Lecture ten

Course review

BUSI2025
International Business
Dr. Chirag Kasbekar
Research School of Management
College of Business and Economics

Long recap!

Reminder of details of exam

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Plan for today

Recap

Broad questions an international

company seeks to answer

Which markets offer the most opportunities and least risks and costs?
n

Differences in political and legal environments

Differences in economic growth, development and policy

Differences in culture and ethics

How do the following global patterns and systems affect these

opportunities, risks and costs?
n

Patterns of international trade

Patterns of FDI

Patterns of regional economic integration

Movements and structure of the foreign exchange market and the

international monetary system

Movements and structure of the global capital markets

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1. How does the international environment affect the search for

sustained above-average profitability and profit growth?

Broad questions an international

company seeks to answer

How important are cost pressures and local responsiveness pressures?

Given the level of these pressures:
n

What overall strategy is appropriate?

What organisational structure is appropriate in order to coordinate

the companys global operations?

What form of entry is most appropriate in which market in order to

attain sustainable competitive advantage within a country and over all?
n

Which markets do we operate in?

When do we enter them?

On what scale do we enter them?

What entry mode do we use to enter them?

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2. How do these differences and patterns in the international

environment affect a companys overall global strategy?

Opportunities, risks and

costs of international
business

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Increasing profitability:
Value creation and capture

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Increasing profitability:
Value creation and capture

Increasing profitability:
Value creation and capture

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The Value Chain

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Location
economies
Global
value
chains

Leveraging
subsidiary
knowledge

Profitability

C
Experience/
scale effects

Expanding
your
market

New
markets

Profit
growth

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Opportunities: Improved profitability and profit

growth through international operations

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Global
value
chains

Expanding
your
market

Adapting
strategy to local
differences:
Cultural
Political
Policy
Legal
Economic
Demographic

Profitability

Profit
growth

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Risks and costs of international operations:

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Above-average performance in
international markets

No. of firms

Market B

Market A

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Variation across and within markets

The costs of operating in

in both markets could
cause performance to drop
in both

Mean A

<

Mean A

Profitability

How does the international

environment affect the
search for sustained aboveaverage profitability and
profit growth?

Which markets offer the most

opportunities and least risks and costs?

1.

Political environments political systems, types and assessment

of political risk (macro and macro risks), legal systems, property
rights, intellectual property

2.

Economic environments economic growth and development,

economic systems, economic indicators (inflation,
unemployment, debt, income distribution, poverty, labour costs,
productivity), freedom and transition (e.g. BRICs)

3.

Cultural environments culture definitions and dimensions,

clustering, cultural awareness and intelligence, company
orientations, implications for managers

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Differences in:

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Which markets offer the most

opportunities and least risks and costs?

1.

Political environments political systems, types and assessment

of political risk (macro and macro risks), legal systems, property
rights, intellectual property

2.

Economic environments economic growth and development,

economic systems, economic indicators (inflation,
unemployment, debt, income distribution, poverty, labour costs,
productivity), freedom and transition (e.g. BRICs)

3.

Cultural environments culture definitions and dimensions,

cultural awareness and stereotyping, clustering, company
orientations, implications for managers

4.

Ethical environments definitions, ethical issues in IB (e.g.

employment, human rights, corruption, poverty, natural
environment), theoretical approaches to ethics, ethical decisionmaking, social responsibilities of business

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Differences in:

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1.

International trade: theory and practice trade patterns, trade theories,

political and economic motives for intervention, trade promotion
measures, trade restrictions, history of trade policy, arguments for and
against free trade, role and future of the World Trade Organization,
implications of trade for managers

2.

Foreign direct investment explanations of FDI patterns, forms of FDI,

risks of FDI, theoretical approaches, benefits and costs of FDI to the home
and host countries, reasons why countries may promote or restrict FDI,
implications for managers

3.

Regional economic integration 5 levels of economic integration,

European Union, NAFTA, ASEAN, APEC, pros and cons of global,
bilateral, and regional integration, rise of FTAs, implications for
managers

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How do these global patterns affect the

opportunities, risks and costs?

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4.

Foreign exchange markets foreign exchange instruments, foreign

exchange markets, exchange rate determination, types of exchange rate
risk, relationship with interest rates and inflation, firms forex strategies

5.

The international monetary system and global capital markets

development of the IMS, role of the IMF and WB, fixed vs flexible
exchange rate systems, Asian currency crisis, purpose of the
international capital market, instruments (Eurocurrency, bonds, global
equity), implications for managers

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How do these global patterns affect the

opportunities, risks and costs?

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How do these differences

and patterns in the
international environment
affect a companys overall
global strategy?

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How strong are cost and local responsiveness

pressures?
What is an appropriate overall global strategy?

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Four Basic Strategies

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How strong are cost and local responsiveness

pressures?
What is an appropriate organizational stucture?

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Which markets do we operate in?

When do we enter them?

On what scale do we enter them?

What entry mode do we use to enter them?

>>>

What form of entry is most appropriate in which

market in order to attain sustainable competitive
advantage, within a country and globally?

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Wholly
owned
subsidiary

Joint-venture
with local
partner

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Level of control over foreign activities

Entry modes

Franchising
Licensing

Export through
agent or
distributor

Direct
export

Amount of resources committed to foreign market

Source: Bartlett, C. A., S. Ghoshal & J. Birkinshaw, 2004. Transnational
Management, Text, Cases, and Readings in Cross-Border Management.

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Assessments

n Case

Analysis Report marks and feedback by

tomorrow, an announcement will be made on
Wattle

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Interim Results

n Tutorial

participation grades to be released

on Wattle next week

n Business

Environment Analysis Report (BEAR)

An announcement will be made on Wattle when
the marks and feedback are available online.

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Wed 3 February 2016

Open-book, online on Wattle

Online exam is open between 10am and 1pm

Two parts:
Part A (multiple choice) 30 mins;
Part B (short answer and essay) 1.5 hours

Remember: You need to start Part B at or before

11:30am to get 1.5 hours to complete it!

Randomised questions your friends may not have to

answer the same set of questions as you

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Final Exam: Date, Time and Venue

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All topics discussed throughout the course should be

considered when preparing for the exam

Many topics are interrelated, and you should be familiar

with them

Questions will be based on the content from the chapters

in the textbook although other material from the lecture
slides and readings can be included when answering
exam questions

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Final Exam: Coverage

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Answering Exam Questions

book, but not much time

n Manage

your time!

n Attempt

all multiple choice questions

n Be

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n Open

to the point, refrain from unrelated issues

n Answer

all parts of the question

n Use

examples case studies, experience, individual

assignment, textbook to illustrate general points

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Thank you!

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