INTERNATIONAL BUSINESS

Ilan Bijaoui

2006

ibii@netvision.net.il

THE POLITICAL SPECTRUM

DEMOCRACY TOTALITARISM

Reactionary Conservative Liberal Radical

Authoritarian Facist Communist Authoritarian

Rule people

Control souls

Economy+Politics

Islam

COMPARATIVE MEASURES OF FREEDOM

POLITICAL RIGHTS

CIVIL RIGHTS

Fair elections, representatives with power, political parties, rights of minorities

Freedom of press, equality under law, social freedom, government-corruption

ECONOMIC SYSTEMS

   Market Allocation: Consumers allocate resources. Competition + Consumer Protection (USA)

   Command Allocation: State Planners.

   Mixed Systems: Governmental Expenditures/GDP 32% USA, 64% Sweden

POLITICS AND MANAGEMENT DECISIONS

• Political risks: Micro (population) and Macro (government)

• Government intervention: Individual-communitarian paradigm

INDEX OF ECONOMIC FREEDOM 

Source: Heritage foundation www.heritage.org

Map of countries by GDP (PPP) per capita, based on the 2005 IMF data.

Rank Country GDP$ per capita

1 Luxembourg 69,800

2 Norway 42,364

3 United States 41,399

4 Ireland 40,610

5 Iceland 35,586

6 Denmark 34,737

7 Canada 34,273

8 Austria 33,615

9 Hong Kong 33,411

10 Switzerland 32,571

11 Qatar 31,397

12 Belgium 31,244

13 Finland 31,208

•International Monetary Fund

, World Economic Outlook Database, April 2006 [1]

[edit]

See also

14 Australia 30,897

15 Netherlands 30,862

16 Japan 30,615

17 Germany 30,579

18 United Kingdom 30,470

19 Sweden 29,898

20 France 29,316

21 Italy 28,760

22 Singapore 28,100

23 United Arab Emirates

27,957

24 Taiwan

(R.O.C)

27,572

25 Spain 26,320

26 Brunei 24,826

27 New Zealand 24,769

28 Israel 23,416

29 Netherlands Antilles ,Netherlands

22,750

30 Greece 22,392

31 Slovenia 21,911

32 Cyprus 21,232

33 South Korea 20,590

Leading exporters and importers in world merchandise trade, 2005  

(Billion dollars and percentage.)WTO

Sources: US International Trade Commission, US Department of Commerce

Source: PRC General Administration of Customs, China's Customs Statistics

Income Gini coefficients in the world

Rank Country Giniindex

Richest 10%to poorest 10%

Richest 20%to poorest 20%

Surveyyear

1 Denmark 24.7 8.1 4.3 1997

2 Japan 24.9 4.5 3.4 1993

3 Sweden 25 6.2 4 2000

4 Belgium 25 7.8 4.5 1996

5 Czech Republic 25.4 5.2 3.5 1996

6 Norway 25.8 6.1 3.9 2000

7 Slovakia 25.8 6.7 4 1996

8 Bosnia and Herzegovina

26.2 5.4 3.8 2001

9 Uzbekistan 26.8 6.1 4 2000

10 Finland 26.9 5.6 3.8 2000

49 Israel 35.5 11.7 6.4 1997

MOTIVATION PUSHES AND PULLS TO INTERNATIONALIZE

  TRADITIONAL MOTIVATIONS(Bartlett)

  Expand sales, acquire resources, minimize risk

. Secure Key Supplies

  Access Low Cost Factors

  Local Market Saturation-Competition

  Market Seeking Behavior

  Technology – Vernon Product Life Cycle

EMERGING MOTIVATIONS

  Economic, Technological, Social Developments

  Amortization of R&D Expenditures(public telephone switching systems)

  Shortening Product Life Cycle

  Scanning & Learning Capabilities

  Competitive Positioning (Cross Subsidization)

PM 4.4 Natural and technological environments

NATURAL ENVIRONMENT

Energy costs Geography

TECHNOLOGICAL ENVIRONMENT

RegulationImprovement

InfrastructureKnow howChange

Raw materials Pollution

Spending patternsEconomic

PM 4.3 Demographic and economic environments

ECONOMIC ENVIRONMENT

Age

DEMOGRAPHIC ENVIRONMENT

PopulationFamily Education

PM 4.5 Political and cultural environments

POLITICAL ENVIRONMENT

Interest groupsEnforcementLegislation

CULTURAL ENVIRONMENT

ShiftsSubculturesValues

LEGAL ENVIRONMENT

• Public International Law: International conventions, custom

International Court of Justice (ICJ) • Private International Law:

Common Law-tradition-precedent (English) US, India, Singapore- detailed contracts

Civil law(Codified) (Napoleonic Code) Thailand, Japan China. US Uniform Commercial Code.

• Theocratic law : Islamic law Sha’riah

EstablishmentJuridiction of Host-Home Country

Intellectual Property Paris Union, Right of Priority

Antitrust: US Sherman Act (1890) EU Competition law

Licensing:

Law-Competition/ Competitors

Champagne perfume (YSL)France-US Counterfeiting

Bribery: Foreign Corrupt Practice Act (197)7

Patent Cooperation Treaty(PCT) 39 European Patent Office

ORIENTATION OF MANAGEMENT & COMPANIES

Ethnocentric

Home Country Superior, Similarities

Regiocentric Geocentric

Similarities & Differences Similarities & Differences

In a world region In home & host Countries

Polycentric

Each Host Country is Unique, Differences

      Domestic

      International

      Multi-domestic, Multi National

      Global

      Transnational

INTERNATIONAL STRATEGIES

INTERNATIONAL STRATEGY-EXPORTS

• Local Distinctive Competence

Raw Material

Know how

Manpower

• International risks

Knowledge protection

Investment protection

STAGES OF DEVELOPMENT

Strategy/ Stage

DomesticInternationalMultinationalGlobalTransnational

ModelCoordinatedDecentralizedCentral hub

Integrated

Network

View of the World

Home Country

Extension markets

National markets

Global markets or resources

Global markets and resources

OrientationEthnocentricEthnocentricPolycentric MixedGeocentric

INTERNATIONAL STRATEGY OF SELECTED FIRMS

GlobalMultidomesticTransnational

Ethnocentric Ikea 1 Danone Coca Cola

Polycentric Ikea2 Unilever

Regiocentric Toyota

Geocentric

PM 11.2 The generic value chain

(Source: Michael E. Porter, Competitive Advantage (New York: Free Press, 1985), p.37.)

ILLUSTRATIVE CONFIGURATION ActivitiesUS Canada UK France Germany Japan

Inbound logistics

Operations

Components

Assembly

Outbound logistics

Order processing

Physical distribution

Marketing

Advertising

Sales force

Promotion materials

x x x x

x x x x x

xx x x x x x

x x x x x x x x x x x x x

ILLUSTRATIVE CONFIGURATION

ActivitiesUS Canada UK France Germany Japan

Service

Procurement

Technology Dvt

Human resource

Management

Firm structure

x x x x x x x xx x

x x x x x x

x

ILLUSTRATIVE COORDINATION

ActivitiesConfiguration Coordination

Operations

Marketing & Sales

Service

Procurement

Technology Dvt

Location of Tasks allocation,production Networking, Technology transfer Product line Brand worldwideCountry Sales coordinationAdvertising\Promotion Similar channels Pricing coordination

Location Similar standards

Location Managing suppliersLocation Tasks allocation Knowledge transfer Sequence of products

CONFIGURATION OF ACTIVITIES

High

Low

Coordination

of Activities

Geographic Dispersed Geographic Concentrated

Extensive Coordination among subsidiaries

Simple Global

Strategy

Country-centered strategy by multinationals operating in one country

Export-based strategy, decentralized marketing

PORTER’S DIAMOND

Factor Demand

Conditions Conditions

Chance Firm Strategy

Structure &

Rivalry

Related &

Supporting Government

Industries

PORTER’S DIAMOND DISCUSSION

Factors Conditions• Human, Physical resources, Capital,

Knowledge, Infrastructure

•Hierarchy, factors: Basic-Advanced

• Factor Creation

Demand Conditions• Demand Composition

• Demanding Buyers

• Anticipatory Buyers

• Pattern Growth

Firm Strategy, Structure& Rivalry• Style of Management & Structure

• National Norms

• Rivalry

Supporting & Related Industries• Supplier Industries & Development

• Related Industries & Market

• Related Industries & Production

ITALIAN SUPPLIER INDUSTRIES TO FOOTWEAR

Leather Footwear

Parts of Design Footwear Services

Leather Processed working Leather Machinery

ITALIAN INDUSTRIES RELATED TO FOOTWEAR

Parts of Footwear

Leather Processed working Leather Machinery

Design Services

Leather Leather Leather Athletic Clothing Handbags Footwear Footwear

PARTIAL CLUSTURING IN DANISH ECONOMY

Barley, Malt Food Processing Refrigeration Yeast Equipment Equipment

Pork Beer Dairy Industry

Trypsin Fermentation Purification (Enzyme) Insulin Equipment Technology

Fermented Insulin Fermented

Enzymes