1 ECP 6701 Competitive Strategies in Expanding Markets International Business: An Overview

2 Readings Daniels, Radebaugh and Sullivan, International Business, Chapter 1

3 International Business: An Overview Why companies engage in international Business? Why the growth of international business has accelerated? Patterns of international competition The evolution of international competition and globalization Patterns of international expansion and strategy.

4 Introduction The Field of International Business – The goal of private business is to increase or to stabilize profits. Success is influenced by Foreign sales Foreign resources Government business (regulated companies or public companies) may or may not be profit- motivated

5 Introduction Why firms engage in international business? – To expand their sales – To obtain resources – To diversify their sources of sales and supplies – To minimize competitive risk

6 Introduction Reasons for Recent International Business Growth – Expansion of technology Business is becoming more global because – Transportation is quicker – Communications enable control from afar – Transportation and communications costs are more conducive for international operations – Liberalization of cross-border movements Lower governmental barriers to the movement of goods, services, and resources enable companies to take better advantage of international opportunities

7 Introduction – Development of supporting institutional arrangements Institutional arrangements – Are made by business and government – Ease flow of goods – Reduce risk – Increase in global competition More companies operate internationally because – New products quickly become global – Companies can produce in different countries – Domestic companies’ competitors, suppliers, and customers become international

8 Modes of International Business Merchandise exports and imports – Tangible items (e.g., cars, televisions, e.t.c) Service exports and imports – Tourism and transportation – Performance of services – Use of intangible assets

9 Modes of International Business Investments Direct investment – Direct investment : Key features are – Control – Access to foreign markets – Access to foreign resources – Higher foreign sales than exporting (often) – Partial ownership (sometimes)

10 Modes of International Business Investments Portfolio investment – Portfolio investment: Key features It is used for diversification purposes Noncontrol of foreign operations Financial benefit (for example, loans)

11 Patterns of international competition The pattern of international competition differs from industry to industry. – Multidomestic industries Competition in one country does not affect competition in other countries. – Global industries A firm’s competitive position in one country is significantly affected by its position in other countries

12 External Competitive Environment Economic forces determine competitive advantage and comparative advantage. The role of government is excessive in international markets. The competitive environment created by other companies. – The next slide illustrates the international business environment.

13 International Business: Operations and Influences

14 International Strategy Evolution Patterns of international expansion: – Strategies for heavy international commitments usually evolve gradually from Passive to active expansion External to internal handling of operations Deepening mode of commitment Geographical diversification – Leapfrogging of Expansion

15 The Usual Pattern of Internationalization

16 Summary Companies engage in international business to expand sales, acquire resources, diversify sales and supplies, and minimize competitive risk. International business transactions have been growing rapidly because of technological improvements and government policies.

17 Summary A company can engage in international business through exports, imports, foreign investment. There is gradual evolution of international business strategies.