NATURE & SCOPE OF INTERNATIONAL BUSINESS By Elisante Ole Gabriel (Tanzania) Chartered Marketer egabriel@edenconsult.net, www.olegabriel.com +255-784-455-499 11/27/2018

KEY TOPICS TO BE COVERED Nature and Scope of International Business International Business Environment International Markets entry strategies The Role of World Trade Organisation Management Tools for International Business International Payment systems & Risks 11/27/2018

NATURE & SCOPE OF IBM International Business Management in the context of this subject is used synonymously with International Marketing management (IMM) Deriving from the word ‘International’ it suggests that IBM is about managing business between nations. These nations could be separated by ‘geographical’ or ‘Political’ boundaries. 11/27/2018

Globalization This is a concept considering the whole world as one huge homogeneous market. Globalisation is hinged on a number of assumptions. It is however on two major dimensions: Globalization of production Globalization of markets 11/27/2018

Domestic marketing and international marketing decisions Overseas Environmental Challenges (Uncontrollables) Domestic Environmental Challenges (Uncontrollables) Political Marketing Challenges in country Y Economic Legal Competition Economic (Controllables) Product Marketing Challenges in country X Consumer Place Price Socio Cultural Political Marketing Challenges in country Z Promotion Legal Competition Infrastructure Logistics Geography 11/27/2018

Reasons for entering international markets growth profitability achieving economies of scale risk spread access to imported inputs uniqueness of product or services marketing opportunities due to life cycle spreading R&D cost 11/27/2018

Key issues in export growth Developing a proactive approach to international trade Promoting Foreign Direct Investments Promoting Competitiveness Simplification of procedures Encouraging large-scale manufacturers Reducing transaction costs Infrastructure development 11/27/2018

Key issues (contd) Entrepreneurship facilitation Strengthening SEZs Encouraging SMEs Devolution of power to states Abolition of indirect taxes for certain sectors Strategy for promoting services’ export 11/27/2018

Identifying opportunities in international markets Extreme focus product strategy Products-country matrix strategy Growth-share matrix of exports Market focus strategies 11/27/2018

MODES OF ENTREING INTERNATIONAL MARKETS This is an institutional mechanism by which a firm makes its products or services available for consumers in international markets. Mode of entry is determined by: - the ability and willingness of the firm to commit resources - the firms’ desire to have a level of control over international operations - the level of risk the firm is willing to take 11/27/2018

Modes of international market entry Production in home country Exports: production is carried out in home country and finished goods are shipped to the overseas markets for sale indirect exports: process of selling products to an export intermediary in the company’s home country who in turn sells the products in the overseas markets direct exports: process of selling the firm’s products directly to an importer in the overseas market 11/27/2018

Modes (contd) complementary exporting: use of distribution channels of an overseas firm to make the product available in the overseas market provide offshore services: to overseas clients with the help of information and communication technology 11/27/2018

Production in a foreign country Modes (contd) Production in a foreign country contractual entry modes international licensing: process by which a domestic company allows a foreign company to use its intellectual property and specific business skills for a compensation (royalty) international franchising: transfer of intellectual property and other assistance over an extended period of time with greater control compared to licensing 11/27/2018

Modes (contd) overseas turnkey projects: conceptualize, design, install, construct, and carry out primary testing of manufacturing facilities or engineering structures for an overseas client organisation types : built and transfer (BT), built, operate, and transfer (BOT), built, operate, own (BOO) international management contracts: a company provides its technical and managerial expertise for a specific duration to an overseas firm 11/27/2018

Modes (contd) international strategic alliance: the relationship between two or more firms that cooperate with each other t o achieve common strategic goals but do not form a separate company international contract manufacturing: a contractual arrangement under which a firm’s manufacturing operations are carried out in a foreign countries 11/27/2018

Investment entry modes Modes (contd) Investment entry modes assembly in overseas markets: refers to exporting various components of the product in completely knocked down (CKD) condition and assembles them overseas international joint ventures: equity participation of two or more firms resulting into formation of a new entity 11/27/2018

Factors for selecting partners for cooperation the alliance partner should have some strength which can be translated into business values for the alliance the alliance partners should be committed to cooperative goals it is preferable that the alliance partner should have multi-cultural business environment 11/27/2018

Wholly owned foreign subsidiaries Factors (contd) Wholly owned foreign subsidiaries to have complete control and ownership of international operations a firm opts for foreign direct investment through: 1. acquiring a foreign company and all its resources in a foreign market (acquisition) 2. the establishment of production and marketing facilities by a firm on its own from scratch (green field) 11/27/2018

Factors affecting the selection of entry mode External factors Market size Market growth Government regulations Level of competition Level of risk political economic operational Production and shipping costs 11/27/2018

Factors affecting the selection of entry mode (contd) Internal factors Company’s objectives availability of company resources level of commitment international experience flexibility 11/27/2018

Benefits of IBM More opportunities Avenue for learning new concepts and challenges Possibility of developing a global brand A room to benefit from economies of scale & scope Spread of risks … AND Wider scope for innovation and creativity. 11/27/2018