International Business Management Flashcards
What are characteristics of international companies ?
- outbound investment
- international business activities
- specific KPIs
- lots of countries/costumers
- different corporate languages and cultures
Give Goals and objectives of international companies?
- Procurement/ sourcing goal - raw materials,intermediate production
- Sale targets - sales, market proximity/access, market penetration
- Cost targets/ objectives - benefits from locational advantages, lower cost, lower taxes
- Strategies goals - company growth, tech.&innovation seeker, risk diversification
Give different Foreign Business Investment
How to types of ways to start business activities abroad?
- Direct Export or Indirect Export (= Working with a local trade agent)
- Contract manufacturing/licensing
- Foreign Direct Investment
a. Greenfield Investment
- WFOE: Wholly Foreign Owned Enterprise
- Joint Venture
b. Brownfield Investment
- Merger & Acquisition (share deals, asset deals)
What are the Pro ́s/Con`s of a WFOE vs. a JV while investing abroad?
Pro`s WFOE
- Full control over the subsidiary regarding Management/GM/HR
- Business risks
- Property/ Machinery/equipment
- Network/communiations
- Less time consuming, difficult, costly to set up
- Fast decision-making processes
- Corporate culture
- Costs/capital
- IP rights/know how
Pro`s JV - Better local legal framework/less restrictions - Already existing network - Employees/candidates - Customers - Suppliers - Business partners - Public officials Insights regarding local Business culture - Technical expertise of local partner - Shared risks + capital contribution
Advantages/disadvantages of Greenfield ?
Greenfield investment : A greenfield investment starts with bare ground + builds up from there
The advantages of a greenfield investment are:
- You will achieve economies of scale + scope in production, marketing, finance, research & development, transportation + purchasing.
- You will have greater control of all aspects of the business.
- You will be able to implement the best long-term strategy.
- Commitment to the market will be solid.
- You can work directly with the relevant authorities from the beginning.
- You will have control over your brand.
- You will have control over your staff + HR recruitment processes.
- There will be marketing/ PR opportunities
The following factors weigh AGAIN the greenfield approach:
- It is likely to cost more – not only regarding money, also in terms of time & manpower
- (Local) Competition could be difficult to overcome.
- The entry process may take years – you may have to experience a bitter learning curve…
- The barriers to entry can be costly.
- Local Governmental regulations may put multinational enterprises at a disadvantage in the short term.
Advantages/disadvantages of Brownfield investments?
M&A - Acquiring an existing company: may mean short-term success, but it won’t necessarily guarantee future stability. Around 50% of merged businesses never achieve their projected financial + market goals
The Pros of this approach are:
- You gain access to an established market + customer contacts
- You have skilled workers at your disposal
- You instantly acquire the target company’s technology, clients + vendors.
- Negotiations usually occur at top level management.
- You have instant branding.
- You have one less competitor to deal with.
- Your knowledge base increases.
Give the different aspect of the PESTEL analysis?
Give the Perlmutter`s EPRG concept of subsidiary governance
Perlmutter`s EPRG concept of subsidiary governance:
Perlmutter differentiates between:
- Ethnocentrism : Home country orientation
- Polycentrism : Host country orientation
- Regiocentrism : Regional orientation
- Geocentrism : Global orientation
What are the Pro`s & Cons with regard to Expatriate postings ?
Pro Arguments for Expat posting:
- Better identification with group of companies (HQ + subsidiaries)
- (Probably) better technical or academic education
- (Probably) better + more international management background -Creating/strengthening of local corporate culture in line with global corporate culture -Better technology transfer + better cooperation with HQ
- (Probably) better quality control & reporting mechanisms, more financial transparency -(Probably) increase of turnover + profit because of international management experience -Increase of trust + reputation
Cons
You should always think of 4 different issues while negotiating an Expatriate posting:
- Legal issues
- Social security issues
- Tax issues
- Residence permits/visa issues
What are the Pros & Cons with regard to local GM recruitment?
Pro Arguments for local GM posting:
- No expensive Expat-Packages – (probably) cheaper salaries….
- Better local customer (+ stakeholder) relations/better local acceptance -No language/intercultural difficulties/misunderstandings
- Contacts to local authorities
- Using already existing business contacts (f.e. Chinese GUANXI)
- Role Model for local talents/ no glass ceilings
What is the difference between Greenfield and Brownfield investment?
What are legal options by market entry?
- Direct/ Indirect export
- contract manufacturing/licence - Licensing is giving legal rights to in-market parties to use your company’s name and other intellectual property. Any licensee can produce and sell products under your name or offer services using your brand.
- Foreign Direct Investment
How to implementing a company abroad/ internationally?
Index ‘s
Ease of doing business ranks economies from 1 to 190, with first place being the best. A high ranking (a low numerical rank) means that the regulatory environment is conducive to business operation. The index averages the country’s percentile rankings on 10 topics covered in the World Bank’s Doing Business.
The Corruption Perceptions Index is an index which ranks countries “by their perceived levels of public sector corruption, as determined by expert assessments and opinion surveys.” The CPI generally defines corruption as an “abuse of entrusted power for private gain”
The Global Innovation Index is an annual ranking of countries by their capacity for, and success in, innovation.
