INTERNATIONAL BUSINESS

MID
1) Explain global strategic rivalry theory (7M)?
Global Strategic Rivalry Theory (GSRT), developed by James Brander and Barbara Spencer,
explains how firms compete globally by focusing on innovation, strategic alliances, and other
competitive strategies. It emphasizes that firms engage in strategic behaviors to gain a
competitive edge in international markets.
Major components of GSRT:
Differentiation: Differentiation involves making a product or service stand out from
competitors through unique features, design, branding, or customer service. It’s crucial for
firms to create a competitive advantage and build a strong market position.
GSRT Relevance: Differentiation allows firms to reduce direct price competition and improve
market share. It helps in capturing niche markets and building brand loyalty.
Quality Aspects: High quality can be a significant competitive advantage. Firms that focus on
superior quality can charge premium prices and attract quality-conscious consumers.
GSRT Relevance: Quality is a key factor in differentiation and can impact a firm’s ability to
maintain a competitive edge globally. It also affects a firm’s reputation and long-term success.
Owning Intellectual Property Rights (IPR): Owning IPR, such as patents, trademarks, and
copyrights, protects innovations and creations from imitation. It provides firms with exclusive
rights and can be a valuable asset.
GSRT Relevance: IPR allows firms to secure competitive advantages by preventing competitors
from copying their innovations. It can also be a source of revenue through licensing deals.
Strategic Alliances: Strategic alliances are partnerships between firms to achieve mutually
beneficial goals. These collaborations can include joint ventures, technology partnerships, and
distribution agreements.
GSRT Relevance: Alliances can help firms access new markets, share resources, and enhance
capabilities. They can also provide strategic advantages by combining strengths and mitigating
risks.
Achieving Economies of Scale: Economies of scale occur when a firm’s production costs per
unit decrease as the volume of production increases. This often results from increased
operational efficiency and bulk purchasing.
GSRT Relevance: Achieving economies of scale can lower costs, improve competitiveness, and
increase market share. It allows firms to compete on price and invest in other strategic areas.
Investing in R&D: Research and Development (R&D) involves investing in new technologies,
products, and processes. It drives innovation and helps firms stay ahead of competitors.
GSRT Relevance: R&D investment is crucial for long-term competitive advantage. It can lead
to new product development, technological advancements, and improvements in quality and
efficiency.

2) Explain porters National Competitive Advantage theory / Porter Diamond model

(10M)
Michael Porter’s National Competitive Advantage theory, also known as the Porter Diamond
model, explains why certain countries or regions are more competitive in certain industries
than others.
1. Factor Conditions: This refers to the nation’s position regarding the factors of production,
such as skilled labor, infrastructure, natural resources, and technological capabilities. A
country’s competitive advantage is influenced by the availability and quality of these factors.
Example: Switzerland's strong emphasis on high-quality education and research facilities
supports its competitive edge in industries like pharmaceuticals and finance.
2. Demand Conditions: The nature and size of domestic demand influence the development
of competitive industries. A strong, sophisticated, and demanding local market can drive
innovation and efficiency as firms strive to meet high standards.
Example: Japan’s rigorous domestic demand for high-quality electronics and automobiles has
spurred innovation and quality improvements in these industries.
3. Related and Supporting Industries: The presence of competitive and efficient supplier
industries and related industries that are internationally competitive contributes to a nation’s
competitive advantage. These related industries can provide resources, technology, and
support that enhance the competitiveness of the primary industry.
Example: Italy’s strength in the fashion industry benefits from a robust network of suppliers
and related industries, such as textiles and design services.
4. Firm Strategy, Structure, and Rivalry: The way firms are created, organized, and managed,
along with the nature of domestic rivalry, affects competitiveness. Intense local competition
can drive firms to innovate and improve efficiency, creating a more competitive industry.
Example: The intense competition among firms in Silicon Valley fosters innovation and rapid
technological advancements in the technology sector.
Government and Chance: Porter also acknowledges the roles of government and chance in
influencing national competitive advantage, though they are not part of the central diamond.
Governments can impact competitive advantage through policies, regulations, and
investments in infrastructure. Chance events, such as natural disasters or major technological
breakthroughs, can also play a significant role.

3) Product life cycle theory in IB? (7M)

The Product Life Cycle (PLC) theory in international business (IB) describes the stages a
product goes through from its introduction to its decline in the market. The theory helps firms
understand the dynamics of product performance over time and how to manage their
products effectively in international markets.
1. Introduction: In this stage, the product is newly launched in the market. Sales growth is
slow as the market is still becoming aware of the product. High costs are associated with
product development, marketing, and promotion.
Characteristics: Limited distribution, high marketing costs, and low or negative profitability.
Firms focus on building awareness and establishing a market presence.
International Context: Firms may initially launch in their home markets before expanding
internationally. Market entry strategies may involve partnerships or joint ventures to mitigate
risks and gain market insights.
2. Growth: The product begins to gain acceptance, and sales start to increase rapidly. The
market becomes more aware of the product, leading to higher demand.
Characteristics: Increased sales and revenues, improved profitability, and expanding
distribution channels. Competition may start to increase as other firms notice the product’s
success.
International Context: Firms may expand into international markets to leverage growth
opportunities and scale. Adjustments in marketing strategies may be needed to cater to
different cultural and market preferences.
3. Maturity: The product reaches its peak sales volume. Market saturation occurs as most
potential customers have already purchased the product. Competition intensifies, and the
focus shifts to differentiating the product and maintaining market share.
Characteristics: Stable sales, high competition, and pressure on profit margins. Firms may
focus on cost reduction, product improvements, or promotional strategies to sustain sales.
International Context: Firms may seek new international markets or explore product
modifications to reinvigorate sales. Strategic alliances or mergers may be considered to
maintain competitive advantage.
4. Saturation: The market becomes saturated with the product. Sales growth slows or
stabilizes, and the market becomes highly competitive. Companies may face challenges in
maintaining their market share.
Characteristics: Sluggish growth, intense competition, and pressure on pricing. Firms may
need to innovate or find new uses for the product to sustain interest.
International Context: Firms may explore niche markets or emerging markets with different
needs. Strategic adjustments or new market segments may be targeted to maintain
profitability.
5. Decline: Sales and demand for the product begin to decline due to market saturation,
technological advancements, or changing consumer preferences. The product may become
obsolete or replaced by newer alternatives.
Characteristics: Decreasing sales, reduced profitability, and potential discontinuation of the
product. Firms may consider phasing out the product or finding ways to extend its lifecycle.
International Context: Firms may withdraw from less profitable international markets or focus
on niche segments where the product still has value. Opportunities for product reinvention or
repurposing may be explored.
4) What is Mercantilism (3M)?
Mercantilism is an economic theory and practice that was prominent from the 16th to the
18th centuries. It emphasizes the importance of accumulating wealth, primarily gold and
silver, to enhance a nation's power and prosperity. Key features of mercantilism include:
Trade Surplus Focus: Mercantilists believed that a country should export more than it imports
to accumulate wealth and increase national power.
Government Intervention: The theory advocates for strong government intervention in the
economy to achieve a favorable balance of trade through tariffs, subsidies, and regulation.
Colonial Expansion: Mercantilism often led to the establishment of colonies and the
exploitation of resources to benefit the mother country, further boosting national wealth.

5) Theories of International Business (IB) (3M)

Theories of International Business provide foundational frameworks for understanding how
and why countries engage in trade and investment across borders. These theories explore the
mechanisms by which nations gain economic advantages and how they can optimize their
participation in the global market. They offer insights into the dynamics of international trade,
competition, and cooperation, guiding businesses and policymakers in making strategic
decisions
Mercantilism:
Focus: Accumulating wealth through a trade surplus.
Key Idea: Export more than import; government intervention is crucial.
2. Absolut Advantage:
Focus: Efficiency in producing goods.
Key Idea: A country should produce and export goods it can produce more efficiently than
others.
3. Comparative Advantage:
Focus: Opportunity cost in production.
Key Idea: Countries should specialize in producing goods where they have the lowest
opportunity cost and trade with others to maximize overall economic benefit.

6) Explain endowment theory (3M)

Endowment Theory, also known as the Factor Proportions Theory, is a concept in international
trade that explains how a country’s resource endowments shape its comparative advantage
in producing certain goods. Developed by economist Eli Heckscher and Bertil Ohlin, this theory
is a key component of the Heckscher-Ohlin model.
Endowment Theory posits that a country's comparative advantage in international trade is
determined by its natural endowments of factors such as land, labor, and capital.
Key Idea: Countries will specialize in producing goods and services that utilize their abundant
and readily available resources more efficiently.
Focus: The theory emphasizes that differences in factor endowments (e.g., natural resources,
skilled labor) shape trade patterns and comparative advantages between nations.
Example: A country with abundant arable land might specialize in agricultural products, while
a country with a highly skilled workforce may focus on high-tech industries.
7) cost advantage theory with money?
Cost Advantage Theory suggests that a firm can achieve a competitive edge by producing
goods or services at a lower cost than its rivals. This theory is often linked to the concept of
"economies of scale" and is crucial for understanding how businesses can leverage cost
advantages to compete effectively in the market.
Key Aspects of Cost Advantage Theory:
Economies of Scale: As a firm increases production, its per-unit cost of production decreases
due to the spread of fixed costs over more units and operational efficiencies.
Impact: Firms with larger production volumes can lower their average costs and offer lower
prices, gaining a competitive advantage.
Cost Leadership Strategy: A company adopts a cost leadership strategy by focusing on
becoming the lowest-cost producer in its industry.
Impact: This allows the firm to compete on price, attract price-sensitive customers, and
achieve higher margins.
Operational Efficiency: Cost advantages can result from efficient production processes,
technology, and supply chain management.
Impact: Streamlined operations, bulk purchasing of materials, and innovation in processes
contribute to reduced costs.
Financial Implications: Lower production costs translate into higher profit margins or the
ability to offer competitive pricing.
Impact: Effective cost management improves profitability and can lead to increased market
share and financial stability.

8) Difference between cost advantage theory and with money?

Cost Advantage Theory (Money

Aspect Cost Advantage Theory (General)
Focus)

Focuses on reducing overall costs, which

Focuses on reducing monetary costs
Definition may include monetary, time, and resource
to gain a competitive edge.
costs.

Broad cost reductions including time,

Monetary savings or reductions in
Primary Metric resources, labor, and operational
expenses.
efficiencies.

Examples of Lowering production costs, Improving process efficiency, reducing

Cost Reduction negotiating better supplier prices. waste, optimizing resource utilization.

Emphasis on operational efficiency,

Emphasis on financial management,
Approach process improvement, and resource
budgeting, and cost control.
management.

Impact on Ability to offer lower prices due to Ability to offer competitive prices due to
Pricing reduced monetary costs. overall cost reductions.

Tools and Budget analysis, financial Lean manufacturing, Six Sigma, process
Techniques forecasting, cost-benefit analysis. reengineering, supply chain optimization.

Retail, manufacturing, services Any industry, including manufacturing,

Industries
where financial costs are a major services, healthcare, where overall cost
Applicable
factor. efficiency is critical.

Long-term Improved profit margins through Sustainable competitive advantage

Benefits controlled monetary expenses. through holistic cost management.

May overlook non-monetary Requires a comprehensive understanding

Challenges inefficiencies, risk of focusing too of all cost factors, complexity in
narrowly on finances. implementation.

Strategic Focus Financial cost leadership. Operational and resource efficiency.

9) Define legal environment?
The legal environment refers to the framework of laws, regulations, and judicial decisions that
govern the operations and behavior of individuals and businesses within a specific jurisdiction.
It encompasses various legal aspects such as contract law, employment law, intellectual
property rights, and regulatory compliance. The legal environment ensures that businesses
operate within the bounds of the law, protecting rights, defining obligations, and resolving
disputes. It plays a crucial role in shaping business practices, influencing strategic decisions,
and ensuring fair and ethical conduct in the marketplace.

10) Define CSR?

Corporate Social Responsibility (CSR) is a business approach that integrates ethical practices
into a company's operations, aiming to positively impact society and the environment beyond
profit generation. CSR involves voluntary actions by companies to address social,
environmental, and economic issues, such as reducing carbon footprints, supporting
community development, and ensuring fair labor practices. By prioritizing stakeholder
interests and contributing to societal well-being, CSR helps build a company's reputation,
fosters trust, and aligns business objectives with broader societal goals.

11) Define political environment?

The political environment encompasses the influence of government policies, political
stability, and the regulatory framework on businesses and economic activities within a
country. It includes factors such as government regulations, taxation policies, trade
restrictions, and political stability that can impact business operations, investment decisions,
and economic growth. Understanding the political environment is crucial for companies to
navigate risks, comply with legal requirements, and strategize effectively in different political
contexts.

12) Define PESTLE?

PESTLE (or PESTEL) is a strategic analysis tool used to identify and evaluate the external macro-
environmental factors that can impact an organization. It stands for:
Political: Government policies, regulations, and political stability.
Economic: Economic conditions, inflation rates, exchange rates, and economic growth.
Social: Social trends, demographics, and cultural factors.
Technological: Technological advancements, innovation, and R&D activities.
Legal: Laws, regulations, and legal issues affecting the industry.
Environmental: Environmental concerns, sustainability, and ecological impacts.
By analyzing these factors, businesses can gain insights into potential opportunities and
threats, helping to shape strategic planning and decision-making.
13) Define International Business?
International Business refers to the commercial activities and transactions that occur across
national borders. It encompasses a wide range of activities, including exporting and importing
goods and services, foreign direct investment, joint ventures, and strategic alliances.
International business involves navigating different economic, political, cultural, and legal
environments, requiring firms to adapt their strategies to diverse markets. The goal is to
expand market reach, increase profitability, and leverage global resources while managing the
complexities and risks associated with operating in multiple countries.

14) Nature or characteristics of IB?

Global Scope: International Business spans across multiple countries, involving cross-border
trade and investment. Companies engage in activities such as exporting, importing, and
setting up operations in foreign markets. This global reach helps firms access new
opportunities and markets.
Cultural Diversity: Operating internationally requires navigating various cultural norms and
practices. Businesses must adapt their strategies to accommodate different consumer
preferences and communication styles. Understanding cultural differences is crucial for
successful market penetration.
Economic Integration: International Business operates within a global economic framework
influenced by international trade agreements and economic policies. Companies must adapt
to economic conditions and regulations in different countries. This integration affects trade
flows and investment opportunities.
Political and Legal Complexity: Firms face diverse political systems and legal environments,
including varying regulations and trade policies. Managing compliance with local laws and
understanding political stability are essential for risk mitigation. This complexity requires
careful strategic planning.
Risk and Uncertainty: International operations are subject to higher levels of risk, such as
political instability and currency fluctuations. Companies must develop strategies to manage
these uncertainties and protect their investments. Risk assessment and mitigation are critical
components of international business planning.
Technological Advancements: Technology plays a key role in facilitating international
operations, from e-commerce platforms to global supply chain management. Innovations in
communication and logistics enhance efficiency and market reach. Embracing technology is
essential for competitive advantage.
Strategic Alliances: International Business often involves forming partnerships and joint
ventures with local firms. These alliances provide market entry opportunities and local
expertise. Strategic collaborations can help firms overcome barriers and accelerate growth in
new markets.
Market Expansion: Companies seek to expand their market presence by entering new
international markets. This expansion diversifies revenue sources and reduces dependency on
domestic markets. Market expansion strategies include targeting new customer bases and
adapting products for different regions.
Competitive Pressure: Operating globally exposes firms to intense competition from both
local and international players. Companies must develop innovative strategies and efficient
operations to maintain a competitive edge. Understanding global market dynamics is key to
staying ahead of competitors.

15) Factors affecting IB?

Economic Factors: Exchange rates, inflation, economic growth, and overall economic stability
affect international trade and investment decisions. Economic conditions in both home and
host countries influence business profitability and risk.
Political Factors: Government policies, political stability, and regulations impact international
operations. Trade barriers, tariffs, and political risks can affect market entry and business
operations.
Legal Factors: Legal systems and regulations, including contract laws, intellectual property
rights, and employment laws, vary by country. Compliance with local laws and international
regulations is essential for smooth business operations.
Cultural Factors: Cultural differences, such as language, values, and social norms, affect
business practices and consumer behavior. Understanding and adapting to cultural
preferences is crucial for successful international marketing and management.
Technological Factors: Technological advancements and infrastructure impact the efficiency
of international operations. Innovations in communication, logistics, and production
processes can enhance global business performance.
Environmental Factors: Environmental regulations and sustainability concerns influence
international business practices. Companies must adhere to environmental standards and
address issues related to climate change and resource management.
Social Factors: Social trends, demographics, and consumer preferences shape market
demand. Understanding social factors helps businesses tailor their products and marketing
strategies to different regions.
Competitive Factors: The level of competition in international markets affects business
strategy. Companies must analyze local competitors, global industry trends, and market
conditions to stay competitive.
Geopolitical Factors: International relations, trade agreements, and geopolitical tensions can
impact cross-border business activities. Geopolitical stability and relationships between
countries influence trade flows and investment opportunities.
16) Challenges and advantages of IB?
Challenges of International Business (IB):
Cultural Differences: Navigating diverse cultural norms and practices can complicate
communication, marketing, and management. Misunderstanding cultural nuances can lead to
business errors and strained relationships.
Political and Economic Instability: Operating in countries with unstable political environments
or fluctuating economic conditions poses risks such as expropriation, currency volatility, and
unpredictable regulatory changes.
Legal and Regulatory Compliance: Adhering to different legal systems, trade regulations, and
compliance requirements can be complex and costly. Firms must manage varying standards
and legal obligations in each country.
Operational Challenges: Managing global supply chains, logistics, and distribution networks
can be intricate. Issues like transportation delays, customs procedures, and differing quality
standards can affect efficiency.
Market Entry Barriers: Entering new markets often involves overcoming barriers such as
tariffs, import restrictions, and local competition. Establishing a presence and gaining market
share can be challenging.
Risk Management: International business exposes firms to various risks, including political
risk, economic fluctuations, and geopolitical tensions. Effective risk management strategies
are essential for safeguarding investments.
Advantages of International Business (IB):
Market Expansion: International business provides access to new markets and customer
bases, offering opportunities for growth and increased sales. Diversifying into global markets
can reduce dependence on domestic markets.
Revenue Growth: Expanding internationally can lead to increased revenue streams and higher
profitability. Firms can capitalize on global demand and leverage economies of scale.
Diversification: Operating in multiple markets helps spread risk and reduces vulnerability to
economic downturns in any single region. Diversification of products and markets can stabilize
revenue.
Access to Resources: International business allows firms to access a broader range of
resources, including raw materials, technology, and talent. It facilitates global sourcing and
supply chain optimization.
Competitive Advantage: Gaining a foothold in international markets can enhance a company's
competitive position. It provides opportunities to leverage global brand recognition and build
a stronger global presence.
Innovation and Learning: Exposure to different markets and business practices can drive
innovation and improve operational practices. Learning from diverse environments can lead
to new ideas and improved business strategies.
Cost Efficiency: International operations can lead to cost savings through economies of scale,
cost-effective production locations, and efficient global supply chains. Reducing costs can
improve overall profitability.

17) Modes of IB?

Exporting: Selling goods or services produced in one country to customers in another country.
Characteristics: Involves minimal investment in foreign markets; often used as a first step in
international expansion. Can be direct (selling directly to foreign buyers) or indirect (using
intermediaries).
Licensing: Allowing a foreign company to use intellectual property, such as patents,
trademarks, or technology, in exchange for royalties or fees.
Characteristics: Provides a way to enter foreign markets with lower risk and investment;
however, it may result in loss of control over intellectual property.
Franchising: Granting a foreign entity the right to operate a business using the franchisor's
brand, business model, and support system.
Characteristics: Allows for rapid expansion with reduced risk and investment; the franchisee
handles local operations while adhering to the franchisor's standards.
Joint Ventures: Forming a partnership with a foreign company to create a new business entity,
sharing ownership, profits, and risks.
Characteristics: Combines resources and expertise of both partners; useful for entering
markets with high barriers or local knowledge requirements. It involves shared control and
potential conflicts.
Wholly Owned Subsidiaries: Establishing a new business or acquiring an existing business in
a foreign country, with full ownership and control.
Characteristics: Provides complete control over operations and strategies; involves higher
investment and risk but offers greater potential for return and strategic alignment.
Strategic Alliances: Collaborating with foreign firms to achieve specific business objectives,
such as technology sharing or market access, without forming a new entity.
Characteristics: Allows for resource sharing and cooperative efforts; can be flexible and
adaptable but requires careful management of relationships and expectations.
Greenfield Investments: Building new facilities and operations from the ground up in a foreign
country.
Characteristics: Offers complete control and customization of operations; involves significant
investment and time but can be tailored to specific needs and market conditions.
Mergers and Acquisitions (M&A): Acquiring or merging with an existing foreign company to
gain market presence, resources, or capabilities.
Characteristics: Provides immediate access to established markets and operations; involves
high costs and integration challenges but can offer substantial growth opportunities.

18) Process of Internationalization?

The process of internationalization involves several key stages through which a company
expands its operations into international markets.
Preliminary Assessment: Evaluate the company's readiness for international expansion by
analyzing its strengths, weaknesses, and market potential.
Activities: Conduct market research, assess internal capabilities, and identify target markets.
Market Entry Strategy Development: Develop a strategy for entering international markets
based on the company's objectives and market conditions.
Activities: Choose an entry mode (e.g., exporting, franchising, joint ventures), and plan market
entry strategies.
Market Research and Selection: Conduct detailed research to understand the target market's
needs, competition, and regulatory environment.
Activities: Analyze market size, customer preferences, local competitors, and legal
requirements.
Market Entry: Implement the chosen entry strategy to establish a presence in the new market.
Activities: Set up distribution channels, establish partnerships, and begin marketing and sales
operations.
Operations and Localization: Adapt business operations and products/services to fit the local
market's needs and preferences.
Activities: Modify products, adjust marketing strategies, and ensure compliance with local
regulations.
Management and Control: Manage and oversee international operations to ensure they align
with overall business objectives.
Activities: Monitor performance, address operational challenges, and manage cross-cultural
teams.
Expansion and Growth: Evaluate opportunities for further growth in the international market
or expansion into additional markets.
Activities: Explore new market segments, invest in additional resources, and scale operations
as needed.
Evaluation and Adjustment: Continuously assess the performance of international operations
and make adjustments as necessary.
Activities: Analyze financial performance, review market conditions, and adapt strategies
based on feedback and results.