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Session 1-Introduction

The principle of comparative advantage:

    This means that other countries and regions can do things well, better
than you- the competition is high. You can compete just with your best products. The best
products can‘t be the same in every place.There are some important factors which determine
the your possible advantages:

   1. Individual       You have some particular skills or you live in a special place in the
                       macroeconomic area, this can assure you in your business

   2. Local            Geographical situation
   3. Regional         The climate and the soil is also different from countries to countries
                       and from regions to regions. The different factors provide different
                       opportunities.
   4. International    It is also true internationally.

The elements of comparative advantage:

   1. Climate                    E.g.: Wine industry- needs special climate- England don‘t
                                 have this –have no good wine either. Hungary has both.
   2. Raw materials              Soil
   3. Special knowledge          The wine-making process also needs special knowledge
                                 and training( experience) .
   4. Specialised infrastructure Technology , transportation, training of people

Comparative advantage
Lost by:

   1. Scarce raw materials        e.g.: mining coal, running out of raw material, it is a big
                                  problem -- Will the last person leaving Seattle –
                                                      Turn out the lights
   2. High wages                  We have to move to cheap labour places either we lose the
                                  c.a. Because high wages the cost increase it is not worth
                                  producing
   3. Loss of skills              Less education means losing skills
   4. High transport costs        We have to reduce our transport costs if we open a new
                                  market. E.g.: Spain – consider the costs and only enter if it
                                  don‘t worth—Look different form of market entry(long,
                                  short)

   Comparative advantage
   Distorted by:

   1. Government fiscal policy        G. can influence by taxation, there are tax discount
                                      areas.
   2. Political policy               There can be more favoured nations
   3. Tariff barriers                We charge import taxes
   4. Protectionism                   Protect their own- e.g.: USA don‘t buy steel and coal
                                     they have their own.
   5. Wars & Conflicts               e.g.: USA & French-now in USA there is everything
                                     French is almost banned ( don‘t buy wines , tourism-
                                     they reject going there)
   6. Monopolies & Cartels           One company dictates, means there are simply no
                                     competition e.g.: the diamond trade owned by one
                                     company
   7. Lobbing groups                 E.g.: Tariff groups
   8. Trading blocs                  e.g.: EU, NAFTA
                                     The regulations and the bureaucracy slow down e.g. the
                                     accreditation of the language exams brought to the
                                     country by A. Godsave…


Why companies trade internationally:

   1. Increase sales       Most international companies are from small countries e.g.:
                           Finland-Nokia , they look for export because they has small
                           market at home , make money, increase sales.
   2. Specialise
   3. Segment market
   4. Extend resources

ANSOFF                   MARKET PENETRATION                 PRODUCT DEVOPMENT
                         The market knows you, you          understand the market use the
                           know the market                   famous brand Tokaj and sell Tokaj
                                                                     cheese

                       MARKET DEVELPOMENT                    DIVERSIFICATION
              Medium research, medium cash, medium risk       New market, new product
                    Sell Tokaj wine to Japanese               Sell Tokaj cheese to Japanese


 Home market situation:

                                                             Product life cycle( not accurate)
                                                             don‘t wait until falling down
                                                             create new and new life cycles

   1.   End of product life cycle Abroad market to Africa
   2.   High domestic competition Using a national identity- e.g.: German cars have image
   3.   Low growth prospects      Maybe saturation in your own country ( this is a limit )
   4.   Instability or risk       You won‘t invest in a country that it is unstable and
                                  gives you high risk => investment goes to other
                                  countries e. g.: In Israel nobody would like to invest in a
                                  hotel

You have to think over a new market in time, at the top.
International Business Development Decisions :

   1. Strategic Issues               : big picture , ‗ the Future ‗
   2. Tactical Issues                : things that you actually do
   3. External Factors

Strategic Issues :

   1. Fit with mission & objectives?       MUST. Is the idea going to the International market
                                           fits with the company‘s mission?
                                           In the context of society max. profit available has to
                                           be made

   2. Resources exist or available?           Banks- Still don‘t have the money but WILL have
                                             the money. We should know where we get the
                                             money.


Tactical Issues :

   1. Product flexibility?                  Customazitation - the topic of midterm project. Is a
                                            product flexible enough? Can we create a market?
   2. Learning potential?                   Structure- information channelling agents
   3. Management skills?                     Dressing-day to day issues. Different ways of
                                            thinking
   4. Risk minimalisation?                  Insure yourself with exact strategy.
                                            Policy of risk minimalisation. Never go to a
                                            market without strategy




External Factors :           These are the factors that can‘t change with your company.
                             E.g.: China the media is in the hands of the State-you can‘t
                             change it
                             You can‘t predict the market only by the size of it e.g.: India- 2nd
                             Largest country in the world in the respect of population. The
                             average income can be acceptable but only few people has very
                             high the most of the population has very low income not a good
                             market
                             This example points out that we have to consider many factors


   1.   Socio-cultural
   2.   Legal economic
   3.   Political
   4.   Technological
Session 2- Company Orientation -             An examination of different forms of
company organisation and the effects on key areas of foreign operation.

Company orientation: Is the answer for the questions: How to do? and What to do?
within the company. Company is an interventional enterprise. It has to be effective and
you have to find the best way of organizing it

   1. Ethnocentric
   2. Geocentric
   3. Polycentric

Ethnocentric:

   1. Ignores the differences        There is no effective communication at international
                                     scale
   2. Home marketing                 Just focusing on one country- one market
   3. Misses opportunities           Companies from this type are not compatible for
                                     international trade-they are locally organised
                                - Very hard to find new markets
                                - Do the same marketing abroad as it was at the home
                                   market => that doesn‘t work
                                - Have to do researches before seeking for new markets.

Polycentric:

Recognises differences
Adapts the marketing loss of economic scale

These companies are international organizations – they exploit the differences of the
market.
E.g.: McDonald‘s- where the design and the logo is the same at every market. You can
enter a restaurant anywhere in the world and you can‘t split the difference until you didn‘t
look through the menu.
They offer different meals to satisfy the different needs of customers.

                                -   Huge differences in the markets
                                -   Significant process of the adaptation
                                -   Different cultures , different people, different
                                    development
                                -   Local profit centers ; Regional headquarters
   Geocentric:

       1.   Synthesis of the two
       2.   Adapts on merit
       3.   Exploits markets
       4.   Minimises costs

   Between the two last. They entered the international market. But they don‘t exploit
   differences.
   The maximum standardization is the main characteristic of this form.
   They are learning organizations.
   E.g.: Coca- Cola- same brand, same products, same marketing , this is decrease their
   costs.

   Control Issues:?

       1. Taylor systems for the market but allow for international comparison —
   In a large company we should have much more control than in a little firm(or little
   market)
                                  - There are different levels of control; more business =>
                                  more control


       2. Emerging or developed economies             Everywhere central company ethic is
                                                       Needed
                                     -   Companies follow the local regulations ( not always
                                         ethic )
                                     -   Sometimes these are not acceptable in other countries
                                         (e.g. Child labour )


   Resource allocation:

       1. Protect Head Office or
       2. Exploit overseas opportunities

   This means that in the international market every company has a home market-they
   protect it from others better than their foreign market shares because they has the central
   steering power at home.
   If there is a crisis the smaller markets simply will be forgotten.

   International Stakeholders:

       1. A scenario for conflict?

 Stakeholders those who have interest in your company at international level. This can cause
you conflicts while trying satisfy different needs at different levels of service.

   International Structures:
     1.The Macropyramid
     2.The Umbrella
     3.The Interglomerate

The Macropyramid:

1.   Central planning                            In the macropyramid there are too much
2.   Marketing standardized                      middle managers, it became hard to
3.   Local creativity inhibited                  communicate.
4.   Communication problems                      They are not interested in individuals- the
5.   Poor career mobility                        structure is huge- there are simply no
                                                 opportunity to be promoted

                                  -   which is planned => headquarters
                                  -   no autonomy for the others
                                  -   they decide all the elements
                                  -   centralized leadership
                                  -   not looking for feedback

     The Umbrella
                                                        This form provides the brand
1.   SBU focus                                          locally
2.   Local market planning                              Provides appropriate style in every
3.   Flexible and responsive                            country at every level of service
4.   Global strategy difficult                          Consider the culture of the host
5.   Risk of duplication                                country and also the corporate
                                                        culture
     - brand only exists in people‘s                    But don‘t have clear global strategy
     mind
     - the umbrella type of companies
     provide this ―feeling‖ of brand
     around their products
     - different cultures => different
     product, different strategy


     The Interglomerate:

     Finance driven structure
     Marketing not a strategic function
     All marketing at SBU level ?

                                  -   you don‘t know these companies
                                  -   they own huge amount of companies, brands
                                  -   they are on the stock exchange
                                  -   these companies organise other companies fiscally,
                                      drive them financially
Session 3- Market Entry- The external forces controlling the business
environment and ways of assessing cultural issues relative to the operation of an
overseas subsidiary, plus the effect of culture on individual, industry and government
DMU‘s.

The slept factors:

Social                These are the factors you can‘t control just monitor
Legal                 They are out of business interest.
Economic
Political
Technological

                            -   Work outside your industry, market , but you have to
                                examine them before entering the market

Social Factors:

 1.Demography
        Different age groups, different sexes needs diff. products
        There is an interesting phenomenon- most motorbikes are bought by oldies
  oldies they relive what they missed out in their past
 2.Culture Is also diverse- e.g.: USA is a matriarchal society, while Italy is a
    patriarchic, we have to choose correctly the target customers we advertise to-
    Women do the shopping-we have to speak to them e.g.: they drive the car in the
    ads.
 3.Religion
 4.Buying patterns In western countries people get used to buy in bulk. They stock,
    buy pre-packaged foods.
    But in the underdeveloped countries can‘t do that- they go shopping 3 times a
    day- they don‘t have frigo at home. So we can‘t sell them pre-packaged goods.


Before entering a target market see the social factors.
Every country has different culture; have to be aware not to insult the culture flow
would be a scandal e.g.: advertising ice cream in Arabic countries, where showing
the mouth is forbidden.

Legal Factors : Became much more important- in the EU strict rules.

   1. Products         Regulate the product before advertise it- look how can you
                       package it
   2. Customers        Has the right to complain, if certain regulations are missed e.g.:
                      ‗ nyomokban mogyorót tartalmazhat‘ , have to write on the
                       package every detail- somebody can show allergenic reactions
                       after eating peanuts.
                       E.g.: In U.K. In the package of Peanuts- BE AWARE IT
                       CONTAINS NUTS
                       If you miss the text from the package and somebody became
                              ill- you are criminally liable
          3. Employees         Be aware- has many many rights. There is a knowledge gap
                               between west and east – too much rights
                               Data protection – it is forbidden to send data across borders
          4. Competition       Proving that what we do is the right way

Economic Factors:

          1. Growth              Population movement, change everything. Watching
          2.                     constantly.
          3. Inflation           Watching Inflation- Government
                                 Keynesian view (- boom bust economy- change everything
                                 when there is a little change in the environment) and
                                 Maniturism(- little changes don‘t upset the boat- go straight
                                  forward-) in economics
          4. Unemployment        there can be a significant unemployment- became
                                  unemployed for many reasons (alcoholism etc.)—this fact
                                  creates very cheap labour costs- they want to work no
                                  matter how low is their wage is-
                                  But we have to consider the fact that it is not every case a
                                  quality of work- e.g.: Miskolc would like to develop
                                  tourism- there are many unemployed in that region, but not
                                  educated in tourism- they may be cheap, but don‘t provide
                                  satisfying service
          5. Exchange rates       Is important to have constant currency- because at every
                                  exchange we can lose the percentage of the difference
                                  between the two currency we changed e. g. : Euro and
                                  Dollar. It is even more important in the tourism- people
                                  won‘t travel if they see that it can cost them a fortune.


Political Factors:

   1. Economic Policy             Is closer to politics than to economics- we consider our
                                  interest- we make business with our friends- to be stable
                                  e.g.: at the next elections
   2. Trade Blocs                 NAFTA, EU, OPEC.
                                  Japanese cars can‘t be sold in the European market- So
                                  they created a Nissan factory in Sunderland- after it Nissan
                                  will be considered as an European brand-they got into the
                                  trade bloc
   3. Taxation                    Certain products are highly taxed e.g.: in UK the wine-
                                  but the beer is cheap- wine is the rich men drink.
   4. Agendas                     Alliencies with certain more favoured nations- status t
                                  tradeing benefit- e.g.: China products- everything was
                                  made
                                  in China because of cheap labour – has high ridk if they
                                  get the licences they will copy them and sell as the
                                  company‘s product for their own profit—has to create
                                  reliable staff
Technological Factors:

     1.Speed of change           You have to know how fast things change; is the market
                                 opened for innovation, what do people need
   2. Innovations               We are open buy new things. Or we are careful wait a minute
                                before make decisions
   3. Cost of transport         Moving a product from one market to another have to know
                                the cost e.g.: Tesco- U.K. 25 years, Hungary- 5 years
   4. Environment               Regulations, Packaging-- Hotels -Restaurants(HACCP)
                                Polluter has to pay a special tax if he/ she pollutes the
                                environment- in Austria not pollution at all
Cultural Factors:

   1. Organizational       Big trading companies don‘t have time to waste for the paper
                           work to get their products fit to the different regulations of
                           different countries. There are certain companies who do it for
                           them e.g.: France Electro- only gives the path for the company
                           to establish the enterprise in the country.
   2. Leadership           Can be Political or Economical e.g.: ‗Blair is the puppy of
                           Business‘
   3. National Stereotypes Can be positive and negative. E.g.
                           a tailor in the U.K. James Green can‘t sell his products with
                           this name- changed to Jacques Vert- national stereotype of the
                           French clothing industry- and became a rich man.
                           Negative USA and French because the Iraq war
   4. Buying styles        DMU- Decision Making Unit
   5. Globalisation        Demonstration effect- e.g.: toys everybody wants to have a
                           certain.
                           If we look at the room of a teenager in the US, in France, in
                           Japan we see the same sight. But it is not true in the older
                           groups in population—there is a generation gap.
                           Global market derives everything into a global village.

Organisations:                              There are no notes because we couldn’t finish but
Structure of org. International Fit

Leadership:                                Mr. Godsave said that in the previous slides he
                                           already mentined everything so it is not important

Effectiveness of corporate leadership style in new markets

National stereotypes:

For customers & employees – valid or not?

Buying styles:

Individual or corporate DMU‘s
Globalisation :
Global consumers& corporate culture