International Business Lectures

Schedule

• January 8, Lecture 1: Introduction to the course.
• January 13, Lecture 2: Strategy, based on Hill, Chapter 13.
• January 15, Lecture 3: External Analysis using Porter's Five Forces model, alongside Seminar 1, a case study on Smart Communications Inc (A).
• January 20, Lecture 4: Internal Analysis, based on Hill, Chapter 13.
• January 22, Lecture 5: Globalization, based on Hill, Chapter 1.
• January 27, Lecture 6: National Differences in Political, Economic, and Legal Systems, based on Hill, Chapter 2.
• January 29, Lecture 7: National Differences in Economic Development, based on Hill, Chapter 3, alongside Seminar 2, a case study on Tony's Chocolonely.
• February 3, Lecture 8: Cultural Differences, based on Hill, Chapter 4.
• February 5, Lecture 9: Ethics, CSR, and Sustainability, based on Hill, Chapter 5.
• February 10, Lecture 10: International Trade Theory, based on Hill, Chapter 6.
• February 12, Lecture 11: International Business Organization, based on Hill, Chapter 14, alongside Seminar 3, a case study on BP: Texas City to Gulf of Mexico.
• February 17, Lecture 12: Entry Strategies and Strategic Alliances, based on Hill, Chapter 15.
• February 19, Lecture 13: Global Production and Supply Chain Management, based on Hill, Chapter 17.
• February 24, Lecture 14: Global Marketing and R&D, based on Hill, Chapter 18.

Brand Management

• Brands serve as marketing tools.
• Brands identify an offering.
• Brands differentiate offerings from similar market options.
• Brands create market value that goes beyond the tangible attributes of an offering.
• Products focus on physical attributes and tangible benefits like taste or nutrition.
• Brands focus on symbolic attributes and elements.
• Brands create differentiation and emotional connections with customers through name and logo.
• Brands are created in the mind.
• Brand image reflects perceptions and enhances emotional connections, shaped by associations that consumers have.
• Commodity Trap happens when products lose uniqueness.
• To avoid the commodity trap, Coca-Cola endorsed the Coke trademark.
• Emotional branding connects brands with feelings such as happiness and nostalgia.
• Cultural integration links brands to global and local traditions, like the Olympics or Christmas.
• Three categories of product attributes: observable (color), experimental (taste), and credence (safety).
• Brand value depends on how visible the attributes are.
• Observable attributes have high visibility, experimental attributes have medium visibility, and credence attributes have low visibility.
• Inverse relationship exists, where brand reliance increases as benefit visibility goes down.
• Unobservable benefits make brands critical to communicate value.

Strategy

• Strategy involves managers taking actions to reach the firm's goals and centers on success through clear goals, direction, and consistency.
• SMART goals are: Specific; Measurable; Achievable; Relevant; Time-framed.
• For most firms, the main goal is to maximize owners' and shareholders' value through profitability, measured as return on invested capital ((Net profits ÷ Total invested capital)), and profit growth, based on net profit increase over time.
• Firm profit is simplified to profit per unit x units sold.
• Value creation is the difference between production cost (C) and perceived quality (V).
• Competitive pressure influences the gap between perceived value (V) and price (P)
• Value creation benefits both firms (profit per unit is price minus cost) and consumers (consumer surplus per unit is perceived value minus price).
• To increase value, firms can lower costs using a low-cost strategy.
• Firms can also enhance value through a differentiation strategy.
• Global expansion involves expanding the potential market size for domestic products and taking advantage of location economies
• Pressures exist for cost reduction and local responsiveness.
• Local responsiveness is driven by consumer and political demands as well as differences in infrastructure and practices.
• Global standardization strategy focuses on increasing profitability and profit growth by reducing costs, suitable when cost pressures are high and local responsiveness is minimal for economies of scale and location
• Localization strategy increases profitability by customizing goods and services, good when cost pressures are not intense and there are significant differences accross nations.
• Transnational strategy attempts to simultaneously achieve low costs and differentiate product offerings across geographic markets.
• Needs complex multidirectional flows of skills leading to conflicting demands and is hard to acheive.
• International strategy creates value by transferring core competencies to foreign markets with lacking indigenous competitors, with low cost pressures and local responsiveness.
• International strategy involves taking products from domestic market and selling them internationally with minimal customisation that is often centralized.

Industry External Analysis

• Strategy is a set of actions managers take to attain goal and requires trade-Offs of balancing cost.
• Global strategy involves balancing cost reduction and local responsiveness.
• Massive profitability differences exist across industries.
• Developed by Michael E Porter, the framework was first published in Harvard Business in 1979.
• Porter's Five Forces Framework aims to assess industry’s competitive environment.
• The Framework considers competitive intensity and industry attractiveness.
• The "industry" is a group of competitors producing substitutes.
• It must be close enough that any behavior will affect them either directly or indirectly.
• Industry boundaries are defined by: Scope of products or services, and geographical scope
• Substitutes meet the same need as an industry's product, but differently.
• The threat of substitutes is high when: There is a high value or low price, there is high similarity, improvements make it appealing, and low switching costs for buyers.
• New entrants increase competition, pressuring prices and costs.
• The threat of entry limits industry profit potential.
• Rivalry is strong is when there are numerous similar competitors, the industry growth is strong and there are high exit barriers.
• Supplier power impacts industry profitability.
• Suppliers have Bargaining Power when: They are more concentrated than buyers, don't depend on revenue, and there are high switching costs for buyers.
• Buyers have high Bargaining Power when: purchasing is in large volumes, low switching costs, Buyers can backward intergrate, and are neglible on performance.
• Soft Drink Industry components are Weak-medium buyers, weak suppliers, medium competitors, weak entry, and weak substitutes.
• Typical steps in Industry Analysis: define the industry; Identify the participants and segment them into groups; Asses the drivers; Determine overall industry; Analyse recent changes.
• Common Pitfalls in Industry Analysis consist of defining it too broadly or narrowly; prioritising; confusing effect with cause; ignoring trends; confusing changes; guide strategy.
• Any of the Five Forces can turn what seems like an attractive industry into an unattractive one.

Internal Analysis

• Within-industry profitability can vary and is analysed through performance.
• Strategic Positioning involves balance value creation and low cost.
• Key to success, firms want to be on the frontier.
• Strategic Positioning has tow key dimensions - How does the company create value with cost leadership or differentiation (competitive adv) and segmented (scope adv).
• Competitive Advantage is the edge that allows a firm to capture more value.
• This occurs when a firm drives a wider wedge between Willingness to Pay and cost compared to its rivals.
• Firms have to choose a position on the Efficiency Frontier to balance value and cost efficiently and operations are essential to Align.
• Strategic Positioning defines who to target (competitive scope) and how to compete (competitive advantage).
• Firms can focus on either costs, or different products for spec needs,
• Value Drivers include product features, customer service, brand and reputation, customisation and technology
• Cost drivers are Economies of Scale, curve effects, Capacity Utilization, Supply Chain Efficiency, Technology.
• Increasing Consumer Retention: Switching Costs & Customer Loyalty
• Advantage is sustained with Preventing Imitation, Knowledge Causal Ambiguity

Globalization

• Globalization is the shift toward a more integrated and interdependent world economy through globaliization of markets and production.
• Markets involves merging of historically distinct and separate national markets in one global marketplace such as decrease in trade.
• Global institutions police the global marketplace and promote treaties that govern the business system through voluntary agreements.
• Globalization is driven by declineing trade and investment and technological change.
• These drive the creation of a production system.
• Economic system has gradually become more favourable and brings opportunities but also risks.
• Criticism points to distruction of jobs in both the US and Europe.
• Labor regulations also increase in cost, leading to Encourage firms to relocate to avoid strict labor and/environmental rules
• It shifts power from away local governments/
• These may be improved by lowering barriers to trade and investment.

National Differences in Economic Development

• Countries differ which is reflected both politically and econimically.
• Countries are affected by collectivism and individualism.
• Collectivism emphasizes collective goals while Individualism emphasizes individual principles of freedom, however there is a grey area.
• Democracy the the rule of the people, who are represented through elects and safeguards based on constutional law.
• Totalitarianism has 4 forms - comnunist, theocratic, tribal and right winged, which leads to psuedo-democracies.
• There are 3 economic systems: market, command and mixed.
• In a trade system, governments regualte behavior and remedies shaped are by political system
• Countries also differ in property rights.
• Economic development measures the monitary or market value of goods and services.
• Other definitions of development include the Human Development Index (HDI), which has components of wealthcare and education.
• Geography and demographics also play a role - they invest in education to offset disadvantges.
• It is seen through polical freedom.
• Economic systems have been changed due to soviet collapse. Economic system and property rights regime influence economic opportunities

Cultural Differences

• Understanding and adapting is essential, with values and norms that might affect the business.
• Culture is a design for living which societies refer people to with a common set.
• Values are ideas about what is good.
• Norms are social rules and guidelines that prescribe appropriate behavior in particular situations.
• There is not a 1 to 1 map as they change from nation to state.
• These are affected by the ethics, CSR, and sustainability of countries.

Ethics, CSR, and Sustainability

• Ethics CSR and sustainability social issues in the system of businesses.
• It requires accepted principles of right or wrong.
• Corporate social responsibility is when corporations consider social consequence for making decisions with presumpsion in both a good economic and social sense.
• These factors should be communicated to stakeholders on what has been regulated.
• Sustainability idea that organisation that is negative to future generations.
• Aligned with the short run, more than envrionmental factors.
• Issues can stem from political, economic development and culutral differences as well and not be ethical in one place.
• Should be minimum aceptable to prevent labour abuse.
• Basic human rights are not universally accessible.
• There are various issues with corruption or envrionmental p.
• These include un ethical behavior and the use of violence etc.

International Trade Theory