International Business Strategy

LON301BUS

Defining International Business

Unit: 2 Knowledgecast: 1

• Demonstrate a sound appreciation of current strategic management concepts

• Assess current developments in the organisational environment and alternative responses related to strategy

Module Learning Outcomes

“ Performance of trade and investment activities by firms across national borders.”

–(Cavusgil et al 2008:4)

What is International Business?

Key Concepts

International Trade

Exporting

Importing or Global Sourcing

International Investment

Foreign Direct Investment

• International Capital Theories: FDI driven by return equalization, portfolio diversification

• Location Theories: FDI driven by countries’ comparative advantage• Product Cycle Theory: FDI driven by firms’ management of the

global product life cycle• Oligopolistic Behavior Theories: FDI driven by firms’ search for, or

defense of, competitive advantage• Internalization Theory: FDI driven by organizations’ internal

transaction efficiency (hierarchy vs. markets)• Eclectic Theories: FDI driven by many shifting forces

Evolving Theory of FDI

• Foreign countries must offer location-specific advantages

To motivate the company to invest there

• Company must have strategic competencies or ownership-specific advantages

To counteract its relative unfamiliarity with foreign markets

• Company must have organizational capabilities To get better returns from leveraging strengths internally rather

than through external market mechanisms such as contracts and licenses

Pre-requisites for 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”

Process of Internationalisation

Process of Internationalisation (2)

Export (agentor distributor)

Joint venture (local partner)

Wholly-ownedsubsidiary

Franchising

Licensing

IndirectExport

High

High

Low

Low

Amount of resources committed to foreign market

Co

ntr

ol

ove

r fo

reig

n a

ctiv

itie

s

• Demonstrate a sound appreciation of current strategic management concepts

• Ensure you are familiar with the key concepts of international business (Slide 5)

• Assess current developments in the organisational environment and alternative responses related to strategy

There are a number of ways in which businesses can internationalise including an evolving theory related to FDI

Knowledgecast Summary

Whirlpool’s Dramatic Turnaround Through Internationalisation

Read the closing case on page 23 of your text by Cavusgil,

Knight and Reisenberger ‘International Business’ in

preparation for this seminar.

Be prepared to answer Questions 1 – 4 from page 24 regarding this

case.

Seminar

Assessment PreparationThis is your first opportunity as a group to read through the major casestudy and the assessment brief (see Unit 5) collectively and highlightkey points.

What note taking process did you choose to use? • Bullet points• Mind Map• Short sentences• Highlighting/underlining and annotating text

Group Activity

Assessment PreparationThis is your first opportunity as a group to read through the major casestudy and the assessment brief (see Unit 5) collectively and highlightkey points.

Discuss as a team;1. What are the key activities involved in this assessment2. Who will be responsible for each activity3. When the activities will need to be completed4. How you can guarantee SUCCESS (what will success look/feel/sound

like?)

Be prepared to share your plans with your tutor.

Group Activity