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

2.2. INTERNATIONAL BUSINESS – main areas Full-time course = 12 lectures per 90 mins. INTERNATIONAL BUSINESS [IB], characteristics, indicators. WORLD BUSINESS TERRITORIES, challenges, integration, main trading blocks [TRIAD, BRIC] GLOBAL BUSINESS ENVIRONMENT. EMERGING MARKETS, characteristics, features, selected markets in detail BRICS Doing business in ASIA Foreign market analysis PREDISPOSITIONS for working in IB, expatriation and HR in IB

EXAM terms BA_IBR 12 lectures (per 90 mins) - Finished by: exam Completion CONDITIONS = min. 12 points out of 30 Active participation in the lectures [active listening, discussing, reading, analyzing & interpreting of economic articles or case study results, presence at lectures – 50%] Case study elaboration & it’s active professional prezentation Knowledge test ALL BASED ON POINTS AS FOLLOW 5 points = 3/5 presence (if less = 0 points) up to 10 points = success at CASE study & its prezentation up to 15 points = TEST TOTAL max – 14 points = E 15 – 17 = D 18 – 20 = C = B 24 – 30 = A

CASE study / team project CASE study on one of these topics: 1. BUSINESS RELATIONS … worldwide. The world economy structuring nowadays, may be compared with the past / possible prospects for future. Examples of certain (political) decisions => concrete influence on business or business relations. 2. SMEs (Small & Medium Enterprises) and their role in a globalizing world Companies up to 250 employees (acc.to European definition), their specifics, positives x negatives, could contain some statistics or comparison in various countries. Their major role in society, comparison of views on them in various countries or contexts. 3. FAMILY BUSINESS …and their role in global business, positives x negatives, examples, specifics, problem of handing over to next generations, comparisons in various countries etc. 4. PRODUCT PLACEMENT – market study Placing of a product into a foreign market, including product description + argument why it is suitable for export, analyses of the preferential market (why this market, structure and potential of the target group), mapping competition, potentials + risks, argument why you think your product will succeed. 5. NOT WIDELY KNOWN (UNUSUAL INFORMATION) about BRICS / EU / ASEAN or another international trade grouping

CASE study - elaboration CASE study on one of these topics: 1. Business Relations 2. SMEs and their role in a globalizing world 3. Family Business 4. PRODUCT placement – market study 5. Not widely known information about an international grouping ELABORATION:  Elaboration in teams per up to 8 people  Presentation of the results - ppt possible, cca 10 min., structured way, clear outcomes (solutions, results) PREZENTATION: - up to 10 min. / all the team members should be involved

Team projects presentation - schedule 6/10/2014introductory lesson, setting the teams, choosing topics 20/10/2014guest lecture - Ananta Giri: Rethinking Economics: With and Beyond Globalization and Towards Planetary Realizations / consulting on the team projects 3/11/2014lecture / consulting on the team projects 17/11/2014Czech bank holidays 1/12/2014presentation of teams /12/2014presentation of teams 3 + 4, concluding the course

7.7. LITERATURE SOURCES Povinná literatura / Mandatory reading: Charles W. L. Hill: Global Business Today, McGraw-Hill/Irwin, 7th edition, 2011 Doporučená literatura / Recommended reading: Allan Sitkin, Nick Bowen: International Business, January Stuart Wall, Dr. Bronwen Rees: International Business: A First Course, September Wild, J., Wild, K., Han, J.: International business: the challenges of globalization. 4th ed. – Pearson, Upper Saddle River, ISBN: Woods, M.: International business. Basingstoke, Palgrave, ISBN: Griffin, R.W., Pustay, M.W.: International business: a managerial perspective. 5th int. ed. - Upper Saddle River, Prentice Hall, ISBN:

8.8. International ENVIRONMENT GLOBAL MACRO MICRO

9.9. INTERNATIONALIZATION – MICRO view Special IB operations: e.g. barter, switch, clearing Entry / Operational modes EXPORTINGCONTRACTUALINVESTMENT Motives for foreign expansion / Drivers of INT ProactiveReactive Dimensions of Internationalization INTERNALEXTERNAL

10. INTERNATIONALIZATION – MACRO view 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:

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 11. Goods traded internationally - categories For these reasons, GOODS which are traded internationally typically tend to fall into 4 broad categories:

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 12. INTERNATIONALIZATION - various research approaches INT = cover for international operations

13. 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

14. 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

15. 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

16. 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

17. 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

18. 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

19. Further IB operations / countertrades 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.

20. 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

21. Data collection SECONDARY / desk analysing of secondary data low cost quick execution PRIMARY / terrain collection & analysis of primary d. relatively high cost time-consuming

22. 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.

23. [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

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 24. [PEST] (P) - LEGAL environment (2)

25. [PEST] (P) – POLITICAL environment (2) Political IB barriers:  Sanctions  Embargo  Exchange rate manipulation  Dual-use  Nationalization o expropriation o confiscation  Privatization

26. [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’

27. [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

28. [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 RELATIONS Thank you for your attention Ing. Pavla Břečková, Ph.D.