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International Business
(Introduction – Country factors)
ERASMUS programme
I
Lecturer Dr Pavlos Dimitratos
[email protected]
Course objectives
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Understand why international business
takes place currently at an unprecedented
rate
Explore challenges for a firm going abroad
Investigate the different modes of entry,
strategies and organization for an
internationalized firm
Examine changes in the international
trade and environment
Study how the international monetary
system and capital market operate
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Textbooks & Articles
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INTERNATIONAL BUSINESS – Competing in the Global
Marketplace
 C. W. Hill, McGraw-Hill, Irwin, 5th edition, 2005
Recommended:
Cateora P.R. (1996), International Marketing, 9th ed.,
Chicago: Irwin.
Czinkota
M.R.,
and
Ronkainen
I.A.
(1993),
International Marketing, 3rd ed., Fort Worth, TX: The
Dryden Press.
Root F.R. (1987), Entry Strategies for International
Markets, Lexington, MA: Lexington Books.
Young S., Hamill J., Wheeler C., and Davies J.R.
(1989), International Market Entry and Development,
Englewood Cliffs, NJ: Prentice-Hall.
Articles from scholarly journals presented during the
lectures
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Evaluation
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Final Exam
Group Coursework
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70%
30%
Final closed-book exam will draw
on material taught/discussed in
the text
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Outward and inward
internationalization
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Outward internationalization concerns the
practices and strategies that an enterprise
undertakes to dispose of its outputs abroad
(e.g. exports, R&D activities abroad)
Inward internationalization deals with the
activities related to the procurement of
inputs (products/services and capital) from
markets abroad (e.g. imports, foreign
capital financing)
The two categories are not isolated from
each other
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Internationalization and
globalization
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Both of them are forms of
‘marketization’
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internationalization/globalization of
markets and production
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Compared with internationalization,
globalization refers to a greater extent
of activities undertaken abroad by the
firm
Internationalization appears to be a
more general / better term
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Internationalization and
globalization
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The debate: Is internationalization
good or bad?
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Mini-case discussion
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Anti-internationalization protests
Effect on jobs, income, environment
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Internationalization as a
strategic choice
Is internationalization always the best
way for a firm to grow/expand?
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Existing
markets
New markets
Existing products
New products
Market penetration
strategy
Product development
strategy
Market development
strategy (& IB)
Diversification strategy
(& IB)
ANSOFF’S PRODUCT/MARKET EXPANSION GRID
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Internationalization may be the easiest
way for a firm to expand
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Internationalization as a
strategic choice (con’d)
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Going abroad needs an appropriate degree
of internal competencies’ development
and monitoring of threats/opportunities in
the external context in order for successful
outcomes to emerge
A short-term approach to
internationalization may render
detrimental results!
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Drivers of internationalization
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Development of regional economic
integration between countries (e.g.
EU, NAFTA, ASEAN)
Increasing international cooperation
between firms
Increasing homogenization of
consumer tastes worldwide (?)
Increasing mobility worldwide
between capital, management and
labour (?)
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Drivers of internationalization
(cont’d)
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Dissolution of former Soviet Union group of
countries
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Declining trade and investment barriers
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Advanced information, technological,
communication and transportation systems
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These (last) three appear to be the most
important reasons driving internationalization
nowadays
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Motives for firms’
internationalization
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Proactive
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Higher sales / profits
New markets
Unique product (& value to the customer)
Technological know-how
Good information on foreign markets
Networks in foreign markets
Management’s urge for internationalization
Pursuit of learning effects/economies of scale (experience
effects)
Leveraging core competencies worldwide
Reputation/brand name of a firm
Access worldwide to technology/technological know-how,
factors of production (location economies), capital
Risk diversification
Pursuit of international learning
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Motives for firm’s
internationalization (cont’d)
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Reactive
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Tax-related benefits offered by
(home/host) government
Pressures from competition at home
Pressures from competition abroad
Saturated demand at home
Follow the client
Excess production surplus (?)
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National differences
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Internationalization presents significant
challenges due to differences across
countries in political,
economic/technological, legal, cultural,
social and religious systems
Political systems may fall towards the
collectivism vs. individualism spectrum…
… democracy vs. totalitarianism spectrum
Economic systems may fall towards the
market or state-directed economy spectrum
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National differences (cont’d)
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Legal systems are different (e.g. code
vs. common law) and may affect
international activities of the firm in
aspects such as
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Property rights
Intellectual property
Product safety and liability
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National differences (cont’d)
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Economic development between countries is
different. Internationalized firms should consider
aspects such as GNP per capita, GNP growth,
degree of privatization, deregulation etc.
Level of education in a country is also significant
(e.g. Japan since 1945)
Geography of country can be important –
landlocked countries may grow slower than coastal
countries; tropical countries may grow slower than
those in the temperate zone
Economic growth appears to be strong in countries
that are committed to a free market system and
strong property rights
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National differences (cont’d)
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The attractiveness of a country as a
market/investment site depends on
balancing the likely benefits against the
costs & risks
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Benefits/costs (munificence / hostility of a
country): depend on
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size of the market
purchasing power
growth prospects (& economic system and property
rights regime)
political payoffs required for market access
supporting infrastructure
cost of adhering to local laws/regulations
psychic distance
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National differences (cont’d)
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Risks (uncertainty) depend on
 Political uncertainties
 Economic mismanagement
 Lack of legal system
Other things being equal, the trade-off may be most
favorable in politically stable developed and
developing nations with free market systems, and
no dramatic upsurge in either inflation rates or
public sector-debt
Mini-case discussion
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Readings
Hill, chapters 1, 2 & pp. ‘Profiting from
Global Expansion’ (ch. 12)
Recommended:
 Dunning, J. (1993) Multinational
Enterprises and the Global Economy,
Addison-Wesley, London.
 Dimitratos, P., Johnson, J. Slow, J. &
Young, S. (2003) Micromultinationals:
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New Types of Firms for the Global
Competitive Landscape, European
Management Journal: 21(2), 164-174.
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