International Business

1. Competitive: Kind and number of competitors, their locations and their activities 2. Distributive: National and international agencies available for distributing goods and services 3. Economic: Variables (such as GNP, unit labor cost, personal consumption expenditure) that influence a firm ability to do business. 4. Socioeconomic :Characteristics and distribution of human population

5. Financial: variables (such as interest rate, inflation rate, taxation) has impact a firm financial decisions. 6. Legal : The many foreign and domestic laws governing how international firms must operate 7. Physical : Elements of nature ( topography, climate and natural resources) 8. Political : Elements of nation’s political climates , nationalism, form of government and international organizations 9. Sociocultural: Elements of culture ( attitudes , beliefs and opinions ) important to international managers 10. Labor : composition , skills and attitudes of labor

11. Technological : the technical skills and equipment that affect how resources are converted to product Self reference criterion:————————————————-A common cause of the added complexity of foreign environment is manages unfamiliarity with other culture. The unconscious reference to the managers own culture values called self reference criterion, is probably the biggest cause of international business blunders. Successful managers are careful to examine a problem in terms of the local cultural traits as well as their own.

Example : in home country worker ready to work extra hour for extra income but in foreign culture worker may prefer time than money so when production manager facing a backlog of order may offer worker extra pay for overtime but manager failed as his reference to own cultural value where worker happy to get extra money for overtime.

A strategic alliance is basically any situation where two or more businessowners or companies implement a strategy together. It could be a shared marketing strategy, a referral relationship or an affiliate program. Strategic alliances are typically fairly informal, they can be as simple as swapping customer lists, running an expo stand together or sharing under utilised resources.

Example : google , t-mobile and HTC made a strategic alliance in 2008 and invent a new phone G1.

A Joint Venture on the other hand is a far more formal arrangement created to undertake a specific business transaction or project. In joint ventures, the companies involved usually create a separate entity (or company) to carry out the implementation and operation of the project.

Typically the objective is to develop new products or services or to expand into new markets. Joint venture partnerships usually involve detailed legal documentation to spell out the objectives of the venture and what each party will contribute including capital, technical support, and services. The legal documentation will also cover things such as management rights, how profit and/or losses are split., rules about restrictions, dispute mechanisms, and exit strategies.

Example : several year ago ford and volks wagon formed a jv in Argentina and Brazil the company named auto latina where volks wagon have 51% equity and Ford 49%. The product design is a mix of ford and volks wagon design but they marketed using their won distribution channel and the sales reaches $7.85 bl with their joint effort

Strategic alliances or joint ventures allow you to partner with an existing business to share the risks and opportunities in a new market.

A strategic alliance is a form of collaboration between two or more companies which can take on many forms such as: * technology transfer* purchasing and distribution agreements* marketing and promotional collaboration* joint product development.

Each partner in the alliance usually retains their independence while contributing towards a mutual shared goal.

A joint venture involves a potentially long term investment of funds, facilities and resources by two or more companies to a combined venture, which benefits all companies. All involved will have an equity stake in the new venture.

A joint venture may be formed to:* run production facilities in another country* establish a marketing and distribution presence* use complementary technologies held by each participant.

————————————————-Joint ventures can also be used to get around country trade barriers. In some cases a joint venture with a local company may be required to enter some overseas markets.

Joint venture is defined as “A cooperative effort among two or more organizations that share a common interest in a business.Joint venture allows companies to strategically become partners to help each other in terms of investment, competitions, business plans and more. Besides these benefits, businesses prefer joint venture under following conditions: 1. “Strong Nationalism” – When consumers believe that a foreign company produces “superior” products or when they only believe in their own country’s products.

2. Credibility – To establish credibility with potential customers, especially when brand is unfamiliar locally. 3. Tax Benefits – When special taxes benefits exist upon becoming partners with local businesses. 4. Avoid Risk – When local businesses have expertise in law, policies and business plans. 5. Law – When government of host country requires companies to have local partnership in order to enter the market 6. Union and Labor –

a. When labor policies differ dramatically.b. When workforce of the entering market are unionized. c. When workforces prefers to be managed only by the local or foreign company.

For example, in order for foreign companies to wholly owned subsidiary complex criteria must be met. The criteria are:1. Only a “holding” operation is involved and all subsequent / downstream investments need prior approval of the Government. 2. Where proprietary technology needs to be protected or sophisticated technology is to be introduced.