1. STRATEGY OF INTERNATIONAL BUSINESS
WEEK 9
STRATEGY OF INTERNATIONAL BUSINESS
(Export And Import, Foreign direct investment and collaboration Strategies)

2. Strategies in international business
Expansion into foreign markets can be achieved via the following mechanisms
Export/import
Foreign direct investment
Collaboration

3. Exports & Imports
Exporting refers to the sale of goods or services produced by a company based in one country to customers in a different country
Importing is the purchase of goods or services by a company based in one country from sellers that reside in another

4. Environmental Factors Influencing Export and Import Operations

5. Exporting Exporting commonly requires coordination among four players:
• Exporter
• Importer
• Transport provider
• Government

6. Advantages of Exporting
Lower investment way to enter foreign markets
Lower risk way to enter foreign markets
Expands sales
Achieves scale economies
Diversifies sales

7. Characteristics of Exporters
The probability of a company’s becoming an exporter increases with company size, but the extent of exporting does not directly correlate with size
Companies export to increase sales revenues, use excess capacity, and diversify markets

8. Phases of Export Development

9. Pitfalls of Exporting Adjusting financial Management
the currency and credit process export require adept financial management
Adjusting customer management
Greater range of services
Adjusting for information technology
A catalog of additional stumbling block

10. Designing an Export Strategy
As a company establishes its export business plan, it must:
assess export potential
obtain expert counseling
select a country or countries where it will focus its exports
formulate its strategy
determine how to get its goods to market

11. The International Transaction Chain

12. Types of importers
Those looking for any product around the world to import and sell.
Those looking for foreign sourcing to get their products at the cheapest price.
Those using foreign sourcing as part of their global supply chain.

13. Types of imports
Industrial and consumer goods to independent individuals and companies.
Intermediate goods and services that are part of the firm’s global supply chain.

14. Strategic Advantages of Imports
Specialization of Labor
Global Rivalry
Local Unavailability
Diversification of Operating Risks

15. The Import Process Two important factors to be considered:
1.Import broker – service company
Provides access to several suppliers or producers, arrange transportation and insurance
2. Customs agencies
Assess and collect duties, as well as ensure that import regulations

16. The Export Process
Direct: products or services are sold to an independent party outside of the exporter’s home country.
Indirect exports: products or services are sold to an intermediary in the domestic market, which then sells the goods in the export market.

17. Indirect Selling Exporters may deal directly with:
agents or distributors in a foreign country
indirectly through third-party intermediaries, such as export management companies
other types of trading companies

18. Direct Selling
Through distributors who usually deal with retailers instead of end users
To retailers and end users
Internet marketing is a new form of direct exporting that is allowing many small- and medium-sized companies to access export markets as never before

19. Export Documentation Key export documents are: pro forma invoice
commercial invoice
bill of lading
consular invoice
certificate of origin
shipper’s export declaration
export packing list

20. Why Exporting May Not Be Feasible
When production abroad is cheaper than at home
When transportation costs to move goods or services internationally are too expensive
When companies lack domestic capacity
When products and services need to be altered substantially to gain sufficient consumer demand abroad
When governments inhibit the import of foreign products
When buyers prefer products originating from a particular country

21. Foreign Direct Investment
Foreign direct investment (FDI) is the direct ownership of facilities in the target country.
It involves the transfer of resources including capital, technology, and personnel.
Direct foreign investment may be made through the acquisition of an existing entity or the establishment of a new enterprise.
Direct ownership provides a high degree of control in the operations and the ability to better know the consumers and competitive environment.

22. Methods for Making FDI
The advantages of acquiring an existing operation include:
adding no further capacity to the market
avoiding start-up problems
easier financing
Companies may choose to build if:
no desired company is available for acquisition
acquisition will lead to carry-over problems
acquisition is harder to finance

23. General Motives for Collaborative Arrangements
To Spread and Reduce Costs
To Specialize in Competencies
To Avoid or Counter Competition
To Secure Vertical and Horizontal Links
To Gain Knowledge
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24. International Motives for Collaborative Arrangements
Gain location-specific assets
Overcome legal constraints
Diversify geographically
Minimize exposure in risky environments

25. Types of Collaborative Arrangements
Companies have a wider choice of operating form when there is less likelihood of competition
Internal handling of foreign operations usually means more control and no sharing of profits
MNEs want returns from their intangible assets

26. Licensing
A company (the licensor) grants intangible property rights to another company (the licensee) to use in a specified geographical area for specific period of time.
Licensing agreements may be:
exclusive or nonexclusive
used for patents, copyrights, trademarks, and other intangible property
Licensing often has an economic motive, such as the desire for faster start-up, lower costs, or access to additional resources

27. Franchising
Franchising includes providing an intangible asset (usually a trademark) and continually infusing necessary assets
Many types of products and many countries participate in franchising
Franchisors face a dilemma:
the more standardization, the less acceptance in the foreign country
the more adjustment to the foreign country, the less the franchisor is needed

28. Management Contracts
Management contracts are used primarily when the foreign company can manage better than the owners

29. Turnkey Operations Turnkey operations are:
Most commonly performed by construction companies
Often performed for a governmental agency

30. Joint Ventures
Joint ventures may have various combinations of ownership
The type of legal organization may be a partnership, a corporation, or some other form permitted in the country of operation
When more than two organizations participate, the joint venture is sometimes called a consortium

31. Equity Alliances
An equity alliance is a collaborative arrangement in which at least one of the collaborating companies takes an ownership position (almost always minority) in the other(s).
Equity alliances help solidify collaboration

32. Collaborative Strategy and Complexity of Control

33. How to Dissolve a Joint Venture

34. Problems of Collaborative Arrangements
The major strains on collaborative arrangements are due to five factors:
Relative importance to partners
Divergent objectives
Control problems
Comparative contributions and appropriations
Differences in culture

35. Managing Foreign Arrangements
The evolution to a different operating mode may:
be the result of experience
necessitate costly termination fees
create organizational tensions

36. Negotiating Process In technology agreements:
seller does not want to give information without assurance of payment
buyer does not want to pay without evaluating information

37. Performance Assessment
When collaborating with another company, managers must:
continue to monitor performance
assess whether to take over operations