Bab 11
ENTRY AND EXPANSION
The process is triggered by different motivations to go abroad. The motivations can be proactive or reactive. Proactive motivations are initiated by aggressive management, whereas reactive motivations are the defensive's response of management to environmental changes ad pressures. Firms that are primarily stimulated by proactive motivations are more likely to enter international business and succeed.
In order to gain assistance in its initial international experience, the firm can make use of either intermediaries or facilitators. Intermediaries are outside companies that actively participate in an international transaction. They are export management companies or trading companies. In order for these intermediaries business functions properly, however, they must be compensated. This will result in a reduction of profits.
International facilitators do not participate in international business transactions, but they contribute knowledge and information. Increasingly, facilitating roles are played by private sector groups, such as industry associations, banks, accountants, or consultants, and by universities and federal, state, and local government authorities.
Apart from exporting and importing, alternatives for international business entry are licensing, franchising, and local presence. The basic advantage of licensing is that it does not involve capital investment or knowledge of foreign markets. Its major disadvantage is that licensing agreements typically have time limits, are often proscribed by foreign governments, and may result in creating a competitor. The use of franchising as a means of expansion into foreign markets has increased dramatically. Franchisors must learn to strike a balance between adapting to local environments and standardizing to the degree necessary to maintain international recognizability.
Full ownership is becoming more unlikely in many markets as well as industries, and the firm has to look at alternative approaches. The main alternative is inter firm cooperation, in which the firm joins forces with other business entities, possibly even a foreign government. In some cases, when the firm may not want to make a direct investment, it will offer its management expertise for sale in the form of management contracts.
Bab 10
BUILDING THE KNOWLEDGE BASE
International business research is therefore instrumental to international business success since it permits the firm to take into account different environments, attitudes, and market conditions.
The difference is in the environment to which the tools are applied. Although the objectives of research may be the same, the execution of international research may differ substantially fro that of domestic research. The four primary reasons for this difference are:
1. New parameters in crossing national borders. For example include duties, foreign currencies and change in their values.
2. New environmental factors. Management needs to know culture, political, and comprehend the difference things of host country
3. The number of factors involved. Environmental relationship need to be relearned whenever the firm enters a new international market.
4. Broader Definition of competition. The firm needs to expose greater variety of competition than that found in home market.
When the firm is uninformed about international differences in consumer tastes and preferences or about foreign market environments, the need for international research is particularly great. Research objective need to be determined based on the corporate mission, the level of international expertise, and the business plan.
A sequential Process of researching foreign market potentials.
Stage one. Preliminary screening for attractive country market. With question “which foreign markets warrant detailed investigation?”
Stage two. Assessment of industry market potential. “What is the aggregate demand in each of the selected markets?”
Stage three. Company sales potential analysis.” How attractive is the potential demand for company products and services?”
Given the scarcity of resources, companies beginning their international effort must rely on data that have already been collected. These secondary data are available from sources such as governments, international organizations, service organizations, trade association, directories and newsletters, electronic information services.
After identifying source of data, the next steps are selection of secondary data, then interpretation and analysis of secondary data, and data privacy (the concern has grown exponentially as a result of e-business)
Conducting Primary Research.
Primary data are obtained by a firm to fill specific information needs.
1. Industrial versus consumer source of data. The researcher must decide whether research is to be conducted into consumer or the industrial product area, which in turn determines the size of the universe and respondent accessibility.
2. Determine the research techniques. Senility to different international environments and cultures will aid the researcher in deciding whether to use interviews, focus groups, observation, surveys, or web technology as data collection techniques.
The International Information System
An information system can provide the decision maker with basic data for most ongoing decisions. Defined as “the systematic and continuous gathering, Analysis, and reporting of data for decision making purposes. Such a system serves as a mechanism to coordinate the flow of information to corporate mangers. Data gathered through:
Environmental scanning activities provide continuous information on political, social, and economic affairs internationally.
Delphi studies. These studies are to enrich the information obtained from factual data; corporations and government frequently resort to the use creative and highly qualitative data gathering methods.
BAB 9.
EMERGING MARKET
In the emerging market economies, the key to international success will be an understanding of the fact that societies in transition require special adaptation of business skill and time to complete the transformation. Due to their growing degree of industrialization, other economies are also becoming part of the world trade and investment picture. It must be recognized that these global change will, in turn, precipitate adjustments in industrialized nations, particularly in the manufacturing and trade sectors. Adapting early to these changes can offer new opportunities to the international firm.
For western firms, the political and economic shifts converted a latent but closed market into a market offering very real and vast opportunities. Yet the shifts are only the beginning process. The announcement of an intention to change does not automatically result in change itself. Highly prized, fully accepted fundamentals of the market economy, such as the reliance on competition, support the profit motive, and the willingness to live with risk on a corporate and personal level, are not yet fully accepted. It is therefore useful to review the major economic and structural dimensions of the change taking place in order to identify major shortcomings and opportunities for international business.
Often the international manager is also faced with state-owned enterprises that have been formed in noncommunist nations for reasons of national or economic security. These firms may inhibit foreign market entry, and they frequently reflect in their transactions the overall domestic and foreign policy of the country rather than any economic rationale. The current global trend toward privatization offers new opportunities to the international firm, either through investment or by offering business skills and knowledge to assist in the success of privatization. Through privatization, budgets can reduced and more efficient – non fewer-services can be provided. Privatized good and services are often more competitive and innovative. Two decades of experience with privatization indicate that private enterprises almost invariably outperform state-run companies.
- One major difficulty encountered is the frequent unavailability of convertible currency. As result, many countries resort to barter and countertrade.
- Lack of protection some countries afford to intellectual property right. Unless importers can be assured that government safeguard will protect their property, trade, and technology transfer will be severally inhibited.
- Attempting to source products from emerging market. Many firm has found that selling is not part of economic culture in some countries.
- The quality of the products. Therefore, the international manager must require manufactures to improve quality and offer prompt delivery using advanced information technology.
- Some transition economies have products that are unique in performance. While they could not be traded during a time of ideological conflict, they are becoming successful global product in an era of new trade relations.
- The most sourcing opportunities are for industrial products, which reflects the past orientation of research and development expenditures. Overtime, however, consumer products may play a large role, sometimes even a surprising one.
- Technology transfer are also substantial opportunities to provides quite useful information.
Why The Mutinational Firms Have higher rate success in transition economies?
- Foreign firms have had a tendency to enter- at least initially- services sectors that allowed high profit potential with minimal capital investments. This permits a first stage entry of little capital risk.
- As multinational firms gain experience and knowledge of the local markets, they may then increase the size of their capital investment.
- The export orientation of the multinational firm is quite consistent with the economic policy goals of many economies. They are often sorely in need of export earnings.
- Many multinationals quickly find their access to local capital through the rapidly developing domestic financial sector to be easier.
- As multinational firms mature in transition, many find that the domestic market itself represents a legitimate market opportunity on a stand alone basis. Although this is the commonly assumed goal of privatization, it is not always achieved.
BAB 8.
ECONOMIC INTEGRATION
LEVELS OF ECONOMIC INTEGRATION
A trading bloc is preferential economic arrangement among a group of countries. From least to most integrative, they are the free trade area, the customs union, the common market and the economic union. It should be noted countries (or groups of countries) may give preferential treatment to another countries on the basis of historic ties or due to political motivations.
01. The Free Trade Area
The free trade area is the least restrictive and loosest from of economic integration among countries. In a free trade area. All barriers to trade among member countries are removed. Therefore, goods and services are freely traded among member countries in much the same way that they flow freely between. No discriminatory taxes, quotqs, tariffs, or other trade barriers are allowed. The most notable feature of a free trade area is that each country continues to set its own policies in relation to nonmembers. In other words, each member is free to set any tariffs, quotas, or other restrictions that it chooses on trade with countries outside the free trade area.
02. The Customs Union
The customs union is one step further along the spectrum of economic integration. Like the members of free trade area, members of a customs union dismantle barriers to trade in goods and services among themselves. In addition, however, the customs union establishes a common trade policy with respect to nonmembers.
03. The Common Market
Further still along the spectrum of economic integrations is the common market. Like the custom union, a common external trade policy. In addition, however, factors of production are also mobile among members. Factors of production include labor, capital, and technology; when factors of productions are freely mobile, then capital, labor, and technology may be employed in their most productive uses. Despite the obvisious benefits, members of a common market must be prepared to cooperate closely in monetary, fiscal, and employment policies. Furthermore, while a common market will enhance the productivity of members in the aggregate, it is by no means clear that individual member countries will always benefit.
04. The Economic Union
The creation of a true economic union requires integration of economic policies in addition to the free movement of goods, services, and factors of production across borders. Under the economic union, members would harmonize monetary policies, taxation and government spending. In addition, a common currency would be used by all members.
ARGUMENTS SURROUNDING ECONOMIC INTEGRATON
They center on (1) trade creation and diversion; (2) the effects of integration on import prices, competition, economic of scale, and factor productivity; and (3) the benefits of regionalism versus nationalism.
Trade Creation and Trade Diversion
The increased export of wheat and other products by Spain to the EU as a result of its membership is termed trade creation. The alimination of the tariff literally created more trade between Spain and the EU. At the same time, because the united states was still outside of the EU, its products suffered the higher price as a result of tariff applications. U. S. exports to the EU fell. When the source of trading competitiveness is shifted in this manner from one country to another, it is termed trade diversion.
Reduced Import Prices
When a small country imposes a tariff on imports, the price of the goods will typically rise because sellers will increase prices to cover the cost of the tariff. This increase in price, in turn, will result in lower demand for the imported goods.
Higher Factor ProductivityWhen factors of production are freely mobile, the wealth of the common market countries, in aggregate, will likely increase. The theory behind this contention is straightforward: factor mobility will lead to the movement of the labor and capital from areas of low productivity to areas high productivity. In addition, to the economic gains from factor mobility, there are other benefits not so easily quantified. The free movement of labor fosters a higher level of communication across cultures. This, in turn, leads to higher degree of cross-cultural understanding; as people move, their ideas, skills, and ethnicity move with them.
Regionalism Versus Nationalism
Economists have composed elegant and compelling arguments in favor of the various levels of economic integration. It is difficult, however, to turn these arguments into reality in the face of intense nationalism.
EUROPEAN INTEGRATION
• Economic Integration In Europe From 1948 to The Mid-1980s
• The European Union Since The Mid-1980s
• Organization of The EU
• Implications of The Integrated European Market
NORTH AMERICAN ECONOMIC INTEGRATION
• U. S.- Canada Free Trade Agreement
• North American Free Trade Agreement
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