okbit22 managing international relations 2. international business and business to business markets
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OKBIT22 Managing International Relations
2. International Business and Business to business markets
International business
= All business transactions that involve two or more countries, i.e. nations
Comprises a large and growing portion of the world’s total business
Almost all companies are affected by global events and competition (e.g. Maija’s father’s farm, 10-kioski, ... ), because most sell output to and/or secure supplies from foreign countries and/or compete against products and services that come from abroad
International business
Modes of business (to have or not to have one or more intermediaries) that differ from those it is accustomed to, on a domestic level
To operate effectively, managers must understand these different modes
International business takes place within a more diverse external environmentAffects the way company functions are handled
Some definitions
Global CompanyA multinational venture centrally managed from
one country, like e.g. Nokia plc. -> maybe, becoming a transnational one, in the future Has global strategies for product design, financing,
purchasing, manufacturing, and marketing.
Transnational CompanyA global network of productive units with a
decentralized authority structure and no distinct national identity, like e.g. Ford Mo.CoRelies on a blend of global and local strategies
Why companies engage in International Business; trigger factors, i.e. internal (push, micro...) and external (pull, macro...) factors Desire for continued growth Domestic market saturation To expand salesTo acquire resourcesTo diversify their sources
of sales and supplies To minimize competitive
risk
Also because of:Rapid increase in and
expansion of technologyLiberalization of
governmental policiesDevelopment of the
institutions needed to support international trade
Increased global competition
Internationalization process
Internationalization is the process by which
Firms increase their awareness of the influence of international activities on their future
Establish and conduct transactions with firms from other countries
How? Modes of international business
The Internationalization ProcessLicensing
Authorizing companies in foreign countries to produce and/or market a given product within a specified territory in return for a fee
ExportingGoods produced in one country are sold to
customers in foreign countries
How? Modes of international business
The Internationalization Process (cont’d)Local warehousing and selling
Goods produced in one country are shipped to the parent company’s storage and marketing facilities located in overseas countries
Local assembly and packagingComponents, rather than finished products, are
shipped to company-owned foreign facilities for final assembly and sales
How? Modes of international business
The Internationalization Process (cont’d)Joint ventures (also strategic alliances or
partnerships)A company in one country pools its resources with
another foreign company or companies to create and market products and jointly share profits and losses
Direct foreign investmentsThe production and marketing of products through
subsidiary in a foreign country that is wholly owned or as the result of cross-border merger
Market Entry Decisions
Foreign Market Selection
Timing & Order of Entry
Market Expansion Strategies
Mode of Entry Decisions
Decision criteria for Mode of Entry
Market Size and GrowthRiskGovernment RegulationsCompetitive EnvironmentLocal Infrastructure
Case
Business to business markets
Market for goods and services bought and sold between businesses is huge
Comprises many types and sizes of organizations that interact selectively and form relationships of varying significance and duration with one another
Although companies are independent entities, they are also interdependentNetworks!
Business to business markets
Companies serving companies are therefore usually cooperative rather than competitive
All businesses buy and sell items in order to create their own offerings
Other businesses may then buy these products to use, to create other products or to sell as finished items to consumers
Characteristics of business markets
International aspectsIn comparison to consumer markets
international b2b business is easierB2B organizations benefit from a lower diversity
in product functionality and performanceB2B organizations are able to work together to
help shape their trading environment
Characteristics of business markets
RelationshipsSignificance of relationships!Between buying and selling companies, but
also among other actorsCollaboration and partnership
Development, supply and support of products
Active sellers and active buyers
Consumer markets
Market structureBuyer behaviourDecision-makingProductsChannelsPromotionPrice
Business markets
Market structure
Business markets
Buyer behaviour and decision-making
Characteristics of business markets
Buying processesPotential risk is highDecisions take much longer Involve more peopleNature and form of interactions between organizations
is based on an understanding of individual customer’s needs and willingness to provide and share information
Group activityDecision Making Unit (DMU) or Buying CentreConsumption is also organizational activity
B2B Buying motivations
Senior Management Reduce costs, use and be seen using latest technology
Purchasing Manager Get value for money, increase own credibility and colleague satisfaction
Plant Engineer Use modern equipment and provide cover for power breakdown
Production Manager Reduce operating costs and improve reliability
Consultants Improve plant efficiency & staff working conditions
Business markets
Products
Business markets
Channels
Business markets
Promotion
Business markets
Price
The economics of Business Market Demand
Derived demandThe impact of derived demand
→ Accelerator principle→ Volatility of demand→ Price variability in business markets
Joint demandCross-elasticity of demand
PESTEL
Categories of business goods
E.g.Component partsSystems Services
Business market customers
Commercial enterprisesOEMsEnd usersResellersOverlap of categories
Government agenciesInstitutions
Case