BFT335 Study Manual.pdf - Study Manual INTERNATIONAL BUSINESS ENVIRONMENT(CASE STUDY Study Manual Contents Study Unit Title Syllabus Page i 1 The

BFT335 Study Manual.pdf - Study Manual INTERNATIONAL...

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Unformatted text preview: Study Manual INTERNATIONAL BUSINESS ENVIRONMENT (CASE STUDY) Study Manual Contents Study Unit Title Syllabus Page i 1 The Importance and Nature of International Business The Importance and Growth of International Business International and Domestic Business Types of International Business Involvement 1 3 8 10 2 Understanding the World Trading Environment The Changing World Trading Environment The Big Three – The Triad Classifying the World A New Focus – Global Convergence 17 18 22 23 26 3 Understanding International Trade The Reasons for International Trade Trade Barriers World Trade Bodies and Institutions World Regional Groups or Trading Blocs 29 30 34 36 39 4 Understanding the International Business Environment Social/Cultural Factors Legal Factors Economic Factors Political Factors Technological Factors The “C” Factors The Use of Slept and C Factors in International Business Planning Social Responsibility and International Business 45 47 52 54 56 57 60 62 64 5 Understanding Consumer Behaviour Consumer Buyer Behaviour Business-to-Business Buyer Behaviour Government Buyer Behaviour Buying Behaviour in Lesser-Developed Countries Buying Behaviour in Newly Industrialised Countries Buying Behaviour in Highly Industrialised Countries 67 68 70 72 73 75 76 6 International Marketing Research and Analysis Defining the Research Problem Secondary Data Primary Data Managing the Research Developments and Trends in International Marketing Research Comparative Analysis Absolute and Competitor Analyses 79 82 84 86 88 90 92 98 7 International Business and Marketing Strategies Business Planning Strategy Development Strategy and Company Factors Strategy and Competition Strategy and Level of Economic Development Strategy and Finance 101 102 107 111 116 119 122 8 Organisational Structures, Cultures and Capabilities Organisational Structures Organisational Culture Staffing and the International Business 125 126 133 135 9 International Strategy: Standardisation, Adaptation and Globalisation Standardisation Adaptation Globalisation 143 144 147 149 10 Market Entry Strategies Choices of Market Entry Selection of Market-Entry Routes The Market-Entry Decision 157 158 162 167 11 International Product Management Products Techniques and Concepts in International Product Management Branding Issues New Product Development Product Adaptation and Standardisation Issues 171 172 174 177 179 182 12 International Pricing Policies Pricing Strategies Countertrade Specific Pricing Methods Quoting Export Prices – Incoterms 189 190 194 197 198 13 International Promotion Policy The Context of International Marketing Communications Marketing Communications Strategies Using Agencies and Consultancies 201 202 205 207 14 International Distribution and Logistics Distribution Channels Distribution Channel Relationships Planning and Managing International Channels of Distribution Trends in International Distribution Distribution Logistics The Total Cost Concept Modes of Transport 211 212 215 217 223 224 228 228 15 The Extended Marketing Mix Service Product Characteristics The Extended Marketing Mix Relationship Marketing 231 232 235 237 16 Implementation, Evaluation and Control Individual Country Annual Marketing Plans Managing the Implementation Process Performance Evaluation and Control Planning for the Future 241 242 246 247 253 17 Finance and International Business Finance and the Development of International Business Financing International Trade Finance and the Multinational Company International Investment Decisions 257 258 262 269 277 18 Risk and the International Business Risk and International Trade/Finance Managing Political Risk Internal Methods of Managing Exchange Rate Risk and Exposure External Methods of Managing Exchange Rate Risk and Exposure 281 282 284 288 290 i . International Business Syllabus Aims 1. Appreciate that many businesses are no longer operating in the domestic local environment. 2. Develop a sense of urgency that tremendous opportunities exist to develop business if companies can change their mind-sets from domestic to international dimensions. 3. Acquire the expertise to develop strategies for international expansion and, in so doing, to understand how to deal successfully with a range of business issues at an international level. Programme Content and Learning Objectives After completing the programme, the student should be able to: 1. Understand the key questions posed by international business and global operations, and be aware of the main reasons why businesses develop internationally. 2. Define globalisation and, in understanding what it means, appreciate how it impacts on all functions of the business. 3. Understand the changing nature of the international business environment with specific regard to: ! The macro factors that underpin world trade. These are the powerhouses that drive changes in patterns of behaviour; ! The major international bodies, IMF, WTO, World Bank, etc., and their influences on shaping the liberalisation of world trade. 4. Understand the factors that give rise to different behaviour patterns (both buying behaviour and other organisational behaviour) in different countries including culture, stages of economic growth and local environmental conditions. Appreciate a range of cultural factors which impinge on firms doing business in overseas settings. 5. Recognise the strategic role of information gathering in directing international business decisions and be aware of the issues surrounding information gathering in an international environment. 6. Recognise the changing planning framework as companies deepen their international and global commitments, and their impact on production, finance, operations, marketing and human resource management. 7. Understand the implications of international operations for distribution and logistics within the firm. 8. Understand the human resource management implications of operating on an international scale. ii 9. Appreciate the range of alternative means by which international market entry may be achieved and the organisational and financial implications of each. 10. Have a clear grasp of the range of tools of the marketing mix in differing economic, political and cultural situations. Notes Case Study Case studies will be provided to students which they will be expected to analyse. Students will be required to demonstrate their analytical ability with reference to the strategic concerns and issues raised by the case studies and to make strategic recommendations based on the outcomes of their analysis. Dealing with case studies of this type is quite a complex task and it is strongly recommended that you familarise yourself with the techniques and approaches to analysis required. The reading list below suggests one publication which provides such guidance. Notes about Studying this Subject In answering questions in the examination, you will be expected to draw on and apply concepts, knowledge and skills acquired in all subjects. In studying the course materials for this subject, therefore, you should constantly be thinking of the application of your studies in the other subjects to the international issues and context under discussion. In addition, it is important that you are aware of, and able to assess, the implications of recent developments and events in respect of their effect on international business. Of particular relevance here are developments in the contribution of the Internet and the rise of e-commerce, in the introduction of the Euro and in the implications of international terrorism, etc. Further Reading We encourage students to read around their subjects although your study manual provides complete coverage of the syllabus for the examination. If you have time available once you have worked through the manual, you may wish to consult one or more relevant books from the suggested reading materials. Students especially should supplement their study of the manual with wide reading of relevant journals, quality newspapers and contemporary media sources. 1 Study Unit 1 The Importance and Nature of International Business Contents Page Introduction 2 A. The Importance and Growth of International Business 3 The Changing Nature of the International Business Environment 3 Reasons for Going International 6 International and Domestic Business 8 Similarities 8 Differences 8 B. C. Types of International Business Involvement 10 Different Orientations, Different Management Culture 10 The Stages Approach 11 2 The Importance and Nature of International Business INTRODUCTION Fewer and fewer companies these days can focus only on their domestic markets. Increasingly, businesses need to understand, consider and plan for international markets. The growth of international business, in all its facets, represents probably one of the most significant commercial developments in recent years. Specifically, international markets represent one of the most significant sources of business opportunities (and threats). Just consider for a moment some of the following facts: ! Initial forecasts of world trade in the year 2000 suggest that the total value of goods and services traded will reach nearly $7 trillion. ! China alone represents a total potential market of some 6 billion people. ! Approximately $1 trillion crosses national boundaries each and every day. ! The world’s largest 500 companies derive on average approximately 70% of their sales and profits from international markets. Small wonder then that international business opens up such major profit and sales opportunities to companies. Moreover, virtually every available measure indicates that international, as opposed to purely domestic, business has for many years now been the fastest growing area of commercial and trading activity and that, if anything, this growth is set to accelerate into the future. The bald statistics on the importance and growth of international marketing, impressive though they may be, do not of themselves tell us about the following issues: ! The reasons for this growth. ! The nature and variety of international business activities. ! How, if at all, international business differs over and above purely domestic business. ! Related to the above, the implications of any differences for the financial, marketing and operations managers and in particular what additional skills and techniques are required when planning international business strategies. ! The key trends and developments in the scope and nature of international business and the way that international markets and business are likely to develop in the future. As a prelude to understanding how to analyse international markets and to develop and implement business strategies for them, we need first to understand some of the background to the nature, growth and scope of international business. This first study unit is designed to do this. The Importance and Nature of International Business 3 A. THE IMPORTANCE AND GROWTH OF INTERNATIONAL BUSINESS As already indicated in the introduction, international markets represent one of the largest and fastest growing areas of commercial and marketing activity. As such, they represents one of the most significant areas of business opportunities for the organisation. A number of factors serve to underpin the size and growth of international activities, some of the most important of which are considered below. The Changing Nature of the International Business Environment As in all business situations, opportunities and threats stem from changes in the environment. In environments which are not dynamic and changing, few such opportunities and threats arise. There is little doubt that the international environment is one of the most dynamic. It is this dynamic nature which gives rise to major opportunities for international business. Examples of some of the major changes in the international business environment in recent years include the following: ! The growth of whole new trading blocs and major changes to existing ones, e.g. the expansion of the European Union (EU), the formation of the Association of South East Asian Nations (ASEAN) and the Andean Common Market (ANCOM). ! Newly emerging markets with significant growth potential, e.g. the Chinese Economic Area, Indonesia, India, South Korea and Mexico. ! Fundamental changes to the economic systems in some countries/regions of the world, for example the collapse of the former Eastern European Communist Bloc. ! Diminishing barriers to international trade and consequent significantly increased competition across national boundaries and often, as we shall see later, on a global basis. ! The growth of the multinational and transnational organisation. ! The development and impact of the Internet These, and other changes, are in fact considered in more depth in this and later study units, but at this stage it is sufficient to note that it is the particularly dynamic nature of the international environment which provides the source of major business opportunities. (a) The continued liberalisation of international trade This particular aspect of the international environment is of particular importance when considering the growth of international business. As already indicated, there has been a continuing trend towards the liberalisation of international trade. Starting after the Second World War, under the auspices of GATT (latterly the World Trade Organisation), agreements have been reached to gradually remove trade barriers such as tariffs and quotas. Imperfect though these agreements have sometimes been, there is no doubt that these have helped the growth of world trade and the rising importance of international business. Patterns of world trade and understanding the world trading environment are so important to international business that we consider them in more depth again in Study Unit 3, together with the social, legal, economic, political, technological and competitive forces which underpin them and which are considered in Study Unit 4. 4 The Importance and Nature of International Business (b) Cosmopolitan customers A third factor in the growth in importance of international business is the changing nature of customers and demand, and in particular, the increasingly cosmopolitan nature of today’s customers. Today’s consumer is much more widely travelled compared to even a decade ago. Combined with an increasingly global media network, today’s consumer is exposed to global lifestyles, products and brands. Increased affluence and education on the part of customers have also served to reinforce much more cosmopolitan attitudes and lifestyles. At the turn of the twentieth century, our grandparents were mainly exposed to domestic products and services. Furthermore, they weren’t particularly interested in buying “foreign” products. Today’s consumer, however, travels widely and wants to purchase the best value and most innovatory products and services, regardless of their country of origin. Clearly, consumers and their needs change, together with their buying habits and the influences on these. Understanding the consumer and their needs lies at the heart of business strategy and planning. This is no different in international business – indeed, if anything, one might argue that the need to understand or at least analyse customer behaviour is heightened when considering consumers across international frontiers. For this reason, therefore, we consider the importance of understanding customer behaviour in Study Unit 5. (c) Improved communications Helping to facilitate the emergence of the more cosmopolitan international consumer have been the huge improvements in international communication. Indeed, the increase in international travel just referred to has partly come about because of these. So, for example, it now costs approximately 1/6th in real terms of what it did only 15 years ago to fly the Atlantic. Of particular importance in this area, of course, has been the growth of new communication technologies such as satellite TV and more recently the growth of the Internet which is rapidly becoming ubiquitous and is giving ready access to consumers to international trends and markets. (d) Strategic networking and the international supply chain It is not only final customers that have become more cosmopolitan in their lifestyles and purchasing habits, but so too have organisational customers. ! Strategic networking is the formation of alliances and agreements between companies. Such alliances and agreements may involve, for example, licensing, franchising and even mergers and acquisitions. Strategic networking is an attempt to combine two or more companies’ skills and resources so as to be able to compete better. ! International supply chains refers to the increasingly international nature of supply in as much as companies often purchase components, raw materials, services, etc. from very diverse parts of the world Increasingly, organisational buyers, whether in manufacturing, services or retailing, are looking towards non-domestic suppliers to provide their raw materials, components and finished products. A good example is that of the United Kingdom retailer, Marks & Spencer. At one time, Marks & Spencer made a feature out of sourcing from only UK suppliers wherever possible. However, in recent years this company, facing increrasingly aggressive competition, has begun to purchase from whichever supplier can best serve their needs with regard to factors such as price, design, delivery and so on, irrespective of their geographical location in the world. The Importance and Nature of International Business 5 Some of the same factors underpinning the emergence of the more cosmopolitan consumer, such as improved communication and so on, apply equally to the organisational customer. In addition, however, companies are increasingly developing strategic networks with suppliers which are based on international supply chains. So, for example, a car which is ultimately sold in the United Kingdom may have had its engine built in Spain, its transmission in Japan, its gearbox and steering in Korea and its trim in Brazil, with assembly in Germany. A number of factors underpin this growth of strategic networking and international supply chains. So, for example, increasingly, even the largest companies can no longer afford to develop new products on their own, but must share the risk by developing strategic alliances with other companies, often in different parts of the world. Similarly, sometimes a company will be unable to gain access to an overseas market without the help of a local company and so again, strategic alliances or joint ventures of some kind are increasingly the order of the day. One of the most significant developments promoting the growth of the international supply chain has been the recognition that managing supply effectively through value chain activities can be one of the most important sources of competitive advantage. There is no doubt that strategic networking and the international supply chain management which is associated with this, will continue to facilitate the growth of international business in the future. (e) Growth of global companies – multinationals and transnationals Factors already discussed which have served to underpin the growth of importance of international business have in turn led to the emergence of the global company. The global company thinks, plans and operates on a truly global basis; in other words, it transcends international boundaries. The 1980s and 1990s have seen the emergence of the multinational and, more recently, transnational company. In an admittedly somewhat chicken and egg fashion, the emergence of the global company has in turn helped fuel further growth in international business. At this stage, we should note that one factor in particular linking the global company with the growth of international business itsel...
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  • Spring '20
  • Marketing, Nature of International Business

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