Fundamental of International Management

International Management; It is to perform management activities across national

borders. The firm accomplishes its mission by conducting its business activities in a
foreign country.
International Business: Pros & Cons
Advantages
Lower Operating Cost; Businesses are normally operated in under developed
countries where raw material, wages and other overhead costs are normally more
than the mother country.
Increase Sales & Profits; Foreign markets are less competitive thus more sales and
profits are achieved, thus more promising.
Continued Growth; Management may be able to ensure companys growth in
relation to its competitors by becoming more involved international business arena.
Disadvantages
Operating in Difficult Environment; In foreign countries management is confronted
wit h different political, economic and cultural environment s. The managers of an
internationally oriented company must handle diversified environmental issues .
Difficult to Keep Track of Competitors: Keeping record of competitors in two or
more countries is simply difficult than staying abreast with the competitors in a
single country. The distances between countries, the different languages & varying
national attitudes exhibit this difficulty.
Dealing With Different Monetary Systems; Dealing with two or more monetary
systems rather than one complicates the accounting process considerably.
Increases the Political Risk; Political risk is the p[potential loss of control over
ownership or benefits of enterprise due to action taken by a foreign government.

Multi-Nationalization

Multinational Corporations; A company that has significant operations in more

than one country. The company investing in international operations is called the
parent company; the country in which the investment is made is called the host
company.
Stages of Multi-nationalization
Stage 1: Exports its products to foreign countries.
Stage 2: Establishes sales organization abroad.
Stage 3: Licenses use of its patients & knowhow the foreign firms that make &
sell its products.
Stage 4: Establishes foreign manufacturing facilities.
Stage 5: Multi-nationalizes management from top to bottom.
Stage 6: Multi-nationalizes management ownership of corporate stock.

Environmental Analysis & International Operations

Environmental Analysis is the process of monitoring an organizational
environment to determine present and future threats and opportunities that
are likely to affect organizational goals attainment.
The social, economic, technological, legal & political environmental
components.
The international, supplier, competition, customer & labour components.
All important components within the international operations.
Performing Environmental Analysis for Multinational Corporation are far
more complicated from domestic organizations, as operating environments
stems primarily from six factors:
Multinationals operate within different national sovereign/different govts
Multinationals function under different economic conditions
Multinationals staff belongs to different value systems.
Multinationals operates in places that experienced industrial revolution.
Multinationals generally necessitate managing over greater distances.
Multinationals conduct business in areas that widely varies in population.

Environmental Analysis & International Operations

Trends in International Environments; environmental trends are

characterized:
Reduction in differences among Countries: The targeted countries for
multinationals are becoming more alike. An increasing similarity among such
countries could significantly alter potential of doing business.
More Aggressive Industrial Policies: The latest trend is that countries are
taking very competitive orientations toward international business. Multinationals should monitor this trend carefully while selecting potential markets.
Protecting Distinctive Assets: Countries are becoming more possessive
towards their assets they are holding.
Free Flow of Technology: This trend has emerged as an imbalance and
carrying away the competitive advantage from multi-nationals. Multinational
corporations must monitor this trend carefully
Emerging, New, Large Scale Markets: The opening up of Eastern Europe,
China, CAS & India are offering opportunities for multinationals and they
should exploit these openings.
Competition from Newly Developing Countries: Developing countries are
becoming competitors in international arena, this aspect must be evaluated.

Environmental Analysis & International Operations

Organizational Direction & International Operations; Like domestic organizations,

multinationals must chart a course consistent with its organizational mission. Type
& extent of international involvement be designed & appropriate organizational
goals must be established.
Strategy Formulation and International Operations
Direct Investment: It entails the purchase of operating and new assets by the
firm in another country, this entails purchase of operating or new assets.
License Agreement: It is a right granted by one company to another to use its
brand name, product specification. The purchasers of license get the profit
from sale of products, whereas seller profits for the free charged from the
license. Purchaser & seller of license are from different countries.
Joint Ventures: It is a partnership between two companies for the purpose of
purchasing / forming some mutually desirable business venture. International
joint ventures involve companies from different countries.
Importing / Exporting: Importing is buying goods / services produced in a
foreign country, exporting its selling goods are services to customers in a
foreign country.

Environmental Analysis & International Operations

Strategy Implementation and International Operations

Variant Organizational Factors: Implementing an internationally based
strategy is considered much greater challenge than implementing a domestic
strategy. For successful implementation multinationals require to develop
internationally oriented organizational strategy. Company has to identify that
how major organizational factors differ.
Management Functions: In various parts of the world dramatic differences
exists in how organizations are designed, how decisions are made, how
performances are evaluated & controlled, how policies are developed and
used, how organizations are led, how communication takes place and how
management methods are applied.
Strategy Evaluation & International Operations; The management must set
standards and ensure that strategy implemented meets them. Evaluation process
becomes complex & somewhat subjective due to different monetary systems & tax
laws.