Transcript Competitive advantage

International Business
Session 1
What is International Business?
Business transactions between parties from
more than one country
 Sourcing, Manufacturing, Selling, Developing
 Parties may include
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Private individuals
Individual companies
Groups of companies
Governmental agencies
Why Study International Business?
Today’s business environment is global.
 Conducting international business presents
unique risks, challenges and opportunities.
 ASK YOURSELF: is your company maximizing the
opportunities of global business across the value
chain?
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Key Objectives
Learn to:
1. Understand the global business environment and
how it is different from the national environment.
2. Select between the different modes of
international business
3. Analyze and react to different cultural contexts
4. Research and evaluate global markets.
5. Assess how countries can shape global business
through policy and integration
6. Understand the EU’s role in the global
marketplace
International vs. Domestic
OPPORTUNITIES
1. Seek
opportunities for growth through
market diversification
2. Gain new ideas about products, services,
and business methods
3. Better serve key customers that have
relocated abroad
4. Be closer to supply sources, benefit from
global sourcing advantages, or gain
flexibility in the sourcing of products
International vs. Domestic
OPPORTUNITIES
5.
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Gain access to lower-cost or bettervalue factors of production
Develop economies of scale in sourcing,
production, marketing, and R&D
Confront international competitors
more effectively or thwart the growth of
competition in the home market
International vs. Domestic
RISKS
Cross-cultural risk: a situation or event
where a cultural miscommunication puts
some human value at stake
2. Country risk: potentially adverse effects
on company operations and profitability
holes by developments in the political, legal,
and economic environment in a foreign
country
3. Currency risk: risk of adverse unexpected
fluctuations in exchange rates
4. Commercial risk: firms potential loss or
failure from poorly developed or executed
business strategies, tactics, or procedures
1.
Basic Indicators of International
Business
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Balance of Payments
◦ http://www.cnb.cz/en/statistics/bop_stat/bop_
q/bop_usd_en.htm
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Indices
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Demographic
Economic
Business
Social and Technological
Balance of Payments (BOP)
Accounting System
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
 Assists policy makers in designing
appropriate public policies
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Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall
7-11
Major Components of the BOP Accounting
System
Current Account
Capital Account
Official Reserves
Errors and Omissions
Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall
7-12
Table 7.6. U.S. Balance of Payments in 2007
Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall
7-13
Population vs. GDP
as percentage of world total
World Population 2010
Demographics
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China
India
Population Pyramids
Purchasing Power Parity (PPP)
World GDP 2008
Per Capita GDP
Doing Business
Produced by World Bank
 Evaluates business regulations and
enforcement
 180+ countries
 10 categories of data
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www.doingbusiness.org
National Business Environment
1.
Starting a Business Tracks the procedures, time,
and costs for a limited liability company to legally
start operation.
2.
Dealing with Licenses Tracks the procedures,
time and costs to build a warehouse, including
obtaining necessary licenses and permits, completing
required notifications and inspections and obtaining
utility connections.
3.
Hiring & Firing Workers Measures the flexibility
of regulations for hiring and firing workers and the
costs of hiring and firing.
National Business Environment
4.
Registering Property Tracks the steps, time, and cost
involved in registering property.
5.
Getting Credit Explores the role of creditor rights
and credit information registries in expanding access to
credit.
6.
Protecting Investors Measures the strength of
minority shareholder protections against directors’
misuse of corporate assets for personal gain.
7.
Paying Taxes Records the tax that a medium-size
company must pay or withhold in a given year, as well as
measures of the administrative burden in paying taxes.
National Business Environment
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Trading Across Borders Details the costs and
procedures involved in importing and exporting a
standardized shipment of goods.
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Enforcing Contracts Evaluates the efficiency of
contract enforcement by following the evolution of a
payment dispute and tracking the time, cost, and
number of procedures involved from the moment
the plaintiff files the lawsuit until actual payment.
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Closing a Business Measures the time and cost
of bankruptcy procedures, and develops indices of
procedural bottlenecks in bankruptcy law
Web Resources
Country Financial and Demographic info
◦ http://www.worldbank.org
◦ https://www.cia.gov/library/publications/the-worldfactbook/index.html
◦ http://globaledge.msu.edu/
◦ http://www.oecd.org
Economic and Political Freedom
◦ http://www.freedomhouse.org/template.cfm?page=1
◦ http://www.heritage.org/index/
National Business Environment
◦ http://www.doingbusiness.org
Human Development
◦ http://www.undp.org
Protectionism
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Mercantilism
Jobs
Defense
Infant Industry
Free Trade
◦ Comparative
Advantage
◦ Competitive
Advantage
Why do nations trade?
Perspectives of the Nation and the Firm
Comparative advantage
Is the concept that helps answer the
question of all nations can gain and
sustain national economic superiority
Competitive advantage
Is the concept that helps explain how
individual firms can gain and sustain
distinctive competence vis-à-vis
competitors
Examples of National Comparative Advantage
China is a low labor cost production base
 India’s Bangalore region offers a critical
mass of IT workers
 Ireland’s repositioning enabled a
sophisticated service economy
 Dubai, a previously obscure Emirate, has
been transformed into a knowledge-based
economy
 National advantage can be created
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Examples of Firm Competitive Advantage
Dell’s prowess in global supply chain
management
 Nokia’s design and technology leadership
in telecommunications
 Samsung’s leadership in flat-panel TV
 Herman Miller’s design leadership
in office furniture
(e.g., Aeron chairs)
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Limitations of Early Trade Theories
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Do not take into account the cost of international
transportation
Tariffs and import restrictions can distort trade flows
Scale economies can bring about additional
efficiencies
When governments selectively target certain
industries for strategic investment, this may cause
trade patterns contrary to theoretical explanations
Today, countries can access needed low-cost capital
on global markets
Some services do not lend themselves to crossborder trade
Michael Porter’s Diamond Model:
Sources of National Competitive Advantage
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Firm strategy, structure, and rivalry – the
presence of strong competitors at home
serves as a national competitive advantage
Factor conditions – labor, natural resources,
capital, technology, entrepreneurship, and
know how
Demand conditions at home – the strengths
and sophistication of customer demand
Related and supporting industries – availability
of clusters of suppliers and complementary
firms with distinctive competences
Porter’s Diamond of
National Competitive Advantage
Firm Strategy,
Structure,
and Rivalry
Factor
Conditions
Demand
Conditions
Related and
Supporting
Industries
National Industrial Policy
Proactive economic development plan
implemented by the public sector to nurture or
support promising industry sectors with
potential for regional or global dominance.
Public sector initiatives can include:
 Tax incentives
 Monetary and fiscal policies
 Rigorous educational systems
 Investment in national infrastructure
 Strong legal and regulatory systems
Globalization
“the growing interdependence of countries
world-wide through the increasing volume
and variety of cross-border transactions in
goods and services and of international
capital flows, and also through the more
rapid and widespread diffusion of
technology.”
– IMF
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Internationalization
Growth of relations between nations and
cultures or between institutions situated
in different nations or cultures.
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Globalization
Internationalization
Growing world systems
 Transnational, Subnational
and Supranational actors
 Driven by free markets and
technology
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Relations between nations
 Nation state is central
actor
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Driven by national interests
What’s the difference?
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Comparing the Growth Rates of World GDP and
World Exports
Productivity levels
“The World is Flat”
Thomas Friedman
Triple Convergence:
1. 10 Flattening Forces
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Internet and IT integration
Outsourcing, Offshoring, Insourcing, Supply Chain
Uploading, Informing at individual level
Technological speed and cost
2. Productivity Lag / Learning Curve
3. Opening of Countries (3 billion people)
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USSR, Central Europe, China, India, South America
Market economies and integrated financial system
Top Global Brands (select
industries)
Beer
Cars
Mobile Operators
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Toyota
1
Budweiser
1
China Mobile
2
BMW
2
Bud Light
2
Vodafone
3
Porsche
3
Heineken
3
Verizon Wireless
4
Mercedes
4
Corona
4
NTT DoCoMo
5
Honda
5
Stella Artois
5
Orange
6
Nissan
6
Guinness
6
AT&T
7
Ford
7
Miller Light
7
T-Mobile
8
Chevrolet
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Skol
8
Movistar
9
VW
9
Amstel
9
MTS
10
Lexus
10 Beck’s
10
TIM
Major Companies in Non-Triad
Markets
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Mahindra & Mahindra
Orascom
Lenovo
Infosys
Wipro
SABMiller
Embraer
Ranbaxy
Haier
Tata
Major Companies in Non-Triad
Markets
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Mahindra & Mahindra India
Orascom
Egypt
Lenovo
China
Infosys
India
Wipro
India
SABMiller
South Africa
Embraer
Brazil
Ranbaxy
India
Haier
China
Tata
India
Automotive
Cellular
Computers
Software
Tech Services
Brewing
Aircraft
Pharmaceuticals
Appliances
Automotive
Negative Consequences
of Market Globalization
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Loss of national sovereignty
Offshoring and the flight of jobs
Effect on the poor
Effect on health and safety
Effect on the natural environment
Effect on national culture
How Globalized is the World?
Only semiglobalized?
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http://www.ft.com/intl/businesseducation/i
ese