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 Computers- Produced in USA
 Television- Produced in Japan
 Electronic Items- From Japan
 Beverages (Coca-Cola, Amul Cool, Etc.)
 Bikes & Cars- From Other Countries
 Perfumes- Manufactured in France.
 Buying products from internet.
 Clothing's-
Footwear, Casuals, Capri, Bermuda, etc.

 First began in the year 1870 and ended in
1919 (end of World War-I).
 Main objective was to import raw materials
and export finished goods. GDP was 22.1.
 Drawbacks: Imposition of trade barriers by
the government, to protect domestic
producers. GDP fell to 9.1.
 This phase has been described as
“BEGGAR-MY-NEIGHBOUR”.

 Growth Strategy- Leads to geographical
expansion.
 Managing Product life-cycle- Shifting of the
market.
 Technology Advantages- Core competencies.
 New business opportunity- entering new
market.
 Proper use of resources- proper utilization of
natural resources of countries
(material, labor, etc.)
 Conti.

 Availability of quality product- Foreign
companies market latest products at reasonable
price.
 Earning foreign exchange- Foreign exchange
may be required for importing many products
(crude oil, equipments, etc.)
 Helps in Mutual growth- India depends on
gulf countries for its crude oil supplies.
 Investment in infrastructure- Investment in
roads, etc.

 Advanced countries felt a severe set back.
 Production increased more than Demand.
 Decline in International Trade.
 Breakdown of Gold Standard (Bretton Woods
System).
 Decline in trade/investment barriers.
 Increase in FDI.
 Technology changes and growth of MNC’s.

 Due to the above limitations, a need for the international
co-operation was felt.
 It led to the establishment of institutions such as:
IMF, IBRD, ITO,GATT/ WTO, etc.
 Establishment of these institutions led to
globalization, and many new trends took place.
 Shifting from exporting & importing to international
marketing.
 Shifting from international marketing to international
business.

 Establishment of WTO, IMF and IBRD.
 Regional integration
(NAFTA, SAARC, ASEAN, APEC, EFTA, etc.
)
 Decline in trade/investment barriers.
 Increase in FDI/FII/QDII.
 Technology changes and growth of MNC’s.

Stage 1-
Domestic
Company

Stage 5- Stage 2-
Transnational International
Company Company

Stage 4- Stage 3-
Global Multinational
Company Company

 Focus on domestic market/suppliers/financial
companies/customers/etc.
 Motto- if it is not happening in home
country, it is not happening.
 Selects diversification strategy for domestic
market.
 Does not select the strategy of
expansion/penetrating into international
market.

 Growth of domestic company leads to
internationalization.
 Exploits the opportunities outside the
domestic country.
 These are Ethnocentric- domestic country
oriented.
 Extends the domestic
product/price/promotion/practice to the
foreign market.

 International company turn MNC when they
start responding to the needs of the different
country.
 They shift from ethnocentric to polycentric
(i.e. company establishes foreign
subsidiary).
 They manufacture product as per the
demand of the specific country.
 Example: Toyota’s Toyopet car’s in USA.

 Produces in a home/single country.
 Markets the same product globally.
 They have global marketing strategy.
 Produces for the global market but focuses
domestically.
 Example: Harley Davidson- Produced in
USA, Focused globally.
 Dr. Reddy’s Lab- Produces in India but
market globally.

 Produces in almost all countries.
 Markets the product in all countries.
 Operates across world.
 Example: Coca-cola.

• Analysis of existing mission and goal.
Step 1 • Example- GE: Attracting & Developing people.

• Organizational analysis of a global business firm
Step 2 • Example: Org’n structure; Marketing; Finance; HR.

• Analysis of International Environment
Step 3 • Political; Economic; Technological; Social; etc.

• Formulation of alternative corporate level strategy
• Stability; Growth; Retrenchment; Combination;
Step 4 Turnaround

• Formulation of alternative business level strategy
• Low cost leadership; Niche strategy; Differentiation.
Step 5

• Selection of best among the alternative strategies
• BCG matrix; Directional policy; 9 cell matrix.
Step 6

• Strategy Implementation
• Partner selection, Behavioral
Step 7 implementation, market, finance.

• Strategy evaluation and control
Step 8

 International business firms either perform
their business operations on their own or
collaborate with other countries/companies.
 Sometimes, companies collaborate with their
competitors also.
 Factors affecting collaboration:
physical, economical, scale of
operation, make or buy, or competitive
environment.

 Spread and reduced cost- reducing the start up cost
and reducing the time by outsourcing.
 Specialize in core competency: companies perform
the activities concerning core competencies most
efficiently compared to other activities.
 Avoid or counter competencies: Some market are not
large enough to accommodate competitors.
 Minimize exposure in risky environment:
Political/economic and security factors create risky
business environment in different countries.

 Vertical or horizontal integration: Linkage or integration
allow companies to concentrate on the core-
competencies, operate on small scale and emphasize on a
portion of supply chain.
 Sharing capacities: Companies can jointly share their
production/service/HR and other capacities in order to
operate on optimum scale.
 Gain location: Sometimes it is difficult for MNC’s to conduct
business in some countries on their own.
 Overcome governmental constraint: Imposing limit on
foreign ownership or prohibit exclusive foreign companies.
 Diversify globally: Diverse culture and geographical
location temp companies to collaborate.

FRANCHISING LICENSING

JOINT
OUTSOURCING
VENTURE

Management contracting

Turnkey contracts

Strategic Alliance

Joint Venture

Merger & Acquisition

 Firm providing management know-how may not have
any equity stake in the enterprise.
 Low-risk, and starts yielding income from the very
beginning.
 Helps in commercializing he existing know-how built up
with significant investment.
 Supports in reducing fluctuations in business volume.
 Brings additional benefit for managing company.
 Example: Tata tea, Harrison malayalam and AVT have
contract to manage the number of plantations in Sri
Lanka.

 Mostly fund in supply, erection and
commissioning of plants.
 Example: Oil refinery, steel mills, cement and
fertilizer plant, etc.
 Agreement by the seller to supply a buyer with
a facility fully equipped and ready to be
operated by the buyer’s personnel.
 Fast-food franchising- when a franchiser agrees
to select a store site, build the store, equip
it, train the franchisee and employees and
sometimes arrange the finance.

 Also known as “entete & coalition”.
 Enhances the long term competitive advantage by
forming alliance with its competitors (existing or
potential).
 Example: A firm may enter the foreign market by
forming alliance with a firm in te foreign market for
marketing or distributing the former’s products.
 A US pharmaceutical company may use the
promotion and distribution infrastructure of
Japanese pharmaceuticals to sell its product in
Japan.
 It is a type of competitive strategy rather than an
entry strategy.

 Technological development alliance:
research consortia, simultaneous
engineering agreement, liasioning or joint
venture.
 Marketing, sales and service alliance.
 Multiple activity alliance.
 Cross-Border alliance
 Examples:
 Tata & TFR, Tata & Tetley,

 Tariff Barriers- Specific Tariffs and Valorem
Tariffs.
 Non-Tariff Barriers-
Quotas, Licensing, Voluntary Export
Restraint (VER), Subsidies, Local Content
Requirement.

 Tariff is the tax imposed on imports.
 Specific tariff- it refers to a fixed charge
levied on the units of the product imported.
 Example: Rs. 1000/- levied on each T.V.
imported.
 Ad-Valorem tariff- Tariff levied as a
proportion of the value of the imported goods
(30% on the Total value).

 Protect domestic industries.
 Increasing cost of imported goods.
 Automobile/sugar/cement industry.

 Govt. of importing country (revenue in the
form of import duty).
 Industries of importing country (Market
share).
 Jobs are saved of domestic country.
 Protection of business- ancillary
industry, servicing, market
intermediaries, etc.

 Consumer pay higher price (due to the
inefficiency of domestic producers).
 Exporting country looses the demand, sales
and profit for its product.

 Motive is to encourage domestic production
and to protect domestic producers from
foreign competitors.
 Govt. pays to domestic producers by
reducing their operation cost.
 Forms of subsidies- cash grants, loan and
advances, tax holidays, govt. procurement of
output at a higher rate, equity participation
and supply of input at lower prices.

Merits:
 International competitiveness of domestic
industry.
 Provide large scale economies.
 Low cost production.
 Early entry to foreign market.
 First mover advantage.
Demerits:
 Protect inefficiency & lethargy of the domestic
firms
 Do not enhance international competitiveness.

 Direct restriction on quantity of goods
imported.
 License are issued to certain firms and
individuals.
 License are issued for importing certain
quantity of goods.
 Example: Car, Bikes, Milk, etc.
Merits
 Protect domestic produces from foreign
competition.

 Opposite form of import quotas.
 It is a quota on exports of the domestic
firms, imposed by the exporting country.
 Imposed on the request of the imorting
country.
Merits:
 Its violation leads to imposition of tariff.
 Protect from foreign competitors.
 Makes domestic goods cheap.

 Some specific portion/fraction of a product
imported to be produced domestically.
 Requirements can be (50% of the
component should be from the domestic
country).
 In value terms (50% of the value of the
product should be produced domestically).
Merits:
 Employment opportunities
 Utilization of local resources and economic
activities

 It is a type of inter-governmental
arrangement.
 Concerned with the production of , and trade
in, certain primary products.
 Objective was to stabilizing the prices.
It takes place in three forms:
 Quota
 Buffer stock and
 Bilateral or Multilateral contract.

 Objective is to prevent a fall in commodity
prices by regulating the supply.
 Countries undertake to restrict export or
production by a certain percentage of the
basic quota decided by the central
committee or council.
 Example:
 Coffee agreement among the major
producers of Latin America and
Africa, limited the amount that could be
exported by each country.

 Seeks to stabilize commodity prices by
maintaining accurate demand and supply.
 Stabilizes the prices by increasing the
market supply.
 When the price tends to rise and absorbing
the excess supply to prevent a fall in the
prices.

Bilateral-
 Purchase & sale certain quantities of a
commodity at agreed prices (between major
importer & exporter).
 Upper & lower prices are specified.
 If the market price remain within this
limit, agreement becomes inoperative.

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Unit 1

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