shree h.n shukla college of managementstudies, …

SHREE H.N SHUKLA COLLEGE OF

MANAGEMENTSTUDIES, RAJKOT

INTERNATIONAL BUSINESS

MODULE-4

CHAP-1

MARKETING GLOBALLY

Chapter Objectives

o To understand a range of product policies and the circumstances in which they are appropriate internationally

o To grasp the reasons for product alterations when deciding between standardized versus differentiated marketing programs among countries

o To appreciate the pricing complexities when selling in foreign markets

o To interpret country differences that may necessitate alterations in promotional practices

Chapter objectives

oTo comprehend the different branding strategies companies may employ internationally

oTo discern complications of international distribution and practices of effective distribution

oTo perceive why and how emphasis in the marketing mix may vary among countries

Marketing Orientations

• International marketing strategies depend

on companies’ orientations that include:

Production

Sales

Customer

Strategic marketing

Societal marketing

Production Orientation

• Companies focus primarily on production -

either efficiency or high quality - with little

emphasis on marketing.

• Used internationally for certain cases:

Commodity sales

Passive exports

Foreign-market segments or niches

Other Orientations

• Sales orientation: a company tries to sell abroad what it can sell domestically and in the same manner on the assumption that consumers are sufficiently similar globally.

• Customer orientation: the product and method of marketing it are varied

• Strategic Marketing orientation: combines production, sales, and customer orientations

• Social Marketing orientation: Companies consider effects on all stakeholders when selling or making their products.

GLOBAL MARKETING STRATEGIES

• Global marketing strategies are actually

important parts of a global strategy. In order

to create a good global marketing strategy,

you must be able to answer: “What I am

trying to achieve in an international market?”

“What are my company’s strengths and

weaknesses for that market?” “How can I

counter challenges in the market?” “What

potential will I have in this market?”

http://www.global-strategy.net/what-is-global-strategy

• Moreover, a good global marketing strategy

incorporates all the countries from all

regions of the world and coordinates their

marketing efforts accordingly. Of course, this

strategy does not always cover all the

countries but should be applied for particular

regions. For example, you can break down

regions like North America, Latin America,

Europe and the Middle East, Asia and the

Pacific, and Africa.

Beyond its breakdown per country or

region, a global marketing strategy

almost always consists of several things:

(1) uniform brand names;

(2) identical packaging;

(3) similar products;

(4) standardized advertising messages;

(5) synchronized pricing;

(6) coordinated product launches; and

(7) harmonious sales campaigns.

(8) Create a consistent and strong brand

culture.

https://www.cleverism.com/how-to-launch-new-product/

The Push-Pull Mix

• Promotion may be categorized as push, which uses direct selling techniques, or pull, which relies on mass media.

• For each product in each country, a company must determine its promotional budget as well as the mix between push and pull

• Factors in Push-Pull Decisions: Type of distribution system

Cost and availability of media to reach target markets

Consumer attitudes toward sources of information

Price of the product compared to incomes

Standardization of Advertising

Programs

• Advantages of standardized advertising include:

Some cost savings.

Better quality at local level.

Rapid entry into different countries.

• Major problems for standardizing advertising

among countries are:

Translation

Legality

Message needs

Branding Strategies

• A brand is an identifying mark for products or services.

• Global branding is hampered by:

language differences

expansion by acquisition

nationality images

laws concerning generic names

• Global brands do help develop a global image

Distribution Strategies

• Distribution is the course - physical path or

legal title - that goods take between

production and consumption.

• Distribution reflects different country

environments:

It may vary substantially among countries.

It is difficult to change.

Choosing Distributors and Channels

• Distribution may be handled internally: When volume is high.

When companies have sufficient resources.

When there is a need to deal directly with the customer because of the nature of the product.

When the customer is global.

To gain a competitive advantage.

• Some evaluation criteria for distributors include their: Financial capability.

Connections with customers.

Fit with a company’s product.

Other resources.

Trustworthiness.

Compatibility with product image.

The Challenge Of Getting

Distribution

• Distributors choose which companies and products to handle. Companies: May need to give incentives.

May use successful products as bait for new ones.

Must convince distributors that product and company are viable.

• Five factors that often contribute to cost differences in distribution are infrastructure conditions, the number of levels in the distribution system, retail inefficiencies, size and operating-hour restrictions, and inventory stock-outs.

The Internet and Electronic

Commerce

• Although the Internet offers new

opportunities to sell internationally, using

the Internet does not negate companies’

needs to develop sound programs within

their marketing mix

Managing the Marketing Mix

• The difference between total market potential

and companies’ sales is due to gaps:

Usage - less product sold by all competitors than

potential.

Product line - company lacks some product

variations.

Distribution - company misses geographic or intensity

coverage.

Competitive - competitors’ sales not explained by

product line and distribution gaps.

SHREE H.N. SHUKLA COLLEGE OF

MANAGEMENT STUDIES, RAJKOT


MODULE-4

CHAP-2

INTERNATIONAL HRM

Chapter Objectives

To discuss the importance of human resource management in international business

To profile principal types of staffing policies used by international companies

To explain the qualifications of international managers

To examine how MNEs select, prepare, compensate, and retain managers

To profile MNEs’ relations with organized labor

Human Resource

Management (HRM)

Human resource management refers to activities necessary to staff the organization.

HRM is more difficult for the international company than its domestic counterpart due to:

Environmental differences.

Organizational challenges.

The Strategic Function of International HRM

Research and anecdotes show that the MNE whose HRM policies support its chosen strategy creates superior value

Many MNEs struggle to develop effective HRM policies

An expatriate is an employee who leaves her or his native country to live and work in another.

A third-country national is an employee who is a citizen of neither the home nor the host country.

Staffing Policies

Three perspectives describe how companies set about

staffing their international operations, namely the:

ethnocentric - fills management positions with home-

country nationals

polycentric - uses host-country nationals to manage local

subsidiaries

geocentric approaches - seeks the best people for key

jobs throughout the organization, regardless of their

nationality

Companies may use elements of each staffing policy

but one type normally predominates

While executive transferred from headquarters to local

operations are more likely to best understand the

company’s core competencies, an ethnocentric

staffing can result in a narrow perspective in foreign

markets

Selecting Expatriates

Technical competence often is the strongest

determinant of who is selected for an international

assignment.

Adaptiveness refers to a person’s potential for

Self-maintenance and personal resourcefulness.

Developing satisfactory relationships.

Interpreting the immediate environment.

Top managers in subsidiaries usually assume a greater

range of leadership roles and broader duties than do

managers of similar-size home-country operations.

Expatriate Failure

Expatriate failure is

operationally costly and

professionally detrimental. The improving sophistication of MNE selection

procedures has reduced the rate of expatriate failure.

A leading cause of expatriate failure is the inability of a spouse to adapt to the host country.

Training Expatriates Training and predeparture preparations

can lower the probability of expatriate

failure. Increasingly, preparation

activities include the spouse.

Training and predeparture preparations

often includes:

general country orientation

cultural sensitivity

practical skills

MNEs usually anchor training programs to

transfer specific information about the

host country as well as improve the

executive's cultural sensitivity.

Compensating Expatriates

Compensation must neither overly reward nor unduly punish a person for accepting a foreign assignment.

The most common approach to expatriate pay is the balance sheet approach.

MNEs often provide additional compensation or more fringe benefits to employees who work in remote or dangerous areas.

Companies struggle to determine the proper degree to which they should equalize pay for the same job done in different countries.

Repatriating Expatriates

Repatriation, the act of returning home from a foreign assignment, has many difficulties

Repatriation tends to cause dissonance in many areas, most notably

Financial.

Work.

Social.

The principal cause of repatriation frustrations is finding the right job for someone to return to

SHREE H.N.SHUKLA COLLEGE OF

MANAGEMENT STUDIES, RAJKOT

MBA SEM-3

MODULE-4

CHAP-3

GLOBAL MANUFACTURING AND

SUPPLY CHAIN MANAGEMENT

Chapter Objectives

To describe different dimensions of global manufacturing strategy

To examine the elements of global supply chain management

To show how quality affects the global supply chain

To illustrate how supplier networks function

To explain how inventory management is a key dimension of the global supply chain

To present different alternatives for transporting products along the supply chain from suppliers to customers

Supply Chain

Management

Supply chain - the coordination of materials, information, and funds from the initial raw material supplier to the ultimate customer.

Logistics

Logistics, or materials management, is that part of the supply chain process that plans, implements, and controls the efficient, effective flow and storage of goods, services, and related information from the point of origin to the point of consumption in order to meet customers’ requirements

Global Manufacturing

Strategies

The success of a global

manufacturing strategy

depends on four key factors:

compatibility

configuration

coordination

control

Compatibility

The degree of consistency between FDI

decisions and a company’s competitive

strategy.

Some company strategies that managers

must consider:

Efficiency/cost

Dependability

Quality

Innovation

Flexibility

Manufacturing

Configuration

Three broad categories of

manufacturing configuration

are:

centralized facility

regional facilities

multidomestic facilities

Coordination and Control

Coordinating is the linking or

integrating of activities into a

unified system.

Control can be the measuring

of performance so companies

can respond appropriately to

changing conditions.

Information Technology

EDI (electronic data interchange)

ERP (enterprise resource planning)

MRP (material requirements planning)

RFID (radio frequency ID)

E-commerce

Private technology exchange (PTX)

Quality

Quality is defined as meeting or exceeding the expectations of customers.

Quality standards can be:

general (ISO 9000)

industry-specific

company-specific (AQL, zero defects,

TQM, and Six Sigma)

Total Quality

Management

Total quality management (TQM) is a process that

stresses:

customer satisfaction

employee involvement

continuous improvements

The goal of TQM is to eliminate all defects.

Supplier Networks

Sourcing: the process of a firm having inputs

supplied to it from outside suppliers (both

domestic and foreign) for the production process.

Domestic sourcing allows the company to avoid

problems related to:

language

culture

currency

tariffs, and so forth

Foreign sourcing allows the company to reduce

costs and improve quality, among other things

Outsourcing

Major outsourcing configurations:

Vertical integration.

Outsourcing through industrial clusters.

Other outsourcing.

Make or Buy Decision

Under the make or buy decision, companies have to decide if they will make their own parts or buy them from an independent company

Companies go through different purchasing phases as they become more committed to global sourcing

Supplier Relations

When a company sources parts from suppliers around the world, distance, time, and the uncertainty of the international political and economic environment can make it difficult for managers to manage inventory flows accurately

The Purchasing Function

Global progression in the purchasing function:

Domestic purchasing only.

Foreign buying based on need.

Foreign buying as part of a

procurement strategy.

Integration of global procurement

strategy.

Major Sourcing Strategies

Assign domestic buyers for foreign purchasing.

Use foreign subsidiaries or business agents.

Establish international purchasing offices.

Assign the responsibility for global sourcing to a specific business unit or units.

Integrate and coordinate worldwide sourcing.

Lean Manufacturing and

Just-in-Time Systems

Lean manufacturing - a productive system whose focus is on optimizing processes through the philosophy of continual improvement.

JIT - sourcing raw materials and parts just as they are needed in the manufacturing process.

Transportation Networks

The transportation system links together suppliers, companies and customers

Foreign trade zones (FTZs) - special locations for storing domestic and imported inventory in order to avoid paying duties until the inventory is used in production or sold.

INTERNATIONAL CORPORATEGOVERNANCE

• Governance systems are not uniform across

countries.

• They are shaped by a variety of factors that are

inherent to the business environment:

1. Efficiency of local capital markets

2. Protections afforded by legal system

3. Reliability of accounting standards

4. Enforcement of regulations

5. Societal and cultural values

CORPORATE GOVERNANCE

CORPORATE GOVERNANCE

Managers

Auditors

Customers

Suppliers

Unions

Media

Regulators

Analysts

Creditors

Investors

BoardREGULATORY

ENFORCEMENT

ACCOUNTING

STANDARDS

LEGAL

TRADITION

EFFICIENTCAPITAL

MARKETS

SOCIETAL AND CULTURALVALUES

Governance systems

are diverse because

these factors

combine in different

ways in different

countries.

1. CAPITAL MARKETEFFICIENCY

Adverse Selection

One party in a transaction has an informationadvantage, and uses this advantage to receivepreferential pricing or risk transfer.

MoralHazardOne party does not bear the full risk of its actions

and so engages in excessively risky transactions.

• When capital markets are efficient, prices (labor, capital, and natural resources)

are “correct,” which improves decision making.

• Efficient capital markets “discipline” corporations:

– Poor decisions are punished.

– Stock prices decline.

– Cost of capital increases.

– Risk of bankruptcy or being taken over increases.

EFFICIENT MARKETS PROTECTAGAINST:

2. LEGALTRADITION

• A country’s legal system has important implications on the rights afforded

to business owners:

– Protection of property against expropriation.

– Predictability of how claims wil l be resolved.

– Enforceability of contracts.

– Efficiency and honesty of judiciary.

• A strong legal system mitigates agency problems because self-interested

managers know illegal actions will be punished.

A corrupted political system reduceseconomic development by discouraging investment.

Mauro (1995)

• Accounting standards give investors confidence that financial reports are

correct and can be relied upon to evaluate risk and reward.

• If accounting standards are compromised, manipulated, or lack

transparency:

– Investment decisions wil l suffer.

– Oversight of management wil l suffer.

– Management incentives wil l be inappropriate.

Companies that adopt international standards receive an “accounting premium” frominvestors.

3.RELIABILITYOF ACCOUNTINGSTANDARDS

Ernstberger and Vogler(2008)

• Even if legal system is strong, officials must be willing to enforce

regulations in a fair and consistent manner.

• Regulatory enforcement signals that management is being monitored,

which contributes to investor confidence that their interests will be

protected.

4. ENFORCEMENT OF REGULATIONS

Companies applymoreconservative accounting when enforcement of securities regulations is strong.

Bushman and Piotroski (2006)

Participation in equity markets increaseswhencountries adopt insider trading laws.

Brudney (1979); Leland (1992)

• Managerial behavior is influenced by the society in which the company

operates.

• Activities that are acceptable in one culture may be unacceptable in

another (such as conspicuous consumption).

• Executives in a country that values “individualism” may be more likely to

take self-interested actions than executives in a country that values

“collectivism,” because they do not risk the same level of scorn for their

behavior.

• Societal values will also influence whether the company takes a more

shareholder-centric or stakeholder-centric approach.

5. SOCIETALAND CULTURAL VALUES

• Large and liquid capital markets; active market for corporate control.

• Investor interests protected by the Securities and Exchange Commission.

• Accounting standards defined by professional body (FASB).

• Governance standards established by:

– Exchange listings (NYSE,NASDAQ).

– Legislation (Sarbanes Oxley, Dodd Frank).

• Mostly shareholder centric.

THE UNITEDSTATES

• Similar to the United States (the “Anglo-Saxon model”).

• Governance standards are recommended in “U.K. Corporate Governance

Code”:

– Separation of chairman and CEO roles.

– Senior independent director.

– Independent board and committees.

– Board, directors, and committees subject to an annual review.

– Emphasis on transparency of procedures and decisions.

– Maintain sound internal controls.

• Companies required to disclose reasons for non-compliance with these

standards (“comply or explain” approach).

THE UNITEDKINGDOM

• Two-tiered board structure:

– Management board: “runs the company”

– Supervisory board: “oversees the company”

• Supervisory board:

– Appoints members to the management board

– Up to 50% labor representatives (“co-determination”)

– Includes founding family members, financial institutions, retired management, etc.

• Board structure is a legal requirement.

• Public shareholder voting rights are somewhat limited.

GERMANY

• History of strong interconnections among firms (“keiretsu”):

– Cross-ownership among customers, suppliers, affiliates, and financiers.

– Systems encourage business relations and cooperation toward shared

objectives.

• Stakeholder-centric:

– Maintain healthy employment.

– Preserve wages and benefits.

– Discourage hostile interactions among firms.

• Large boards comprised mostly of executive directors.

JAPAN

• Dominated by “chaebol” (affiliated companies that operate under the

strategic and financial guidance of headquarters):

– Led redevelopment following Korean War.

– Benefited from subsidized government loans.

• Deficiencies brought to light by Asian Financial Crisis of 1997:

– Low profitability.

– Hidden debts.

– Shielded from disciplining force of capital markets.

• Reforms to stabilize the system:

– Eliminate inter-group guarantees (foster self-sufficiency).

– Greater independence standards.

– Greater rights to minority shareholders.

SOUTH KOREA

• Partial transition from communism to capitalism:

– Government continues to be the primary owner.

– Protects societal concerns (maintain employment, protect key industries from

foreign competition).

• Two-tiered board:

– Board of directors: mostly company executives.

– Board of supervisors: 33% employee representation.

• Individual shareholders are minority owners with little voting power.

• Little foreign ownership.

CHINA

• “Clause 49:” improved governance standards for listed companies

(adopted 1999, revised2004):

– Majority of non-executives on the board.

– If chairman is a non-executive (executive), 33% (50%) of board must be

independent.

– Board must meet at least four times a year.

– A director cannot be a member of more than 10 committees across all companies.

– Independent, financially literate audit committee.

– Extensive disclosure of related party transactions

• Challenges to reform:

– Underdeveloped capital markets.

– Continued dominance of family-controlled business groups.

INDIA

• Governance characterized by weak protection:

– Excessive influence by insiders.

– Low levels of disclosure.

– Limited voting rights for minority shareholders.

• Deregulation of capital markets is driving reform.

• Three markets for listing based on a company’s governance:

– Nivel 1 (lowest); Nivel 2 (mid); Novo Mercado (best).

• To list on the Novo Mercado, a company must have:

– Equal voting rights.

– 20% independent directors.

– Financials prepared according to U.S. GAAP or IFRS.

BRAZIL

• Weak governance systems:

– Concentrated ownership of shares.

– Control by insiders.

– Weak legal protections for minority shareholders.

– Lack of disclosure.

– Inefficient capital markets.

– Heavy involvement by government.

• Controlling shareholders use influence to gain advantages:

– Manipulation of transfer pricing to siphon money.

– Forced dilution of minority interests.

• Government has tendency to intervene in business to promote its own

interests.

RUSSIA

GLOBAL CONTEXT


CORPORATE SOCIAL RESPONSIBILITY

CSR IN A GLOBAL CONTEXT

CSR AND DEVELOPING COUNTRIES

JUSTIFICATIONS FOR CSR

DEFENSIVE

PROACTIVE

POTENTIAL ROLES OF GOVERNMENT IN THE CSR AGENDA

A MULTIPLICITY OF POLICY INSTRUMENTS


CSR AND DEVELOPING COUNTRIES

The concept of CSR aims to examine the role of business insociety and to maximize the positive outcomes ofbusiness activity.

Governments, companies and NGOs in many middle-and-low-income countries have accelerated the process ofadaptation of the developed country-driven CSR agendathrough greater direct engagement.


JUSTIFICATION FOR CSR

TWO BROAD SETS:

DEFENSIVE-minimizing the potential bad effects of CSR onlocal communities, environments and markets when imposed through international supply chains andinvestments

PROACTIVE-increase the domestic public benefits of CSRpractices in economic, social, and environmental terms(there is various kinds of partnership initiative that seekto transfer knowledge and expertise, foreign investment)


POTENTIAL ROLES OF GOVERNMENT IN THE CSR AGENDA

Spans social, economic and environmental spheresincluding issues of corruption, poverty reduction andhuman rights.

Goals differ from country to country. However, a broadlydefined goal of public engagement in CSR is thealignment of business activities and public policy. It’s clearvision may increase the likelihood of success of corporatecontribution to national development.


A MULTIPLICITY OF POLICY INSTRUMENTS

5 distinctive roles for public sector engagement with CSR:

1. regulation

2. facilitation

3. partnership

4. endorsement

5. demonstration

CSR IN INTERNATIONAL BUSINESS

SUSTAINABLE DEVELOPMENT AND ENVIRONMENT

HUMAN AND LABOR RIGHTS

BE COMPLIANT

BE CONSISTENT

LOCAL ECONOMY AND SOCIETY

TRANSPARENCY

LEGALITY

CONSUMERS

SUPPLY CHAINS


SUSTAINABLE DEVELOPMENT & ENVIRONMENT

Today’s generation must invest for the future and stopborrowing from the future generation by wasting theresources at present.

And so there’s a need to promote new economicdevelopment model, based on the context corporationsshould go beyond the minimum, this will bring turn tobetter consumer favor, product and process innovations,and raw material savings.



CSR Demands:

Be Compliant – operational conduct of the enterprise should not be lower than the standards

Be Consistent – have partners of the same kind in adopting the same observance and recognition of rights



Enterprises must protect the primary rights of its workers wherever it operates and strive to observe the following:

Refrain forced or obligatory laborBe an advocate of the abolition of child labor Respect right of privacy and freedom of opinion Respect exercise of political rights and trade unions Refrain from discriminatory treatmentFair compensationHealthy and safe working environment



Large international enterprises bring extraordinary impacton the development of less-developed countries.However, problems occur in the differences ontechnological capability of the host country’s lack ofcapacity to adapt.

Involvement of stakeholders is necessary in terms ofrelevant decisions that would contribute to thedevelopment of the territory or to the host country inparticular and that it reduces investment risks.



Typical examples of conduct of multinational companiesthat considered to be responsible and have gained widepositive recognitions:

Transfer of technology

The grant of licenses for the use of intellectual property rights at costs compatible with the local market

Granting authority to manufacture products and brands that are protected

Training for the development of local skills



Development of new products by means of local knowledge and skills

Creation of viably durable forms of collaboration with local partners

Corporate venturing investment in the local start-up capital


TRANSPARENCY

Corporate transparency - is a form of deep-rootedmanagerial initiative which evolved into a philosophy ofremoving walls and facilitating free and easy public accessto corporate information. It involves openness,communication and accountability.

Transparent measures include financial disclosurestatements, the freedom of information legislation,budgetary review, audits and religious compliance.

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