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UNIT 1

1.Steps needed to upgrade a domestic company to international company.

Stages of international business.internationalization process ?

A frm which is entirely domestic in its activities normally passes through dierent

stages o internationalisation beore it becomes truly global.

1. DOMESTIC COM!"#$

 The operation mission and vision o the frm is limited to t%e national political

boundaries. These companies ocus its view on the domestic mar!et opportunities

domestic suppliers domestic fnancial companies domestic customers etc. It never

thin!s o growing globally. I it grows beyond it present capacity the company

selects the diversifcation strategy o entering into new domestic mar!ets new

products technology etc. It does not select the strategy o e"pansion into the

international mar!ets.

&. I"TE'"!TIO"!( COM!"#$

#ome o the domestic companies which grow beyond their production $ mar!eting

capacities thin! o internali%ing their operations. Those companies who decide to

e"ploit the opportunity outside the domestic country. The focus of t%ese

companies is domestic but e)tends t%e *ings to t%e foreign countries.

 These companies e"tend the domestic product domestic price promotion and other

business practices to the oreign mar!ets.

+. M,(TI"!TIO"!( COM!"#$

It formulates di-erent strategies for di-erent marets thus the &N' operateits o(ces branches subsidiaries in other country li!e domestic company. They

ormulate distinct polices and strategies suitable to that country. Thus they operate

li!e concerned in each o their mar!ets.

/. 0(O!( COM!"#$

A global company is the one which has either global mar!eting strategy or a global

sourcing strategy. )lobal company eit%er produces in %ome country or in a

single country and focuses on mareting t%ese products globally or

produces globally or focuses on mareting t%ese products domestically.

2. T'!"S"!TIO"!( COM!"#$

It produces3 marets3 in4ests and operate3 across t%e *orld. It is an

integrated global enterprises which lin!s global resources with global mar!ets at

proft. There is no pure transnational companies satisy many o the characteristics

o a global corporation.

 The transnational companies should have the ollowing characteristics*

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0eocentric Orientation$ This 'ompany adopts global strategy but allows value

addition to the customer o a domestic country.

Scanning or information ac5uisition$ These companies scan the environmental

inormation regarding economic environment political environment social and

cultural environment and technological environment.

6ision 7 !spirations$ The vision + aspiration o transnational companies are

global mar!ets global customers and grow ahead o global companies.

0eograp%ic scope$ They analy%e the global opportunities regarding the

availability o resources customers mar!et technology research and development

etc. #imilarly they also analy%e the global challenge and threats li!e competition

rom the other global companies local companies etc.

Operating Style$ The transnational companies globali%e the unction li!e , + -

roduct development placing !ey human resources procurement o high valued

material etc.

!daptation$ These companies adapt their products mar!eting strategies and other

unctional strategies to the environment actors o the mar!et concerned.

8'M olicy$ This 'ompany is not restricted by national political or legal constraints.

It selects the best human resources and develops them regardless o nationality

ethnic group etc. /ut the international company reserves the top and !ey positions

or national.

urc%asing$It procures world0s class material rom the best source across the

globe.

&.nature 9c%aracter3feature:3ad4 and disad4 of intl. business?

 The nature and characteristics or eatures o international business are*

1. (!'0E SC!(E OE'!TIO"S$

In international business all the operations are conducted on a very huge scale.

roduction and mar!eting activities are conducted on a large scale. It frst sells its

goods in the local mar!et. Then the surplus goods are e"ported.

&. I"TE0'!TIO" O; ECO"OMIES$

International business integrates 2combines3 the economies o many countries. This

is because it uses fnance rom one country labour rom another country and

inrastructure rom another country. It designs the product in one country produces

its parts in many dierent countries and assembles the product in another country.

It sells the product in many countries i.e. in the international mar!et

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+. DOMI"!TED # DE6E(OED CO,"T'IES !"D M"CS$

International business is dominated by developed countries and their multinational

corporations 2&N's3. At present &N's rom U#A 4urope and 5apan dominate 2ully

control3 oreign trade. This is because they have large fnancial and other resources.

 They also have the best technology and research and development 2, + -3. They

have highly s!illed employees and managers because they give very high salaries

and other benefts. Thereore they produce good 6uality goods and services at low

prices. This helps them to capture and dominate the world mar!et.

/. E"E;ITS TO !'TICI!TI"0 CO,"T'IES$

International business gives benefts to all participating countries. 7owever the

developed 2rich3 countries get the ma"imum benefts. The developing 2poor3

countries also get benefts. They get oreign capital and technology. They get rapid

industrial development. They get more employment opportunities. All this results in

economic development o the developing countries. Thereore developing countries

open up their economies through liberal economic policies.

2.

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changes. They must ad9ust their business activities and adapt accordingly to survive

changes

8I08 (I6I"0 ST!"D!'D

'omparative cost theory indicates that the countries which have the advantages o

raw materials human resources and climatic conditions in producing particulargoods can produce the products at low cost and also o high 6uality. 'ustomer in

various countries can buy more products with the same money. In turn it can also

enhance the living standard o the people through enhanced purchasing power and

by consulting high 6uality.

I"C'E!SED SOCIO@ ECO"OMIC AE(;!'E

International business enhances consumption level and economic welare o the

people o the trading countries.

AIDE' M!'

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'O6IDES T8E OO'T,"IT# 7 C8!((E"0ES TO DOMESTIC

,SI"ESS

International business frms provide the opportunities to the domestic companies.

 These opportunities include technology management e"pertise mar!et

intelligence product developments etc.

DI6ISIO" O; (!O,' !"D SECI!(I!TIO"

International business o labour enhancement o productivity posing challenges

development to meet them innovation and creations to meet the competition lead

to overall economic growth o the world nations.

OTIM,M 7 'OE' ,TI(I!TIO" AO'(D 'ESO,'CES

International business provides or 8ow o raw materials rom the countries wherethey are in e"cess supply to those countries which are in short or need most.

C,(T,'!( T'!"S;O'M!TIO"

International business benefts are not purely economic or commercial they are

even social and cultural.

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 The signifcance o imports is obvious where the country lac!s a strong resources

base but similar conditions e"ist even in more endowed nations. The production o

many items in India or e"ample depends on the importation o critical raw material

and energy supplies.

,!"TIT# 0OODS !6!I(!(E AI(( I"C'E!SESFA nation by concentrating production on the items having the greatest comparative

advantage and trade a portion o this output or goods that have comparative

disadvantages at home. The importation o goods that are produced more e(ciently

abroad results in a greater variety and 6uantity o goods on the local mar!et than i

resources were applied to the production o where applied to the production o

goods where the country does not have a comparative advantage.

AIDE' M!'

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The %2 agency %2*56 gathers data on education information. !or e"ample it shows in

*thiopia only &89 of the viable age group enrol at secondary school, but the figure is ':9 in the

%.

*ducation levels, or lack of it, affect marketers in a number of ways;

• advertising programmes and labelling

• girls and women e"cluded from formal education #literacy rates$

• conducting market research

• comple" products with instructions

• relations with distributors and,

• support sources - finance, advancing agencies etc.

#eliion

eligion provides the best insight into a society7s behaviour and helps answer the

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• market segments - Maylasia - Malay, 5hinese and Indian cultures making market

segmentation

• ensitivity is needed to be alert to religious differences.

!ttitudes and values

4alues often have a religious foundation, and attitudes relate to economic activities. It is

essential to ascertain attitudes towards marketing activities which lead to wealth or material

gain, for e"ample, in Buddhist society these may not be relevant.

 lso DchangeD may not be needed, or even wanted, and it may be better to relate products to

traditional values rather than just new ones. Many frican societies are risk averse, therefore,

entrepreneurialism may not always be relevant. ttitudes are always precursors of human

behaviour and so it is essential that research is done carefully on these.

'ocial oranisation

efers to the way people relate to each other, for e"ample, e"tended families, units, kinship. In

some countries kinship may be a tribe and so segmentation may have to be based on this.

6ther forms of groups may be religious or political, age, caste and so on. ll these groups may

affect the marketer in his planning.