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McGraw-Hill/Irwin
International Management
Chapter 1
An Introduction to International
Management
McGraw-Hill/Irwin
International Management
1-3
Chapter Objectives
Define the concepts of international business and international
management.
Examine the transnationality of countries and companies
Distinguish among the various types of international mindsets
observed in international firms.
Discuss the stages of development of an international company.
Define and understand the strategic, marketing and economic
motives of firms seeking to expand internationally.
Explain the strategic objectives and sources of competitive
advantage for an international firm.
1-4
Chapter Topics
The International Management Setting
What is International Business
What is International Management
International Companies and International Mindsets
The Evolution of an International Enterprise
Why Firms Seek to Engage in International Business
Strategic Objectives and Sources of Competitive
Advantage
The Environment of International Management
1-5
1-6
1-7
1-8
An International Company
is an enterprise that has operations in two or more countries. If it has
operations in several countries then it may have a network of wholly or
partially (jointly with one or more foreign partners) owned producing
and marketing foreign affiliates or subsidiaries. The foreign affiliates
may be linked with the parent company and with each other by ties of
common ownership and by a common global strategy to which each
affiliate is responsive and committed. The parent company may control
the foreign affiliates via resources that it allocates to each affiliate
capital, technology, trademarks, patents, and manpower and through
the right to approve each affiliates long- and short-range plans and
budgets.
1-9
Global
Rank
1
2
3
4
5
Company
Wal-Mart Stores
Exxon Mobil
General Motors
BP
Ford Motor
2002 Revenues ($
millions)
219,812.0
191,581.0
177,260.0
174,218.0
162,412.0
1-10
Foreign
Affiliates
Domestic
Firms
Ratio Foreign:
Domestic
U.S.A
103818
71006
1.46
U.K.
79402
51885
1.53
Netherlands
105793
69477
1.52
Ireland
268272
24571
10.9
China
7199
2633
2.73
France
75970
101732
0.75
Sweden
68845
77417
0.89
1-11
International Mindsets
Specific pressures will affect competition in
industries and firms that cross national
boundaries causing
1) a global orientation that relies on coordination
of worldwide activities to maximize the
collective organization, and
2) a multidomestic orientation that responds to
individual country opportunities and
constraints.
1-12
International Mindsets
(contd.)
1-13
1-14
Evolutionary Stages
Stage 1: Foreign Inquiry
Stage 2: Export Manager
Stage 3: Export Department and Direct Sales
Stage 4: Sales Branches and Subsidiaries
Stage 5: Assembly Abroad
Stage 6: Production Abroad
Stage 7: Integration of Foreign Affiliates
1-15
Market-Seeking
Motives
Cost-Reduction
Motives
Strategic
Motives
1-16
Bandwagon Effect
when firms venture abroad to follow
their major competitors
1-17
National
Differences
Scale Economies
Scope Economies
Expanding and
exploiting potential
scale economies in
each activity.
Sharing investments
and costs across
products, markets, and
businesses.
Managing risks
Portfolio
diversification of risks
and creation of options
and side-bets.
Managing different
kinds of risks arising
from market or policyinduced changes in
comparative advantage
of different countries.
1-18
Ex. 1-2
(contd.)
Strategic
Objectives
Innovation, learning,
and adapting.
National
Differences
Learning from societal
differences in
organizational and
managerial processes
and systems.
Scale Economies
Benefiting from
experience cost
reduction and
innovation.
Scope Economies
1-19
Political:
Governments
Ideology
Stability
Civil Strife
Economic:
Cultural:
Trade Agreements
Trading Blocs
GNP/Wages
Inflation
Customs
Values
Language
Religion
The
International
Company
Legal:
Infrastructure:
International Law
Host Country Laws
Home Laws
International Piracy
Communications
Internet
Transportation
Technology
International
Environmental
Analysis
Economic Environment
& Infrastructure
(Chapter 2)
Political
Environment
(Chapter 3)
Legal
Environment
(Chapter 4)
Cultural
Environment
(Chapter 5)
Management/Implementation
of International Initiatives
International
Strategic
Initiatives
Strategies for
Intl Competition
(Chapter 6)
Foreign Modes
Of Entry
(Chapter 7)
1-20
1-21
1-22
Global Strategy