International Business Assessment

• A frank and rational assessment of a firm's ability to do business internationally is needed

Key Questions to Answer

• Businesses must answer these four questions:
  • Is there a specific reason to operate globally?
  • Is there a specific edge that can provide customers and defend against competition?
  • Are there sufficient resources, such as managerial skills, talent, global skills, money, and time, to achieve goals and compete?
  • Is there the necessary willpower to overcome obstacles?

Evaluating Assets

• The assessment of international possibilities needs evaluation of assets and liabilities.

Tangible Assets

• Tangible assets include:
  • In-place people
  • Physical locations
  • Great customers
  • Intellectual Property (IP)
  • Language capabilities
  • Customer service
  • After-sales support

Intangible Assets

• Intangible assets include:
  • Training
  • Brand
  • Expertise

SWOT Analysis

• SWOT model elements:
  • Strengths are internal
  • Weaknesses are internal
  • Opportunities are external
  • Threats are external

Competency Elements

• Core competence is an element of competence
• Distinctive competency is another element of competence

Planning

• Planning is essential and can be:
  • Formal or informal
  • Tactical/strategic or strategic/tactical
  • Done with the CEO, a specific staff, or a functional person/marketing

Key Planning Questions

• A plan should answer these 8 questions:
  • Where are we today, and where do we want to go?
  • Which international actions do we want to generate?
  • Which international actions do we want to generate in reaction to what others want us to do?
  • Which past strategies should be eliminated or modified?
  • Who are our current and potential competitors in overseas markets?
  • What capabilities and resources are available for international business (skill sets, monies, facilities, experience)?
  • Which organizational structures best suit the business, culture, and personnel?
  • How will real-time data be captured, analyzed, and executed to understand global competitive intelligence, customer feedback, and financial data for necessary corrective action?

Potential Outcomes

• A plan helps to achieve:
  • Improved quality
  • Lower cost leadership
  • Established regional footholds
  • Broad awareness campaign

International Risk Questions

• Companies must answer four main questions regarding international risk:
  • What are the risks and associated impacts on business?
  • What causes a country to have risks?
  • How can a country reduce its high levels of risk for companies?
  • How can a company get help reducing risks in creating strategic plans for international business?

Four Types of Risk

• The four types of risk:
  • Financial
    • Currency issues, market volatility, balance of trade, interest rates, money supply
  • Cultural
    • Social-cultural trends, both good and bad
  • General
    • Competition, access to distribution channels, Internet presence
  • Governmental
    • Explicit and hidden barriers, such as quotas, tariffs, bureaucratic obstacles, local partner requirements, and "land grab"

Key Issues

• Distinct factors/issues:
  • Poor government fundamentals, evidenced by a lack of infrastructure and government-run companies
  • Corrupt practices, with a prevalence of bribes
  • Weak enforcement of laws and policies, leading to inconsistencies and increased costs

Risk Reduction Options

• Three main options to reduce risks:
  • Adopt a "Me-Too" approach, mirroring successful companies
  • Build stable foundations within the country to create a positive regulatory environment
  • Embrace being different

Seeking Assistance

• Three main ways to seek assistance:
  • DIY
  • Use available U.S. government resources
  • Call in outside assistance from international consulting companies

Behavioral Attitudes Toward Risk

• Four behavioral attitudes toward risk:
  • Individualists: Concerned with personal impact
    • Exhibit "how will risk affect me" attitude
  • Egalitarians: Concerned with group impact
    • Exhibit "how will risk impact us" attitude
  • Hierarchists: Fear upsetting the social order
  • Fatalists: See no point in fearing risks

Reasons for Accentuated International Risk

• International risk is more complex than domestic risk

Methods of Entering a Foreign Market

• Methods and considerations for entering a foreign market include:
  • Exporting
    • Least risky and costly, very flexible
    • Consists of being least invested and lacking local condition awareness
  • Licensing
    • Quick expansion internationally, new revenue via royalties, creates potential partners, provides a "quite" competitive entry
    • Can lose control quickly when expanding, risking the complete benefit
  • Franchising
    • Two revenue streams via upfront fee + royalties, instant credibility due to brand name, access to local market information
    • May help future competitors by giving secrets away.
  • DFI (Direct Foreign Investment)
    • Proven resources, close relations with local government, and a popular brand image with local customers
    • Integrate companies and may acquire bad habits that take time and money to eliminate.
  • By Global Alliances
    • Shared risks, expenses, experience, and rewards
    • Difficulty in creating shared long-term goals due to unclear positions.

Differentiation

• DFI involves acquisition
• Greenfields involves a wholly-owned subsidiary

Strategies for Entering a Foreign Market

• Three support strategies to enter a foreign market are available
  • Global Strategy which uses the motto "Think Global, Act Global"
  • Multidomestic Strategy which uses the motto "Think Local, Act Local"
  • Transnational Strategy which uses the motto "Think Global, Act Local"

Company Structure Steps

• The three step process to link activities with goals through a company structure:
  • Determine the right number of jobs/essential positions
  • Connect all the jobs into a workable, practical solution
  • There will always be a tradeoff among people, time, money, and external events, requiring to pick among structures

Main Organizational Structures

• Four main organizational structures:
  • By Division
    • Excellent focus, especially domestic vs international
    • Requires concerns about the "silo" effect
  • By Function
    • Great for communications affecting the function
    • Needs cross-talk with other functional groups
  • By Region
    • Excellent focus on the area
    • Requires sharing information per global issues
  • By Product
    • Builds experience per product line
    • Requires sharing information

3 C's Concept

• Communication, Cooperation, Coordination

Key Control Systems

• There is a need to know what level of control to seek

Centralized vs Decentralized Structures

• Centralized structures
  • Have a central HQ which provides a steady hand
  • Provide one voice, or one path and direction
  • Lack of decision-making skills and one size that does not fit all
• Decentralized structures:
  • How do you make communications work for you

Behavior-Based vs Outcome-Based Systems

• Behavior-based systems
  • How to monitor specific situations with subsidiaries
• Outcome-based systems:
  • Focus on results
  • The nuances of the local market might be lost

Transfer Pricing

• Involves questions such as:
  • Are there forces from local operations to buy items from HQ?
  • Are the percentages and dollar amounts fair to both parties?
  • Is there a need to compare market prices versus historical prices?

Contingencies of Technologies and Geographies

• HQs may operate in markets that are either geographically contiguous or disparate and markets technologically contiguous or disparate

Key Decision Making Elements

• 4 Key Decision-Making Elements
  • What is our goals (HQ & the subs)?
  • What is the competitive space like?
  • How do we best organize our global work activities?
  • Don't look for perfection - no such match betweenstructure & plan