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Ha Tong
BUS 367: International Business
Professor Craig Wright
How to do business internationally?
I. Why go international?
As you may know, many companies nowadays are trying to do business internationally because
of some important criteria that benefit their own business development; or in the other word, to
earn profits in the most efficient way.
 Cheap labor, material, exporting costs: Many developing countries appear attractive to
foreign businesses because of their inexpensive materials and labor force, especially in
developing countries like China, India, Mexico, etc in order to achieve economies of
scale.
 Higher demand: Since their current markets are going to be saturate, going international
is the best solution to save and earn money.
 Better government regulations: This one seems rare; however, does not mean “can-not-
happen”. The government regulations in some developing countries are in favor of
foreign businesses in order to boost the country’s economic growth. Moreover, the local
country also wants to learn new technologies as well as manufacturing methods from
foreign businesses to boost efficiency
 Access to more talented workforce: Foreign business can have more flexibility in
recruiting talented engineers, workers, and employees.
 Improving industry attractiveness: Obviously, doing in business in one country will limit
the company itself. Whereas if the company goes international, its products are exposed
to consumers with different tastes, opinions, favorites. By introducing their products to
other customers, the company will have several opportunities to bring its image to the
world by advertising campaigns.
 Differentiating products: The company’s products will be changed and differentiated to
meet the consumers’ needs better, which provides chances for the company to raise prices
to earn more profits.
 Normalizing risks: Companies would have a chance to have a diversified portfolio to
reduce their risks.
 Generating knowledge: obviously, a foreign company could learn new things to produce
better products if going international.
II. Things to consider if going international
1. Culture
Culture is considered to be the most important thing if you want to make profits in
foreign countries. In the Hofstede model, there are five dimensions of the culture to think
about: power distance, individualism/collectivism, masculinity/femininity, uncertainty
avoidance, and long-/short-term orientation. Clearly, Western cultures are different from
Eastern ones. By understanding these concepts, a business can know how to do things in
the most appropriate ways in order to come up with suitable negotiation, communication,
advertising, etc. For example, Japanese people do not have the word, self-respect, in their

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dictionary; but American people do have. This could mean that Japanese people are
interested in working in a team: everybody has to do things that favor the team’s goal, not
individual’s benefit.
First, regarding the company’s products and services, by understanding the culture,
the business can have knowledge of consumer behavior differences across cultures. This
definitely helps them to make suitable branding and advertising strategies. Also, by
understanding different consumers’ tastes, favorites, and opinions, the company can
differentiate its own products and services directing different consumer segments to gain
higher profits. Wipro Technologies in Europe, which was originally from Indian, had
some problems of understanding and building relationships with its customers. They just
brought their Indian culture, which focuses on collectivism, to its new European
environment, which is all about individualism.
Second, by spending time to study what the other side of the world thinking, the
mother company could have better oversea strategic management. Danone and Wahaha is
a typical example of a failure in international management due to dissimilar visions and
cultural perspectives. Danone was too dependent on the management control of the joint
venture by Zong, the president of Wahaha. The mother one, Danone, did not
communicate effectively with Wahaha about strategies to capture the Chinese market
share effectively; but let Zong do whatever he wanted.
Case related: Danone and Wahaha: A bitter-sweet partnership
Third, communication is what the mother company and the local one needs to do in
order to guarantee the development of the local and goal of the headquarter as a whole.
Lacks of communication could lead to misunderstandings in management, development,
visions, and profitability of the company. For example, Wipro Technologies in Europe
and its headquarter in India faced the communication problem: the India-based people
would periodically come to Europe for meetings or discussions; otherwise, they just do
email, telephone, and video-conferencing to keep track on what going on. Moreover, the
company’s structure seemed to be fragile since European and Indian employees have
some conflicts in operating and hiring processes.
Case related: Cisco Systems, Inc: collaboration on new product introduction; Wipro
Technologies in Europe, Levendary Café
2. Government regulations
Besides culture, government regulations seem to be the most difficult obstacle
that a business has to overcome. The foreign business has no choice but apply the
complex local laws and regulations regarding taxes, accounting systems, such restrictions.
As a result, this would cause inconsistency in the company’s management and goals. For
example, in the case Levendary Café: Challenge in China, the US headquarter faced
serious problems regarding its recent entry into the fast-growing market in China,
including the company’s inconsistent accounting system. This definitely caused problem
to the company in the long-run. There should be consistent reporting system between the
Levendary China and the corporate in order to guarantee transparency in management
and operation. The second example is regarding the challenge of Google with the Chinese
government in entering China. Obviously, the Chinese government controlled the Internet
strictly because they believed that they have to stabilize the country for the economic
development. They tried to make their citizens blind on everything, which is kind of

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stupid, but very smart and cruel strategy to rule the country. Therefore, Google had no
choice but obeying the “stupid” rules.
 Corruptions: As a company is doing business in a foreign country, it has to meet every
“under-table” laws, known as corruptions. Corruptions include bribery, tunneling,
embezzlement, fraud, nepotism, and cronyism. Some countries consider these things as
their customs.
Case related: Google and the Government in China, Levendary Cafes: Challenge in
China
3. Patent
Patent is very sensitive problem in developing countries, especially China, where
individual’s intelligence is sold with cheap price everywhere without permission of the
author. Danone and Wahaha also faced this problem regarding Danone manufacturing
technology, which was transferred to Wahaha joint ventures for production. Wahaha used
the brand and formula owned by the JVs without proper authorization to benefit its non-
joint ventures. Obviously, the company’s core competency is the most crucial thing of the
company to set it apart from others and earn money. Losing core competency means
losing business.
Case related: Cameron Auto Parts, Danone and Wahaha
4. Financial situation
The local financial situation should be taken into consideration if a business decides to go
international, especially the local country’s growth rates, exchange rates, etc.
5. Geography
This criterion is always a problem. Long distance can cause higher shipping costs, freight
costs, lead time issues, and time zone differences. For example, Scotts Miracle-Gro tried
to make a decision whether or not to outsource to China. There existed several problems
relating supply chain operation and associated costs, such as overhead costs, transition
costs, general and administrative costs.
Case related: Polaris Industries, Scotts Miracle Gro
6. Oversea Operation/Management
One of the costs relating to this is transition costs. There could exist moral hazard, in
which one side cheat on the other for benefits; or adverse selection, in which the foreign
company may make the contract with bad companies due to lack of information.
Moreover, foreign operation can cause distraction and time-consuming.
7. Managing operating exposure
Since a business may have foreign currency-denominated costs/revenues, it is more
difficult to approximate the amount of future cash flows. One example is the Baker
Adhesives and a Brazilian Novo ’s problem. Two companies signed a contract agreeing
in a per gallon price; however, the value of payment was lower than anticipated due to
appreciation in Brazilian reais. In order to solve this problem, the company can use
forward market and money market to reduce additional lost
a. Revenue management
Market selection is the most important thing to consider. One suggestion is that a
company can export its products to a stable country (in exchange rate term) or sell to
a market within a country that is not very price-sensitive
b. Cost management

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Building facilities, and making any related decision of selecting their number and size
should be done in such a way that a firm and adjust to currency movements. A giant
factory can be less efficient; and smaller plants might allow better management of
currency exposure
c. Financial management
Financial cash flows could be used to offset local currency exposure.
However, these methods depend upon several criteria such as power of the industry and
trust between each other. A company should acknowledge the associated risks, and who pays for
the risks, etc in order to minimize the risks as much as possible.
Case related: Baker Adhesives
III. Types of going outside your home
There are several ways to set your foot in foreign countries as following.
Transnational
(most complex)
Global Multinational International
Definition A bunch of
difference
subsidiaries all
trading or
networking with
one another
Core competency
used over and over
(Coca Cola) =>
everyone doing the
same thing, one
great idea used
over and over
again
Lots of independent
subsidiaries
(separate companies
in diff. countries =>
country manager)
Import/export (sell
products elsewhere,
buys materials
elsewhere, head
quarter in home
country
Disadvantages - Hard to keep
track of
- Make decision
to the world
- Don’t need to
talk to each
other
- Inconsistent
management,
operations =>
different goals,
visions
- Lack of
communication
- Hard to keep
track of
Advantages - Reduce risks - Reduce risks
and associated
costs
- Reduce risks
-
- Reduce risks
Case related: Chabros International Group: A world of wood
IV. Adaptation of Globalization
1. Adaptation
Adaptation is one way to achieve success if the business decides to go international. A
foreign business should adapt their products and services to local consumers if the
products are related to their daily habits and cultures. Therefore, the company has to
understand characteristics of the products and services; in the other words, they have to
know local consumers’ habits and behaviors in using similar products in order to change
their products if necessary. These products and services usually are food, convenient

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stores, etc, which are cultural-rooted. In the case 7-Eleven in Taiwan: Adaptation of
convenience stores to new market environments, the company has successfully set up and
adapted its store chains in Asian countries by its intelligent strategies. Since the structures
in Taiwan and most of the countries in Asia are vertical with high density. The company
built up the store chains for mainstream needs, which is unlike the 7-eleven convenient
stores in the US with full of supplementary stuffs for urgent needs. According to Hsieh,
the growth of 7-Eleven in Taiwan since 1980 could be divided into three distinct phases
of about a decade each as following.
 Phase one: Imitation
At this stage, its immediate priority was to establish a good working relationship with the
America partner, and was characterized by President Chain Store Corp.’s conformity
with the tried and tested US model.
 Phase two: Localization
The second decade marked the beginnings of the realization that the “mistakes” of the
first decade needed to be undone. The President Chain started to loosen up some of the
established systems and structures, principally those that pertained to ownership, location
and merchandise. The company had begun taking steps to provide a local flavor in its
stores.
 Phase three: Innovations
The company reinforced the concept of customer convenience not only at the level of
operation, but also at the level of technology. This one required the company to do things
that are untested but workable ideas around products and services offered at the store.
Therefore, the company had to understand its own customers’ habits and behaviors
deeply.
There are many company succeeded in adapting their adaptation into local
markets, such as Pizza Huts, McDonald, KFC, etc. However, there some companies faced
failures. For example, Grosch, a brewery originating from Netherland, produced too
many different products with efforts to adapt the products to every local markets in
Germany, UK, Poland. However, the company seemed to be short of knowledge of
consumers’ behaviors and the products’ characteristics.
2. Globalization
Globalization is another way to set a foot step into foreign markets. Many corporations
are successfully standardizing their products, such as Unilever, P&G, Coca Cola,
Samsung, Apple etc. An excellent example could be Samsung. Samsung, known as
having traditionally production-oriented strategies, has changed to marketing-oriented
strategies. Since technology is changed day by day, the electronic products usually have
short life cycle. Samsung was smart in making products that meet consumers’ needs:
advanced and cheap products. The company also spent lots of efforts on global marketing
campaigns by establishing product, regional, and marketing strategy teams. Overall, these
products and services are designed and developed with multiple functions to meet most
of the consumers’ needs.

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Advantages and Disadvantages
Adaptation Globalization
Advantages - Material availability
- Flexibility
- Products are
differentiated =>
earn more money
- Low costs
- Easy to control
- Cheap product, meet
general consumes’
demands
Disadvantages - High costs in
marketing,
management and
operation
- Difficult to control
- Undifferentiated
products
Case related: 7-Eleven in Taiwan: Adaptation of convenience stores to new market
environments, Henkel Detergent, Levendary Café, Samsung, Amore
V. How to get new products into International Markets (Foreign market entry modes)
Exporting
(Direct,
Indirect)
Licensing Joint
Venture
Direct
Investment
Strategic
Alliances
Financial Capital
Requirement
Low Zero Med High High
Profit Potential
to Investor
Med Low Med High High
Financial risk Low Low Med High High
Managerial Management
Requirement
Low Low Med High Med
Operational
Decisiveness
Med High Low High Med
Speed of Market
Entry
Low High High Med High
Technological Access to
Customer
Feedback
Low Low Med High Med
Technological
Risk
Med High Med Low Med
Other Ability to cope
with high tariffs
Low High High High Low
Ability to
exploit high
economies of
scale
High Low Med Med Med
Obviously a company wants to want foreign direct investment in order to control and own
everything. This means the company will have no choice but learning and building everything

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from a baby level in a new market. This is somewhat risky and unstable. However, there are
several restraints if going international.
Exporting is the first option to consider. However, its restraints are government regulations
and lack of consumer information.
The second one is licensing. An example could be in the case Cameron Auto Parts,
McTaggart was willing to help the company to get a step in joining European market by
licensing. Although this could save some money for Cameron, but it also means that Cameron
would have no access to the European market in the future; and its own core competency was
sold to another company. Licensing company can turn into future competitors or may ruin the
company’s names and reputation.
The third one is full acquisition or joint venture. This solution can help the foreign business
simplify managerial decision making and make everything easier to earn money. These alliance
options allow firms to pursue a strategic goal as well as create value from combining widely
different sets of capabilities including selective access to the target firms’ capabilities and
management with separate firms. However, there may exists conflict over asymmetric new
investments, mistrust over each other, lack of support from the mother company, and
performance ambiguity.
The fourth one is strategic alliance. This method will allow technology exchange, increase
global competition, industry coverage, and fasten economies of scale and reduction of risk. Its
disadvantages are difficult to find a good and suitable partner, loss of control and unstable
relationship management across border.
Case related: Neilson International in Mexico
VI. Trade Finance Instruments
Following are some of main trade finance instruments:
Instruments Pros Cons
Prepayment - Reduce nonpayment
for goods
(exporters)
- Least attractive
payment option for
importers
- Uncompetitive for
exporters
Letter of credit: a commitment
by an importer’s bank that
payment will be made to the
exporter once the L/C’s terms
and conditions have been met
- Reduce nonpayment
for goods
(exporters)
- Guarantee shipped
goods (importers)
- Increase
transparency
- Reduce risks for
both sides
- High cost associated
with the use of L/Cs

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On-time payment is always a concern of the international buyers. One of the reasons
causing the problem is that the sellers do not trust the buyer; therefore, they choose to pay later if
there exist any unqualified products. For example, Belco is a global leading marketer of poultry,
meat and other food products. The company’s credit team was facing a problem of collecting
account receivables, particularly from Kooritsa Kiev. Having been collaborated with Belco for
four years, Kooritsa had committed on placing large order and made quick payments in early
2008. It was 40 days since Kooritsa received the order, but the company hadn’t pay back Belco,
which was about $84,000; and the company was going to have an outstanding balance for an
additional $78,000 that would come to due in 15 days.
Case related: Exporting to Ghana, Belco Global Foods
Documentary collections:
entrusting their own banks the
collection of an importer’s
payment
- Allow exporters
retain control of the
goods until payment
is received
- Low bank
associated fees
- Goods shipped are not
specification
(importers)
Open account: exporters ship
and delivery goods before
payment (typically 30-90 days)
- Attractive to
importers since they
can resell foods
before having to pay
- Generate working
capital needs for
exporters
- The highest-risk option
for exporters

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Case briefs
1. Global Wine War 1009: New World versus Old (p.10)
2. Wipro Technologies Europe (A) (p.12)
3. Henkel KGaA: Detergents Division (p.13)
4. Scotts Miracle-Gro: The Spreader Sourcing Decision (p.15)
5. Polaris Industries Inc. (case analysis, p.15)
6. Offshoring at Global Information Systems, Inc (p.17)
7. Baker Adhesives (p.18)
8. Belco Global Foods (p.19)
9. Cisco Systems, Inc.: Collaborating on New Product Introduction GS-66 (p.20)
10. Foreign Investment in Russia: Challenging the bear (p.21)
11. Cameron Auto Parts (p.22)
12. Chabros International Group: a world of wood (case analysis, p.23)
13. Exporting to Ghana (case analysis, p.24)
14. Danone and Wahaha: A bitter-sweet partnership (p.27)
15. Grosch: Growing Globally (p.28)
16. Neilson International in Mexico (case analysis, p.29)
17. Levenday Café: A global challenge (p.31)
18. Samsung (p.31)
19. Google and the Government of China on Tuesday (p.32)
20. AmorePacific (p.33)