Defining International Business

2. International Business Strategy LON301BUS Defining International Business Unit: 2 Knowledgecast: 1

3. Module Learning Outcomes • Demonstrate a sound appreciation of current strategic management concepts • Assess current developments in the organisational environment and alternative responses related to strategy

4. What is International Business? “ Performance of trade and investment activities by firms across national borders.” • (Cavusgil et al 2008:4)

5. Key Concepts International Trade Exporting Importing or Global Sourcing International Investment Foreign Direct Investment

6. Evolving Theory of FDI • International Capital Theories: FDI driven by return equalization, portfolio diversification • Location Theories: FDI driven by countries’ comparative advantage • Product Cycle Theory: FDI driven by firms’ management of the global product life cycle • Oligopolistic Behavior Theories: FDI driven by firms’ search for, or defense of, competitive advantage • Internalization Theory: FDI driven by organizations’ internal transaction efficiency (hierarchy vs. markets) • Eclectic Theories: FDI driven by many shifting forces

7. Pre-requisites for Internationalisation • Foreign countries must offer location-specific advantages • To motivate the company to invest there • Company must have strategic competencies or ownership-specific advantages • To counteract its relative unfamiliarity with foreign markets • Company must have organizational capabilities • To get better returns from leveraging strengths internally rather than through external market mechanisms such as contracts and licenses

8. Process of Internationalisation • Classic internationalization process: • Incremental process of increasing commitment and understanding of foreign market (Uppsala Model) • Today many companies short-cut this process • In an Internet Age, many are even “Born Global”

9. Process of Internationalisation (2) High Wholly-owned subsidiary Joint venture (local partner) Franchising Control over foreign activities Licensing Export (agent or distributor) Indirect Export Low Low High Amount of resources committed to foreign market

10. Knowledgecast Summary • Demonstrate a sound appreciation of current strategic management concepts • Ensure you are familiar with the key concepts of international business (Slide 5) • Assess current developments in the organisational environment and alternative responses related to strategy • There are a number of ways in which businesses can internationalise including an evolving theory related to FDI

12. Seminar Whirlpool’s Dramatic Turnaround Through Internationalisation Read the closing case on page 23 of your text by Cavusgil, Knight and Reisenberger ‘International Business’ in preparation for this seminar. Be prepared to answer Questions 1 – 4 from page 24 regarding this case.

13. Group Activity Assessment Preparation This is your first opportunity as a group to read through the major case study and the assessment brief (see Unit 5) collectively and highlight key points. What note taking process did you choose to use? • Bullet points • Mind Map • Short sentences • Highlighting/underlining and annotating text

14. Group Activity Assessment Preparation This is your first opportunity as a group to read through the major case study and the assessment brief (see Unit 5) collectively and highlight key points. Discuss as a team; 1. What are the key activities involved in this assessment 2. Who will be responsible for each activity 3. When the activities will need to be completed 4. How you can guarantee SUCCESS (what will success look/feel/sound like?) Be prepared to share your plans with your tutor.