International Management of Business

The following are important approaches of international management

Ethnocentrism

This approach focus on domestic market. The domestic market given the primary consideration and international market is given a secondary option. This approach does not recognize the cultural difference and apply same program and strategies for international market. The management is centrally controlled in this approach. There is no local market research.

Poly-Centrism Approach

This approach is totally opposite to Ethnocentric approach and see the international market as total new market and therefore the product and marketing program are designed in accordance with the culture and requirement of that market. The subsidiary are allowed to operate as per local requirement and decision making process is decentralized.

Geo centrism

This approach is mix of early approaches this approach believe that basic standard of home country must be followed however necessary changes in some operations are allowed as per requirement of local market. Each country requirement is considered to amend the global strategies accordingly . This approach allow flexibility . The approach believe in global strategy with due respect of local market.

Types of entry in overseas market

Types of entry in overseas Market

1. Direct Exporting
2. Indirect Exporting
3. Contract Manufacturing
4. Joint Venture 
5. Overseas Production

Important Factor for overseas entry

1. Firm Size 

Normally a large scale firm enter in international trade. The small scale company normally goes for the export because the setting a overseas operation requires a huge investment.

2. Mode of entry Available 

Some countries allow restricted access to foreign firm. for example some countries does not allow capital repatriation and the capital amount will remain invested . This is not an attractive option for foreign investor and this restriction also carry many risk especially risk . 

3. Skilled labor Availability 

The skilled labor availability in the country. The many huge scale industry require a lot of skilled labor . for example if a airline want to start an overseas production it would not be possible for it to start its operation in non developed countries like Afghanistan or Somalia because the required skill level would not be available in those countries.

4. Risk Assessment  

Assessment of different risk factor. There are a range of risk associated with international business these risk vary from the political risk to financial risk. Different entry options carry different risks some carries high political risk and some high financial risks. for example in case of export there are minimum risk .

5. Quality Issue 

The branded company also consider the quality control issue. Especially huge brands are more interested in brand image and quality issues. The many entry option like third party involvement in production under licensing arrangement may create quality issues.

Advantages of overseas Operations

Advantages of Overseas Operations

1. Better relationship with customer
2. Better understanding of local Market
3. Better Understanding of local Culture
4. Better control over the quality of production
5. Win the customer loyalty
6. lower Production cost 
7. Lower Transportation 
8. Lower Storage Cost
9. Overcome the Barriers both Tariff and Non Tariff
10. Bidding for public orders

Types of Services by International Banks

The following services offered by international Banks

1. Provide Finance for Foreign Trade
2. Provide Finance for huge projects like Dam Construction or Port Construction
3. International Transfer of Funds
4. Provide Facilitation Services for international Trade
5. Provide Foreign currency exchange for international Trade
6. Deals in Euro bands for lending and Borrowing
7. Providing Expert Services on international Trade

Types of Foreign Investments

Types of Foreign Investment

There are Basically Two types of foreign investment

1. Port polio foreign investment
2. Direct Foreign investment

Port folio foreign Investment :- The Port folio foreign investment is made in stock exchange by foreign investors. in port folio investment you are not directly involve in business operations.

Advantages of Portfolio investment:-

Easy to Dis-invest

The first advantage of port folio investment is that you can play safe and any time if you feel that your investment is at risk you can dis-invest your investment immediately. The all you need to call your broker to sell your shares in the market or you can also enter to your account online and sell your shares at market price.

Minimum Regulatory Requirement

The portfolio investment does not require much legal formalities .In many countries you enter into the market with the help of broker . You does not required non objection certificates from dozen of department to start a new business and need not to face red tap-ism in case of port folio investment.

Minimum Political Risk

The many political risk like civil war , political instability may be reduced due to port folio investment as discussed earlier that investment can be easily withdrawal from the stock exchange. The investor give great consideration to risk factor and in case of port folio investment many risk are minimized to acceptable level.

Financial Risk can be managed by diversification of portfolio

The risk management in port folio investment is much easier than direct investment . The all you need an expert to diversify your investment in accordance with internationally accepted rules and procedures. it is important to know that diversification does not total eliminate the financial risk it just minimize the financial risk. 

Public information is available for informed decision making

In port folio investment you can make more informed decision as you have access to wide information available on stock exchange about companies . you can also get detail market analyses from the financial newspaper and magazines. So there is a lot of free advice available for you investment decision. you can also get expert views about the investment from your broker or financial expert of the market.

2.Direct Investment 

The direct foreign investment is other than investment in stock exchange. in direct investment you are directly or indirectly involve in production or service provision.There are different types of foreign direct investment. 

1. Joint Ventures Arrangements
2. Licensing Arrangements
3. Foreign Subsidiary
4. Foreign Branches

Joint Ventures

What is Joint Venture

There are two types of Joint Ventures

1. Contractual Joint Venture
2. Equity Joint Venture

1. Contractual Joint Venture 

This type of joint venture normally for a specific period of time and for a particular project. The joint venture contract terminates terminates at the completion of project. The typical joint venture types is construction of huge project like a Dam or a housing society.

2. Equity Joint Venture 

The equity Joint venture is a long term arrangement and not for a specific project . Technically it is a joint investment of two entities and typically both party should have 50% investment .

Advantages of Joint Venture (Contractual Joint Venture)

1.Funds Availability  

Under the joint venture arrangement the more funds are available as more than one party is involved.

2. Speedy Work 

The second advantages the work is divided in different segments so everyone is performing its given tasks .

3. Improved Performance 

There is a sense of competition among the joint venture partners. this improves the quality of work.

4.Risks are Shared 

 Big project involves big risk , this arrangement allows the risk sharing among different partners in joint venture arrangement.

5. Introduction Management skill and technology 

This arrangement introduces new management skill to the entity and also helps to introduce the use of new methods and technology .

Disadvantages of Joint Ventures

1. Decision making process in not independent
2. high dependence on performance of other party
3. Sharing profit with other party

4. Difficult to coordinate

Advantages of Globalization

Advantages of Globalization

The following are important advantages of Globalization

1. Customer have access to quality products
2. The organization has more buyers
3. The more output result in lower unit fixed cost
4. The technological transfer to developing countries
5. The skills improvement of people around the world
6. The introduction of improved business practices

The following are limitations of Globalization

1. The one product cannot serve the globe
2. The currency exchange issue
3. Cultural issues
4. Lack of infrastructure facilities
5. Lack of skilled labor
6. Languages problems