2. Defining International Business
International Business Strategy
301LON
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PLEASE DO NOT CHANGE TEMPLATE OR FORMATTING
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. International Business Strategy
“Strategy is the (international) direction and scope of an organisation over the long term: which achieves advantage in a changing (international) environment through its configuration of resources and competences with the aim of fulfilling stakeholder (international) expectations.”
Adapted on Johnson & Scholes 2008:3

5. International Market Development Strategy
Products
Existing
New
Protect & Build
-Consolidation
- Market Penetration
Product Development
-Modified products
-New products
Market Development
-New segments
-New uses
-New geographical markets
National
International
Diversification
-Related
-Unrelated
Existing
Markets
New

6. 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.

7. The Nature of International Business
All value-adding activities—including sourcing, manufacturing, and marketing—can be performed in international locations.
International trade can involve products, services, capital, technology, know-how, and labor.
Firms internationalize through various entry strategies, such as exporting and foreign direct investment.

8. Key Concepts in International Business
Globalization of markets: Ongoing economic integration and growing interdependency of countries worldwide.
International trade: Exchange of products and services across national borders, typically through exporting and importing.

9. Key Concepts (cont.)
Exporting: Sale of products or services from a base in the home country or a third country to customers located abroad. Boeing and Airbus export billions of dollars in commercial aircraft products every year.
Importing or Global Sourcing: Procurement of products or services from suppliers located abroad for consumption in the home country or a third country. Toyota imports many parts from China when it manufactures cars in Japan.

10. Key Concepts (cont.) International portfolio investment:
Passive ownership of foreign securities, such as stocks
and bonds, in order to generate financial returns.
International investment:
Transfer of assets to another country or the acquisition of
assets in that country. Also known as “foreign direct Investment”
(FDI). We will focus on this type of investment.

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

12. 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”

13. Evolving Mentality
Strategies Emerging from the Integration Responsiveness
Global
Transnational
International
Multinational

14. Home Replication Strategy
The firm views international business as separate from, and secondary to, its domestic business.
Expansion abroad is an opportunity to generate incremental sales for domestic product lines.
Products are designed for domestic customers, and international business is pursued mainly to extend the life of domestic products and to replicate home market success.
Management holds little interest in foreign markets and expects little knowledge to flow from foreign operations.
12-14

15. Multidomestic Strategy
The firm develops subsidiaries or affiliates in each of its foreign markets, and appoints local managers to operate independently and be locally responsive.
Products and services are adapted to suit the needs and wants of buyers in each country.
Because headquarters acknowledges differences among national markets, subsidiaries are allowed to vary products and practices by country.
Country managers are often nationals of the host country, and generally don’t share knowledge and experience with managers in other countries.

16. Global Strategy
Headquarters seeks substantial control over all country operations in order to minimize redundancy and to achieve maximum efficiency, learning, and integration worldwide.
Global strategy asks, “Why not make the same thing, the same way, everywhere?” Products, marketing, and company practices are relatively standardized.
R&D, manufacturing, marketing, and other activities tend to be concentrated at headquarters, where they can be centrally coordinated and controlled.
Management views the world as one large marketplace.

17. Transnational Strategy
A coordinated approach to internationalization in which the firm strives to be more responsive to local needs while retaining sufficient central control of operations to ensure efficiency and learning.
The firm seeks to combine the major advantages of multidomestic and global strategies while minimizing their disadvantages.
It’s a flexible approach: standardize where feasible; adapt where appropriate.
However, most firms find implementing transnational strategy very challenging

18. Process of Internationalisation
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

19. Knowledgecast Summary
Demonstrate a sound appreciation of current strategic management concepts
Assess current developments in the organisational environment and alternative responses related to strategy
MAXIMUM THREE LEARNING OUTCOMES TO REVIEW: ONE REVIEW SUB BULLET PER LEARNING OUTCOME

21. Seminar Whirlpool’s Dramatic Turnaround Through Internationalisation
Read the closing case on page 57 of your required textbook by
Cavusgil, Knight and Reisenberger ‘International Business’ in
preparation for this seminar.
Remember that this is group work were participation is expected.
You are to prepare powerpoint presentation and be ready to present
and answer questions on you analysis.
Individual contributions will be assessed during the seminar session.

22. 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.