Module 1

International Business
Management
M a n a g e m e n t
Module 1
Introduction to international business
Local,
regional,
national,
international, and
global business
Management orientation of overseas

business ethno centric,
poly centric,
region centric, and
geo centric orientation
Reasons for internationalization of

business
factors restricting internationalization

of business
major global companies in the world

M a n a g e m e n t
Present scenario of
business
M a n a g e m e n t
What
is
M a n a g e m e n t
International
business consists of
transactions that are
devised and carried
out across national
borders to satisfy
the objectives of
individuals,
companies, and
organizations.
M a n a g e m e n t
Definitions
1) IB field is
concerned with the issues
facing international
companies and governments
in dealing with all types
of crossborder Transactions.
M a n a g e m e n t
Definitions
2) IB involves all
business
transactions that
involve two or more
Countries.
M a n a g e m e n t
Definitions
3) IB consists of
transactions that are
devised and carried out
across borders to
satisfy the objectives
of individuals and
Organizations.
M a n a g e m e n t
Definitions
4) IB consists
of those activities
private and public
enterprises
that involve the
movement across
national boundaries
of goods and
services, resources,
knowledge or skills.
M a n a g e m e n t
Need for International

Business
International business :
causes the flow of ideas,
services, and capital across
the world
offers consumers new choices
permits the acquisition of a
wider variety of products
facilitates the mobility of
labor, capital, and
technology
provides challenging
employment opportunities
reallocates resources, makes
preferential choices, and
shifts activities to a
global level
M a n a g e m e n t
Types of International
Business
Export-import trade
Foreign direct
investment
Licensing
Franchising
Management contracts
M a n a g e m e n t
Internation
al b u s i n e s s
q u e s t i o n s
How will an idea , good ,

or service fit into the
international market?
Should trade or
investment be used to
enter a foreign market?
Should supplies be
obtained domestically
or abroad?
What product
adjustments are
necessary to be
responsive to local
conditions?
What are the threats
from global
competitors , and how
can these threats be
counteracted?
M a n a g e m e n t
Types
Importing and Selling and buying goods

Exporting and services with
organizations in other
countries
Multinational An organization with
Enterprise operating units located in
(MNE) foreign countries.
Global An organization having

Organization corporate units in a number
of countries integrated to
operate worldwide.
M a n a g e m e n t
I n t e r n a t i o n a l
busines
strad
em arketi
ng
are related but not

same
M a n a g e m e n t
International
trade
as it indicates pertains to
only bilateral or multilateral
trade activities
M a n a g e m e n t
Trade activities between two or

more countries can be understood
both at
macro level ie ,
country level,
micro level ie firm or
company
M a n a g e m e n t
International
business
International trade
Macro level Micro level
International marketing
M a n a g e m e n t
International and
national business
Three fundamental
difference are in terms of
market ,
competition
currency
M a n a g e m e n t
factor international national
Business horizon global National
competition global Local /regional/

national
Regional formation Trade blocks / Free access

/ segmentation agreement
currency Foregin excahange Local currency

(unstable) (stable)
Risk and unpredictable More predictable

uncertainity
Role of agent Primary can be a More predictable

catalyst Secondary
M a n a g e m e n t
Orientation of management:
Perlmutter (1967) identified distinctive "orientations"
of management of international organisations.
His "EPRG" scheme

identified four types of
attitudes or orientations
associated with successive
stages in the evolution of
international operations.
M a n a g e m e n t
ETHNOCENTRIC MANAGEMENT
ORIENTATION
home country is superior to any other
country in the world regardless of any
evidence to the contrary .
“ since a product or a service performed

well at home , it should also perform well
abroad . Since this is so obvious , no
further research is necessary on foreign
markets and no adaptations need to be
made to the products or services to
M a n a g e m e n t
•Ethnocentrism - home country orientation

exporting surplus
M a n a g e m e n t
POLYCENTRIC MANAGEMENT ORIENTATION

each country is unique and therefore it
allows its subsidiaries to have more
control in developing strategies that will
work in a particular country .
“ Since each country is so unique , complete

control should be given to local managers
since they obviously know what is best for
the company in that country .” As long as
these subsidiaries are profitable ,
headquarters is apt to leave them alone .
“ Let the Romans do it their way . We really
don ’ t understand what is going on here , but
we have to have confidence in them . As
long as they earn a profit , we want to
remain in the background ” ( Perlmutter ,
2001 ).
Though an improvement over a purely

ethnocentric view , a purely polycentric
one
the has its flaw viewpoint
polycentric in that headquarters
often leads and
to
subsidiaries are somewhat
ethnocentricity cut region
within each off from one
where
the company another
operates
.
M a n a g e m e n t
• Polycentrism - host country orientation

subsidiary operation
M a n a g e m e n t
•Regiocentrism - regional orientation

world market strategies
M a n a g e m e n t
GEOCENTRIC MANAGEMENT ORIENTATION

geocentric orientation believes that the
entire world is a potential market and
strives to develop strategies that will
work in every market .
In geocentrically oriented companies ,

authority is not simply placed with
headquarters at home or with
subsidiaries abroad , but rather a is
dispersed more equally between the two
so that a collaboration is formed . Also ,
a view of superiority is not based on
nationality .
M a n a g e m e n t
•Geocentrism - world orientation

world market strategies
M a n a g e m e n t
The four stages are as follows:

1.Stage one:
domestic in focus, with all activity concentrated in
the home market. Whilst many organisations can
survive like this, for example raw milk marketing,
solely domestically oriented organisations are
probably doomed to long term failure..
M a n a g e m e n t

2. Stage two:
home focus, but with exports (ethnocentric). Probably

believes only in home values, but creates an export
division. Usually ripe for the taking by stage four
organisations.
M a n a g e m e n t

3. Stage three:
stage two organisations which realise that they must
adapt their marketing mixes to overseas operations.
The focus switches to multinational (polycentric) and
adaption becomes paramount.
M a n a g e m e n t

4. Stage four:
global organisations which create value by extending

products and programmes and focus on serving
emerging global markets (geocentric).
This involves recognising that markets around the

world consist of similarities and differences and that it
is possible to develop a global strategy based on
similarities to obtain scale economies, but also
recognises and responds to cost effective differences.
Its strategies are a combination of extension,
adaptation and creation. It is unpredictable in
behaviour and always alert to opportunities.
There is no time limit on the evolution process. In
some industries, like horticulture, the process can be
very quick.
M a n a g e m e n t
Stages of domestic to global evolution
Management Stage one Stage two Stage three Stage four

emphasis Domestic International Multinational Global
Focus Domestic Ethnocentric Polycentric Geocentric

Marketing Domestic Extension Adaption Extension
strategy
Structure Domestic International Worldwide Adaption

area creation
matrix/mixed
Management Domestic Centralised top Decentralised Integrated

style down bottom up
Manufacturing Mainly Mainly Host country Lowest cost

stance domestic domestic worldwide
Investment Domestic Domestic used Mainly in each Cross

policy worldwide host country subsidization
Performance Domestic Against home Each host Worldwide

evaluation market share country market country market
share share
M a n a g e m e n t
View of Model orientatio Strategy

the world n
1 Domestic Home country Controlled Ethnocentric domestic
federation
2 International Extension Coordinated Ethnocentric International

market federation
3 Multinational National market Decentralised polycentric Multidomestic

federation
4 Global Global market Centralized hub geocentric Global

or resources
5 transnational Global markets Integrated geocentric transnational

network
M a n a g e m e n t
STAGE 2
M a n a g e m e n t
STAGE 3
M a n a g e m e n t
STAGE 4
M a n a g e m e n t
STAGE 5
M a n a g e m e n t
high
GLOBAL TRANSNATIONAL
STRATEGY STRATEGY
pressure
Cost
INTERNATIONAL MULTIDOMESTIC
STRATEGY STRATEGY
low
low high
Pressure for
local
responsiveness
M a n a g e m e n t
When Coca - Cola has an

increase of 2 % in sales ,
it might well translate
into 500 , 000 additional
cases for the month
M a n a g e m e n t
The old adage Think Global , Act

Local is fine for businesses selling
nationally distributed consumer products
and services
majority of small business

Think Local , Act Local .
For example , why would a locally - owned real -
estate agency need to spend money on
internet Search Optimization?
M a n a g e m e n t
1) Minority Supplier Commitments

Foster a climate of entrepreneurial
opportunity through targeted minority
supplier identification and a new
supplier mentoring program .
2) Urban Economic Partnerships
A commitment to strengthen local
economies through urban economic
partnerships and increased marketing
investments with local retailers and
entrepreneurs .
3) Opportunities for Minority
Financial Institutions
4) Task Force to Review Value Chain
5) Increased Community Contributions
M a n a g e m e n t
ITC IBD ( International Business

Division ) is the country ’ s second
largest exporter of agri products
M a n a g e m e n t
In the year 1990 , the company

leveraged its agri – sourcing
competency & thus set up the
agri business division for
export of agri - commodities .
The Division is today one of
India's largest exporters .
ITC's unique and now widely
acknowledged e - Choupal
initiative began in 2000
M a n a g e m e n t
E - Choupal services today

more than 4 million farmers
wide range of crops soabean ,
coffee , wheat , rice , shrimp tc
Over 40 , 000 villages

7000 kiosks across nine states
MP , Haryana , Utharanchal , Karnataka ,
AP , Up , Maharashra , Rajasthan and
kerala
M a n a g e m e n t
M a n a g e m e n t
M a n a g e m e n t
M a n a g e m e n t
M a n a g e m e n t
How to analyse a case
theory are tools . One one needs

to know which tool to be selected
and how it can be used .
Only some of the tools or a

small portion of the theory is
applicable here .
One needs to have creativity

and analytical skill to
translate the theory to the
real life situation
M a n a g e m e n t
According to Raymond , the analyst

should try to seek answers to
following questions :
1. What’s actual problem involved in

the case
2. What are the relevant facts
3. What are the crucial unknown
aspects of the scene
4. What are the major critical
questions related to each specific
event
5. In what ways can logic and
reasoning be used lo determine
crucial inferences, connections and
relationships
6. In what manner can contradictory
facts and arguments be weighed in making
decisions
7. What should be the proper timing
of decisions
8. In what ways can those decisions
be best executed
M a n a g e m e n t
Schnell ’ s ten - point model

1. Identification of the problem.
2. Determination of facts.
3. Ascertainment of alternative courses of
action.
4. Analysis of advantages and disadvantages of
the alternatives.
5. Assessment of advantages and disadvantages of
the alternatives.
6. Prediction of concurrent advantages and
disadvantages.
7. Selection of best alternative.
8. Execution of the decision.
9. Filing the problem
solution.
‘
10. Comparing expected results with the actual
results of the decision.
M a n a g e m e n t
Coco cola Third stage company multinational

1 ITC
on home country
Stage two, evaluation is based
Bajaj Third stage adapted to local

situation
Coco cola fourth stage company using local
2 resurces
Itc stage two, concentraing hiome
market
Bajaj stage three
Suggestion
Coco cola ecocentric
geo frindly,adapting
bajaj global resources
to market , ,
3 itc
givepoly
morecentric
treatment plant,
importance CSR, efluent
ITC diversfy d product, awareness at

all level to b improved
Bajaj geocentric orientation
Coca Cola now poly centric, earlier geo centric
4 ITC
Bajaj
ethnocentric,
Geo centric, From scooter to bike,
moving to developing countries
Coca cola MNC polycentric funny ad with

local stars,
5 ITC
Multi domestic strategy
international, ethnocentric
Bajaj international company,
monopoly???????
M a n a g e m e n t
How a multinational
company strives for
business / market
expansion with local
strategy
Focuses mostly on
exports of agri -
products
Direct exports of two

and three wheelers .
Joint ventures and
strategic alliances

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Module 1

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International Business

Management orientation of overseas

Reasons for internationalization of

factors restricting internationalization

major global companies in the world

Need for International

How will an idea , good ,

Importing and Selling and buying goods

Global An organization having

are related but not

Trade activities between two or

Macro level Micro level

factor international national

Business horizon global National

competition global Local /regional/

Regional formation Trade blocks / Free access

currency Foregin excahange Local currency

Risk and unpredictable More predictable

Role of agent Primary can be a More predictable

His "EPRG" scheme

“ since a product or a service performed

•Ethnocentrism - home country orientation

POLYCENTRIC MANAGEMENT ORIENTATION

“ Since each country is so unique , complete

Though an improvement over a purely

• Polycentrism - host country orientation

•Regiocentrism - regional orientation

GEOCENTRIC MANAGEMENT ORIENTATION

In geocentrically oriented companies ,

•Geocentrism - world orientation

The four stages are as follows:

The four stages are as follows:

home focus, but with exports (ethnocentric). Probably

The four stages are as follows:

The four stages are as follows:

global organisations which create value by extending

This involves recognising that markets around the

Stages of domestic to global evolution

Management Stage one Stage two Stage three Stage four

Focus Domestic Ethnocentric Polycentric Geocentric

Structure Domestic International Worldwide Adaption

Management Domestic Centralised top Decentralised Integrated

Manufacturing Mainly Mainly Host country Lowest cost

Investment Domestic Domestic used Mainly in each Cross

Performance Domestic Against home Each host Worldwide

View of Model orientatio Strategy

2 International Extension Coordinated Ethnocentric International

3 Multinational National market Decentralised polycentric Multidomestic

4 Global Global market Centralized hub geocentric Global

5 transnational Global markets Integrated geocentric transnational

When Coca - Cola has an

The old adage Think Global , Act

majority of small business

1) Minority Supplier Commitments

ITC IBD ( International Business

In the year 1990 , the company

E - Choupal services today

Over 40 , 000 villages

How to analyse a case

theory are tools . One one needs

Only some of the tools or a

One needs to have creativity

According to Raymond , the analyst