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International Business

Monday (12, June 10 AM) Within minutes Within 45 minutes

Midnight Monday / Tuesday: (40 hrs. after)

Chanda places an on-line order for an I-pod Music Player on Apple Computers Web. Specification: Sons name to be inscribed on the set. Free delivery at New York. Order confirmed with a tracking number for Chanda to follow progress of the freight of the article Music player with name engraved shipped from Shanghai, China, left Apple factory in Shanghai on a FEDEx van for the sorting facility and then put on a plane for anchorage Alaska Chanda tracks the I-pod through flight and on the FEDEx hub at Indianapolis, USA Wending its way through a maze of conveyor belts and ramps and guided by robotic arms into containers with specific zip codes, travelling aboard vans and aircraft, the I-pod arrives in New York. At the back of the shining metal box were the words Designed in California. Assembled in China

Many more countries had joined in making the I-pod Microdrive (the heart of the machine) Hitachi, Japan Controller chip South Korea Sony Battery assembled in China Stereo digital to analog converter by a company in Edinburgh, Scotland Flash memory chip from Japan Software on a chip that allows one to search 10,000 songs designed by programmers at PortalPlayer in India Source: (Nayan Chanda, Author of Bound Together)

Globalization: International business perspectives


Universalisation of capitalism

Business becomes global corporations and companies Strategies Globality Outlook

Globalization of Markets Production : global supply chains Financial flows / FDIs / PIs Transport links and logistics

Global institutions: WTO, IMF International Organization for standardization. ISO 9001:2000 series ICANN

Regional Economic Integration : EU, NAFTA, SAARC

Role of Emerging Economies

Sheer size of their consumer markets and their growth story Bottom of the pyramid, frugal engineering End of corporate imperialism

Challengers and incumbents

Globalization and Management The global manager.

Business Assessment of Countries: Risk Rating

Political Risk Rating Method A Model (IMR)


Type of Risk Examples Pol. Stability Minimum Score 3 Maximum Score 14

Possibility of Internal conflicts


External threat to stability Pol./ Econ. Environment Degree of econ. Control Dependability as trading partner Constitutional guarantees Effectiveness of public administration

0
0 5 4 2 2

14
12 9 12 12 12

Quality of labour relations / social peace

15

Type of Risk

Examples

Minimum Score

Maximum Score

Pop. Size Per cap. income Econ. Growth last 5 years Domestic Econ. Conditions Potential growth last 3 years Inflation last 2 years Openness of cap. Mkt for foreigners Availability of high quality labour Ability to hire foreigners Availability of energy resources Regulations on envrt Standard of infrast.

4 2 2 3 2 3 2 2 2 4 2

8 10 7 10 10 7 8 8 14 8 14

Type of Risk

Examples

Minimum Score

Maximum Score

Import restrictions

10

Export restrictions
FDI restrictions Brand / T. Mark protection External Econ. Relations Rstres on money transfers Currency revaluation previous 5 years BOP condition Amount of oil/energy imports Intl financial standing Currency exchange restrictions

2
3 3 2 2 2 3 3 2

10
9 9 8 7 9 14 8 8

Approaches to managing risk


Direct Legal action Defensive / Reactive Make operations dependent on parent co. Control makeup of management Long-term agreements Linking / Merging JVs Promoting host goals Indirect Risk insurance (eg: ECGC of India) Contingency planning methods Home country government pressure Lobbying foreign governments Becoming good corporate citizen to host country

MODEL FOR ECONOMIC VIABILITY PROFILE WITH WEIGHTS FOR DIFFERENT SETS
Criteria Growth Rate Indicator Change of GDP Weight

Level of Development GDP Per Capita

Inflation
Investments Fiscal Policy External Debt Debt Repayment International Trade Liquidity

Rate
as % of GDP Net Budget Deficit as % of GDP as % of Exports as % of Exports Balance of Trade in % of GDP Foreign Exchange reserves in % of Imports

40%

30%

30%

EUROMONEY: COUNTRY RISK ASSESSMENT


Economic Data (25% weight) Political Risk (25% weight) Debt indicators (10% weight) Debt defaulted/rescheduled (10%) Credit ratings (10%) Access to bank finance (5%) Access to short-term finance (5%) Access to international bond/syndicated loan markets (5%) Access to forfaiting (5%)

MNEs: Main Vehicle of International Business


A good definition of MNEs:
An enterprise having a substantial direct investment in foreign countries engaged in active management of such offshore assets and regarding those operations strategically and organizationally as integral part of it.

Motivations for international operations: Capitalize on all potential advantages Traditional:


Secure key supplies. Eg: ONGC in Russia Seek markets abroad in pursuit of economies of scale: Mahindra in US Seek access to low cost factors of production. CEAT in Sri Lanka

These push factors can be related to the product Life Cycle Theory

Emerging motivations Beyond overseas sales and production operations: Set of forces I Increasing scale economies expanding R&D investments shortening product life cycles II global scanning and learning capability (on raw materials, markets, products, technologies)

III
Competitive positioning (eg. Crosssubsidisation of markets)

Process of Internationalization: Countervailing strategic advantage of an MNE over a domestic company: Superior knowledge or skills as regards technology, marketing, R&D, Scale economies or some other part of its value chain Options for entry in markets abroad Exports Licensing Franchising Joint venture Wholly owned subsidiary

Uppsala Model of internationalization: Go through cycles of investment treating market entry as a learning process: Step I : Initial commitment of resources to the foreign market to know about customers, competitors and regulatory conditions. II : On this basis, evaluate current activities and opportunities for additional investment.

III: Make a subsequent resource commitment, eg. buy out local distributor or invest in a manufacturing plant.

IV:

With additional knowledge and several cycles of investment, develop capability and market knowledge to compete in the foreign market.

STRATEGIC MANAGEMENT A critical part: Deciding how a company should compete abroad. All companies make money through value creation. 3 general strategies for value creation:
Differentiating products or services from those of competitors (eg. Mercedes Benz.) Cost leadership (eg. ACER of Taiwan) Niche strategy Focusing a specific line of products/services relative to competitors who operate more broadly (eg. PORSCHE of Germany for Upscale sports cars. Slogan There is no substitute)

Regardless of this basic approach, companies are

A LINKED SET OF VALUE CHAINS. So, companies can add value by Changing any of their primary activities (manufacturing, marketing) Changing any of their supporting activities (materials procurement, HR) either alone or in combination.
So a companys international strategy is about choices on - How value chain activities are configured (eg.

Where do value chain activities happen? ) and Coordinated (eg. Are dispersed activities tightly controlled from HQ? or Do they remain under local control?)

OFTEN COMPANIES CHANGE THESE ACTIVITIES TO IMPROVE THEIR CORE COMPETENCIES (i.e: skills that are hard for competitors to imitate) CORE COMPETENCIES CAN BE LOCATED ANYWHERE IN THE FIRMS VALUE CHAIN AND PROVIDE THE BASIS FOR INTERNATIONAL COMPETITIVENESS.
Examples: Logistical execution Product innovation Manufacturing Quality

Wal-Mart 3M Toyota

Location Economies: cost effective availability of benefits exclusive to locations. Scattering certain value chain activities to locations that offer such benefits can provide a source of competitiveness. But sustainable competitive advantage comes from: ability to constantly change and adapt which allows many individual firms to outperform their competitors.

Success factors for cos in specific industries: Processed Foods


Taste Sales promotion Price Distr. Channels Brand identification Product efficiency Product innovation Patents held / filed Co. image Styling Service Quality Price Fuel efficiency Distr. system

Pharmaceuticals

Autos

Strategic Approaches used by MNEs:


(International, multidomestic global and transnational) Diverse MNEs are networks of relationships among many dispersed organizations, each with somewhat different goals and perspectives (eg: GE)

Understanding strategy in this context involves figuring out


- the internal movements of information, people, resources and products
through the MNEs entire web of linkages.

Perspectives on MNE Strategy


Evolution of strategic role of MNEs foreign operations: 4 stages/ strategic approaches/ mentalities: International :Overseas operations considered as appendages. Technology and other knowledge transferred from parent company to overseas operators.

Multidomestic: Multiple, nationally responsive (Localization Strategy) strategies by the companys worldwide subsidiaries Global : Treats the world as its unit of analysis through global products and manufacture on global scale.

Transnational: Combines local responsiveness with global-scale competitive efficiency.

Another Perspective: Evolution of the strategic role of an MNE in terms of its overseas operations: International (ethnocentric) Multinational (polycentric) Global (geocentric) Transnational (dispersed but specialized resources and activities integrated into an interdependent worldwide network)

For readings: Characteristics and aspects of organizational architecture of these strategies. Challenges and opportunities for each of these strategies.

Note: An MNE might operate with any one of these strategic approaches, depending on the industry, the companys strategic position and a variety of other factors.

More likely, most companies will bear some characteristics of each of these approaches.

Exercise:
Organisational set-up for the four strategic approaches.

Process of developing international strategy A template:


Step 1 The Mission Statement Step 2 Conducting a SWOT (environmental scanning) Step 3 Evaluate alternatives, set strategic goals Step 4 Developing implementation tactics and plans Step 5 Putting control and evaluation procedures in place.

A Model:

DETERMINATION OF

A FIRMS COMPETITIVE POSITION IN INTERNATIONAL BUSINESS HANS MUHLBACHER et al


CUSTOMER & MAJOR STAKEHOLDERS

MACRO-ENVIRONMENT

SUCCESS FACTORS

COMPETITOR ANALYSIS
COMPETITIVE ENVIRONMENT ASSESSMENT OF CORPORATE POLICY CORPORATE STRATEGY MANAGEMENT SYSTEMS OPERATIONS

INTERNAL ANALYSIS
CORPORATE POLICY CORPORATE STRATEGY MANAGEMENT SYSTEMS OPERAITONS

DISTINCIVE COMPETENCIES PROFILE OF STRENGTHS & WEAKNESSESS COMPARISON OF PROFILES OF STRENGTHS & WEKNESSES

COMPETITIVE ADVANTAGES

Advantages and disadvantages of different foreign market entry options.


Advantages Exporting fairly inexpensive easy foreign access no ownership risks Fairly inexpensive Useful where trade barriers/ tariffs hinder exporting Leverages location economies without ownership concerns Low cost, low risk Offers more control than licensing Builds presence fast Very inexpensive Low risk revenue Disadvantages Missed location economies logistical difficulties Risky where IPR protection is weak Control ceded to licensee may inhibit coordination May help create new competitors Control still an issue Franchisee may not be motivated to adhere to franchisors standards No long term presence May create competitors

Licensing

Franchising

Management Contracts

Turnkey projects

An option if direct investment is out Lowers risk if long term instability exists Allows high control Offers location economies Can pick own site, workers, technology.

No long-term presence May create competitors Vulnerable to political and legislative changes Very expensive to set up Time-consuming to set up Requires considerable international expertise Risky due to ownership Risky due to ownership Cultural differences may be formidable May be buying problems Risks giving some control on technology to partner Still some ownership risk

Greenfield subsidiaries

Acquired subsidiaries

Allows high control Rapid market entry Offers location economies Less financial risk than subsidiaries Leverages partners resources, know-how

Joint ventures

Going global: first movers and late movers


Advantages of first movers:
Preempt rivals and capture demand by establishing a strong brand name. Capture scale economies ahead of later entrants Benefit from a lower cost structure which later entrants find difficult to match. Create high switching costs making it difficult for later entrants to win business.

Disadvantages:
Pioneering costs can be heavy. Chances of survival better if a firm enters after others have already created potential. Regulations can change to the benefit of later entrants.

Factors that may prevent companies from venturing abroad: Liabilities of Origin Christopher Bartlett & Samanthra Ghoshal
Feeling trapped in prison of local standards and of strong domestic demand for products Being unaware of the companys global potential Limited exposure to global competition, leaving companies overconfident or blind to potential dangers

But successful emerging MNEs have overcome these constraints through:


Push from home eg. SAMSUNG from South Korea and Thermax from India Pull from abroad eg. Ranbaxy of India

Strategies for Late Movers: (Bartlett & Ghoshal)


Benchmark and sidestep eg. Jollibee of Philippines against McDonald Confront and Challenge eg. BRL Hardy against established wine exporters in Europe Learning how to learn Protect the past Build the future

Exercise:
How MNEs can manage conflicting demands of
global integration local responsiveness world wide learning

Focus on MNE strategy and Organization


Main preoccupations :

Internal consistency and cohesion of the organizational set-up Compatibility of organizational features with the strategy of the company or the fit between strategy and organization Fit between company strategy and organization on the one hand and the competitive conditions in the market

These make demands on;

Structure of the company in its operational aspects :


Decision-making Division into subunits Coordination / integration

Control systems and incentives Processes Organizational culture Capacity to change, innovate and learn

Structuring International Business Operations


Organizational structure typically changes: As firms expand their international operations or modify their strategic approach. A common sequence:
An Export Department

International Division Structure with either

Geography or
Product Line as the basis for sub-division Global Area Structure with countries or regions as basis
Or

Global Product Structure where a company organizes around a diversified set of products or businesses Global Matrix Structure

Where geographic and product division structures overlap and decision making is shared between product and geographic managers.

Thinking beyond the Matrix structure.

Organizational structure typically changes:

When firms expand their international operations or They modify their strategic approach.

I A common first step:


An export manager with some staff Or An export department Functional Divisions

Product Division Structure

OR

Geographical Area Structure

Global Product Structures

Global Area Structure

OR

Global Product Structure

Global Matrix Structure Flexible Matrix Structure

Typical firm Structure: I . Firm with a narrow product line:


CEO

FINANCE

PRODUCTION

HR

MARKETING

EXPORT DEPT

FOREIGN REPS/BUYERS

II. Firm with a wide product line:


CEO
FINANCE PRODN HR MARKETING EXPORT DEPT

Small Appliances

Large Appliances

Industrial Equipment

Financial Services

Note: Export manager and staff may report directly to CEO.

III. International Division on Product Structure Basis:


International Division President

Snack foods

Beverages

Restaurants

Catering / Supplies

IV. International Division on Area Structure Basis:

International Division President

NORTH AMERICA

ASIA

SOUTH AMERICA

EUROPEAN UNION

Example: Harley Davidson of U.S

V. The Global area structure:


CORP.STAFF

CEO
FINANCE EXPORT DEPT R&D

PRODN

MARKETING

Line Management

N. AMERICA

EUROPE

L. AMERICA

ASIA

INDIA
CHINA INDONESIA

V. The Global Product Structure:


CORP.STAFF PRODN MARKETING

CEO
FINANCE PERSONNEL R&D

Line Management Product Divn. A Product Divn. B Product Divn. C Product Divn. C Product Divn. E

EUROPE

ASIA

MIDEAST INDIA CHINA INDONESIA

AFRICA

Marketing

Production

Finance

VI. The Global Matrix Structure :


CEO
PRODN MARKETING FINANCE PERSONNEL R&D

Europe

Tractors

Asia

Other area & Product Divisions

GM, Tractors, Europe

GM, Tractors, Asia

Nissan Motors Limited (example of an organizational Chart in a strategic alliance

Chief Executive Officer Carlos Ghosn

Chief Operating Officer Toshiyuki Shiga

Vice Chairman Tadao Takahashi

Ex- Vice Pr American Operations Hiroto Saikawa

Ex- Vice Pr (R&D) Mitsuhiko Yamashita

Ex- V Pr Corporate Planning Carlos Tavares

Senior Vice Pr (Treasury) Alain Dassa

Senior Vice Pr (Production) Toshiharu Sakai

Senior Vice Pr Senior Vice Pr Senior Vice Pr (TCSX)** (Design) (Global Marketing) Kazumasa Katoh Shiro Nakamura Junichi Endo

Auditor Masahiko

Auditor Takeo

Auditor Toshiyuki

Auditor Takemoto

**Total Customer Satisfaction


Function

Strategic Alliances:

Informal International Cooperative Alliances Formal International Cooperative Alliances International Joint Ventures

Other types of International Strategic Alliances than JVs.

Production alliance - Motivation may include desire to acquire complex manufacturing expertise from each other or reducing costs of production. Eg. Bharat Forge and Faw Corp., China for highly engineered forged auto components in China. R&D alliance - to develop new products or technologies eg: Elder with Daiwa to launch IMBRAM, a novel neutraceutical. Super Religare Labs with Norwegian DIAGENIC to launch the worlds first early breast cancer detection test.

Financial alliance - partners reduce their financial exposure in risky projects by sharing costs eg: Morgan Stanley and China Fortune Securities for a securities trading company in China Marketing alliance - partners share services or expertise in marketing related areas in ways that generate additional profits for both. eg: Bharati Airtel with Transcend Infn Inc. for sale and distribution of memory accessories.

Why SAs?
Local partners knowledge of the market Government regulations Sharing risks Sharing technology Economies of scale Low-cost raw materials or labour

Key considerations in the SA decision:


Could other participation better satisfy strategic objectives? Does the firm have management and capital resources to contribute to the SA? Can a partner really benefit the companys objectives? What is the expected payoff of the venture?

Pre-alliance process: Building an SA


-

Partner selection: Strategic and organisational analysis. Avoidance of wrong choices and unrealistic expectations. Determination of scope of the alliance. Opt for simplicity and flexibility.

Reasons why SAS present some very significant management challenges : Strategic and environmental disparities between partners Lack of a common experience and perception base Difficulties inter-firm communication Conflicts of interests and priorities Inevitable differences among individuals managing the interface

Specific Tasks in Managing an SA


Structuring the interface. Managing knowledge flows. Adopt appropriate structure for governance.

Perspectives on SAs
-

Viewed as second best option. Alliances need not be permanent. Flexibility is essential. An internal knowledge network is also a must for organisational learning.

Acquisitions Vs Greenfield Ventures Pros and Cons

Indian Corporate Acquisitions Abroad


2007 Deals worth $42.6 b. (China 2007 - $13b. Russia - $15 b) Largest: Tata Corus; Hindalco Novelis (Canada) Between 2003 2004: Value of foreign acquisitions more than doubled each year, with a compound annual growth of 108% Success rate : Between 2003 and 2004 in 42 Indian deals, about one-third generated 10% above the normal index for foreign acquisitions. Bains Study 2005: Only one-third of all foreign deals are successful one year after announcement. Indian companies, on average are as successful as these US and European peers.

Some important ones: Tata Tetlee Videocon Thomson (color picture tube plants) 2005 VSNL Teleglobe (Canada) 2006 Dr. Reddy Labs Betapharm (Germany) 2006 Apollo Dunlop South Africa (2006) Mahindra Valtra (Finnish truck co.) United Breweries (Whyte & MackKay Scotland) Godrej Keyline (FMCG firm, UK) Jindal Steel & Power iron ore mine in Bolivia (2006) Tata Tea Energy Brands (US) Tata Motors Jaguar / Land Rover ONGC Videsh Ominex, Columbia Suzlon Energy Hansen Transmission, Belgium

Indian MNCs in Boston Consulting Groups Challengers 100


Bajaj Auto - Automotive Equipment Bharat Forge Birla Hindalco - Non-ferrous metals Cipla - Pharmaceuticals Cromption Graves - Engineered Products Dr. Reddys - Pharmaceuticals Infosys Technologies - IT Services / BPO Larsen & Toubro - Engineering Services Mahindra & Mahindra - Automotive Equipment Satyam Computer Services IT Services / BPO

Suzlon Energy Tata Consultancy Services Tata Motors Tata Steel Tata Tea Videocon Industries VSNL Wipro Technologies

Wind energy IT Services / BPO Automotive Equipment Steel Food and Beverages Consumer Electronics Telecom Networks IT Services / BPO

Indian IT could do substantial global acquisitions, but the larger acquisitions so far have been in other areas. Acquisitions give Indian firms:
a global scale a portfolio of recognized brands access to huge markets

But also involve as key challenges:


difficult integration processes between different management mindsets Stark cultural differences Out-of-sync operational processes HRs, deriving value through organizational structures Navigating complex labour laws

China Challengers (41)


(Seeking expansion through acquisitions)
Bay steel BYD Changhong Cherry Automobiles China Mobiles CIMC CNOOC FAW Haier Hisense Huawei Technologies Johnson Electric Lenovo Petro China TCL Corporation ZTE Consumer Electronics Home Appliances Shipping Oil Auto equipment Home appliances Consumer Electronics Telcom Equipment Engineering products Computers Oil Consumer Electronics Telcom Equipment

Off-shoring Services in International Business


Widely used as a particular subcategory of outsourcing So 4 types of outsourcing based on location and control / ownership are: 1. Captive onshore outsourcing: shift of intra-firm supplies to an affiliated firm in the home country 2. Non-captive: if shift benefits a non-affiliated firm in the home economy 3. captive offshoring: when supplies sourced from an affiliated firm abroad 4. Non captive offshoring: When supplies are source from a non-affiliated firm abroad. Outsourcing is not a new phenomenon.

Potential for offshoring depends on:


technical and institutional separability to what extent the task is standardised transaction and managerial costs within the firm relative to outside suppliers production costs size of the market

The location of offshored services depends on:


labour costs trade costs quality of institutions, specially legal framework tax and investment regime quality of infrastructure esp. telecoms skills esp. language and computer skills.

Two-thirds of offshoring is estimated to be captive offshoring

Estimates of size of offshoring services in IT and Business Process: OECD (2005): $32 b. (2001) McKinsey (2003): $35 b. (2001) Indias ranking: In computer & Information Services: 1(@ $ 31 b.) In computer Information and other business services: 8 Analyse: Indias strengths Weaknesses

Data on Indian IT exports FY 07 IT software ITes BPO Total $22.9 b. $ 8.4 b. $31.4 b. FY (est.) 08 $ 28 29 b. $10.5 11 b. $ 39 40 b.

Industry employment in FY 07 - 1.6 million indirect employment due to IT ITes nearly 6 million Total 7.5 million

International Financial Markets Can be classified into


International Money Markets International Capital Markets

I.

International Money Markets for financial instruments (deposits, accounts or securities) having maturities of 1 year or less. Notably: Euro-commercial paper which is a short term debt obligation of a corporation or bank having maturities of one, three and six months. International Money Markets are often termed Eurocurrency markets. Eurocurrency: Any foreign currency denominated deposit at a financial institution outside the country of the currencys issuance. Eurodollars (Class discussion) Interest Rates applicable: CIBOR

II. International Capital Markets for financial Instruments having maturities over 1 year. Can be classified into: Equity & Debt markets or as markets for: Securitized capital (separable and tradable) like bonds or stocks Non securitized capital (bank loans)

International Equity Markets: ADRs / GDRs / Euro-equity markets

Stock Exchanges Investment Banks

Indian Equity Market: Role of SEBI Class discussion

Also Private Placements

SALE OF EQUITY (OR DEBT) TO A LARGE INVESTOR NORMALLY A ONE-TIME TRANSACTION PURCHASER HOLDS IT TILL REPURCHASE BY THE FIRM (IF EQUITY) OR MATURITY (IF DEBT)

International Debt Markets: 4 Kinds of International financing:


Domestic Borrower in a domestic currency Foreign Borrower in a domestic currency Domestic borrower in a foreign currency Foreign Borrower in a foreign currency

3 & 4 are Eurobonds

International Bonds classified into: Foreign Bonds and Eurobonds Euronotes: of longer than Short term: Medium Term notes: Has Characteristics similar to a bond Maturities of 9 months to 10 years.

International Bank Loans: Euro credits Syndicated Credit

I. Two money market instruments:


1.

2.

Certificate of Deposit: Issued by a bank to indicate ownership of a large deposit (over $10,000) often by a company. A negotiable instrument, it can be bought and sold between the time it is issued and the time it is redeemed. Commercial Paper: Short term debt instruments issued by important companies and banks, maturity 5 to 365 days, as large as $10,000 or as large as $1 million. In Euro currency market it is known as Euro Commercial Paper.

II. Some important Indian companies which have used ADRs/GDRs: ICICI and HDFC have floated ADRs in the US while SBI, UTI and Kotak Mahindra have raised funds through GDRs

III. Why cross listing (listing of shares of common stock on two or more stock exchanges)
1. Improve 2. 3. 4. 5.

the liquidity of existing shares and provided a liquid secondary market for new equity issues in foreign markets. Increase share price by overcoming mispricing in a segmented and illiquid home capital market. Increase the firms visibility and political acceptance to its customers, suppliers, creditors and home governments. Establish a secondary market for shares that are used to acquire other firms in the host market (eg: Tata acquiring Corus in Europe) Create a secondary market for shares that may be used to compensate local management and employees in foreign affiliates.

IV. Alternative Instruments to source equity in international markets


Sale of directed public share issue to investors in a target market Sale of a Euro equity public issue to investors in more than one market including both foreign and domestic markets (international equity issues originating and sold anywhere in the world) Private placements (Sale of a security to a small set of qualified institutional buyers) Sale of shares to private equity funds (limited partnerships of institutional and wealthy individual investors Sale of shares to a foreign firm as part of a strategic alliance.

V. Sourcing Debt
Major Sources of Debt Funding:
International bank loans: Traditionally sourced in the Eurocurrency markets. Eurodollar bank loans are also called Eurocredits given to MNEs, governments, other banks. (Euro currency : domestic currency of one country on deposit in a second country. Euro currency deposits are an efficient and convenient money market device for holding excess corporate liquidity and a major source of short term bank loans to finance corporations and their working capital needs including financing of imports and exports. Euronote Market: Collective term for short to medium debt instruments sourced in Eurocurrency markets (Note is a written acknowledgement of a debt) International Bond Market Has variety of instruments, falling within two classifications: Eurobonds and Foreign bonds

Eurobond:
Underwritten by an international syndicate of banks and other security firms and sold in countries other than the country in whose currency the issue is denominated.

Foreign Bond:
Underwritten by a syndicate composed of members from a single country, sold principally within that country and denominated in the currency of that country. The issuer, however, is from another country (A bond issued by a firm resident in Germany, denominated in dollars and sold in the US to American investors is a foreign bond Yankee bond)

New York Stock Exchange: Worlds biggest market for share trading. Merged with Euro next, a panEuropean exchange . Nearest rival in US is NASDAQ London Stock Exchange : Surpasses New York in structured finance and new stock listings. Its Alternative Investment Market (AIM) is geared to smaller firms. Alternative Investment Market (AIM) London : A sub market of London Stock Exchange, now becoming an international exchange, for smaller firms to float shares with a more flexible regulatory system than applicable to the big companies. There are no requirements for capitalization or number of shares issued.

International Finance Centres

Other financial hubs in US: Chicago : Worlds derivatives centre. Famous for its Mercantile Exchange. Houston : An active cluster of energy traders and hedge funds. in Europe: Frankfurt and Geneva

Zurich Paris trading

An important centre for banking derivatives. : Specialized in private banking and wealth management. : Specialized in insurance. : Largest market in Europe for in mutual funds.

in Asia: Tokyo market centre. Hong Kong companies. Singapore and

Worlds second largest share and Asias biggest financial

: With half of market capitalization from mainland Chinese : Noted for strengths in stocks, derivatives, private banking wealth management.

in

Shanghai Mumbai

: Comes after Tokyo and Hong Kong value of equities traded. : India plans to make it a leading financial centre of Asia

Dubai : Growing as a new financial centre, with offices of several global financial institutions (Its style cramped lately!) Qatar infrastructure Bahrain banking. : : An important hub for finance.

Well established in Islamic

Process of International Marketing


Motives for international marketing
Growth Profitability Risk spread Access to imported inputs Uniqueness of product / services Life cycle-oriented marketing opportunities Spreading R&D costs

SWOT Analysis Decision to enter international markets

International marketing decisions


Market identification and targeting (Segments) Choice of entry mode Product decisions Distribution channel decisions Market promotion decisions

Enter international markets

Review performance
Consolidate marketing efforts for global marketing

Computation of Market Potential


Is evaluated, according to one method by 8 dimensions with weights attached to each:
Measures Used Market Size Market growth rate Market intensity Market consumption capacity Commercial infrastructure Market receptivity Country risk 10/50 6/50 7/50 5/50 7/50 6/50 4/50 Urban, rural populations Electricity consumption etc GDP growth rate GNI per capita as per PPP private consumption. Percentage of middle class in consumption Telephone and road density, retail outlets etc Trade as percentage of GDP

Analysis of international markets


2 Models :
BCG Matrix:
Classification of markets on the basis of growth rate and market share:

High growth High share products (stars) Low growth High share products (cash cows) High growth Low share products (Question marks) Low growth Low share products (Dogs)

Market attractiveness / company strength matrix:

Combining market attractiveness and competitive strength of a company, both based on various factors. Firms focus is to be at the point where the two are very high.