International Business: Session 2

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Seek opportunities for growth through market diversification; gain new ideas about products, services, and business methods; better serve key customers that have relocated abroad; be closer to supply sources, benefit from global sourcing advantages, or gain flexibility in the sourcing of products.

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Nội dung Text: International Business: Session 2

International Business Session 2
International vs. Domestic OPPORTUNITIES 1. Seek opportunities for growth through market diversification 2. Gainnew ideas about products, services, and business methods 3. Better serve key customers that have relocated abroad 4. Be closer to supply sources, benefit from global sourcing advantages, or gain flexibility in the sourcing of products
International vs. Domestic OPPORTUNITIES 5. Gain access to lower-cost or better-value factors of production 6. Develop economies of scale in sourcing, production, marketing, and R&D 7. Confront international competitors more effectively or thwart the growth of competition in the home market
FDI Based Explanations: Dunning’s Eclectic Paradigm Three conditions determine whether or not a company will internalize via FDI: 1. Ownership-specific advantages – knowledge, skills, capabilities, relationships, or physical assets that form the basis for the firm’s competitive advantage 2. Location-specific advantages – advantages associated with the country in which the MNE is invested, including natural resources, skilled or low cost labor, and inexpensive capital 3. Internalization advantages – control derived from internalizing foreign-based manufacturing, distribution, or other value chain activities
Factors Relevant to Choice of Foreign Market Entry Strategy 1. The goals and objectives of the firm, such as desired profitability, market share, or competitive positioning; 2. The particular financial, organizational, and technological resources and capabilities available to the firm; 3. Unique conditions in the target country, such as legal, cultural, and economic circumstances, as well as distribution and transportation systems; 4. Risks inherent in each proposed foreign venture in relation to the firm’s goals and objectives in pursuing internationalization; 5. The nature and extent of competition from existing rivals, and from firms that may enter the market later;
Participants in International Business 1. The focal firm – initiator of IB transaction, including MNEs and SMEs 2. Distribution channel intermediary – specialist firm providing logistics and marketing services in the international supply chain 3. Facilitator – a firm providing special expertise in legal advice, banking, customs clearance, market research, and similar areas
Types of Focal Firms  Multi-National Enterprise  Joint-Venture  SME  Born Global Firm  NGOs
Common Characteristics of Born Global Firms • Emergence often associated with significant product/process breakthrough or innovation • Products often involve advanced technology, substantial added value, superior quality, and differentiated design • Internationalization typically via exporting and facilitated through network relationships • Heavy user of advanced IT and communications technologies
Foreign Market Entry Strategies of Focal Firms Cross-border business transactions can be grouped into three categories: 1. Trade: buying and selling of products 2. Contractual exchange of services or intangibles: buying and selling of services 3. Equity ownership in foreign operations: establishing foreign presence through direct investment
MODES of International Business Activities Exporting (importing) Global sourcing (out-s, in-s, offshore) Contract manufacturing Licensing and Franchising (mgmt. contract) Foreign Direct Investment (FDI) Strategic Alliances (Joint Venture)
Exporting Advantages Disadvantages  Relatively low financial  Vulnerability to tariffs and NTBs exposure  Logistical complexities  Permit gradual market entry  Potential conflicts with distributors  Acquire knowledge about local market  Avoid restrictions on foreign investment
Export Documentation  quotation or pro forma invoice  commercial invoice is the actual demand for payment issued by the exporter. It includes a description of the goods, the exporter’s address, delivery address, and payment terms.  A packing list, indicates the exact contents of the shipment.  Thebill of lading is the basic contract between exporter and shipper.  The shipper's export declaration ("ex-dec”) lists the contact information of the exporter and the buyer (or importer), as well as a full description, declared value, and destination of the products being shipped.  The certificate of origin indicates the country
Incoterms
Who pays for what? Landing Unload charges Unload from Landing at onto Transport truck at charges Transport importer's trucks Transport Export- to the at origin's to port, from the to Entry Load to duty exporter's origin's port, import's Unloadin importers' destinatio -Customs Entry truck payment port port Loading port g port n Insurance clearance -Taxation EXW No No No No No No No No No No No No Main Carriage NOT Paid By Seller (Free… Carrier/Alongside Ship/On Board) FCA Yes Yes Yes No No No No No No No No No FAS* Yes Yes Yes Yes No No No No No No No No FOB* Yes Yes Yes Yes Yes No No No No No No No Main Carriage Paid By Seller (Cost and Freight … and Insurance… / Carriage Paid to … and Insurance… ) CFR* Yes Yes Yes Yes Yes Yes No No No No No No CIF* Yes Yes Yes Yes Yes Yes No No No Yes No No CPT Yes Yes Yes Yes Yes Yes No No No No No No CIP Yes Yes Yes Yes Yes Yes No No No Yes No No Arrival (Delivery Duty….. Unpaid/Paid) DEQ* Yes Yes Yes Yes Yes Yes Yes No No Yes No No DDU Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes No No DDP Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes * for ship only (+ named Port), others for all carriers (+ named Place)
Methods of Payment -- Export Cash in Advance Letter of Credit Draft Open Account
Global Sourcing Importing Outsourcing Contract Manufacturing
Contract Manufacturing Hiring firm approaches Contract Manufacturer with Design or Formula Type of outsourcing Bidding Process $ 233 billion business Wistron, HTC
Countertrade Payments are made in kind rather than cash. The focal firm is engaged simultaneously in exporting and importing. Also known as “two-way” or “reciprocal” trade Used when conventional means of payment are difficult, costly, or nonexistent. ◦ Hard currency unavailable ◦ Developing country doesn’t have expertise to sell in foreign markets 20