INTERNATIONAL MANAGEMENT

1. INTERNATIONAL MANAGEMENT Chapter 1 Understanding International Business & Management

2. Understanding International Business & Management • National ---------------------------- International • Any sort of business activity that crosses national boundaries- International Business. • Activities relating to industry and commerce performed on an international level. • International Management- Process of applying management concepts and techniques in a multinational environment.

3. Domestic Business International Business Same • Basic Functions • Processes • Techniques Difference Environment within which these functions are performed and processes are carried out.

4. International Business Environment • Environment- Sum total of all the forces surrounding & influencing the life and development of the firm. • Why ? External Environment Business Opportunity Threats to Business Internal Environment Strengths Weakness of the Org. Business Decision

5. International Business Environment • Business Dynamics to a large extent depends on the environmental dynamics. • Environmental understanding becomes more important in the area of international business in which the environmental forces of the home country interact with the foreign environment.

6. Environmental Characteristics • Factors and Forces are external to the firm. • Essentially uncontrollable. • Environmental factors are dynamic-they continuously change over time. NEED ? • Anticipate, respond and adapt to the complexity and rapid pace of various environmental forces changes globally. • Being international environmental factors are given, the firms should adapt its business strategy to suit the environmental factors.

7. Components of International Business Environment Global Environment Foreign Environment Domestic Environment Micro Environment Internal Environment

8. Internal Environment Represent firm’s business strategy and decision with regard to-- • Production • Finance • Marketing • Human Resources • Research Activities Firm can change them, but within the constraints of various environmental factors.

9. Micro Environment • Actors in the firm’s immediate environment which directly influence the firm’s decisions and operations. Micro Environment General Public Market Intermediaries Financial Institutions Suppliers Competitors Customers Are Semi-Controllable-Controllable to some extent

10. Domestic Environment Competitive Structure Economic climate Political & Legal forces Uncontrollable IMPACT ?

11. Domestic firms venture into international business Lack of domestic demand and/or Intense Competition Export Promotion Measures and/or Economic Incentives

12. Foreign Environment Geographic Economic Conditions Social-Cultural Environment Political & Legal forces Technological Environment Ecological Environment

13. Differences Exist • Between domestic & foreign environments. • Among the environments prevailing in different foreign markets. Business Strategies that are successful in one nation might fail miserably in another nation.

14. Global Environment • World Economic Condition • International Financial Systems • Working of WTO, IMF, WB.. • International Agreements & Treaties • Regional Economic Groupings • World-wide Economic Recession • Initiatives of Regional levels European Union (EU) North American Free Trade Association (NAFTA) Association of South East Asian Nations ( ASEAN) • Exerts influence over domestic as well as foreign Countries.

15. Global Environment ( Uncontrollables) International Economic Environment Domestic Environment ( Uncontrollable) Competitive Structure • (Controllable) • International Business • Decision • Production • Finance • Human Resource • Marketing Political and Legal Forces Economic Climate Domestic Environment ( Uncontrollables) Competitive Structure Foreign Environment ( Uncontrollable) Geographic Environment Regional Economic Groups and Agreement Ecological Environment International Financial Institutions and System Economic and Financial Environment Social-Cultural Environment International Trade Organization and Agreements Legal Environment Political Environment

16. Relevance of International Business Environment • Central Issues in entering into international business - • Which market (s) to select? • How to enter into those markets? • Decisions are strategic in nature and influenced by the environmental forces. • Target markets should have enough market potential.

17. How to enter (Mode) of entry?(Market Entry and Operating Forms) • Exporting • Direct • Indirect Licensing/ Franchising Strategic Alliance • Production/ • Assembly Facility • Contract Manufacturing • Assembly operations • Wholly-owned • manufacturing facility

18. Exporting is desirable • If economical to produce in the home country. • No legal restrictions on import of given product in the foreign markets. • May take either the form of direct and indirect exporting.

19. In case of import bans or excessive transportation cost • Set up manufacturing subsidiaries abroad • Assembly operations • Contract manufacturing • Feasible, 1. If foreign governments allow FDI 2. Raw materials & labor are locally available at competitive prices. • In case FDI is disallowed.. - GO for either licensing/franchising - Joint Venture

20. Environmental forces & Functional & Tactical Decisions of a Firm • What should be the scale of production? • Should the firm employ labor or capital intensive techniques? • How to finance firm's foreign operations? • How much to repatriate? • What marketing mix should the firm use? • Should the firm hire local persons or employ foreign nationals? • What should be their compensation package?

21. Non-Economic Environment Political Socio-Cultural Legal Ecological Geographic

22. Political Form of Government Political Party System Political Ideology Role of Government Political Stability

23. Socio-Cultural Language Education Aesthetics Religions & Superstition Attitude & values Social groups & Organizations

24. Myths versus Reality (Japanese Management styles and techniques – some major findings) • All Japanese workers are not laborious/industrious as is commonly believed. • Company loyalty among many Japanese may not be as high as is expected. • Many Japanese managers are tend to be autocratic. (Discussions- refer page 20).