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International Management. Phatak, Bhagat, and Kashlak. Chapter 1. An Introduction to International Management. Chapter Objectives. Define the concepts of international business and international management. Examine the transnationality of countries and companies

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International management

International Management

Phatak, Bhagat, and Kashlak

Chapter 1

Chapter 1

An Introduction to International Management

Chapter objectives
Chapter Objectives

  • Define the concepts of international business and international management.

  • Examine the transnationality of countries and companies

  • Distinguish among the various types of international mindsets observed in international firms.

  • Discuss the stages of development of an international company.

  • Define and understand the strategic, marketing and economic motives of firms seeking to expand internationally.

  • Explain the strategic objectives and sources of competitive advantage for an international firm.

Chapter topics
Chapter Topics

  • The International Management Setting

  • What is International Business

  • What is International Management

  • International Companies and International Mindsets

  • The Evolution of an International Enterprise

  • Why Firms Seek to Engage in International Business

  • Strategic Objectives and Sources of Competitive Advantage

  • The Environment of International Management

Fig 1 1 managing in the international environment
Fig. 1-1: Managing in the International Environment

Section I: The Macro-Environment

(Economics, Politics, Infrastructure Laws, Culture)

Section II: Firm-Level Initiatives

(Strategy, Structure, Implementation, Control)

Section III: Manager Responses

(Communication, Motivation, Leadership, Negotiations, Responsibility

Definition of international management
Definition of International Management

  • International management is defined as a process of accomplishing the global objectives of a firm by:

  • effectively coordinating the procurement, allocation, and utilization of the human, financial, intellectual, and physical resources of the firm and across national boundaries, and

  • effectively charting the path towards the desired organizational goals by navigating the firm through a global environment that is not only dynamic but often very hostile to the firm’s very survival.

Domain of international management
Domain of International Management

Why, when, and how does a business firm (as an organization) decide to “go international” including the expansion and reduction of such internalization?

Why, when, and how is its organizational behavior – a broad term covering mission, objectives, strategies, structures, staff, and processes [particularly, decision-making] internal, and external transactions and relations, performance, impact, etc. – altered by internationalization.

An international company
An International Company

… is an enterprise that has operations in two or more countries. If it has operations in several countries then it may have a network of wholly or partially (jointly with one or more foreign partners) owned producing and marketing foreign affiliates or subsidiaries. The foreign affiliates may be linked with the parent company and with each other by ties of common ownership and by a common global strategy to which each affiliate is responsive and committed. The parent company may control the foreign affiliates via resources that it allocates to each affiliate – capital, technology, trademarks, patents, and manpower – and through the right to approve each affiliate’s long- and short-range plans and budgets.

International management
Table 1-3: Labor Productivity of Foreign Affiliates and Domestic Firms in Manufacturing in Selected Economies

International mindsets
International Mindsets Domestic Firms in Manufacturing in Selected Economies

  • Specific pressures will affect competition in industries and firms that cross national boundaries causing

  • a global orientation that relies on coordination of worldwide activities to maximize the collective organization, and

  • a multidomestic orientation that responds to individual country opportunities and constraints.

International mindsets contd
International Mindsets Domestic Firms in Manufacturing in Selected Economies(contd.)

  • Increasingly, there are pressures for international companies to be both globally efficient and locally responsive. These pressures derive from environmental changes such as new technologies, unanticipated competition, and the convergence of industry boundaries. In such situations, firms exhibit a transnational mindset to simultaneously gain efficiency and local market benefits.

Foreign market entry modes
Foreign Market Entry Modes Domestic Firms in Manufacturing in Selected Economies

  • Exporting

  • Counter-trade

  • Contract manufacturing

  • Licensing

  • Franchising

  • Turnkey projects

  • Non-equity strategic alliances

  • Equity-based ventures such as wholly-owned subsidiaries and equity joint ventures

International management

Fig. 1-2: Motives to Go International Domestic Firms in Manufacturing in Selected Economies



The Historically Indigenous Firm





Evolutionary stages

Stage 1 Domestic Firms in Manufacturing in Selected Economies: Foreign Inquiry

Stage 2: Export Manager

Stage 3: Export Department and Direct Sales

Stage 4: Sales Branches and Subsidiaries

Stage 5: Assembly Abroad

Stage 6: Production Abroad

Stage 7: Integration of Foreign Affiliates

Evolutionary Stages

Bandwagon effect
Bandwagon Effect Domestic Firms in Manufacturing in Selected Economies

… when firms venture abroad to follow their major competitors

Ex 1 2 global strategy an organizing framework
Ex. 1-2: Global Strategy: An Organizing Framework Domestic Firms in Manufacturing in Selected Economies

Ex 1 2 contd
Ex. 1-2 Domestic Firms in Manufacturing in Selected Economies(contd.)

Sources of Competitive Advantage

International management

Fig. 1-3: The International Environment Domestic Firms in Manufacturing in Selected Economies





Civil Strife


Trade Agreements

Trading Blocs












International Law

Host Country Laws

Home Laws

International Piracy






International management

Fig. 1-4: Fundamentals of International Management: A Model of International Management


of International Initiatives







Organizing Int’l Operations (Chapter 9)

Economic Environment

& Infrastructure

(Chapter 2)

Controlling Int’l Operations (Chapter 10)

Strategies for

Int’l Competition

(Chapter 6)

Managing Technology

and Knowledge(Chapter 11)



(Chapter 3)

Int’l Human Resource Mgmt (Chapter 12)

Foreign Modes

Of Entry

(Chapter 7)

Work Motivation (Chapter 13)



(Chapter 4)

Leadership (Chapter 14)

Int’l JVs and


(Chapter 8)

Communications (Chapter 15)



(Chapter 5)

Negotiations and

Decision-Making (Chapter 16)

Ethics and Social Responsibility

(Chapter 17)

Key terms and concepts
Key Terms and Concepts of International Management

  • Foreign Direct Investment (FDI)

  • Definition of International Business

  • Definition of International Management

  • Definition of International Company

  • Transnationality Index

  • International Mindsets

    • Global orientation

    • Multidomestic orientation

    • Transnational orientation

Key terms and concepts contd
Key Terms and Concepts of International Management(contd.)

  • Evolution of an International Enterprise

  • Evolution of Service Firms

  • Motives for International Expansion

    • Market seeking

    • Cost reduction

    • Strategic

  • Global Strategy