individualism vs Collectivism

tendency to only look after them selves and immediate family vs tendency to belong to group who look after each other in exchange for loyalty.

Masculinity vs Femininity

the degree to which the dominant values in society are money, success and material goods vs the degree to which the dominant values in society are caring for others and quality of life.

Strategic importance of cultures

affects people’s attitudes towards work, their motivation to acheive, how they value time and their ethics

a company’s culture is visable in

Face to face, company to company and Company to customer

Face to face culture

meetings, negotiations etc, the language used, knowledge, behaviours and rituals

Company to company culture

contracts, alliances etc, the organisation, hierachy and decision making and the work attitudes

Company to Customer culture

consumer preferences and quality of demand

to create a effective company culture firms should

build diversity issues into decisions, aim for a culturely balanced decision making and leadership teams

organisational structures

so all the right jobs go to and decisions are made by the right people

economic integration

centralised and hierarchical structure

national responsiveness

decentralised structure with automated subsidiaries