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University Of Finance & Administration INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D.

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Presentation on theme: "University Of Finance & Administration INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D."— Presentation transcript:

1 University Of Finance & Administration INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D.

2 2.2. INTERNATIONAL BUSINESS Full-time course = 12 sessions á 90 mins. (summer term 2011) 1-2/ What is international business (IB). IB basic indicators - balance of trade / payment. Territorial / commodity structure of IB. Comparative advantage, free trade / economy. Protectionism x Liberalism. ( ) 3-4/ Internationalization, drivers. Entry modes and business activities in IB. International market research (PEST/STEEP), and linkage to Competition analysis (Porter) and SWOT. Data collection and their selection in the international environment. ( ) 5-6/ Guest lecture prof. Eric Severin (Lille University, France) Individual TEAM work on the MARKET STUDY. ( ) 7-8/ Culture and its role in international business. Cultural elements and multi-culture communication. Hofstede’s five dimensions of culture differences. Emerging markets, prospective territories. TEAM work presentations: foreign market study. ( ) 9-10/ Globalization – microeconomic and macroeconomic view. Drivers of globalization, pros & cons. International trade barriers. Forms of economic integration. EXPORT - microeconomic and macroeconomic view. Export risks and their elimination / securing. TEAM work presentations: foreign market study. ( ) 11-12/ EASTER ( ) INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. /

3 3.3. CREDIT conditions B_IB CONDITIONS: PRESENCE at IB lectures: 60% TEAM PRESENTATION – (market study) preparation at home: 15 min. presentation of team work – chosen MARKET STUDY lecture marks based on active PARTICIPATION: communication, reading and discussing topical economic issues / team knowledge COMPETITION If unfulfilled: 1. knowledge test / 2. semester elaborated paper + test INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. /

4 4.4. Common session STRUCTURE  IB NEWS – small talk / discussion – topical business issues  LECTURE  READING – analyzing – interpretation of an article (team work) / Prezentation of the materials prepared at home  Team MARKET STUDY prezentation INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. /

5 5.5. International ENVIRONMENT INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. / GLOBAL MACRO MICRO

6 6.6. INTERNATIONALIZATION – MICRO view INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. / Special IB operations: e.g. barter, switch, clearing Entry / Operational modes EXPORTINGCONTRACTUALINVESTMENT Motives for foreign expansion / Drivers of INT ProactiveReactive Dimensions of Internationalization INTERNALEXTERNAL

7 7.7. INTERNATIONALIZATION – MACRO view INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. / Innate strategic capability Access to production factors, which its overseas competitors lack Economies of scale (its unit costs of production are lower than competitors’ – based on volume) patented product exceptional reputation comparative advantage Basic drivers of INT:

8 Minerals, agriculture products (comparative advantage) PRIMARY products Low-fashion clothing Producer enjoys preferential access to production factors LOW VALUE added goods firms enjoying the right strategic capabilities HIGH VALUE added goods only large-scale production on an international scale can allow firms to reach their min.efficient scale of production CAPITAL-intensive goods 8.8. Goods traded internationally - categories For these reasons, GOODS which are traded internationally typically tend to fall into 4 broad categories: INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. /

9 process of increasing involvement of enterprises in international markets, although there is no agreed definition of internationalization or international entrepreneurship INTERNACIONALIZATION the decision to establish foreign direct investment (FDI) production units abroad MULTINACIONALIZATION an ongoing process by which regional economies, societies, and cultures have become integrated through a globe-spanning network of communication and trade integration of national economies into the international economy through trade, FDI, capital flows, migration, and the spread of technology GLOBALIZATION 9.9. INTERNATIONALIZATION - various research approaches INT = cover for international operations INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. /

10 10. Dimensions of INTERNACIONALIZATION Material purchase / components / technology / goods FDI in a company (impact on competition at a domestic market) INTERNAL dimension (active IB in external flow) Export Ownership of production unit abroad Licence / Contracts EXTERNAL dimension INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. /

11 11. MOTIVES for foreign expansion PROACTIVE motivesProfit advantageUnique product Technological advantage Exclusive informationTax advantageEconomy of scaleREACTIVE motivesStrong competitionOver-productionDomestic revenues declineCapacity (surpluses)Saturated domestic market Customer distance / logistic point distance INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. /

12 12. Entry modes & business activities in IB ENTRY MODES EXPORTING Direct export Indirect export CONTRACTUAL Licence & Franchise AlianceOther INVESTMENT Joint venture Major / Minor / 50-50% Wholly Owned Subsidiary Greenfield Acquisition INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. /

13 13. INT. TRADE EXPORT Quantity of goods and services exported abroad Selling of products made in one’s own country for use or resale in other countries DIRECT x INDIRECT (intermediary) IMPORT Quantity of goods and services imported from abroad buying of products made in other countries for use or resale in one’s own country Internal dimension of internationalisation INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. /

14 14. CONTRACTUAL international business activities LICENCE contractual agreement in which a firm in one country licenses the use of its INTELLECTUAL property to a firm in a second country in return for a RAYALTY pay licensor provides its patents, trademarks, know-how, trade secrets x royalty beer breweries, Skoda avoiding restrictions – investment / testing market FRANCHISE Provision of right to make business in a certain – in advance agreed way (recipe, brand names, trademarks, logos, mktg techniques, procedures) for a royalty payment unique product, unique conditions high level of standardization (LR, McD. – color, space solution) ALIANCES Cooperation (customers – purch. strength / compet. – cartel, capacity, research, anti- red-tape administration) OTHER agreements Technological / Management INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. /

15 15. INVESTMENT business activities JOINT VENTURE an entity formed between two or more parties to undertake economic activity together Major [> 50%] - Minor [< 50%] - 50 / 50 WOS [Wholly Owned Subsidiary] GREENFIELD ACQUISITION MNC / MNE / MNO MNC = buy resources, create goods in a variety of countries & then sell them in a variety of countries. Coordination of activities from headquarters (often). MNE = non-for-profit organizations (Int.Red Cross) and non typical MNC MNO = general term when referring to both non-for-profit and profit- seeking organizations INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. /

16 16. International INVESTMENTS - generally FDI = Foreign Direct Investment investments made for the purpose of ACTIVELY CONTROLLING PROPERTY, assets, or companies located in host countries home x host country Portfolio Investment purchases of foreign financial assets (stock, bonds, certificates, deposits) for a purpose OTHER than CONTROL INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. /

17 17. Further IB operations / countertrades INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. / Counter trade = is exchanging goods or services that are paid for, in whole or part, with other goods or services BARTER Exchange of goods or services directly for other goods or services no money is involved (as means of purchase or payment) SWITCH trading 3 parties involved, partly barter + partly money involved or in FIN: Practice in which one company sells to another its obligation to make a purchase in a given country. Counter PURCHASE Sale of goods and services to a country by a company that promises to make a future purchase of a specific product from the country BUYBACK occurs when a firm builds a plant in a country - or supplies technology, equipment, training, or other services to the country and agrees to take a certain percentage of the plant's output as partial payment for the contract OFFSET Agreement that a company will offset a hard - currency purchase of an unspecified product from that nation in the future.

18 18. Decision making – foreign market evaluation  PEST / STEEP / STEEPLE analysis  Competition analysis (Porter)  SWOT analysis  BENCHMARKING  Emerging market trends DATA collection:  Secondary data = was collected already  Primary data = necessary to obtain it INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. /

19 19. Data collection SECONDARY / desk analysing of secondary data low cost quick execution PRIMARY / terrain collection & analysis of primary d. relatively high cost time-consuming INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. /

20 20. Basic business analysis Analysis of external environm. (market) PEST / STEEP / STEEPLE COMPETITION analysis Analysis of inner environm. (company) SWOT Factors: political, economical, social, technological (PEST), ecological (STEEP), legal and European (STEEPLE) Barriers to entry Threat of substitutes Buyer power Supplier power Rivalry / degree of rivalry of present competitors Strengths Weakness Opportunities Threats INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. /

21 21. ŘÍZENÍ OBCHODU [ROb] Ing. Pavla Břečková, Ph.D. / INT environment & its influence on business IB works in a certain environment, which has an influence on: Decision making WHETHER OR NOT to enter this market (market selection) Entry mode (the form of entry) Choosing of mktg strategy PEST analysis = analysis of int.envi: Political & Legal e. Economical e. Social & Cultural e. Technological e.

22 22. ŘÍZENÍ OBCHODU [ROb] Ing. Pavla Břečková, Ph.D. / [PEST] P – Political & Legal environment Legal environment:  possibility to control ownership  possibility to buy properties (lands, buildings)  possibility to repatriate the profit abroad  law enforcement  possibility to set up a new company & finishing entrepreneurship Political environment: o political system and political stability o influence of interest groups / stakeholders o relation to foreign companies o corruption

23 Cases create legal precedents COMMON / CASE law Detailed listing what IS and IS NOT permissible CIVIL law Based on the faith & practice of a particular religion RELIGIOUS law Often in communist and dictatorships is whatever the country’s bureaucrats say it is BUREAUCRATIC law 23. [PEST] (P) - LEGAL environment INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. /

24 24. [PEST] (P) – POLITICAL environment Political IB barriers:  Sanctions  Embargo  Exchange rate manipulation  Dual-use  Nationalization o expropriation o confiscation  Privatization INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. /

25 25. [PEST] E – Economic environment  economic policy of government: o IB policy o rate policy  basic macro-economic measures and their development / trend  proportion of ‘grey economy’ INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. /

26 26. [PEST ] S – Social & Cultural environment Culture:  Extent of freedom of society  Hierarchy  Value orientation (e.g.: western pattern etc.) Institutions: –Family –Religious bodies –Educational institutions Further factors: –Language –Non-verbal communication –Way of dressing –Aesthetics –Life styles INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. /

27 27. [PEST] T – Technological environment  existence & quality of basic infrastructure  quality & availability of communication infrastructure: TV, broadcast, phones etc.  IT – possibility of data transfer abroad => internationalization of services, standardisation  approach to information  E-commerce / e-business  B2C, B2B, C2C (e-Bay), C2B INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. /

28 Import / Export International TRADE FDI / Portfolio inv. // JV / WOS / MNO etc. International INVESTMENT Barter, Switch trading, Buyback,. Other forms of int. business ACTIVITY (counter-trades) 28. INTERNATIONAL BUSINESS CONSISTS IN: INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. /

29 -Internationalization, drivers of internationalization -Dimensions of internationalisation: internal x external -Motives for foreign expansion: proactive x reactive -Entry / opeartional modes -Exporting -Contractual -Investment -FDI x Portfolio investment -Data collection / Primary x Secondary data -Common business analysis (PEST/STEEP/STEEPLE – Competition analysis - SWOT) -Countertrade operations (Barter, Switch, Counter purchase, Buyback, Offset) 29. KEY terms INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. /

30 30. Thank you for your attention Ing. Pavla Břečková, Ph.D. INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. /


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