International business

Uppsala model

Firms internationalise gradually, starting with low-risk/low-commitment modes and slowly moving to higher commitment over time as they gain knowledge and confidence in that market

Sequence of the Uppsala model

License/patent → 2. Indirect exports (via agent) → 3. Direct exports → 4. Sales office → 5. Local packaging/assembly → 6. Wholly owned subsidiary (FDI)

Example of a NZ Born Global firm

Rocket Lab becuase

• Unique product — small satellite launches, niche global demand

• Home market too small — NZ could never sustain a space company alone

• Borderless from day one — their customers were always going to be international (NASA, commercial satellites)

• Launches from both NZ and Virginia — showing they went straight to FDI rather than gradual steps, skipping Uppsala entirely

Oli Framework

O — Do we have a unique advantage worth exploiting? (FSA)

L — Is there a country that offers us something valuable? (CSA)

I — Is it better to do this ourselves rather than outsource

Internalisation explanation and example

Internalisation is when a company makes the decision to keep operations in house or to outsource to a different firm. The decision to keep operations in house is when there is an important FSA that the firm doesn't want any other business to alter or not get right. For example KFC internalises their operations because they want to keep control of their secret recipe to make sure that it is consistent.

FSA and CSA matrix

	Low CSA	High CSA
High FSA	Compete on firm strengths alone — e.g. Apple, global brand	Best position — exploit both. E.g. Japanese car firms in low-cost countries
Low FSA	Weakest position — restructure or exit	Rely on country advantages — e.g. basic manufacturing, commodities

Porters 5 forces

Bargaining power of buyers (consumers)

Bargaining power of suppliers

Rivalry among existing competitors (strength of competition)

Threat of new entrants — how easy is it for new competitors to enter the market?

Threat of substitute products — can customers switch to a completely different product that does the same job?

formulation stage of the strategy

Mission — what is the firm's purpose? What needs does it meet long term?

Environmental analysis — SWOT, Porter's 5 Forces, expert trends

Setting objectives — short term (0–1 year), medium term (1–3 years), long term (5–10+ years)

Implementation stage of strategy

• The plan is broken into actionable parts

• Goals are assigned to different departments

• Each department knows what they are responsible for

Evaluation plan of the strategic process

• Progress is periodically measured against objectives

• If something isn't working, the plan is adjusted

• Important: profits aren't always the best measure — e.g. if war forces a more expensive shipping route, profits drop but that doesn't mean the strategy failed

Real world examples to use when talking about strategy planning

COVID, wars, trade disputes mean 6 months can feel like long term planning

How to use the results of a SWOT analysis

• SO (Strengths + Opportunities) — use strengths to exploit opportunities

• ST (Strengths + Threats) — use strengths to counter threats

• WO (Weaknesses + Opportunities) — convert weaknesses by exploiting opportunities

• WT (Weaknesses + Threats) — neutralise weaknesses and threats, create a defensive boundary

Formulation of exam question

• Define the concept — what is it?

• Explain the parts — what does it involve?

• Critical insight — what's the limitation or key challenge?

• Real world example — company or event that illustrates it

Market driven economy

Supply and demand drives everything. E.g. USA.

Centrally driven economy

state owns the means of production (factories, resources) and a government committee decides what gets produced and traded. It's not just controlling resources, it's controlling the entire economy. E.g. North Korea, Soviet Union.

Mixed economy

mostly market-driven but with some state-owned enterprises and government intervention. E.g. New Zealand - mostly supply and demand but the government owns things like Air NZ, sets interest rates through the Reserve Bank, and provides public healthcare.

Privatisation

government sells assets to private buyers for example selling telecom to a private business (now spark)

Nationalisation

government takes control of private assets for example government taking majority ownership of Air NZ after it nearly collapsed

Divesture

the process of selling off assets from the government to private investors

Contract management

government transfers operating responsibility but keeps the legal ownership. So they don't sell the ownership at all, they just hand over the running of it to a private firm.

economic integration levels

the level of how much trade occurs between places

Free trade

Barriers to trade (such as tariffs) among member countries removed

Customs union

Tariffs between member countries eliminated and a common trade policy toward non- member countries for example Mercosur (Founded 1991: Argentina, Brazil, Paraguay, Uruguay & Venezuela + Associate Members)

Common market

Elimination of trade barriers among member countries, a common external trade policy and mobility of capital, labour & enterprise among member countries people can work anywhere in the common market

Economic union

Deep form of integration involving free movement of goods, services, capital, labour & enterprise among member countries and full integration of economic policies. Example EU now

Political union

Full economic integration, unification of economic policies and a single government E.g. USA (federal & state authorities) - until recently that's what the European union was going towards this. In the US each state has its own laws and parliment then the federal which is Washington president

Resource based view VRIO

Valuable, Rare, Imperfectly imitable, organisation based view

Levels of dynamic capability

Quick/incremental learning — continuously improving what you already do

Integration of new assets — bringing in new knowledge or technology (radical learning)

Modification and transformation — fundamentally changing how you operate when the environment demands it

Business clusters - Entrepreneurs

Consist of critical mass of entrepreneurs, venture capitalists, specialist suppliers & contractors; plus risk-embracing trial-&-error culture = self-reinforcing local growth cycle 

MNE structural archatypes

Centre-for-global: New technology developed in central R&D units (e.g. Standardised telecoms switching components) 

Local-for-local: Local subsidiaries totally responsible for new or customised products & services for local markets (e.g. Sanitarium’s NZ Marmite factory) 

Local-for-global: New product or service developed by local subsidiary then sold through many other country units (e.g. Unilever River handwashing soap bar) 

Global-for-global: Transnational/differentiated network creates ambidexterity – meeting needs & adapting to environmental changes (e.g. Sony’s consumer electronics division; IBM’s innovation networks) 

Absolute advantage

a country can produce something better or more efficiently than anyone else. E.g. NZ has an absolute advantage in dairy farming due to land and climate.

Comparative advantage

a country doesn't need to be the best at something, just relatively better than trading partners. Even if one country is better at everything, trade still benefits both sides if each specialises in what they're relatively best at. For example Bangladesh has comparative advantage in textiles and clothes making

Factor endowment

a country should produce and export goods that use the factors of production it has in abundance, and import goods that use factors it has in scarcity.

Factor endowment examples

Country	Abundant factor	Therefore exports
NZ	Land	Dairy, meat, fruit
China	Labour	Manufactured goods
USA	Capital	Technology, finance, high-tech
India	Labour	IT services, textiles

At a business POV why did Unilever supply iodised salt to Ghanaians?

High margin on small quantities — although the unit price is low, the margin per unit is actually higher than normal. Poor consumers buy smaller sachets but pay more per gram than wealthier consumers buying bulk. So it's profitable.

Goodwill and market development — by investing in BOP communities now, Unilever builds brand loyalty and trust. As these economies develop and incomes rise, those consumers already know and trust the Unilever brand. It's a long term market investment.

Scale — there are billions of people at the base of the pyramid. Even tiny margins multiply into significant revenue at that scale.

Slowbalisation

Slowbalisation started after the 2008 Global Financial Crisis actually, then accelerated due to a series of events:

• GFC 2008 — first signs of deglobalisation

• Brexit — UK leaving the EU, fragmenting European trade

• COVID-19 — exposed vulnerability of global supply chains

• Ukraine War — disrupted energy and food supply chains globally

• Trump trade wars — US tariffs on China, renegotiation of NAFTA into USMCA

• US-China tech rivalry — restrictions on Huawei, semiconductors

Not just one event, it's a series of shocks that have made countries and firms pull back from globalisation and become more self-reliant.

Triad nations

USA, EU, Japan

challenge of the triad nations

The BRICS countries are emerging with more flourishing economies especially china government-backed R&D, Belt and Road Initiative, 5 Year Plans, world's largest manufacturer, now competing in high-tech (Huawei, TikTok, BYD electric cars), and India massive English-speaking knowledge workforce, IT services (Infosys), fast growing middle class consumer market. More and more innovation is challenging the control of Triad nations.

SME advantages over MNE

Less bureaucratic — decisions made faster

More flexible — can adapt quickly to new opportunities

More innovative and entrepreneurial — willing to take more risks

Personal networks — relationships and trust-building is their core strength

Agile — can sense and respond to temporary opportunities large firms miss

SME Challenges

Lack of capital — less money to invest in foreign markets

Lack of knowledge — less experience of foreign markets and regulations

Psychic distance — unfamiliarity with foreign cultures and markets influences decisions

Fewer human resources — smaller teams stretched thin

Scale — can't always compete on price with large MNEs

Arguments for free trade

Countries specialise in what they do best (comparative advantage)

Lower prices for consumers

More markets for firms to exploit FSAs and CSAs

Drives innovation and competition

Lifts living standards in developing nations

Arguments against free trade

Income inequality — benefits not equally distributed, North-South divide

Job losses — cheaper labour abroad means unemployment at home

Environmental damage — firms chase lowest standards

IP theft and corruption — especially in emerging markets

Cultural erosion — globalisation homogenises local cultures

Over-dependence — COVID exposed how vulnerable global supply chains are

Tax avoidance — MNEs exploit different tax regimes