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Study of International Business Articles.Part 1: Essential of International Business.Part 2: Theories applied to International Business.Part 3: Bargaining Approach and Resources.Part 4: International Business Phenomena.Part 5: Internalization.Part 6: Competitive advantages.
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Master of Business Administration
University of Hertfordshire, UK
July 2009
Prepared by Yaw Chooi Fun
Norazian Abdullah
Lee Tai Keong
Eu Wee Khai
International business (IB) is the study of business activities that cross national borders.
It is concerned with firms that undertake business and the national governments that regulate them
Business with interventions of governments of home and host countries in inter-country business activity
No unique theory to explain responses of business to government policies and policy making of governments towards international firms
Lack of theoretical focus has diverted emphasis on policies to conflicts and cooperation among corporations and governments.
Seek growth (efficiency) and distribution of benefits (equity)
Markets appropriately distorted to achieve objectives
Provide differential barriers and incentives to foreign business
Free trade and stable or fixed exchange rates;same considerations for inter/intra –
national trade and investments
Theory of specialisation and division of labour (comparative advantage); general explanation of benefits of division
of labour for domestic & international
Other theories applied; explains production and income generation
Adapted for us in IB to characterise and analyse business govt negotiation policy making and behaviour
Focuses on bargaining resources and stakes of participant economic and commercial conclusions
Focuses on collection of assets, interests and abilities of bargaining parties economic, political and social issues
Resources of businesses technology, funds, skills, foreign markets,
employment opportunities & trade relations with home govt
Resources of host govtsaccess to market, natural resources, low
cost labour, funding opportunities
Stakes of businessesavailability of markets, sources of supplies,
importance of successful negotiation and inter-relatedness of host country to business’s global interests
Stakes of host govtsvailability of business opportunities,
importance of business and negotiation to host govt and relevance to country’s overall interests.
Strategic alliance with business for desired resource – technology, local ownership or foreign distribution network
Purchase / contracting agreement for acquiring desired resource
Diversification and Multiple Locations of activities reduce control of host govt
Joint venture with local businesses lobbying govt for favourable policies
Strategic alliance with other businesses raise govt’s stakes in bargain
Offer more benefits to host country during initial negotiations
Involve host govt in business venture (GLCs) – mutual interests
Meet key concerns of host govt – profit remittances, financing, imports or training
Government concerns with TNC – negotiations, trade offs and resolutions
Patterns of exports and imports
Gains from trade
Reasons and directions of FDI and contractual relations
Strategies and operations in international production – effects of govt intervention
Cross cultural aspects
Differential barriers and incentives imposed by govts to determine distribution of benefits.
Difference among Governments as to their goals in dealing with TNC/INC initiatives and operationsAssessment and management of conflicting
rules of the game, i.e difference in lega, regulatory and institutional enviroments in the two or more countries
country risk that arises from different treatment of business activities by home and host countries
Exchange risks
Synthesis with culture differences for IB Phenomena?
Brian Toyne and Douglas Nigh“Introduce a new paradigm that believe
would enrich IB inquiry by shifting attention away from the firm as the central unit of analysis to a more comprehensive multilevel, hierarchical view of the international business process.” http://www.jstor.org/pss/155414
International product cycleThe international product cycle removes the
classical assumption that factors and products are immobile internationally.
Synthesis Conflict with Hamel? Product can sustain
longer now with globalizationMcKinsey Quarterly quoted Gary Hamel,
“Company must become as purposefully and creatively experimental in thinking about their management systems and processes as they already are in thinking about R&D or new-product development.”http://www.interknowledgetech.com/Innovative
%20Management.pdf
Imperfect competition success factorsProprietary technology Multi-country access to factors of
production and to consumersadditional scale economies in production
distribution, purchasing etc.
Production, distribution and consumption of materials, components, factors and some products and services occur entirely within the units of the firmEconomics of vertical and horizontal
integrationEmphasis on the advantage to the
individual firm of keeping decisions internalDynamic nature of competition
Transactions are carried out internally
Reduce cost of transaction in larger markets, with improved, unfettered communications and transportation.
Difference from internalization: does not considers the functioning of all the firm’s internal activities such as managing people and use of a monopoly position
Firm specific competitive advantages that enable individual firms to outcompete
Synthesis with the FSA and CSA article “The international competitiveness of asian firms”? Or porters diamond model
Combination of location theory, competitive advantages and the concept of internalization
Covers all the market-related factorsProduct, firm, industry and economy
But interactions between Governments and companies and among Governments are left aside
Finance theory, arbitrage national financial conditions
National currencies create unique difference for INCs and directly involve governmental decisions
International firms must pass through the foreign-exchange barrier
Existence of governmental policies differentiates a theory of international business from domestic business
Governments are satisfied with gains generated by an IB activity in open markets, they impose no barriers and, hence no theory of international business is necessary
More synthesis?