IB-chapter Three
IB-chapter Three
IB-chapter Three
Supplier Customer
countries countries
International
business
Partner Competitor
countries countries
The international business
“Star Analysis”
•Competitor countries
•Home, supplier, customer, and partner
countries of competitors
•Global and local competitors
•Political, legal and regulatory climate –
trade agreements, home-country policies
IB Analysis-summary
Reasons to import:
Specialization of labor (Companies can take
advantage of the higher quality at lower prices that labor
specialization provides)
Global rivalry (global rivalry has forced companies to
use foreign suppliers to keep the costs of inputs low and
quality levels high)
Local unavailability (Sometimes because of the
unavailability of products locally, companies have no
choice but to import)
Diversification (like exporters, companies import as
part of a diversification strategy)
Importing and Exporting: Problems and Pitfalls
•Management contract
•A company is paid a fee to transfer management
personnel and administrative know-how abroad to
assist a company
•A company which wants to get management
assistance may pay for the required managerial
assistance when it believes another company can
better manage its operation.
•Foreign management contracts are used primarily
when the foreign company can manage better than
the owners
Collaborative Strategies and Direct Investment
•Equity alliances
•An arrangement in which at least one of the
companies takes an ownership position in the
other
•The purpose of the equity ownership is to solidify
a collaborating contract, such as a supplier-buyer
contract, so that it is more difficult to break
•particularly if the ownership is large enough to secure
a board membership for the investing company it
solidifies collaboration.
Collaborative Strategies and Direct Investment:
Comparison