ASA University Bangladesh

(ASAUB)

AN ASSIGNMENT
On

COURSE CODE
COURSE NAME
PROGRAM NAME
SEMESTER

:
:
:
:

IBT 501
INTERNATIONAL BUSINESS
MBA (R)
FALL - 2013

SUBMITTED TO
Professor
Faculty of Business
ASA UNIVERSITY BANGLADESH (ASAUB)
SUBMITTED BY

MD.SAMSUL ALAM
ID
BATCH NUMBER
SECTION

:
:
:

13-2-14-0026
19th
A

Date of Submission:

28th December, 2013

LETTER OF TRANSMITTAL

28th December, 2013

To,
Dr. A. K. M. Helal uz Zamam

Professor
Faculty of Business
ASA University Bangladesh (ASAUB)
Subject: Submission of Assignment.

Dear Sir,
I am very glad to inform you that under your kind guidance & Instruction. I
have Completed my Assignment paper on International Human
Resource Management . I have tried my best to make it a good one
within given time. Any sort of suggestion regarding this term paper would
be gladly appreciated and we would be gratified if this paper serves its
purpose.
We are pleased to provide you this term paper with necessary notes,
reference and we shall be available for any clarification, if required.

Sincerely Yours,
..
Md. Samsul Alam

ID: 13-2-14-0026
Batch: 19th
Program: MBA ( R)
ASA University Bangladesh (ASAUB)

Declaration
I do hereby solemnly declare that the work presented in this Assignment
paper Carried Out by me and has not been previously to any others
University/Collage/Organization.
The work I have presented dose not breach any exciting copyright no
portion of this Assignment paper is copied from any work done .
I further undertake to indemnify the department Against any loss or
damage arising from breach of the forgoing obligation .

Md. Samsul Alam

ID: 13-2-14-0026
Batch: 19th
Program: MBA ( R)
ASA University Bangladesh (ASAUB)

Table of Contents

SL No.

Particulars

Acknowledgements

Introduction

Objective

Importance of International strategy

Identifying International Opportunities

Determinants of National Advantage

International business-level strategy

International corporate-level strategy

ENTRY STRATEGIES

10

Risks in an International Environment

11

SUMMARY

12

Findings

Introduction:

Provides an overview framework for understanding international strategy.

Observes that international strategy draws on much of the same theory as
corporate strategy.
The same tests that can be applied to justify expansion across
businesses--the better off and ownership tests--also apply to expansion
across borders. What is different about international strategy is that
widening a firm's domain to the entire globe introduces substantively
different degrees of heterogeneity, scale, and volatility across markets.
These three factors create new opportunities and trade-offs for
multinationals. Effective international strategy is based on a source of
competitive advantage that capitalizes on one of these factors and aligns
the configuration of all its activities in support of that advantage.
Multinationals need to choose the products they offer, the countries in
which they compete, the location of their activities, and their organizational
design contingent on their international strategy.

Objective of International Strategic:

International strategy is A strategy through which the

firm sells its goods or services outside its domestic
market.

Companies adopt an international strategy when they aim to leverage their

core competencies by expanding opportunistically into foreign markets.
International firms include the likes of McDonald's, Kellogg, Google, Hair,
Wal-Mart, and Microsoft.
The international model relies on local subsidiaries in each country to
administer business as instructed by headquarters. Some subsidiaries may
have freedom to adapt products to local conditions as well as to set up
some light assembly operations or promotion Programs. Still, ultimate
control resides with managers at headquarter who reason they best know
the basis and potential extension of the companys core competencies.
Historically, critical elements of the companys value chain, such as
research and development to branding, have been centralized at
headquarters.

Importance of International strategy:

International strategy is important because it prevents stronger countries
from taking advantage of weaker ones. Furthermore, it is important when it

comes to establishing a product or service which can compete successfully

in the international market.
International strategy is important because it will establish the product or
service as a competitive product among other products of the international
country and could garner major profits for the company releasing the
product or service. It can also establish the company as an international
competitor and it may be a first step to setting up bases in other countries
in order to support potential international operations which will give growth
to the company and increase profits on the bottom line. Strategy is
important overall because it is the only way to effectively use the resources
the company has in order to increase profits and use the least amount of
resources possible.
Domestic strategic planning only includes the product and strategy that has
to do with that product and target markets. International strategic planning
includes different cultures so for each culture the product may have to be
modified. Some countries may also allow bribes and expect it in order to
allow the product into their country. All these factors have to account for
when introducing the product while domestically, these issues do not exist.
Certain legal issues also need to be looked at and analyzed in order to
make sure that everything is done legally and all the proper paperwork is
done in order to ensure that in the end the product or its marketing is not
breaking any laws. A market study needs to also be done to make sure the
product doesn't offend the people in that market.

 INTERNATIONAL STRATEGY TO
EXPAND BUSINESS OF
BANGLADESH

Identifying International Opportunities:

A strategy through which the firm sells its goods or services outside its
domestic market
Reasons for an International Strategy:
Potential new opportunities
Innovation occurs in home-country market and demand for
product develops in other countries
Extend product life cycle
Secure needed resources
Pressure for global integration and globally branded products
Global economies of scale
High potential demand for products and services
Currency fluctuations and tariffs

International Strategy Benefits:

Increased Market Size
Domestic market may lack the size to support efficient scale
manufacturing facilities.
Return on Investment
Large investment projects may require global markets to
justify the capital outlays.

Weak patent protection in some countries implies that firms

should
expand overseas rapidly in order to preempt
imitators.

Economies of Scale (or Learning)

Expanding size or scope of markets helps to achieve
economies of scale in manufacturing as well as marketing,
R&D or distribution.
Can spread costs over a larger sales base.
Can increase profit per unit.
Location Advantages
Low cost markets aid in developing competitive advantage by
providing access to:
Raw materials
Transportation
Lower costs for labor
Key customers
Energy

Determinants of National Advantage:

Factors of production
The inputs necessary to compete in any industry
Labor

Land Natural resources

Capital

Infrastructure

Basic factors
Natural and labor resources

Advanced factors
Digital communication systems and an educated workforce

 Demand Conditions
Characterized by the nature and size of buyers needs in the
home market for the industrys goods or services.

Size of the market segment can lead to scale-efficient facilities.

Efficiency can lead to domination of the industry in other

countries.

Specialized demand may create opportunities beyond national

boundaries.

Related and Supporting Industries

Supporting services, facilities, suppliers and so on.

Support in design

Support in distribution

Related industries as suppliers and buyers

Firm Strategy, Structure and Rivalry

The pattern of strategy, structure, and rivalry among firms.

Common technical training

Methodological product and process improvement

Cooperative and competitive systems

International Strategies:
Firms can choose one or both of two basic types of International Strategies:

International business-level strategy:

Follows generic strategies of low cost, differentiation, focused low cost,
focused differentiation, or integrated low cost and differentiation
There are four generic strategies that are used to help organizations
establish a competitive advantage over industry rivals. Firms may also

choose to compete across a broad market or a focused market. We also

briefly discuss a fifth business level strategy called an integrated strategy.
1. Cost Leadership Organizations compete for a wide customer based
on price. Price is based on internal efficiency in order to have a margin that
will sustain above average returns and cost to the customer so that
customers will purchase your product/service. Works well when
product/service is standardized, can have generic goods that are
acceptable to many customers, and can offer the lowest price. Continuous
efforts to lower costs relative to competitors is necessary in order to
successfully be a cost leader. This can include:

Building state of art efficient facilities (may make it costly for

competition to imitate)
Maintain tight control over production and overhead costs
Minimize cost of sales, R&D, and service.

Porters 5 Forces Model

Earlier we discussed Porters Model. A cost leadership strategy may help to
remain profitable even with: rivalry, new entrants, suppliers power,
substitute products, and buyers power.

Rivalry Competitors are likely to avoid a price war, since the low
cost firm will continue to earn profits after competitors compete away
their profits (Airlines).
Customers Powerful customers that force firms to produce
goods/service at lower profits may exit the market rather than earn
below average profits leaving the low cost organization in a monopoly
positions. Buyers then loose much of their buying power.
Suppliers Cost leaders are able to absorb greater price increases
before it must raise price to customers.
Entrants Low cost leaders create barriers to market entry through
its continuous focus on efficiency and reducing costs.
Substitutes Low cost leaders are more likely to lower costs to entice
customers to stay with their product, invest to develop substitutes,
purchase patents.

How to Obtain a Cost Advantage?

Determine and Control Cost

Reconfigure the Value Chain as Needed

Risks

Technology
Imitation
Tunnel Vision

Value Chain A framework that firms can use to identify and evaluate the
ways in which their resources and capabilities can add value. The value of
the analysis lays in being able to break the organizations operations or
activities into primary (such as operations, marketing & sales, and service)
and support ( staff activities including human resources management &
procurement) activities. Analyzing the firms value-chain helps to assess
your organizations to what you perceive your competitors value-chain,
uncover ways to cut costs, and find ways add value to customer
transactions that will provide a competitive advantage.

2. Differentiation - Value is provided to customers through unique features

and characteristics of an organizations products rather than by the lowest
price. This is done through high quality, features, high customer service,
rapid product innovation, advanced technological features, image
management, etc. (Some companies that follow this strategy: Rolex, Intel,
Ralph Lauren)
Create Value by:

Lowering Buyers Costs Higher quality means less breakdowns,

quicker response to problems.
Raising Buyers Performance Buyer may improve performance,
have higher level of enjoyment.
Sustainability Creating barriers by perceptions of uniqueness and
reputation, creating high switching costs through differentiation and
uniqueness.

Risks of Using a Differentiation Strategy

Uniqueness
Imitation
Loss of Value

Porters Five Forces Model Effective differentiators can remain

profitable even when the five forces appear unattractive.

Rivalry Brand loyalty means that customers will be less sensitive to

price increases, as long as the firm can satisfy the needs of its
customers (audiofiles).
Suppliers Because differentiators charge a premium price they can
more afford to absorb higher costs and customers are willing to pay
extra too.
Entrants Loyalty provides a difficult barrier to overcome. Substitutes
(trans. 4-26) Once again brand loyalty helps combat substitute
products.

3. Focused Low Cost- Organizations not only compete on price, but also
select a small segment of the market to provide goods and services to. For
example a company that sells only to the U.S. government.
4. Focused Differentiation - Organizations not only compete based on
differientation, but also select a small segment of the market to provide
goods and services.
Focused Strategies Strategies that seek to serve the needs of a particular
customer segment (e.g., federal government).
Companies that use focused strategies may be able serve the smaller
segment (e.g. business travelers) better than competitors who have a wider
base of customers. This is especially true when special needs make it
difficult for industry-wide competitors to serve the needs of this group of
customers. By serving a segment that was previously poorly segmented an
organization has unique capability to serve niche.

Risks of Using Focused Strategies:

Maybe out focused by competitors (even smaller segment)

Segment may become of interest to broad market firm(s)

5. Using an Integrated Low-Cost/Differentiation Strategy

This new strategy may become more popular as global competition
increases. Firms that use this strategy may see improvement in their ability
to:

Adaptability to environmental changes.

Learn new skills and technologies
More effectively leverage core competencies across business units
and products lines which should enable the firm to produce produces
with differentiated features at lower costs.

Thus the customer realizes value based both on product features and a low
price. Southwest airlines is one example of a company that does uses this
strategy.
However, organizations that choose this strategy must be careful not to:
becoming stuck in the middle i.e., not being able to manage successfully
the five competitive forces and not achieve strategic competitiveness. Must
be capable of consistently reducing costs while adding differentiated
features.

International corporate-level strategy:

The type of corporate strategy selected will have an impact on
the selection and implementation of the business-level
strategies.
Some strategies provide individual country units with the
flexibility to choose their own strategies.
Other strategies dictate business-level strategies from the
home office and coordinate resource sharing across units.

 Focuses on the scope of operations:

Product diversification
Geographic diversification
Required when the firm operates in:
Multiple industries, and
Multiple countries or regions
Headquarters unit guides the strategy
But business or country-level managers can have substantial
strategic input.

Multidomestic Strategy:
Strategy and operating decisions are decentralized to strategic
business units (SBU) in each country.
Products and services are tailored to local markets.
Business units in one country are independent of each other.
Assumes markets differ by country or regions.
Focus on competition in each market.
Prominent strategy among European firms due to broad variety of
cultures and markets in Europe.

Global Strategy:
Products are standardized across national markets.
Business-level strategic decisions are centralized in the home office.
Strategic business units (SBU) are assumed to be interdependent.
Emphasizes economies of scale.
Often lacks responsiveness to local markets.
Requires resource sharing and coordination across borders (hard to
manage).

Transnational Strategy:
Seeks to achieve both global efficiency and local responsiveness.
Difficult to achieve because of simultaneous requirements:
Strong central control and coordination to achieve efficiency
Decentralization to achieve local market responsiveness

 Firm must pursue organizational learning to achieve competitive

advantage.

HOW DO FIRMS
STRATEGIES:

GO

INTERNATIONAL?

ENTRY

Foreign market entry strategies differ in degree of risk they present, the
control and commitment of resources they require and the return on
investment they promise. There are two major types of entry modes:
1) non-equity mode, which includes export and contractual agreements,
2) equity mode, which includes joint venture and wholly owned
subsidiaries.
The market-entry technique that offers the lowest level of risk and the least
market control is export and import. The highest risk, but also the highest
market control and expected return on investment are connected with direct
investments that can be made as an acquisition (sometimes called
Brownfield) and Greenfield investments

Exporting and importing

The first and the most common strategy to be an international company is:
import and export of goods, materials and services. Exporting is the

process of selling goods or services produced in one country to other

countries.
There are two types of exporting: direct and indirect. Indirect export means
that products are carried abroad by other agents and the firm doesnt have
special activity connected with international market, because the sale
abroad is treated like the domestic one. For these reasons it is difficult to
say that it is an internationalization strategy. In the case of direct exporting,
the firm becomes directly involved in marketing its products in foreign
markets.

Licensing
Licensing is another way to enter a foreign market with a limited degree of
risk. The international licensing firm gives the licensee patent rights,
trademark rights, copyrights or know-how on products and processes. In
return, the licensee will: produce the licensors products, market these
products in his assigned territory and pay the licensor fees and royalties
usually related to the sales volume of the
products. This type of agreement is generally welcomed by foreign public
authorities because it brings technology into the country.

Franchising
Franchising is similar to licensing except that the franchising organization
tends to be more directly involved in the development and control of the
marketing program .The franchising system can be defined as a system in
which semi-independent business owners (franchisees) pay fees and
royalties to a parent company (franchiser) in return for the right to become
identified with its trademark, to sell its products or services, and often to
use its business format and system. Compared to licensing, franchising
agreements tends to be longer and the franchisor offers a broader package
of rights and resources which usually includes: equipments, managerial
systems, operation manual, initial trainings, site approval and all the
support necessary for the franchisee to run its business in the same way it
is done by the franchisor. In addition to that, while a licensing agreement
involves things such as intellectual property, trade secrets and others in
franchising it is limited to trademarks and operating know-how of the
business.
Advantages of the international franchising mode are as follows:

 low political risk

low cost
allows simultaneous expansion into different regions of the world
well selected partners bring financial investment as well as managerial
capabilities to the operation.
There are also disadvantages of the international franchising mode:
franchisees may turn into future competitors
demand of franchisees may be scarce when starting to franchise a
company, which can lead to making agreements with the wrong
candidates
a wrong franchisee may ruin the companys name and reputation in the
market
comparing to other modes such as exporting and even licensing,
international franchising requires a greater financial investment to attract
prospects and support and manage franchisees.

Joint Ventures
Foreign joint ventures have much in common with licensing. The major
difference is that in joint ventures, the international firm has an equity
position and a management voice in the foreign firm. A partnership
between host- and home-country firms is formed, usually resulting in the
creation of a third firm .
This type of agreement gives the international firm better control over
operations and also access to local market knowledge. The international
firm has access to the network of relationships of the franchisee and is less
exposed to the risk expropriation thanks to the partnership with the local
firm. This type of agreement is very popular in international management.
Its popularity stems from the fact that it permits the avoidance of control
problems of the other types of foreign market entry strategies. In addition,
the presence of the local firm facilitates the integration of the international
firm in a foreign

Environment.

Risks in an International Environment:

Political Risks
Instability in national governments
War, both civil and international
Potential nationalization of a firms resources
Economic Risks

Differences and fluctuations in the value of different currencies

Differences in prevailing wage rates
Difficulties in enforcing property rights
Unemployment

SUMMARY:
In the international competitive environment, the ability to develop a
transnational organizational capability is the key factor that can help the
firm adapt to the changes in the dynamic environment. As the fast rate of
globalization renders the traditional ways of doing business irrelevant, it is
vital for managers to have a global mindset to be effective. Globalization of
business has led to the emergence of global strategic management. A
combination of strategic management and international business will result
in strategies for global cooperation. However, there are obstacles to
progress along the way.
The problems caused by these obstacles can be solved by cooperative
ventures based on mutual advantages of the parties involved. Proper
effective communication will be a key element for global strategies because

what is proper and effective in one culture may be ineffective and improper
in
another. Marketing products globally is complex and difficult because of
several factors including: International Strategic Alliances, coordination and
control of international marketing, communication, regional trade blocks,
and choice of global strategy. The firm with the choice of an effective global
that takes into consideration its strengths and weaknesses in the face of
the opportunities and
threats in the environment, will survive

Findings :
This study found that high business relatedness between a subsidiary and
parent firm are positively associated with a broad market scope and
differentiation strategy. Secondly, international experience is positively
associated with a differentiation strategy. The study also found that
perceived competition is positively associated with a broad market scope
and perceived low competition influences a narrow product/market scope.
Finally, perceived barriers positively impact a differentiation strategy.