Notes

IBT REVIEWER

INTERNATIONAL BUSINESS AND TRADE

SOCIO-CULTURAL ENVIRONMENT
~ Social Factor- reference groups, family, and social roles and statuses
~ Culture- customs, arts, social institutions, and achievements of a particular nation, people, or other social group.

E L E M E N T S O F C U L T U R E
~ Attitude and Beliefs- all aspects of human behavior
~ Attitude towards Time- behavior regarding punctuality
~  Attitude towards Works and Leisure- views towards wealth and material gains
~  Attitude towards Achievement- 
~  Attitude towards Change- resist change and how the areas of resistance differ among cultures.
~  Attitude towards Job-  most desirable or prestigious varies greatly.
~ Cultural Dimension- to determine the cultural aspects of markets.
~ Religion-  moral and ethical standards
~ Family System- subject to a host of local codes.
~ Educational system- literacy rate and the general level of education
~Marketing in Cross Cultural context- based on the values of society must also be adaptive.

TECHNOLOGICAL ENVIRONMENT
~ study different elements in the technological segment.



ECONOMIC ENVIRONMENT
 Economic System- dominant method of resource allocation:

3 Types of Economic system
~ Market Allocation- Consumers “write” the economic plan.
~Command Allocation- state has broad powers to serve the public interest.
~ Mixed Allocation- proportion of Gross Domestic Product (GDP).


THE INTERNATIONAL ECONOMIC SYSTEM

~ Eurepean Union- ensure the free movement of people, goods, services and capital
~ World Bank-world’s largest sources of funding
~ IMF- monetary cooperation, secure financial stability
~ World trade Organization- operates a global system of trade rules
~ General Agreement on Tariffs and Trade- reliable system of international trade rules.
~ Income and Purchasing power Parity Around the Globe- company charts a plan for global market expansion.


KEY ECONOMIC ISSUES THAT INFLUENCE THE INTERNATIONAL BUSINESS
~ Inflation- rise the prices of various goods and services.
~ Unemployment- rate of the number of unemployed workers
~ Debt- sum of government’s financial obligations,
~ Income Distribution- skewed income distributions of urban and rural areas.
~ Poverty- state of having little or no money,
~ Balance of Payment- statement of International Transactions


ECONOMIC ENVIRONMENT
Political System- the political environment of a country,
~ Political Risk-imposition of new controls
~ Confiscation-government’s taking ownership of a property without compensation.
~ Expropriation-
~ Nationalization- Involves government ownership.
~ Domestication-


INDICATORS OF POLITICAL INSTABILITY
~ Social Unrest-
~ Attitude of Nationals-
~ Policies of the Host Government


MODES OF ENTERING INTERNATIONAL BUSINESS

Merger and Acquisition

Merger- combine forces to create a new, joint organization.

Types of Mergers
~  Horizontal merger-  direct competition and share the same product lines.
~  Vertical merger- not compete with each other but exist in the same supply chain and markets.
~ Market-extension merger- deal in the same products but in separate markets.
~ Product-extension merger- deal in products that are related to each other and operate in the same market.
~ Conglomeration- involved in totally unrelated business activities.
~ Acquisition- takeover of one entity by another.
~ Consolidation- merger and acquisition of many smaller companies


Joint Ventures- form a partnership to share markets, intellectual property, assets.
Strategic Alliance- undertake a mutually beneficial project while each retains its independence.
Licensing- obtaining permission from a company (licensor)
Franchising- a specialized form of licensing 
Contract Manufacturing- working agreement between two companies.
Exporting- sale of products and services in foreign countries



Exporting Methods
~ Direct Marketing- sale in the foreign market by the manufacturer himself
~ Agents- obtain orders on a commission basis.
~ Distributors-buy the product from the manufacturer


Modes of entering in an int’l business:
✔Merger and acquisitions
✔ Joint ventures
✔Strategic Alliance
✔Licensing and Franchising
✔Contract Manufacturing
✔Exporting




ASSESSING CAPABILITIES AND POTENTIAL

Trade-basic economic principle that deals with buying or selling of goods and services.

Importing- purchasing goods and services from other countries then bringing them homebound

Exporting- selling of goods and services to foreign nations.
 
ANALYZING DOMESTIC CAPABILITIES
International Market Research- analyze the potential demand and for their target country of export.


International Market Research Process
a. Developing Research Questions
b. Conducting Research
c. Review Potential Markets
d. Develop an Export Plan


ASSESSING EXPORT INDUSTRIES
1. Export potential Map-
2. market Analysis map
3. Export Performance index- assess and monitor the different dimensions of export performance



Exporting Theories

~ Export behavior as a Marketing Innovation by Simmonds and Smith (1968)
~ Diffusion of Innovation Theory by Lee and Brasch (1978)
~ Knowledge Development and Increasing Foreign Market Commitment Model by Johanson and Vahlne (1977)
~Pre-Export Behavior Model by Wiedersheim-Paul, et al. (1978)
~ Stage Hierarchy Approach by Bilkey and Tesar (1977)

ASSESSING CAPABILITIES AND POTENTIAL
✖Identifying trade opportunities
✖Analyzing domestic capabilities
✖Assessing export industries
✖Exporting theories