2. Defining International Business
International Business Strategy
LON301BUS
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Unit: 2 Knowledgecast: 1

3. Module Learning Outcomes
Demonstrate a sound appreciation of current strategic management concepts
Assess current developments in the organisational environment and alternative responses related to strategy
Defining International Business including the key concepts of trade and investment.

4. What is International Business?
“ Performance of trade and investment activities by firms across national borders.”
(Cavusgil et al 2008:4)
Make reference to the globalisation of markets: the ongoing economic integration and growing interdependency of countries worldwide.

5. Key Concepts International Trade Exporting
Importing or Global Sourcing
International Investment
International Trade: Exchange of products and services across national borders; typically through exporting or importing
Exporting: Sale of products or services to customers located abroad; from a base in the home country or third country
Importing or global sourcing: Procurement of products from suppliers located abroad for consumption in the home country or a third country
International Investment: The transfer of assets to another country or the acquisition of assets in that country
Foreign Direct Investment (FDI): An internationalisation strategy in which the firm establishes a physical presence abroad through the acquisition of productive assets such as capital, technology, plant etc NEXT SLIDE FOCUSES ON FDI
Foreign Direct Investment

6. Evolving Theory of FDI
International Capital Theories: FDI driven by return equalization, portfolio diversification
Location Theories: FDI driven by countries’ comparative advantage
Product Cycle Theory: FDI driven by firms’ management of the global product life cycle
Oligopolistic Behavior Theories: FDI driven by firms’ search for, or defense of, competitive advantage
Internalization Theory: FDI driven by organizations’ internal transaction efficiency (hierarchy vs. markets)
Eclectic Theories: FDI driven by many shifting forces

7. Pre-requisites for Internationalisation
Foreign countries must offer location-specific advantages
To motivate the company to invest there
Company must have strategic competencies or ownership-specific advantages
To counteract its relative unfamiliarity with foreign markets
Company must have organizational capabilities
To get better returns from leveraging strengths internally rather than through external market mechanisms such as contracts and licenses

8. Process of Internationalisation
Classic internationalization process:
Incremental process of increasing commitment and understanding of foreign market (Uppsala Model)
Today many companies short-cut this process
In an Internet Age, many are even “Born Global”

9. Process of Internationalisation (2)
High
Wholly-owned
subsidiary
Joint venture (local partner)
Franchising
Control over foreign activities
Licensing
Export (agent
or distributor)
We will return to these forms of market entry in Unit 9
You may choose to define them here (make reference to Cavusgil, Knight and Reisenberger definitions for consistency)
Indirect
Export
Low
Low
High
Amount of resources committed to foreign market

10. Knowledgecast Summary
Demonstrate a sound appreciation of current strategic management concepts
Ensure you are familiar with the key concepts of international business (Slide 5)
Assess current developments in the organisational environment and alternative responses related to strategy
There are a number of ways in which businesses can internationalise including an evolving theory related to FDI
MAXIMUM THREE LEARNING OUTCOMES TO REVIEW: ONE REVIEW SUB BULLET PER LEARNING OUTCOME

12. Seminar Whirlpool’s Dramatic Turnaround Through Internationalisation
Read the closing case on page 23 of your text by Cavusgil,
Knight and Reisenberger ‘International Business’ in
preparation for this seminar.
Be prepared to answer Questions 1 – 4 from page 24 regarding this
case.

13. Group Activity Assessment Preparation
This is your first opportunity as a group to read through the major case
study and the assessment brief (see Unit 5) collectively and highlight
key points.
What note taking process did you choose to use?
• Bullet points
• Mind Map
• Short sentences
• Highlighting/underlining and annotating text

14. Group Activity Assessment Preparation
This is your first opportunity as a group to read through the major case
study and the assessment brief (see Unit 5) collectively and highlight
key points.
Discuss as a team;
1. What are the key activities involved in this assessment
2. Who will be responsible for each activity
3. When the activities will need to be completed
4. How you can guarantee SUCCESS (what will success look/feel/sound like?)
Be prepared to share your plans with your tutor.