0 - Ringkasan Bisglob

Disusun oleh : Muhammad Firman (Akuntansi FE UI 2012)
BISNIS GLOBAL
International Investments
Capital supplied by residents of one country to residents of
CHAPTER 1 another . There are Two categories:
1. Foreign direct investments
AN OVERVIEW OF INTERNATIONAL BUSINESS 2. Portfolio investments
Exports as a % of GDP
What Is International Business?

Business transactions between parties from more than one
country
Parties may include:
1. Private individuals
2. Individual companies
3. Groups of companies
4. Governmental agencies
How Does International Business Differ from Domestic?
 Currency conversion
 Legal systems
 Culture
 Availability of resources
Why Study International Business?
 Large organizations
 Foreign-owned subsidiaries
 Small businesses
 Competitors Other Forms of International Business Activity
 Business techniques and tools 1. Licensing
 Cultural literacy 2. Management contracts
3. Franchising
International Business Activities
 Exporting and Importing Variations of Organizations
 International Investments 1. Multinational corporation
 Licensing, Franchising, and Management Contracts 2. Multinational enterprise
3. Multinational organizaztion
Exporting and Importing
Exporting Multinational Corporations (MNCs)
selling of products made in one’s own country for use or  Engage in foreign direct investment
resale in other countries  Own and control foreign assets
Importing  Buy resources in multiple countries
buying of products made in other countries for use or  Create goods and services in multiple countries
resale in one’s own country  Sell goods and services in multiple countries
Visible and Invisible Trade The World’s Largest MNCs :

Trade in Goods Wal-Mart Chevron
o Merchandise exports and imports Exxon Mobil ING Group
o Visible trade Royal Dutch Shell Total
BP General Motors
Trade in Services Toyota Motor ConocoPhillips
o Service exports and imports
o Invisible trade
The Era of Globalization
Globalization: is the inexorable integration of markets,
nation-states, and technologies,in a way that is enabling
M a t a k u l i a h l a i n y a n g b e l u m a d a d i P D F i n i a k a n s a y a u p d a t e d i www. a k u n t a n s i d a n b i s n i s . wo rd p re s s . c o m
Contac t me : muhammad.f irman177@gmail.com /@f irmanmhmd (Line) 1621
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individuals, corporations and nation-states to reach around Globalization and Emerging Markets
the world farther, faster, deeper, and cheaper than ever BRIC : Brazil ,Russia, India , China
before
Big Ten :
World Exports as a % of World GDP Argentina Brazil China
South Korea Indonesia Mexico
Poland Turkey India
South Africa
CHAPTER 2
GLOBAL MARKETPLACES AND BUSINESS

CENTERS
The World Economy
Foreign Direct Investment Relative to World GDP
Marketplaces of North America

1. United States
2. Canada
3. Mexico
4. Greenland
5. Countries of Central America and the Caribbean
United States
 Third largest population in world
 Fourth largest land mass
 Largest economy
 27 percent of world’s GDP in 2006
 Prime market for exports
The U.S. Dollar :
- Invoicing currency
- Flight Capital
Contemporary Causes of Globalization
Strategic Imperatives Canada
1. To leverage core competencies  Second largest land mass
2. To acquire resources and supplies
3. To seek new markets  80 percent of population concentrated along
4. To better compete with rivals U.S./Canadian border
 Rich natural resources
Environmental Change and Globalization  Trade with U.S. - single largest bilateral trade
- Changes in political environments relationship in the world
- Technological changes
Advantages of Canada
1. Proximity to U.S. market
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2. Stability of legal and political systems  India

3. Excellent infrastructure and educational systems  Afghanistan and Central Asian Republics
 Southeast Asian Countries
Headquarters of World’s Largest Corporations in 2007 by
Country Japan
 Second largest economy
 GDP of $4.3 trillion in 2006
 Industries controlled by keiretsu
 GDP growth rate of 1.6 percent (since 2000)
China
 World’s most populous country – approximately
1.3 billion people
 Communist ideology mixed with market-oriented
economic policies
 Heavy FDI
Annual FDI Flows to China 1992-2006
Mexico
 Largest Spanish-speaking nation
 Federal government system
 Participant in NAFTA along with U.S. and Canada
Central America and the Caribbean
Economic development hindered by: India
 Political instability  World’s second most populous country
 Chronic U.S. military intervention  Per capita GDP of $820
 Inadequate educational systems  British colony until 1947
 Weak middle class
 Poverty Southeast Asian Countries
 Import limitations  Thailand, Malaysia, and Indonesia
 Low labor costs
Marketplaces of Western Europe  Significant FDI in recent years
- European Union member countries  Continued recovery from currency crisis in 1997
- Other countries in Western Europe and 1998
Euro Countries : Marketplaces of Africa and the Middle East
Belgium, France, Luxembourg , Germany, Italy, Africa
Netherlands 867 million people
Ireland, Greece, Portugal, Spain , Austria, Finland, Russia 54 countries
Estonia, Latvia, Lithuania, Armenia, Belarus, Georgia, Major economies: South Africa, Ivory Coast, Algeria,
Moldova, Ukraine, Azerbaijan, Romania, Bosnia- Nigeria
Herzegovina, Croatia, Macedonia, Slovenia, Serbia,
Montenegro, Albania, Austria, Bulgaria, Czech Republic, Middle East
Slovak Republic, Hungary, Poland Cradle of civilization
Major economies: Saudi Arabia, Kuwait, UAE
Marketplaces of Asia
 Japan Marketplaces of South America
 Australia and New Zealand Brazil, Bolivia, Uruguay, Argentina, Chile, Colombia
 The Four Tigers French Guiana, Paraguay, Peru, Ecuador, Venezuela
(Singapore,Taiwan,Hongkong,South Korea)
 China
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CHAPTER 3 Disadvantages
1. Competition
LEGAL, TECHNOLOGICAL, ACCOUNTING, AND 2. Job loss
POLITICAL ENVIRONMENTS 3. Dependency on economic health of MNC
4. Political power
Cultural Impacts of MNCs on Host Countries
The Legal Environment Advantages
While domestic firms must follow laws and customs of the 1. Improved standard of living
home country, international businesses must obey laws of 2. Introduction of new products
the home country and all host countries. 3. Better health care
4. More sanitary food products
Legal Systems
Common Law Disadvantages
Based on wisdom of judges’ decisions on individual cases 1. Abuse of less developed policies in the areas of safety
through history. Its Cases create legal precedents and environmental concerns
2. Negligent product offerings
Countries Using Common Law :
1. United States Dispute Resolution
2. Canada  Which country’s law applies?
3. Australia  In which country should the issue be resolved?
4. India  Which technique should be used to resolve the
5. New Zealand conflict?
6. Barbados  How will the settlement be enforced?
7. Saint Kitts
8. Nevis Principle of Comity
9. Malaysia A country will honor and enforce within its own territory
the judgments of foreign courts. Conditions of the
Civil Law principle:
 Based on codification of what is and is not 1. Reciprocity is extended
permissible 2. Defendant is given proper notice
 Originated in biblical times with the Romans 3. Judgment does not violate domestic statutes or treaty
 Reinforced by French Napoleonic code obligations
 Judge determines scope of evidence collected and
presented Arbitration
Arbitration is the process by which both parties to a
Religious Law conflict agree to submit their cases to a private individual
Based on the officially established rules governing faith and or body whose decision they will honor.
practice of a particular religion. A country that applies
religious law to civil and criminal conduct is called a The Technological Environment
theocracy 1. Infrastructure
2. Low-cost labor
Bureaucratic Law 3. Resources
Bureaucratic law is the legal system in communist 4. Agricultural land
countries and in dictatorships. 5. Rich natural resources
6. Skilled labor
Laws Affecting International Business Transactions
- Sanctions Intellectual Property
- Embargo Patents
- Extraterritoriality Copyrights
Trademarks
Laws Directed Against Foreign Firms Brand names
- Nationalization
- Confiscation Intellectual property often forms the basis of a firm’s
- Expropriation competitive advantage
- Privatization
International Treaties Protecting Intellectual Property
Economic and Political Impacts of MNCs on Host Rights
Countries 1. International Convention for the Protection of
Advantages Industrial Property Rights (i.e., the Paris
1. Greater selection Convention)
2. Higher standards 2. Berne Convention for the Protection of Literary
3. Job creation and Artistic Works
4. Tax benefits 3. Universal Copyright Convention
5. Technology transfers
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4. Trade-Related Intellectual Property Rights  Does the country rely on free market or
Agreement government controls?
 Does the government view foreign firms as a
The Accounting Environment positive influence?
The Roots of National Differences  Are the firm’s customers private or public?
 GAAP - Generally Accepted Accounting Principles  Does the government act arbitrarily?
 Is the existing government stable?
Influences on a Country's’ Accounting System
Insurance Against Political Risks
1. Overseas Private Investment Corporation (OPIC)
2. Multilateral Investment Guarantee Agency (MIGA)
CHAPTER 4
THE ROLE OF CULTURE
Culture
Culture is the collection of values, beliefs, behaviors,
customs, and attitudes that distinguish one society from
another. A society’s culture determines the rules that
Differences in Accounting Practices practices affect a firm govern how firms operate in the society.
decisions on :
1. Valuation and Revaluation of Assets Characteristics of Culture
2. Valuation of Inventories 1. Learned behavior
3. Dealing with Tax Authorities 2. Interrelated elements (Language, Social,
4. Use of Accounting Reserves Communication, Religion, Values, Attitudes)
5. Reported income and profits 3. Adaptive
4. Shared
Other Differences
1. Capitalization of Financial Leases Elements of Culture
2. Preparation of Consolidated Financial Statements
3. Capitalization of Research and Development
expenses
4. Treatment of Goodwill
Impact of Capital Markets
 International Financial Reporting Standards
The Political Environment
Political risks :
1. Ownership risk
2. Operating risk
3. Transfer risk
Examples of Political Risks
 Expropriation
 Confiscation
 Campaigns against foreign goods Social Structure
 Mandatory labor benefits legislation 1. Individuals, families, and groups
 Civil wars 2. Social stratification
 Inflation 3. Social mobility
 Kidnappings, terrorist threats
 Repatriation Language
 Currency devaluations 3000+ different languages worldwide
 Increased taxation 10,000+ different dialects
Primary delineator of cultural groups
Levels of Political Risk
1. Macropolitical risk World Languages
2. Micropolitical risk Arabicn, Chinese dialects, English, French, German, Hindi,
Portuguese, Russuoan and other slavic, Scandinavian,
Firms Need to Answer These Questions Spanish, Turkic, Malay, Other.
 Is the country a democracy or dictatorship?
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15. Color symbolism

16. Synchronization of speech and movement
Africa’s Colonial Legacy 17. Taste, symbolism of food, oral gratification
18. Cosmetics
19. Sound signals
20. Time symbolism
21. Timing and pauses
22. Silence
Gift Giving and Hospitality
Gift giving is an important means of communication, but
what is appropriate varies.
Religion
 Imposes constraints on roles of individuals in
society
 Affects the types of products consumers may
purchase
 Varies from country to country
Major World Religions
1. Mixed christianity
2. Islam
3. Other (Atheism, animism,dinamism)
4. Hinduism
5. Buddhism
6. Confucianism
7. Sikh
Two million Muslims annually descend on the Grand
Translation Disasters Mosque in Mecca, Saudi Arabia as part of the Haij
KFC’s Finger Lickin’ Good
 Eat your fingers off (China) Values and Attitudes
Pillsbury’s Jolly Green Giant Values are the principles and standards accepted by the
 Intimidating green ogre (Saudi Arabia) members; attitudes encompass the actions, feelings, and
thoughts that result from those values.
Caterpillar Fundamental English
Caterpillar has developed its own simplified language Values and Attitudes :
instruction program - Time
- Education
Yes and No Across Cultures - Age
Latin America : meaning of “mañana” (Tomorrow vs. - Status
“Some other day – not today”)
Japan : meaning of “yes” versus “yes, I understand” Theories of Culture
 Hall’s Low-Context, High-Context Approach
Nonverbal Communication  Cultural Cluster Approach
Nonverbal Communication may account for 80-90 percent  Hofstede’s Five Dimensions
of all information transmitted among members of a
culture Hall’s Low-Context ,High-Context Approach
by means other than language. An approach to understanding communication based on
the relative emphasis on verbal and nonverbal cues to
Forms of Nonverbal Communication transmit meaning
1. Hand gestures High- and Low-Context Cultures
2. Facial expression
3. Posture and stance
4. Clothing/hair style
5. Walking behavior
6. Interpersonal distance
7. Touching
8. Eye contact
9. Architecture/ interior design
10. Artifacts and non-verbal symbols
11. Graphic symbols
12. Art and rhetorical forms
13. Smell
14. Speech rate, pitch, inflection, volume
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The Cultural Cluster Approach Israel, australia, finland, germany, norway, sweden,
An approach to understanding communication based on denmark, ireland, canada, new zealand, great britain, USA,
meaningful clusters of countries that share similar cultural austria,netherland.
values
A Synthesis of Country Clusters 3. Individualist and power respect
Spain, france, italy,belgium, south africa
Uncertainty orientation
Emotional response to uncertainty and change
Goal orientation
What motivates people to achieve different goals
Hofstede’s Five Dimensions

1. Social Orientation
2. Power Orientation
3. Uncertainty Orientation
4. Goal Orientation
5. Time Orientation
Time orientation
Social Orientation The extent to which members of a culture adopt a long-
Relative importance of theinterests of the individual term or a short-term outlook on work and life
versusinterests of the group
Understanding new cultures

Power Orientation Patterns 1. Self-reference criterion
Appropriateness of power/authority within organizations 2. Cultural literacy
3. Acculturation
CHAPTER 5
THE ETHICS AND SOCIAL RESPONSIBILITY IN

INTERNATIONAL BUSINESS
Social Orientation and Power orientation patterns Nature of Ethics and Social Responsibility in International
1. Collectivist and power respect Business
Pakistan,colombia, peru, taiwan, thailand,protuguese, Ethics are an individual's personal beliefs about whether
greece, iraq , argentina, japan, india, philippiness, turkey, a decision, behavior, or action is right or wrong.
mexico, hongkong,chile, singapore, vietnam,brazil
Ethical Generalizations
2. Invidivualist and power tolerant  Individuals have their own personal belief systems
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 People from the same cultural context will tend to Approaches to Social Responsibility
hold similar beliefs
 Behaviors can be rationalized
 Circumstances affect adherence to belief systems
 National culture is intertwined with ethics
Ethics in a Cross-Cultural Context
Obstructionist Stance
 Do as little as possible to address social or
environmental problems.
 Deny or avoid responsibility
Examples : Astra, Nestle, Danone
Defensive Stance
 Do what is required legally, but nothing more
 Corporate responsibility is to generate profits
Example : Philip Morris
Accommodative Stance
 Meet ethical and legal requirements and more
 Agree to participate in social programs
Ethics in Cross-Cultural and International Contexts  Match contributions by employees
 How Organizations Treat Employees  Respond to requests from nonprofits
 How Employees Treat the Organization  No proactive behavior to seek such opportunities
 How Employees and Organizations Treat other
Economic Agents Proactive Stance
 Strong support of social responsibility
Acceptability of Bribery  Viewed as citizens of society
Acceptable : Russia, China, Taiwan, South Korea  Seek opportunities to contribute
Unacceptable : Australia, Sweden, Switzerland, Austria Examples : McDonald’s, The Body Shop, Ben & Jerry’s
Managing Ethical Behavior Across Borders Managing Compliance Formally
1.Guidelines or codes 1. Legal compliance
2. Ethics training 2. Ethical comliance
3. Organizational practices 3. Philanthropic giving
4. Corporate culture
Informal Dimensions of Social Responsibility
Corporate Social Responsibility Organizational leadership and culture
Corporate Social Responsibility is the set of obligations an Whistle blowing
organization undertakes to protect and enhance the
society in which it functions. Evaluating Social Responsibility
A corporate social audit is a formal and thorough analysis
Examples of Companies with Commitment to Corporate of the effectiveness of the firm’s social performance.
Social Responsibility :
1. L.L. Bean Difficulties of Managing Corporate Social Responsibility
2. Toyota Across Borders
3. Lands’ End Actors in policy formulation process :
4. 3M 1. The state
5. Dell Computer 2. The market
6. DaimlerChrysler 3. Civil society
7. BP
8. Honda Difficulties of Managing Corporate Social Responsibility
Across Borders
Areas of Social Responsibility 1. Anglo-saxon approach
1. Organizational stakeholders 2. Asian approach
2. General social welfare 3. Continental European approach
3. Natural environment
Regulating International Ethics and Social Responsibility
Approaches to Managing Social Responsibility Foreign Corrupt Practices Act (FCPA)
1. Obstructionist  Alien Tort Claims Act
2. Defensive  Anti-Bribery Convention of the Organization for
3. Accomodative Economic Cooperation and Development
4. Proactive  International Labor Organization (ILO)
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and services for which other countries are more productive

CHAPTER 6 than it is
INTERNATIONAL TRADE AND INVESTMENT Comparative Advantage
Produce and export those goods and services for which it is
relatively more productive than other countries. Import
those goods and services for which other countries are
International Trade relatively more productive than it is
Trade is the voluntary exchange of goods, services, assets, Differences between Comparative and Absolute Advantage
or money between one person or organization and
another. International trade is trade between residents of  Absolute versus relative productivity differences
two countries.  Comparative advantage incorporates the concept
of opportunity cost, Value of what is given up to
Sources of World’s Merchandise Exports, 2006 get the good
Comparative Advantage with Money
1. One is better off specializing in what one does
relatively best
2. Produce and export those goods and services one
is relatively best able to produce
3. Buy other goods and services from people who are
better at producing them
Relative Factor Endowments
 Heckscher-Ohlin Theory
 What determines the products for which a country
will have a comparative advantage?
 Factor endowments vary among countries
 Goods differ according to the types of factors that
are used to produce them
Classical Country-Based Trade Theories
1. Merchantilism Heckscher-Ohlin Theory : A country will have a
2. Absolute advantage comparative
3.Comparative Advantage advantage in producing products that intensively use
4.Comparative Advantage with Money resources (factors in production) it has in abundance.
5. Relative Factor Endowments
U.S. Imports and Exports, 1947: The Leontief Paradox
Mercantilism
A country’s wealth is measured by its holdings of gold and
silver. A country’s goal should be to enlarge holdings of
gold and silver by:
1. Promoting exports
2. Discouraging imports
Disadvantages of Mercantilism :
 Confuses the acquisition of treasure with the
acquisition of wealth Modern Firm-Based Trade Theories
 Weakens the country because it robs individuals of  Growing importance of MNCs
the ability to:  Inability of the country-based theories to explain
o Trade freely and predict the existence and growth of
o Benefit from voluntary exchanges intraindustry trade
 Forces countries to produce products it would  Failure of Leontief and others to empirically
otherwise not in order to minimize imports validate country-based Heckscher-Ohlin theory
Protectionism Firm-Based Trade Theories
Modern mercantilism (neomercantilists) 1. Country Similarity Theory
 American Federation of Labor -Congress of 2. Product Life-Cycle Theory
Industrial Organizations 3. Global Strategic Rivalry Theory
 Textile manufacturers 4. Porter’s National Competitive Advantage
 Steel companies
 Sugar growers Country Similarity Theory
 Peanut farmers Explains the phenomenon of intraindustry trade (as
opposed to interindustry trade) . Trade between two
Absolute Advantage countries of goods produced by the same industry
Export those goods and services for which a country is  Japan exports Toyotas to Germany
more productive than other countries. Import those goods  Germany exports BMWs to Japan
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 Stages
The International Product Life Cycle: Innovating Firm’s o New product
Country o Maturing product
o Standardized product
Stages in the Product Life Cycle
1. New product stage
2. Maturing product stage
3. Standardized product stage
Global Strategic Rivalry Theory
Firms struggle to develop sustainable competitive
advantage. Advantage provides ability to dominate global
marketplace .
Focus : strategic decisions firms use to compete
internationally
Global Strategic Rivalry Theory Sustaining Competitive
Advantage
 Owning intellectual property rights
 Investing in research and development
 Achieving economies of scale or scope
 Exploiting the experience curve
The International Product Life Cycle: Other Industrialized
Countries Porter’s Diamond of National Competitive Advantage
Theories of International Trade
The International Product Life Cycle: Less Developed

Countries
Types of International Investments

Does the investor seek an active management role in the
firm or merely a return from a passive investment?
 Foreign Direct Investment
 Portfolio Investment
International Investment Theories
1. Ownership Advantages
2. Internalization
3. Dunning’s Eclectic Theory
Product Life-Cycle Theory
 Describes the evolution of marketing strategies
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Ownership Advantages
A firm owning a valuable asset that creates a competitive The Gold Standard
advantage domestically can use that advantage to Countries agree to buy or sell their paper currencies in
penetrate foreign markets through FDI. exchange for gold on the request of any individual or firm
 Why FDI and not other methods? and to allow the free export of gold bullion and coins.
Internalization Theory Sterling-Based Gold Standard
FDI is more likely to occur when transaction costs with a British pound sterling was the most important currency
second firm are high. Transaction costs are costs from 1821 to 1918. Most firms would accept either gold or
associated with negotiating, monitoring, and enforcing a British pounds.
contract.
The Collapse of the Gold Standard
Dunning’s Eclectic Theory  Economic pressures of WWI
FDI reflects both international business activity and  Countries suspended pledges to buy or sell gold at
business activity internal to the firm. currencies’ par values
 Gold standard readopted in 1920s
Three conditions for FDI:  Dropped during Great Depression
1. Ownership advantage  British pound allowed to float in 1931
2. Location advantage Float: value determined by supply and demand
3. Internalization advantage
The Bretton Woods Era
Factors Affecting the FDI Decision :  44 countries met in Bretton Woods, New
1. Supply Factors : Production cost, logistic, resource Hampshire, in 1944
availability, access to technology  Goal: to create a postwar economic environment
2. Demand factors : Customer access, marketing to promote worldwide peace and prosperity
advantages, exploitation of competitive  Renewed gold standard on modified basis (dollar-
advantages, customer mobility based)
3. Political factors : avoidance of trade barries,  Created International Bank for Reconstruction and
economic development incentive Development and International Monetary Fund
Map 6.1 Natural Resources: Venezuela’s Orinoco Basin
International Bank for Reconstruction and Development
All rights reserved. No part of this publication may be (the World Bank)
reproduced, stored in a retrieval system, or transmitted, in  Goal 1: to help finance reconstruction of European
any form or by any means, electronic, mechanical, economies
photocopying, recording, or otherwise, without the prior
written permission of the publisher. Printed in the United  Accomplished in mid-1950s
States of America.  Goal 2: to build economies of the world’s
developing countries
CHAPTER 7 Organization of the World Bank Group :
1. International Bank for reconstruction and development :
THE INTERNATIONAL MONETARY SUSTEM AND Makes hard loans
2. International development association : Offers soft loans
THE BALANCE OF PAYMENTS 3. International finance corporation : Promotes private
sector development
4. Multilateral Investment Guarantee Agency : privdes
The International Monetary political risk insurance
International Monetary System The international monetary
system establishes the rules by which countries value and Objectives of the International Monetary Fund
exchange their currencies and provides a mechanism for  To promote international monetary cooperation
correcting imbalances between a country’s international  To facilitate the expansion and balanced growth of
payments and receipts. international trade
 To promote exchange stability, to maintain orderly
Balance of Payments exchange arrangements among members, and to
The Balance of Payments (BOP) Accounting System records avoid competitive exchange depreciation
international transactions and supplies vital information  To assist in the establishment of a multilateral
about the health of a national economy and likely changes system of payments
in its fiscal and monetary policies.  To give confidence to members by making the
general resources of the IMF temporarily available
History of the International Monetary System to them and to correct maladjustments in their
 The Gold Standard balances of payments
 The Sterling-Gold Standard  To shorten the duration and lessen the degree of
 The Collapse of the Gold Standard disequilibrium in the international balances of
 The Bretton Woods Era payments of members
 The End of the Bretton Woods Era
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 Facilitated creation and adoption of euro

Membership in the IMF
Open to any country willing to agree to rules and Exchange Rate Arrangements as of 2007
regulations
185 member countries as of 2008
Membership requires payment of a quota
A Dollar-Based Gold Standard
 Countries agreed to peg the value of currencies to
gold
 U.S. $ keystone of system
 Fixed exchange rate system
 Adjustable peg
 Functioned well in times of economic prosperity
The End of the Bretton Woods System
 Susceptible to speculative “runs on the bank”
 U.S. $ became only source of liquidity necessary to
expand international trade
 People questioned the ability of U.S. to meet
obligations (Triffin Paradox)
 IMF created special drawing rights (SDRs) – paper
gold
 Bretton Woods system ended August 15, 1971
Performance of the International Monetary System since
1971
 Most currencies began to float
 Value of U.S. $ fell relative to most major Exchange Rates of Dollar vs. Yen, the Euro, and the
currencies Deutsche Mark, 1970-2005
 Group of Ten agreed to restore fixed exchange rate
system with restructured rates of exchange
 Development of floating exchange rate system
o Supply and demand for a currency
determine its price in the world market
o Managed float – central banks can affect
supply and demand
 Legitimized in 1976 with the Jamaica Agreement
Key Central Banks
International Debt Crisis

OPEC quadrupled world oil prices
1. Resulted in inflationary pressures in oil-importing
countries
European Union 2. Exchange rates adjusted
 Believed flexible system would hinder ability to 3. Transfer of wealth
create integrated economy Countries borrowed more than they could repay
 Created European Monetary System to manage
currency relationships Approaches to Resolve the International Debt Crisis :
 ERM participants maintained fixed exchange rates 1. The Baker plan
among their currencies 2. The Brady plan
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Joint ventures
The Balance of Payments Accounting System BOP Entries, Capital Account

The BOP accounting system is a double-entry bookkeeping
system designed to measure and record all economic
transactions between residents of one country and
residents of all other countries during a particular time
period.
Its Measures and records all economic transactions
between residents of one country and residents of all
other countries during specified time period, Provides
understanding of performance of each country’s economy
in international markets, Signals fundamental changes in
country competitiveness , and Assists policy makers in
designing appropriate public policies
Four Important Aspects of the BOP Accounting System
 Records international transactions made in some
time period
 Records only economic transactions
 Records transactions between residents of one
country and all other countries
Residents include individuals, businesses,
government agencies, nonprofit
organizations
 Uses a double-entry system
Major Components of the BOP Accounting System Official Reserves Account
1. Current account Records level of official reserves
2. Capital account Four types of assets
3. Official reserves  Gold
4. Errors and omissions  Convertible currencies
 SDRs
Types of Current Account Transactions  Reserve positions at the IMF
 Exports and imports of goods
 Exports and imports of services Errors and Omissions
 Investment income BOP must balance
 Gifts
 Current Account + Capital Account + Official
Capital Account Reserves Account = 0
 Foreign Direci Investment (FDI)  Current Account + Capital Account + Official
 Portofolio Investment Reserves Account + Errors and Omissions = 0
Capital account transactions Defining BOPs Surpluses and Deficits

Maturity Motivation Typical Official Settlements Balance reflects changes in a country’s
Investments official reserves; essentially, it records the net impact of
the Central Bank’s intervention in the foreign-exchange
Portofolio < 1 year Investment Checking market in support of the local currency
(Short-term) income or account
facilitation of balances
international Time deposit
commerce Commercial
paper
Bank Loans CHAPTER 8
Portofolio > 1 year Investment Governement
(Long-term) income bills, notes,and FOERIGN EXCHANGE AND INTERNATIONAL
bonds
Corporate FINANCIAL MARKETS
stocks and
bonds
Foreign Inderte Foreign Foreign Exchange
Direct minate subsidiaries Foreign exchange is a commodity that consists of
Investment Foreign currencies issued by countries other than one’s own.
factiories
International Demand for Yen
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Demand for Japanese yen is derived from foreigners’ The Role of Banks
demand for Japanese products  Buy or sell major traded currencies
 Markets
Supply of Yen o Wholesale market
Supply for Japanese yen is derived from Japanese demand o Retail market
for foreign products
Bank Foreign Exchange Clients
The Market for Yen 1. Commercial customers
2. Speculators
3. Arbitrageurs
Foreign-Exchange Trading
One of the example is The Tel Aviv foreign-exchange trader
which is an important link in the $3.2 trillion-per-day global
exchange market.
Spot and Forward Markets
 Spot Market: foreign exchange transactions that
are consummated immediately
 Forward Market: foreign exchange transactions
that are to occur sometime in the future
Foreign-Exchange Rates
Direct exchange rate
 Direct quote
 Price of the foreign currency in terms of home
currency Mechanisms for Future Foreign Exchanges
Indirect exchange rate  Currency future
 Indirect quote  Currency option
 Price of the home country in terms of the foreign o Call option
currency o Put option
Structure of the Foreign-Exchange Markets Arbitrage
The foreign-exchange market comprises buyers and sellers Arbitrage is the riskless purchase of a product in one
of currencies issued by the world’s countries. market for immediate resale in a second market in order to
profit from a price discrepancy. There are two types of
Foreign-Exchange Trading arbitrage activities that affect the foreign-exchange
The largest center for foreign exchange trading is London, market: arbitrage of goods and arbitrage of money.
followed by New York and Tokyo. Arbitrage has two types :
1. Arbitrage of goods
Currencies Involved in Foreign-Exchange Market 2. Arbitrage of money : two point, three point, - covered
Transactions interest
Three-Point Arbitrage
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2007, by Currency (in billions of U.S. dollars)
International Capital Market Global Equity Markets

 Major International Banks  Start-up companies are no longer restricted to
 International Bond Market raising new equity only from domestic sources
 Global Equity Markets  Development of country funds
 Offshore Financial Centers o Mutual fund specializing in a given
country’s funds
The World’s Largest Banks Offshore Financial Centers
1. ING Group Focus on offering banking and other financial services to
2. Fortis nonresident customers
3. Citigroup
4. Dexia Group Locations
5. HSBC Holding Bahamas, Bahrain, the Cayman Islands, Bermuda, the
6. BNP Paribas Netherlands Antilles, Singapore, Luxembourg, Switzerland
7. Credit Agricole
8. Deutsche Bank
9. Bank of America Corp.
10. HBOS CHAPTER 9
Establishment of Overseas Banking Operations FORMULATION OF NATIONAL TRADE

1. Subsidiary Bank
2. Branch Bank POLICIES
3. Affiliated Bank
The Eurocurrency Market Rationales for Trade Intervention
 Originated in the early 1950s  Should a national government intervene to protect
 Eurodollars – U.S. dollars deposited in European the country’s domestic firms by taxing foreign
bank accounts goods entering the domestic market or
o Euroyen constructing other barriers against imports?
o Europounds  Should a national government directly help the
 Eurocurrency – currency on deposit outside in country’s domestic firms increase their foreign
banks worldwide sales through export subsidies, government-to-
 Euroloans quoted on basis of LIBOR government negotiations, and guaranteed loan
programs?
The International Bond Market  Free Trade or Fair Trade?
Major source of debt financing for:
1. World’s governments Industry-Level Arguments
2. International organizations 1. National defense
3. Larger firms 2. Infant industry
3. Maintenance of existing jobs
Two types of bonds 4. Strategic trade
1. Foreign bonds
2. Eurobonds National Defense Argument
 Country must be self-sufficient in critical raw
International Bond Issues materials, machinery, and technology or else be
vulnerable to foreign threats.
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 Appeals to general public

 Protects steel, electronics, and machine tools
industries, and merchant marines
Infant Industry Argument
 Imposition of tariffs to give U.S. firms temporary
protection from foreign competition until firms are
fully established
 Powerful economic development strategy
 Which industries should be protected? For how
long?
Nontariff Barriers
Maintenance of Existing Jobs 1. Quotas
 Jobs in high-wage countries threatened by imports 2. Numerical export controls
from low-wage countries 3. Product and testing standards
4. Restricted access to distribution networks
 Forms of assistance 5. Public-sector procurement policies
o Tariffs 6. Regulatory controls
o Quotas 7. Currency controls
Strategic Trade Theory 8. Investment controls
Strategic trade theory suggests that a national government 9. Local-purchase requirements
can make its country better off if it adopts trade policies Impact of an Import Tariff on Demand for U.S.-Made SUVs
that improve the competitiveness of its domestic firms in
such oligopolistic industries.
National Trade Policies
1. Economic Development Programs
2. Industrial Policy
3. Public choice analysis
Exonomic Development Programs.
 Export promotion strategy
 Import subtitution strategy
Industrial policy
When industrial policy is pursued, the national government
identifies key domestic industries critical to the country’s
future economic growth and then formulates programs
that promote their competitiveness
Public Choice Analysis Tariff Rate Quota on Widgets
Special interest groups are willing to work harder for the A tariff rate quota imposes high tariff rates on imports
passage of laws favorable to their interests than the above the threshold level.
general public is willing to work for the defeat of laws
unfavorable to its interests.
Barriers to International Trade
Tariffs: tax placed on a good that is traded internationally
Non-tariff Barriers: governmental controls on international
trade
Reasons for Tariffs
 Tariffs raise revenues for national governments
 Tariffs act as a barrier to trade
Tariff Barriers to International Trade
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These Indian sugarcane workers receive less for their crops  Ensure that trade occurs on the basis of
because of the tariff-rate quota imposed by the U.S. comparative advantage, not the size of
government subsidies
Other Nontariff Barriers  Protect consumers from predatory behavior
1. Product and testing standards
2. Restricted access to distribution networks
3. Public-sector procurement policies CHAPTER 10
4. Local-purchase requirements
5. Regulatory controls INTERNATIONAL COOPERATION AMONG
6. Currency controls
7. Investment controls NATIONS
Types of Barriers to International Trade

Tariffs General Agreement on Tariffs and Trade
A tax placed on an imported or exported good involved in  Developed as part of the Havana, Cuba,
international trade conference in 1947
- Ad valorem  Provided forum for trade ministers to discuss
- Specific barriers to international trade
- Compound
The Role of the GATT
The GATT’s goal was to promote a free and competitive
international trading environment benefiting efficient
Quantitative Restrictions producers by sponsoring multilateral negotiations to
Trade Barriers that impose a numerical limit on the reduce tariffs, quotas, and other nontariff barriers
quantitiy of a good that may be imported or exported
- Quotas GATT Negotiating Rounds
- Numerical Export Controls
- Embargoes
- Voluntary export restraints
Other Nontariff Barriers
Givernement Laws, Regulations, Policies, or procedures
that impede international trade
- Product and testing standards
- Restricted access to distribution netwroks
- Public sector procurements policies
- Local purchase requirements
- Regulatory controls
- Currency controls
- Investment controls
Promotion of International Trade
1. Subsidies
2. Foreign trade zones
3. Export financing programs Most Favored Nation (MFN) Principle
The most favored nation principle requires that any
Controlling Unfair Trade Practices preferential treatment granted to one country
International Trade Administration (ITA) must be extended to all countries.
 Division of U.S. Department of Commerce
 Determines whether an unfair trade practice has Exceptions to the MFN Principle
occurred  Members permitted to lower tariffs to developing
 Confirmed cases transferred to U.S. International countries without lowering them for more
Trade Commission (ITC) developed countries
 Regional arrangements promote economic
Two types of unfair trade practices integration (e.g., EU and NAFTA)
1. Government subsidies
2. Unfair pricing practices Goals of the World Trade Organization (WTO)
 Promote trade flows by encouraging nations to
Controlling Unfair Trade Practices adopt nondiscriminatory, predictable trade policies
1. Contervailing duties  Reduce remaining trade barriers through
2. Antidumping regulations multilateral negotiations
Objectives of Unfair Trade Practice Laws  Establish impartial procedures for resolving trade
disputes among members
 Promote global efficiency by encouraging
production in those countries that can produce a Differences between WTO and GATT
good most efficiently
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GATT focused on promoting trade in goods; WTO’s  491 million population

mandate includes:  Combined GDP of $14.4 trillion
1. trade in goods
2. trade in services Governing Organizations of the EU
3. international intellectual property protection  The Council of the European Union
4. trade-related investment  The European Commission
WTO’s enforcement powers are stronger  The European Parliament
 The European Court of Justice
WTO Challenges
 The Cairns Group The European Parliament shares responsibility for adopting
 Multifibre Agreement the EU’s budget with the European Commission
 General Agreement on Trade in Services (GATS)
 Agreement on Trade-Related Aspects of Three Pillars of the Maastricht Treaty
Intellectual Property Rights (TRIPS) 1. A new agreement to create common foreign and
 Trade-Related Investment Measures Agreement defense policies among members
(TRIMS) 2. A new agreement to cooperate on police, judicial,
and public safety matters
Enforcement of WTO Decisions 3. The old familiar European Community, with new
 Country failing to live up to the agreement may provisions to create an economic and monetary
have a complaint filed against it union among member states
 WTO panel evaluates complaint
 If found in violation, the country may be asked to Maastricht Treaty
eliminate the trade barrier The most important aspect of the Maastricht Treaty was
the
Forms of Economic Integration establishment of the Economic and Monetary Union.
1. Free trade area
2. Customs union Economic and Monetary Union
3. Common market The creation of a single currency called the euro
4. Economic union European Central Bank - responsible for controlling the
5. Political union Eurozone’s money supply, interest rates, and inflation
Forms of Economic Integration Components of the Treaty for Europe (Treaty of

Amsterdam)
 A strong commitment to attack the EU’s chronic
high levels of unemployment
 A plan to strengthen the role of the European
Parliament by expanding the number of areas that
require use of the co-decision procedure
 Establishment of a two-track system
Treaty of Nice
Sought to reduce the risk of political gridlock as the
number of members increases
 reduced number of areas where unanimity is
required for Council approval
 adjusted number of votes assigned to each Council
member
The North American Free Trade Agreement
Implemented in 1994 to reduce barriers to trade and
investment among Canada, Mexico, and the United States
Major Regional Trade Associations
AFTA ECOWAS
ANCOM EU
APEC EFTA
CACM GCC
CARICOM MERCOSUR
CEMAC NAFTA
CER SADC
European Union (EU)

 Most important regional trading bloc
 27 member countries
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CHAPTER 11
INTERNATIONAL STRATEGIC MANAGEMENT
International Strategic Management

International strategic management is a comprehensive
and ongoing management planning process aimed at
formulating and implementing strategies that enable a firm
to compete effectively internationally.
Strategic Planning
The process of developing a particular international Components of International Strategy
strategy is often referred to as strategic planning. 1. Distinctive competence
2. Scope of operations
Fundamental Questions 3. Resource deployment
 What products and/or services does the firm 4. Synergy
intend to sell?
 Where and how will it make those products or Distinctive Competence
services?  Answers the question: What do we do
 Where and how will it sell them? exceptionally well, especially as compared to our
 Where and how will it acquire the necessary competitors?
resources?  Represents important resource to the firm
 How does it expect to outperform its competitors? Scope of Operations
 Answers the question : Where are we going to
Factors Affecting International Strategic Management conduct business?
1. Language  Aspects of scope
2. Culture o Geographical region
3. Politics o Market or product niches within regions
4. Economy o Specialized market niches
5. Governmental interference
6. Labor Resource Deployment
7. Labor relations  Answers the question : Given that we are going to
8. Financing compete in these markets, how will we allocate
9. Market research our resources to them?
10. Advertising  Resource specifics
11. Money o Product lines
12. Transportation/ communication o Geographical lines
13. Control
14. Contracts Synergy
 Answers the question: How can different elements
Sources of Competitive Advantage of our business benefit each other?
1. Global efficiencies  Goal is to create a situation where the whole is
2. Multinational felxibility greater than the sum of the parts
3. Worldwide learning
Developing International Strategies
Global Efficiencies 1. Strategy formulation
- Location efficiencies 2. Strategy implementation
- Economies of scale
- Eeconomies of scope Steps in International Strategy Formulation :
1. Development of a mission statement
Location Efficiencies 2. Perform a SWOT analysis
For example,Mercedes-Benz has achieved economies of 3. Set strategic goals
scale by focusing production of its M-class at its assembly 4. Develop tactical goals and plans
plant in Vance, Alabama. 5. Develop a control framework
Strategic Alternatives Mission Statements
1. Home replication strategy  Clarifies the organization’s purpose, values,
2. Multidomestic strategy direction
3. Global strategy
4. Transnational strategy  Communicates firm’s strategic direction
 Specifies firm’s target customers and markets,
principal products, geographical domain, core
technologies, concerns for survival, plans for
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growth and profitability, basic philosophy, and Level 2 Business strategy Differentiation
desired public image Cost leadership
Focus
Examples : Level 3 Functional Finance
1. Wells Fargo : Satisfy all our customers’ financial strategies Marketing
needs, help them succeed financially, be known as Operations
one of America’s great companies and the Human Resource
number-one financial services provider in each of management
our markets R&D
2. Carpenter Technology : Major, profitable, and
growing international producer and distributor of Corporate Strategy
specialty alloys, materials, and components 1. Single-Business Strategy
2. Related Diversification
SWOT Analysis 3. Unrelated Diversification
1. Strengths
2. Weaknesses Advantages of Related Diversification
3. Opportunities  Less dependence on single product
4. Threats  Greater economies of scale
 Entry into additional markets more efficient and
Environmental Scanning effective
An Environmental Scan is a systematic collection of data
about all elements of the firm's external and internal
environments, including markets, regulatory issues, CHAPTER 12
competitors' actions, production costs, and labor
productivity. STRATEGIES FOR ANALYZING AND ENTERING
The Value Chain FOREIGN MARKETS
Foreign Market Analysis

 Assess alternative markets
 Evaluate the respective costs, benefits, and risks of
entering each
 Select those that hold the most potential for entry
or expansion
Critical Factors in Assessing New Market Opportunities
1. Product-market dimensions
2. Major product-market differences
3. Structural characteristics of national market
4. Competitor analysis
5. Potential target markets
6. Relevant trends
7. Explanation of change
8. Success factors
Strategic Goals 9. Strategic options
Strategic goals are the major objectives the firm wants to
accomplish through pursuing a particular course of action. Choosing a Mode of Entry
1. Exporting : Indirect exports, Direct Exports,
Tactical Goals and Plans : Intercorporate transfers
 Middle management issues 2. International Licesing
 Details of implementation 3. International franchising
4. Specializes modes : Contract manufacturing,
 Examples : Hiring, Compensation, Career paths, Management contracts, Turnkey prjects
Distribution and logistics 5. Foreign Direct Investmen : Greenfield strategy,
Acquisition strategy, Joint venture
Control Framework
A Control Framework is the set of managerial and Decision factors :
organizational processes that keep the firm moving toward 1. Ownership avantages
its strategic goals. 2. Location advantages
3. Internalization advantages
Levels of International Strategy 4. Other factors : Need for entry, resource availability,
Hierarchy Level strategy Variants global strategy
Level 1 Corporate strategy Single-business
Related diversification Exporting
Unrelated Advantages
diversification
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 Relatively low financial exposure

 Permit gradual market entry 1.) Export Management Company
 Acquire knowledge about local market An export management company (EMC) is a firm that acts
 Avoid restrictions on foreign investment as its client's export department by managing the legal,
financial, and logistical details of exporting, and providing
Disadvantages advice about consumer needs and available distribution
 Vulnerability to tariffs and NTBs channels in the foreign markets the exporter wants to
 Logistical complexities penetrate.
 Potential conflicts with distributors
2.) Webb-Pomerene Association
Motivations for Exporting A Webb-Pomerene Association is a group of U.S. firms that
1. Proactive operate within the same industry and that are allowed by
2. Reactive law to coordinate their export activities without fear of
violating U.S. antitrust laws.
Forms of Exporting
Indirect Exporting 3.) International Trading Company
Direct exporting Five Largest Soga Soshas :
Intracorporate transfers 1. Mitsubishi Corporation
2. Mitsui & Company
Indirect Exporting 3. Marubeni
4. Sumitomo Group
5. Itochu Corporatio
4.) Other intermediaries
Manufacturer’s agents, Manufacturer’s export agents,
Export and import brokers, Freight forwarders
International Licensing
Licensing is when a firm, called the licensor, leases the
right to use its intellectual property—technology, work
methods, patents, copyrights, brand names, or
trademarks—to another firm, called the licensee, in return
for a fee.
Direct Exporting
The Licensing Process
Intracorporate Transfers
Basic Issues in International Licensing

 Set the boundaries of the agreement
 Establish compensation rates
 Agree on the rights, privileges, and constraints
conveyed in the agreement
 Specify the duration of the agreement
Licensing Advantages
Low financial risks
Low-cost way to assess market potential
Avoid tariffs, NTBs, restrictions on foreign investment
Licensee provides knowledge of local markets
Additional Considerations for Exporting
Governmental policies, Marketing concerns, Logistical Licensing Disadvantages
considerations, Distribution issues Limited market opportunities/profits
Dependence on licensee
Types of Export Intermediaries Potential conflicts with licensee
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Possibility of creating future competitor Maintain control over operations

Acquire knowledge of local market
Franchising Avoid tariffs and NTBs
A franchising agreement allows an independent Disadvantages
entrepreneur or organization, called the franchisee, to High financial and managerial investments
operate a business under the name of another, called the Higher exposure to political risk
franchisor, in return for a fee. Vulnerability to restrictions on foreign investment
Greater managerial complexity
Basic Issues in International Franchising
 Does a differential advantage exist in the domestic Examples of Foreign Direct Investment
market?  Building new facilities (the greenfield strategy)
 Are these success factors transferable to foreign  Buying existing assets in a foreign country
locations? (acquisition strategy)
 Has franchising been a successful domestic  Participating in a joint venture
strategy?
Greenfield Strategy : Best site, Modern facilities, Economic
Franchising Advantages development incentives.,Clean slate
Low financial risks
Low-cost way to assess market potential Acquisition Strategy : A second FDI Strategy is the
Avoid tariffs, NTBs, restrictions on foreign investment acquisition of an existing firm conducting business in the
Maintain more control than with licensing host country.
Franchisee provides knowledge of local market
All rights reserved. No part of this publication may be
Franchising Disadvantages reproduced, stored in a retrieval system, or transmitted, in
Limited market opportunities/profits any form or by any means, electronic, mechanical,
Dependence on franchisee photocopying, recording, or otherwise, without the prior
Potential conflicts with franchisee written permission of the publisher. Printed in the United
Possibility of creating future competitor States of America.
Specialized Entry Modes for International Business
1. Contract manufacturing CHAPTER 13
2. Management contract
3. Turnkey project INTERNATIONAL STRATEGIC ALLIANCES
Contract Manufacturing Advantages
Low financial risks
Minimize resources devoted to manufacturing Strategic Alliances
Focus firm’s resources on other elements of the value A strategic alliance is a business arrangement whereby
chain two or more firms choose to cooperate for their mutual
Contract Manufacturing Disadvantages benefit.
Reduced control (may affect quality, delivery schedules) Joint Venture
Reduce learning potential A joint venture (JV) is a special type of strategic alliance in
Potential public relations problems which two or more firms join together to create a new
business entity that is legally separate and distinct from its
Management Contracts Advantages parents.
Focus firm’s resources on its area of expertise Benefits of Strategic Alliances
Minimal financial exposure
Management Contracts Disadvantages
Potential returns limited by contract expertise
May unintentionally transfer proprietary knowledge and
techniques to contractee
Turnkey Projects Advantages
Focus firm’s resources on its area of expertise
Avoid all long-term operational risks
Turnkey Projects Disadvantages
Financial risks : Cost overruns
Construction risks : Delays, Problems with suppliers
Foreign Direct Investment
Advantages Scope of Strategic Alliances
High profit potential  Significant variation
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o Comprehensive alliance
o Narrowly defined alliance
 Degree of collaboration depends upon basic goals
of each partner
Types of Functional Alliances
1. Production alliances
2. Marketing alliances
3. Financial alliances
4. Research and development alliances
Issues in the Implementation of Strategic Alliances
1. Partner selection
2. Form of partnership Pitfalls of Strategic Alliances
3. Joint management 1. Incompatibility of partners
2. Access to information
3. Distribution of earnings
Factors Affecting Partner Selection 4. Loss of autonomy
Compatibility 5. Changing circumstances
Relative safeness
Nature of partner’s products or services The scope of strategic alliances
Learning potential
Approaches to Joint Management
1. Shared Management Agreement
2. Assigned Arrangement
3. Delegated Arrangement
Shared Management Agreement
Assigned Arrangement
Delegated Arrangement
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Production efficiencies
CHAPTER 14 Production flexibilities
Flexible response to change
INTERNATIONAL ORGANIZATION DESIGN Marketing flexibility
AND CONTROL
Global Product Design Disadvantages
Unnecessary duplication
Organization Design Coordination and cooperation difficult
Organization design (or organization structure) is the Global Area Design
overall pattern of structural components and The Global Area Design organizes the firm’s activities
configurations used to manage the total organization. around specific areas or regions of the world.
Factors Affecting Design Disadvantages of Global Area Design
Country culture Firm may sacrifice cost efficiencies
Environment Diffusion of technology is slowed
Technology Design unsuitable for rapid technological change
Strategy Duplication of resources
Size Coordination across areas is expensive
Functions of Firm Design Cadbury Schweppes PLC Global Area Design
1. Allocates organizational resources
2. Assigns tasks to its employees
3. Informs employees about firm’s rules, procedures,
and expectations
4. Collects and transmits information
Types of Knowledge Affecting Design
 Area konowledge
 Product knowledge
 Functional knowledge
Forms of Global Organization Design
 Product
 Matrix
 Customer
 Area
 functional
Managerial Philosophies Affecting Design
Ethnocentric
Polycentric
Geocentric
Global Product Design Global Functional Design
The global product design assigns worldwide responsibility The global functional design calls for a firm to create
for specific products or product groups to separate departments or divisions that have worldwide
operating divisions within a firm. responsibility for the common organizational functions—
finance, operations, marketing, R&D, and human resources
Samsung’s Global Product Design management.
Global Functional Design Advantages
Transference of expertise
Highly centralized control
Focused attention of key functions
Global Functional Design Disadvantages
Practical only when firm has few products or customers
Coordination difficult
Duplication of resources
Global Customer Design
The global customer design is used when a firm serves
different customers or customer groups, each with specific
Global Product Design Advantages : needs calling for special expertise or attention.
Managerial expertise
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Global Matrix Design

A global matrix design, the most complex of designs, is the CHAPTER 15
result of superimposing one form of organization design on
top of an existing, different form. LEADERSHIP AND EMPLOYEE BEHAVIOUR
Advantages IN INTERNATIONAL BUSINESS
Brings together the functional area and product expertise
Promotes organizational flexibility
Provides access to all advantages of other designs Dimensions Influencing Individual Behavior
Personality
Disadvantages Personality is the relatively stable set of psychological
Appropriate for firms with many products and unstable attributes that distinguishes one person from another.
environments
Employees accountable to multiple supervisors What Determines Personality?
Decisions may take longer - Nature
- Nurture
Global Hybrid Design
Most firms create a hybrid design, rather than pure design, Big Five Personality Traits :
that best suits their purposes, given the firms’ size, 1. Agreeableness
strategy, 2. Conscientiousness
technology, environment, and culture, and blends 3. Emotional Stability
elements of all the designs discussed. 4. Extroversion
5. Openness
Coordination
Coordination is the process of linking and integrating Other Personality Traits
functions and activities of different groups, units, or 1. Locus of Control
divisions. 2. Self-Efficacy
3. Authoritarianism
Control 4. Self-esteem
Control is the process of monitoring ongoing performance
and making necessary changes to keep the organization
moving toward its performance goals.
Control Function in International Business
Process of monitoring ongoing performance and making
necessary changes to keep the organization moving toward
its performance goals
Three levels:
1. Strategic
2. Organizational
3. Operations
Essential Control Techniques
1. Accoutning systems
2. Procedures
3. Performance ratios
Reasons for Resistance to Control
1. Overcontrol
2. Inappropriately focused control
3. Increase accountability
Overcoming Resistance to Control
 Promote participation
 Control system with clear and appropriate focus
that creates reasonable accountability
 Diagnostic mechanism
 Cultural perspective
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-Security
- Physiological
2.) McClelland’s Learned Needs Framework
- Need for achievement
- Need for power
- Need for affiliation
3.) Herzberg’s Two-Factor Theory
- Hygiene factors
- Motivator factors
Expectancy Theory : A Process-Based Model of
Motivation
Expectancy theory suggests that people are motivated
to behave in certain ways to the extent that they perceive
that such behaviors will lead to outcomes they find
personally attractive.
Reinforcement Model
Locus of control
- Internal  Behavior that results in a positive outcome will
- External likely be repeated under the same circumstances
in the future
Self-efficacy  Behavior that results in a negative outcome will
indicates a person's beliefs about his or her capabilities result in a different choice under the same
to perform a task. circumstances in the future
Authoritarianism Leadership
Authoritarianism is the extent to which an individual Leadership is the use of concoercive influence to shape the
believes that power and status difference are appropriate goals of a group or organization, to motivate behavior
within hierarchical social systems like business toward reaching those goals, and to help determine the
organizations. group or organizational culture.
Self-Esteem Differences between Leadership and Management

Self-esteem is the extent to which a person believes that
he or she is a worthwhile and deserving individual.
Attitudes across Cultures
Job satisfaction
Organizational commitment
Perception
Perception is the set of processes by which an individual
becomes aware of and interprets information about the
environment.
Stress
Stress is an individual's response to a strong stimulus.
Theories of Motivation
1. Need-Based Models
2. Process-based models
3. Reinforcement model
Need-based models
 Maslow’s Hierarchy of Needs
 McClelland’s Learned Needs Framework The Role of Managers Varies across Cultures
 Herzberg’s Two-Factor Theory
1. ) Maslow’s Hierarchy of Needs
- Self-actualization
- Self-esteem
-Social
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any form or by any means, electronic, mechanical,

photocopying, recording, or otherwise, without the prior
written permission of the publisher. Printed in the United
States of America.
CHAPTER 16
INTERNATIONAL MARKETING
Marketing
Marketing is “the process of planning and executing the
conception, pricing, promotion, and distribution of ideas,
goods, and services to create exchanges that satisfy
individual and organizational objectives.”
International Marketing
International Marketing is the extension of these
Models of Decision Making marketing activities across national boundaries.
1. Normative
2. Decriptive International Marketing as an Integrated Functional Area
The normative model
Managers should :
1. Reconize that problem exists
2. Identifiy alternative solutions
3. Evaluate each alternative rationally
4. Select the best alternative
5. Implement the chosen alternative
6. Follow up and evaluate the selected course of action
7. End up with a decision that best serves organization
interest
The descriptive model Market Strategy Must Support Business Strategy
1. Use incomplete and imperfect information 1. Cost leadership
2. Are constrained by imperfec information 2. Differentiation
3. Tend to satisfice or adopt the first minimally acceptable 3. Focus
alternative
4. End up with a decision that may or may not serve the Marketing Mix Issues
best interests of the organization  How to develop the firm’s product(s)
Steps in the Normative Model  How to price those products
1. Proble recognition  How to sell those products
2. Identifying alternatives  How to distribute those products to the firm’s
3. Evaluating alternatives customers
4. Selecting the best alternatives
5. Implementation Elements of the Marketing Mix for International Firms
6. Follow up and evaluation
Groups and Teams in International Business
Regardless of whether a firm is a small domestic company
or a large MNC, much of its work is accomplished by
people working together as part of a team, task force,
committee, or operating group
Characteristics of Mature Teams
1. Develops a well-defined role structure
2. Establishes norms for members
3. Promotes cohesiveness
4. Includes informal leaders
All rights reserved. No part of this publication may be
reproduced, stored in a retrieval system, or transmitted, in
PE1
Factors Affecting Pricing Policies

1. Business strategy
2.Competitive environment
3. Cost of doing business
4. Exchange rate fluctuations
Pricing Policies
Standard price policy,Two-tiered pricing,Market pricing
Determining the Profit-Maximizing Price
Key Decision-Making Factors
1. Standardization versus customization
2. Legal forces
3. Economic factors
4. Changing exchange rates
5. Target customers
6. Cultural influences
7. Competition
Standardization versus Customization
1. Ethnocentric approach
2. Polycentric approach
3. Geocentric approach
Standardized International Marketing
Advantages
1. Reduces marketing costs
2. Facilitates centralized control of marketing
3. Promotes efficiency in R&D
4. Results in economies of scale in production Determining the Profit-Maximizing Price for two markets
5. Reflects the trend toward a single global
marketplace
Disadvantages
1. Ignores different conditions of product use
2. Ignores local legal differences
3. Ignores differences in buyer behavior patterns
4. Inhibits local marketing initiatives
5. Ignores other differences in individual markets
Customized International Marketing
Advantages
1. Reflects different conditions of use
2. Acknowledges local legal differences/ differences
in buyer behavior
3. Accounts for other differences in individual
markets
Disadvantages Conditions for Market Pricing
1. Increases costs/ inefficiencies  Firm must face different demand and/or cost
2. Inhibits centralized control of marketing conditions in the countries in which it sells its
3. Reduces economies of scale in production products
4. Ignores the trend toward a single global  Firm must be able to prevent arbitrage
marketplace
Product Risks to Market Pricing Policy
Product comprises both the set of tangible factors that the 1. Charges of dumping
consumer can see or touch (the physical product and its 2. Damage to brand name
packaging) and numerous intangible factors such as image, 3. Development of a gray market
4. Customer resentment
installation, warranties, and credit terms.
Factors Affecting the Standardization of Products Promotion Mix
1. Legal factors 1. Advertising
2. Economic factors 2. Sales promotion
3. Cultural influences 3. Personal selling
4. Brand names 4. Public relation
PE1
Factors Affecting Advertising Strategy

 The message it wants to convey
 The media available for conveying the message
 The extent to which the firm wants to globalize its
advertising effort
Advertising
 Message: the facts or impressions the advertiser
wants to convey to potential customers
 Medium: the communication channel used by the
advertiser to convey a message
Global Advertising
A customer entering this domino parlor in Egypt
encounters no language barriers in knowing that the
establishment
serves Coke.
Personal Selling
Personal Selling: making sales on the basis of personal
contacts
Advantages of Personal Selling for International Firms
 Local sales representatives understand local Basic Parts of a Distribution Channel
culture, norms, and customs
 Personal selling promotes close, personal contact
with customers
 Personal selling makes it easier for firm to adopt
valuable market information
Local sales representatives understand local culture,
norms, and customs
Personal selling promotes close, personal contact with
customers
Personal selling makes it easier for firm to adopt valuable
market information
Sales Promotion
Sales promotion: comprises specialized marketing efforts
designed to offer an incentive for behavior such as Distribution Channel Options
coupons, in-store promotions, sampling, direct mail
campaigns, cooperative advertising, and trade fair
attendance.
Public Relations
Public Relations consists of efforts aimed at enhancing a
firm’s reputation and image with the general public, as
opposed to touting the specific advantages of an individual
product or service.
Distribution Issues
1. Physical transportation mode
2. Merchandising mode
Advantages/Disadvantages of Transportation Modes
PE1

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Disusun oleh : Muhammad Firman (Akuntansi FE UI 2012)

What Is International Business?

Visible and Invisible Trade The World’s Largest MNCs :

GLOBAL MARKETPLACES AND BUSINESS

The World Economy

Foreign Direct Investment Relative to World GDP

Marketplaces of North America

2. Stability of legal and political systems  India

THE ROLE OF CULTURE

15. Color symbolism

Hofstede’s Five Dimensions

Understanding new cultures

THE ETHICS AND SOCIAL RESPONSIBILITY IN

and services for which other countries are more productive

Theories of International Trade

The International Product Life Cycle: Less Developed

Types of International Investments

 Facilitated creation and adoption of euro

International Debt Crisis

The Balance of Payments Accounting System BOP Entries, Capital Account

Capital account transactions Defining BOPs Surpluses and Deficits

2007, by Currency (in billions of U.S. dollars)

International Capital Market Global Equity Markets

Establishment of Overseas Banking Operations FORMULATION OF NATIONAL TRADE

 Appeals to general public

Types of Barriers to International Trade

GATT focused on promoting trade in goods; WTO’s  491 million population

Forms of Economic Integration Components of the Treaty for Europe (Treaty of

European Union (EU)

INTERNATIONAL STRATEGIC MANAGEMENT

International Strategic Management

Foreign Market Analysis

 Relatively low financial exposure

Basic Issues in International Licensing

Possibility of creating future competitor Maintain control over operations

Global Matrix Design

Self-Esteem Differences between Leadership and Management

any form or by any means, electronic, mechanical,

Factors Affecting Pricing Policies

Factors Affecting Advertising Strategy

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