Course objectives

1. International Business(Introduction – Country factors)ERASMUS programmeILecturer Dr Pavlos Dimitratos pdimitr@aueb.gr

2. Course objectives • Understand why international business takes place currently at an unprecedented rate • Explore challenges for a firm going abroad • Investigate the different modes of entry, strategies and organization for an internationalized firm • Examine changes in the international trade and environment • Study how the international monetary system and capital market operate

3. Textbooks & Articles • INTERNATIONAL BUSINESS – Competing in the Global Marketplace • C. W. Hill, McGraw-Hill, Irwin, 5th edition, 2005 • Recommended: • Cateora P.R. (1996), International Marketing, 9th ed., Chicago: Irwin. • Czinkota M.R., and Ronkainen I.A. (1993), International Marketing, 3rd ed., Fort Worth, TX: The Dryden Press. • Root F.R. (1987), Entry Strategies for International Markets, Lexington, MA: Lexington Books. • Young S., Hamill J., Wheeler C., and Davies J.R. (1989), International Market Entry and Development, Englewood Cliffs, NJ: Prentice-Hall. • Articles from scholarly journals presented during the lectures

4. Evaluation • Final Exam 70% • Group Coursework 30% • Final closed-book exam will draw on material taught/discussed in the text

5. Outward and inward internationalization • Outward internationalization concerns the practices and strategies that an enterprise undertakes to dispose of its outputs abroad(e.g. exports, R&D activities abroad) • Inward internationalization deals with the activities related to the procurement of inputs (products/services and capital) from markets abroad(e.g.imports, foreign capital financing) • The two categories are not isolated from each other

6. Internationalization and globalization • Both of them are forms of ‘marketization’ • internationalization/globalization of markets and production • Compared with internationalization, globalization refers to a greater extent of activities undertaken abroad by the firm • Internationalization appears to be a more general / better term

7. Internationalization and globalization • The debate: Is internationalization good or bad? • Mini-case discussion • Anti-internationalization protests • Effect on jobs, income, environment

8. Internationalization as a strategic choice • Is internationalization always the best way for a firm to grow/expand? • Internationalization may be the easiest way for a firm to expand

9. Internationalization as a strategic choice (con’d) • Going abroad needs an appropriate degree of internal competencies’ development and monitoring of threats/opportunities in the external contextin order for successful outcomes to emerge • A short-term approach to internationalization may render detrimental results!

10. Drivers of internationalization • Development of regional economic integration between countries (e.g. EU, NAFTA, ASEAN) • Increasing international cooperation between firms • Increasing homogenization of consumer tastes worldwide (?) • Increasing mobility worldwide between capital, management and labour (?)

11. Drivers of internationalization (cont’d) • Dissolution of former Soviet Union group of countries • Declining trade and investment barriers • Advanced information, technological, communication and transportation systems • These (last) three appear to be the most important reasons driving internationalization nowadays

12. Motives for firms’ internationalization • Proactive • Higher sales / profits • New markets • Unique product (& value to the customer) • Technological know-how • Good information on foreign markets • Networks in foreign markets • Management’s urge for internationalization • Pursuit of learning effects/economies of scale (experience effects) • Leveraging core competencies worldwide • Reputation/brand name of a firm • Access worldwide to technology/technological know-how, factors of production (location economies), capital • Risk diversification • Pursuit of international learning

13. Motives for firm’s internationalization (cont’d) • Reactive • Tax-related benefitsoffered by (home/host) government • Pressures from competition at home • Pressures from competition abroad • Saturated demand at home • Follow the client • Excess production surplus (?)

14. National differences • Internationalization presents significant challenges due to differences across countries in political, economic/technological, legal, cultural, social and religious systems • Political systems may fall towards the collectivism vs. individualism spectrum… • … democracy vs. totalitarianism spectrum • Economic systems may fall towards the market or state-directed economy spectrum

15. National differences (cont’d) • Legal systems are different (e.g. code vs. common law) and may affect international activities of the firm in aspects such as • Property rights • Intellectual property • Product safety and liability

16. National differences (cont’d) • Economic development between countries is different. Internationalized firms should consider aspects such as GNP per capita, GNP growth, degree of privatization, deregulation etc. • Level of education in a country is also significant (e.g. Japan since 1945) • Geography of country can be important – landlocked countries may grow slower than coastal countries; tropical countries may grow slower than those in the temperate zone • Economic growth appears to be strong in countries that are committed to a free market system and strong property rights

17. National differences (cont’d) • The attractiveness of a country as a market/investment site depends on balancing the likely benefits against the costs & risks • Benefits/costs (munificence / hostility of a country): depend on • size of the market • purchasing power • growth prospects (& economic system and property rights regime) • political payoffs required for market access • supporting infrastructure • cost of adhering to local laws/regulations • psychic distance

18. National differences (cont’d) • Risks (uncertainty) depend on • Political uncertainties • Economic mismanagement • Lack of legal system • Other things being equal, the trade-off may be most favorable in politically stable developed and developing nations with free market systems, and no dramatic upsurge in either inflation rates or public sector-debt • Mini-case discussion

19. Readings • Hill, chapters 1, 2 & pp. ‘Profiting from Global Expansion’ (ch. 12) Recommended: • Dunning, J. (1993) Multinational Enterprises and the Global Economy, Addison-Wesley, London. • Dimitratos, P., Johnson, J. Slow, J. & Young, S. (2003) Micromultinationals: New Types of Firms for the Global Competitive Landscape, European Management Journal: 21(2), 164-174.