International Business in a

Global Context
Week 1
Introduction and overview
 International business
• To assist students to have a basic
understanding of the nature and operation of
a business organisation in a global context.
• To introduce students to the key business
functions and to investigate the operation of
organisations in relation to the external
environment.
 Content outline
• Key areas:
• Global Marketing Strategy
• The attractiveness of going global
• The role of culture in this aspect
• Ethics and social responsibility in international
business
• International strategic management
• Strategic alliances
• International Human Resource Management
 Coursework
• Recommended books
• Apart from the recommended books
• Read newspapers and other journals
• Assessment methods and types
• Assignment
• Class presentations
• Final examination
 What is a business?
• A business is any activity that provides goods or
services to consumers for the purpose of making a
profit.
• Some organisations are, however, not set up to
make profits.
• These are established to provide social or
educational services and they function in much the
same way as a business.
• Thus, most of the business principles introduced in
this course also apply to non-profit organisations.
Functional areas of a business concern

• The activities needed to operate a business

can be divided into a number of functional
areas:
• These include:
• Human resource management,
• Operations,
• Marketing
• Accounting and finance.
 Why do people set up businesses?
• Businesses are influenced by :
• The need to make money
• The economy
• Government (free market system)
• Consumer trends
• Entrepreneurial spirit
• To help a cause
 International business
• It consists of business transactions between parties
from one than one country.
• A global business is one that competes with other
businesses in the world market.
• It is any business that has a global or international
dimension and which has the world as its business
territory.
• Global business consists of transactions that are
devised and carried out across national borders to
satisfy the objectives of individuals, companies and
organisations (Czinkota et al., 2004).
International business vs domestic business

• Domestic business involves transactions occurring within

the boundaries of a single country.
• International business differ for a number of reasons:
• The countries involved may use different currencies.
• The legal systems may be different forcing one to adjust
to to certain practices to conform to local law.
• The cultures could be different.
• The availability of resources could different. One might
be rich in natural resources but poor in skilled labour.
 Studying International business
• Almost all large organisations have international
operations or are affected by the global economy
• You will need to understand this increasingly
important area to better access career opportunities
and to interact effectively with other managers.
• Studying international business is critical if you want
to be an effective manager. You need global skills
and knowledge to compete successfully with peers
inside and outside your organisation.
 Studying international business
• To keep pace with your future competitors you
need to ensure your global skills and knowledge
will aid your career rather than allow their
absence to hinder you.
• To stay abreast of the latest business techniques
and tools because no single country has a
monopoly on good ideas.
• You study international business to obtain
cultural literacy.
 The challenges of international business
• While the international market may be a perfect target for
your business, expanding beyond your home country does
not come without its challenges.
• Language and cultural barriers. These can be serious
constraints.
• Differing cultural norms may also stand in the way of a
successful business expansion, if your company doesn't
respect them.
• Solution: research cultural practices in the countries you plan
to expand into, especially as these may relate to the
company's product or service.
• The foreign needs might not be the same as your domestic
customers.
 Exploring global business
• The issue of globalisation
• It has led to the intensification of international
business activity.
• Globalisation is a long-standing programme
advocated by the economically advanced
nations to free up international trade across
the globe through treaties.
• It has also come to mean the relocation of
production or service activities to places that
have much lower labour costs.
 Small firms to big firms
• Businesses tend to start as small firms.
• Small businesses vary substantially in terms:
• Size
• their resource positions
• the goals of their founders
• their potential
• management sophistication
• the stage of their development and
• performance.
 The new dynamic
• A new dynamic is created when local and
global interests interact, as is inevitable when
a company begins to source international
operations.
• There is, and has been, a great deal of
controversy about whether a small firm can
make any meaningful headway in this
direction, without the necessary ‘help’ from
another big firm.
Attaining an international posture
• Global ambition – A global exporter – it will mean
selling across a key market/s of the world.
• 2. Global positioning – seeking a location/presence
in an international market. India, for example
because of its size, growth or resources available to
ensure the company’s long-term competitiveness.
• 3. Value proposition - Values attributes to its
advantage are quality and customisation.
• 4. Capabilities --Capabilities leading to
differentiation proposition - superior quality,
customisation, innovative designs.
 Foreign attractiveness
• A country will be attractive for a foreign investor if,
in investing in that country one gets a return that is
equal to or higher than his risk adjusted weighted
cost of capital.
• The fundamental question of a foreign investment
falls into the general framework of opportunities
and risks analysis.
• Such an analysis is important since it gives
organisations an avenue to check on likely risks and
opportunities inherent in a foreign operation. It
can either deter or encourage investments.
 Analysis
• PESTEL
• SWOT
Reasons why businesses are going global

• Because They Can...

• The internet has opened the door for companies to
trade all over the world. Previously it was too
expensive to do this. Now you don’t even need to
have a physical presence in a country in order to do
business. You can be an international company from
the comfort of your own home.
• Cultures are Homogenising
• Again, this is the work of the internet. Cultures are
becoming more and more similar
Reasons why companies are going global
• To become a Trusted Brand
• Moving internationally increases your prestige as a brand.
It will increase your overall reach because customers are
going to look at an international brand and assume they
can be trusted. It is all just because of this added prestige.
• Competition is Forcing companies elsewhere
• Competition can force you to take a look at unexploited
economies. There might be less competition out your
country, thus giving your business a better chance of
survival.
Reasons why businesses are going global
• It is cheaper to do business in some countries
• Sometimes it is just a matter of cost. It is sometimes
cheaper to do business abroad because you can reduce
production costs and pay employees in some countries
less. There is a reason why Apple outsources the bulk
of its iPhone production to Asia, likewise Gap in Asia.
• Savings on taxes
• Tax havens are a gold mine for major international
companies. It is a chance to save most of your profits
for yourself, but this can only happen by expanding
internationally.
Reasons why businesses are going global
• Creating an Economy of Scale
• Expanding will enable you to produce more units. The
more units you produce, the lower your unit per cost. This
can increase your profit margins, but you can only get the
best of this through selling to more customers, which can
only come through expanding to more countries.
• The basis to look for a new market
• What do you do when demand begins to slide for your
product?
• Sometimes the best option available to you is to look for
another market. Finding another country where demand
for your product could be higher is a far superior option.
Reasons why businesses are going global
• To gain competitive advantage: To better understand your
business on a global scale, competitive advantage must be
realised in one of two ways: cost leadership or
differentiation.
• Cost leadership strategy uses economies of scale to deliver
products or services at the lowest cost to the customer.
• Differentiation occurs when companies are able to deliver
benefits to the customer that exceed those of competitors.
• Differentiation is more broadly defined, and includes
unique features that may involve the products/services
themselves, distribution methods, or promotional
techniques.
 Why global business is important
• Gone are the days when businesses would confine their
operations to local or regional markets.
• With technology advancing so fast and international trade
expanding, businesses now have the incentive to sell
products and services in foreign markets.
• As such, operating a business on a global level helps
enterprises expand their market share, reduce costs and
become more competitive.
• Market Share
• Through global business, businesses can access new markets
and customers.
 Multinational companies
• The term ‘multinationals’ often means operating in a
number of different countries—but the actual use of the
label applies to corporations that have a global presence.
• The term is used in a neutral sense simply to indicate very
large size and participation in global markets.
• A more negative connotation of the term is that such
corporations are effectively beyond the full reach of
national laws because they have a presence in many
locations, can move money and resources around at will,
can sometimes escape taxation, and thus represent a
power beyond public control.
 Multinational companies
• Coca-Cola, a U.S.-based company, has over 80
percent of its profits coming from outside the United
States.
• The global corporation is viewed as a key factor in
promoting employment and economic growth in a
nation.
• But growing a business to the global level and
sustaining its competitiveness is extremely
challenging, even under the most favourable
conditions.
 What are my alternatives for market-entry
strategy?
• If you are thinking about going global, but are
unsure of how to expand into a new market,
there are many market-entry strategy options.
• Deciding which method is most appropriate
depends heavily on the planning process.
 Entry strategies
• Exporting: 
• Contractual Agreements: Licensing and Franchising: Licensing
agreements mean establishing a presence in a foreign market
without large capital investments.
• Instead, patent rights, trademark rights, and rights to use
technology and operational processes are given to another
company.
• Franchising is a form of licensing in which the franchiser supplies
a standard package of products, systems and management
services and provides more support in the business .
• This method involves long-term, non-equity associates between
a company and another in a foreign market.
 Entry strategies
• Strategic International Alliances: 
• A strategic international alliance is a business relationship
established by two or more companies to cooperate out of a
mutual need and to share risk in achieving common goals. 
• International Joint Ventures and Consortiums are two types of
Strategic International Alliance.
• International Joint Ventures are characterised as follows: (1)
Joint Ventures are established, separate, legal entities, (2) They
acknowledge intent by the partners to share in the
management of the Joint Venture,
• (3) they are partnerships between legally incorporated entities,
such as companies, chartered organisations, or governments
and not between individuals and
• (4) equity positions are held by each of the partners.
 Entry strategies
• Foreign Direct Investment: Investment with a foreign nation
is another way for a company to develop and enter a market.
• Investing locally has many benefits, including: taking
advantage of low-cost labour, avoiding high import taxes,
reducing high costs of transportation to a new market,
gaining access to raw materials and technology, or as a
means of gaining market entry altogether.
• The most common form of foreign direct investment is
when companies establish manufacturing operations
throughout the world.
• This trend in FDIs will continue to increase as barriers
preventing free trade are eliminated and companies can do
business wherever it is most cost effective.
How do I create a solid presence across the
globe
• A number of brands are taking positive steps
towards creating a solid presence across the
globe through a variety of ways.
• Adapt social strategies to translate across
multiple languages.
• Adjust menus to appeal to the cravings of a
diverse group of people (e.g. McDonald’s).
 Global/local brands
• McDonald's
• McDonald's is a successful global brand.
• While keeping its overarching branding consistent,
McDonald's practices ‘glocal’ marketing efforts.
• McDonald’s brings a local flavour, literally, to
different countries with region-specific menu items.
• In 2003, McDonald's introduced the McArabia, a
flatbread sandwich, to its restaurants in the Middle
East.
Glocalisation
 Global Marketing strategy
• A global marketing strategy (GMS) is a strategy
that encompasses countries from several
different regions in the world and aims at
coordinating a company’s marketing efforts in
markets in these countries.
 Global Marketing Strategy
• To be effective, it must incorporate all functional aspects of a
business – from finance to operations to R&D.
• It must also carry a well-defined objective because without
officially declaring where you are going, you will never get there.
• Be honest with yourself and your team. Ask: What are you trying
to accomplish in an overseas market?
• What are the weaknesses and strengths in that market?
• How will you overcome them?
• What upside potential do you have?
• Then together sit still, answer the questions and begin to draft a
global marketing strategy.
 Expansion strategies
• Ansoff’s Matrix - routes to business expansion
• The power of the matrix lies in the fact that it
can be used for any industry.
• Penetration Strategy – (existing product, existing
market). If Malaysia Cocoa Processing factory
sells more chocolate in Malaysia.
• Expansion Strategy if it sells in Eastern Europe.
• Related diversification if it develops a toffee
and sells in Malaysia.
• Unrelated diversification - if it sells automobiles.
 Generic strategies for competitive
challenges
• Cost Leadership – by achieving the lowest cost
of production, a company can reduce its prices.
• Differentiation - it makes your product or
service appear different in the minds of
consumers. e.g., products – better design,
reliability, service and delivery; service –
availability, expertise, location. (M)
• Focus – a company concentrates on either a
market area, a market segment or a product.
 Exploring global business
• The issue of globalisation
• Globalisation is a long-standing programme
advocated by the economically advanced
nations to free up international trade across
the globe through treaties.
• It has also come to mean the relocation of
production or service activities to places that
have much lower labour costs.
 Making the decision to go global
• Making the decision to go global.
• When is the right time?
• What sort of resources do I need?
• How can I make it?
 Global strategy
• Why is global strategy important?
• From a company perspective, international
expansion provides the opportunity for new
sales and profits.
• In some cases, it may even be the situation
that profitability is so poor in the home
market that international expansion may be
the only opportunity for profitmaking.
 Going global
• For most entrepreneurs, building and maintaining a
local customer base is one of the first steps on the
road to success.
• Once they have achieved this goal, some business
owners feel they are ready to take on the next step:
expanding internationally.
• Becoming a global company is an impressive feat, and
not every business that sets out to do it accomplishes
the goal.
• To successfully convert your business from domestic
to international, you will need to consider a new set
of factors too.
 Going global
• Creating a strong international presence is not
that simple.
• There are numerous things to think about
when selling and marketing in another
country, and these factors must be considered
carefully.
 Going global
• How do I ensure that a customer base exists in the country or
countries I want to enter?
• A product that sells well in your home country may not necessarily
have the same appeal elsewhere, so it is crucial to invest time and
energy into researching potential foreign markets.
• Is there a need for what you want to offer? 
• Are the people inclined to purchase your product? 
• Don't think that they might — know that they will.
• Do your homework and get a first-hand idea of how your business
will fare. 
• Conduct research and test your product in the foreign
marketplace.
• Experience the culture and social norms of the people you will be
selling to.
 Going global
• Do I have the available resources and staff to
focus on both expansion and my established
business?
• Before you decide to expand, make sure you
have the financial and structural stability to
add staff members who can handle the new
influx of work that comes with such growth
 Going global
• Local competition. It is not always easy to convince a foreign
customer to purchase your company’s product when there is
a comparable product available that is made in the
customer’s home country.
• While some big-name U.S. chains like McDonald’s and
Starbucks have clout overseas, small and medium-sized
companies need to work a little harder to convince the
international market that their brands are trustworthy and
better than the competition.
• Why would customers buy from you over the local company?
• Can you penetrate the market? If you do, can you be
profitable under the circumstances? 
 Going global
• Find the right partner(s).When you are
expanding your business, it is critical that you
do not try to go it alone.
• You need someone who understands the local
market; someone who has experience in the
industry; someone who has capital needed to
grow the business.
• Probably someone who has passion for your
brand.
 Going global
• Before deciding on specific marketing
activities, organisations must better
understand their global strategy. 
• Global strategy: the competitive advantages
arising from location, world-scale economies,
or global brand distribution, namely, by
building a global presence.
 Tutorials
• Why is it important to study international business?
• What is international business? How does it differ from
domestic business?
• Why do some business become global whereas others
remain local or regional?
• What is the impact of the internet on international
business?
• Would you like to work for a foreign-owned company?
Why or why not?
• What are some of the skills that may exist between
managers in a domestic setting and those in an
international firm