INTERNATIONAL BUSINESS Ilan Bijaoui 2007 ibiinetvision net il

INTERNATIONAL BUSINESS Ilan Bijaoui 2007 ibii@netvision. net. il 1

THE POLITICAL SPECTRUM Rule people DEMOCRACY 2 Authoritarian Reactionary Islam Control souls Facist Conservative Communist TOTALITARISM Liberal Authoritarian Radical Economy+Politics

COMPARATIVE MEASURES OF FREEDOM POLITICAL RIGHTS Fair elections, representatives with power, political parties, rights of minorities CIVIL RIGHTS Freedom of press, equality under law, social freedom, government-corruption 3

ECONOMIC SYSTEMS · Market Allocation: Consumers allocate resources. Competition + Consumer Protection (USA) · Command Allocation: State Planners. · Mixed Systems: Governmental Expenditures/GDP 32% USA, 64% Sweden 4

POLITICS AND MANAGEMENT DECISIONS • Political risks: Micro (population) and Macro (government) • Government intervention: Individualcommunitarian paradigm 5

INDEX OF ECONOMIC FREEDOM 6 Source: Heritage foundation www. heritage. org

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Map of countries by GDP (PPP) per capita, based on the 2005 IMF data. 26

WTO 27

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WTO 30

Trade with China : 2000 -6 NOTE: All figures are in millions of U. S. dollars. Year 2000 Exports 13, 111. 1 2004 2005 2006 81, 788. 2 34, 744. 1 41, 925. 3 243, 470. 1 55, 185. 7 Imports Balance -68, 677. 1 196, 682. 0 -161, 938. 0 -201, 544. 8 287, 774. 4 -232, 588. 6 SOURCE: U. S. Census Bureau, Foreign Trade Division, Data Dissemination Branch, Washington, D. C. 20233 31

Trade with China : 2007 NOTE: All figures are in millions of U. S. dollars. Month Exports Imports Balance January 2007 4, 364. 2 25, 635. 0 -21, 270. 9 February 2007 4, 630. 7 23, 064. 5 -18, 433. 8 March 2007 5, 479. 4 22, 725. 4 -17, 246. 1 April 2007 4, 849. 4 24, 222. 9 -19, 373. 5 TOTAL 19, 323. 6 95, 647. 9 -76, 324. 3 SOURCE: U. S. Census Bureau, Foreign Trade Division, Data Dissemination Branch, Washington, D. C. 20233 32

Source: PRC General Administration of Customs, China's 33 Customs Statistics

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Income Gini coefficients in the world 37

MOTIVATION PUSHES AND PULLS TO INTERNATIONALIZE TRADITIONAL MOTIVATIONS(Bartlett) · Expand sales, acquire resources, minimize risk. Secure Key Supplies · Access Low Cost Factors · Local Market Saturation-Competition · Market Seeking Behavior · Technology – Vernon Product Life Cycle 38

EMERGING MOTIVATIONS · Economic, Technological, Social Developments · Amortization of R&D Expenditures(public telephone switching systems) · Shortening Product Life Cycle · Scanning & Learning Capabilities · Competitive Positioning (Cross Subsidization) 39

NATURAL ENVIRONMENT Raw materials Energy costs Change Pollution Know how Geography Infrastructure TECHNOLOGICAL ENVIRONMENT Improvement PM 4. 4 40 Natural and technological environments Regulation

DEMOGRAPHIC ENVIRONMENT Age Family Population Education ECONOMIC ENVIRONMENT Economic PM 4. 3 41 Demographic and economic environments Spending patterns

POLITICAL ENVIRONMENT Legislation Enforcement Interest groups CULTURAL ENVIRONMENT Values Subcultures PM 4. 5 42 Political and cultural environments Shifts

LEGAL ENVIRONMENT • Public International Law: International conventions, custom International Court of Justice (ICJ) • Private International Law: Common Law-tradition-precedent (English) US, India, Singapore- detailed contracts Civil law(Codified) (Napoleonic Code) Thailand, Japan China. US Uniform Commercial Code. • Theocratic law : Islamic law Sha’riah 43

Establishment Juridiction of Host. Home Country Intellectual Property Paris Union, Right of Priority Antitrust: US Sherman Act (1890) EU Competition law Licensing: Law-Competition/ Competitors Champagne perfume (YSL)France-US Counterfeiting Bribery: Foreign Corrupt Practice Act (197)7 44 Patent Cooperation Treaty(PCT) 39 European Patent Office

ORIENTATION OF MANAGEMENT & COMPANIES Ethnocentric Home Country Superior, Similarities Regiocentric Geocentric Similarities & Differences In a world region In home & host Countries Polycentric Each Host Country is Unique, Differences 45

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INTERNATIONAL STRATEGY-EXPORTS • Local Distinctive Competence Raw Material Know how Manpower • International risks Knowledge protection Investment protection 48

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STAGES OF DEVELOPMENT Strategy/ Stage Domestic Model International Multinational Coordinated Decentralized Central hub Extension markets National markets View of the World Home Country Orientation Ethnocentric Polycentric 58 Global Transnational Integrated Network Global markets and or resources Mixed Geocentric

INTERNATIONAL STRATEGY OF SELECTED FIRMS Global Multidomestic Transnational Ethnocentric Ikea 1 Danone Polycentric Ikea 2 Unilever Regiocentric Geocentric 59 Coca Cola

(Source: Michael E. Porter, Competitive Advantage (New York: Free Press, 1985), p. 37. ) PM 11. 2 The generic value chain 60

ILLUSTRATIVE CONFIGURATION Activities US Canada UK France Germany Japan Inbound logistics Operations Components x x x Assembly Outbound logistics Order processing Physical distribution Marketing Advertising Sales force Promotion materials 61 x x x x x x x x x x x x x x x

ILLUSTRATIVE CONFIGURATION Activities US Canada UK France Germany Japan x x x Service x x Procurement x x Technology Dvt Human resource x x x Management x Firm structure 62

ILLUSTRATIVE COORDINATION Activities Operations Marketing & Sales Service Procurement Technology Dvt 63 Configuration Coordination Location of Tasks allocation, production Networking, Technology transfer Product line Brand worldwide Country Sales coordination AdvertisingPromotion Similar channels Pricing coordination Location Similar standards Location Managing suppliers Location Tasks allocation Knowledge transfer Sequence of products

CONFIGURATION OF ACTIVITIES High Extensive Coordination among subsidiaries Simple Global Country-centered strategy by multinationals operating in one country Export-based strategy, decentralized marketing Strategy Coordination of Activities Low 64 Geographic Dispersed Geographic Concentrated

PORTER’S DIAMOND Chance Firm Strategy Structure & Rivalry Factor Demand Conditions Related & Supporting Government Industries 65

PORTER’S DIAMOND DISCUSSION Factors Conditions Demand Conditions • Human, Physical resources, Capital, Knowledge, Infrastructure • Hierarchy, factors: Basic-Advanced • Factor Creation • Demand Composition • Demanding Buyers • Anticipatory Buyers • Pattern Growth Firm Strategy, Structure& Rivalry Supporting & Related Industries • Style of Management & Structure • National Norms • Rivalry • Supplier Industries & Development • Related Industries & Market • Related Industries & Production 66

ITALIAN SUPPLIER INDUSTRIES TO FOOTWEAR Leather Footwear Parts of Design Footwear Services Leather Processed working Leather Machinery 67

ITALIAN INDUSTRIES RELATED TO FOOTWEAR Leather Athletic Clothing Handbags Footwear Parts of Footwear Leather Processed working Leather Machinery 68 Design Services

PARTIAL CLUSTURING IN DANISH ECONOMY Barley, Malt Food Processing Refrigeration Yeast Equipment Pork Beer Dairy Industry Trypsin Fermentation Purification (Enzyme) Insulin Equipment Technology Fermented Insulin 69 Fermented Enzymes