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University of Sunderland / MDIS. » Explain the process of internationalization; » Identify reasons for FDI; » Select target markets and sites for exporting.

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Presentation on theme: "University of Sunderland / MDIS. » Explain the process of internationalization; » Identify reasons for FDI; » Select target markets and sites for exporting."— Presentation transcript:

1 University of Sunderland / MDIS

2 » Explain the process of internationalization; » Identify reasons for FDI; » Select target markets and sites for exporting and FDI; » Assess global risks.


4 » the need to get market access; » the search for lower production costs; and » a quest for natural resources and other assets.

5 » Discuss the difficulties encountered by MNCs when entering overseas markets.

6 » The decision to 'go abroad' is another aspect of strategy which involves a matching of internal resources with external opportunities aimed at achieving the organization's goals. » Although the basic principles of strategy apply, the decision-making in international strategy is much more complex because of the 'barriers created by distance' (Ghemawat, 2001). » Ghemawat identified four dimensions of distance; geographic, cultural, administrative, and economic all of which, in different ways, add complexity to decision-making. » Managers have to decide not just which countries to target but how they are going to target those countries and they need some idea of the global systems and structures appropriate for their organization. How companies organize will depend very much on the type of product/service they produce.

7 » IMD World Competitiveness Yearbook; » The Economist Intelligence Unit; » GlobalEDGE » The World Economic Forum



10 » Political and Legal Environment; » Economic and Financial Environment; » Socio-cultural Environment; » Technological Environment; » Ecological Environment.

11 » Size and growth rate of the market; » Major Competitors, products and the market share; » Prices, marketing, and promotions of competitors; » Distribution networks; » Local standards and regulations including trade mark rules and product liability; » Value of imports and exports of the product; » Tariffs and other trade regulations; and » Local cultural factors that may require product adaptation.

12 » Financial system —how developed is the banking system? What currency is used? Are there any foreign exchange controls? Is there a stock exchange? » Investment —are there any investment guarantees? Are there any incentives? What business registration procedures exist? » Labour regulations —what regulations are there covering expatriate employees? Are there social, health, and unemployment insurance payments to be made for local and expatriate employees? Is there a minimum wage? » Disputes —how are disputes settled? Are there any regulations protecting intellectual property rights? Is there any competition law? » Taxation —what taxes exist and what are the rates? » Reporting—what are the statutory requirements for financial reporting? » Expatriate employees —are entry visas and work permits required? What housing, education, and medical facilities are there for expatriate employees?

13 » change in political leadership; » radical change in philosophy of political leadership; » civil unrest between ethnic groups, races, and religions; » corrupt political leadership; » weak political leadership; » reliability of the infrastructure; » supply chain disruption; » economic risks such as the volatility of the economy and foreign exchange problems; » organized crime; » poor relationships with other countries;

14 » security; » political stability; » government effectiveness; » legal and regulatory; » macroeconomic; » foreign trade and payments; » Financial; » Tax policy; » Labour market; and » Infrastructure

15 1.The internationalization process is normally a gradual transition from exporting to FOI but some firms may be 'born global'. Explain what this means and why firms should want or need to be 'born global'. 2.Why is it that some firms locate their investments close to their markets whilst others appear to have the luxury of a much greater choice of location? Illustrate your answer with examples. 3.Investigate the factors that attracted Tesco to invest in the USA. Is it just the recession that has caused a problem and will they eventually succeed? Explain your answer. 4.Explain what is meant by political risk. Use examples to illustrate your answer.

16 1.India's urban population is estimated to grow by 230 million in the next 20 years. Analyse the consequences of this growth for the Indian economy. 2.Explain the attraction of the Indian economy as an investment location. 3.Investigate how easy it would be for a Western company to establish a new business in India. 4.Starbucks has chosen to enter the Indian economy with a domestic partner. Explain why this might be a more attractive proposition than direct investment. 5.What risks will Starbucks face in entering the Indian economy?

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