Management of International Business www.thebrandgenix.com Akshay's Blog

1. MANAGEMENT OF
INTERNATIONAL
BUSINESS
A S S I G N M E N T 1 & 2

2. Submitted by:-
Akshay Parashar
ASSIGNMENT 1 & 2

3. ASSIGNMENT 1

4. E.P.R.G. APPROACH
The way businesses and staff view the world is described as international management
orientations. Howard Perlmutter identified a way of classifying alternative management
orientations, which is commonly referred as Perlmutter’s EPRG model. He states that
businesses and their staff tend to operate in one of four ways:

5. E.P.R.G. MODEL

6. ETHNOCENTRIC
These people or companies believe that the home country is superior. When they look to new
markets they rely on what they know and seek similarities with their own country. Overseas
subsidiaries or offices in international markets are seen as less able and less important than the
head office. Typically, these companies make few adaptations to their products and undertake
little research in the international markets.
In these companies, opportunities outside the home country are ignored. Such companies are
also sometimes referred to as domestic companies. Ethnocentric companies that do business
outside the home country can be described as international companies; they adhere to the
notion that the products that succeed in the home country are superior and can, therefore, be
sold everywhere without adaptation.

7. POLYCENTRIC
In contrast, polycentric organizations or managers see each country as unique, and
consider that businesses are best run locally. Polycentric management means that the
head office places little control on the activities in each market, and there is little attempt
to make use of any good ideas or best practices from other markets.
The term polycentric describes management’s often-unconscious belief or assumption
that each country in which a company does business is unique. This assumption lays the
groundwork for each subsidiary to develop its unique business and marketing strategies
in order to succeed. The term multinational company is often used to describe such a
structure.

8. REGIOCENTRIC
A Regiocentric organization sees similarities and differences in a world region, and
designs strategies around this. Often there are major differences between countries in a
region. For example, Norway and Spain are both in Europe, but are very different in
climate, culture, transport, retail distribution, and soon.
For example, a US company, which focuses on countries included in the North American
Free Trade Agreement (NAFTA)- the United States, Canada, and Mexico, has a region-
centric orientation. Similarly if companies of ASEAN member countries focus only on
South East Asia, then they are said to have regiocentric orientation.

9. GEOCENTRIC
Geocentric companies, as truly global players, view the world as a potential market, and
seek to serve this effectively. Geocentric management can recognize the similarities and
differences between the home country and the international markets. It combines
ethnocentric and polycentric views; in other words, it displays the “think global, act local”
ideology.
The geocentric orientation represents a synthesis of ethnocentrism and polycentricism
into a ‘worldview’ that sees similarities and differences in markets and countries, and
seeks to create a global strategy that is fully responsive to local needs and wants. The
case of European Silicon Structures illustrates the practice of geocentric organizations.

10. NATURE OF E.P.R.G APPROACH
• Accurate Information
• Information not only accurate but should be timely
• The size of the international business should be large
• Market segmentation based on geographic segmentation
• International markets have more potential than domestic markets

11. SCOPE OF E.P.R.G APPROACH
• International Marketing
• International Finance and Investments
• Global HR
• Foreign Exchange

12. INTERNATIONAL BUSINESS IN INDIA
International Business in India looks really lucrative and every passing day, it is coming
up with only more possibilities. The growth in the international business sector in India is
more than 7% annually. There is scope for more improvement if only the relations with
the neighboring countries are stabilized. The mind-blowing performance of the stock
market in India has gathered all the more attention (in comparison to the other
international bourses). India definitely stands as an opportune place to explore business
possibilities, with its high-skilled manpower and budding middle class segment.

13. SECTORS HAVING POTENTIAL FOR
INTERNATIONAL BUSINESS IN INDIA :
• Information Technology and Electronics Hardware.
• Telecommunication.
• Pharmaceuticals and Biotechnology.
• R&D.
• Banking, Financial Institutions and Insurance & Pensions.
• Capital Market.
• Chemicals and Hydrocarbons.
• Infrastructure.
• Agriculture and Food Processing.
• Retailing.
• Logistics.
• Manufacturing.
• Power and Non-conventional Energy.

14. MODES OF ENTRY IN FOREIGN
MARKET
• Exporting
• Joint venture
• Outsourcing
• Franchising
• Turnkey projects
• Foreign Direct Investment
• Mergers and Acquisitions
• Licensing
• Contract Manufacturing
• Strategic Alliances

15. EXPORTING
• It is the process of selling goods and services produced in one country to other country.
• Exporting maybe Direct or indirect a
• Direct exporting involves you directly exporting your goods and products to another overseas
market. For some businesses, it is the fastest mode of entry into international business.
• Indirect Exporting involves exporting through domestically based export intermediaries. The
exporter has no control over his product in the foreign market

16. JOINT VENTURE
• It is strategy used by companies to enter a foreign markets by
joining hands and sharing ownership and management with another
company.
• It is used when 2 or more companies want to achieve some common
objectives and expand international operations.
• The common objectives are:
– Risk reward sharing
– Foreign market entry
– Technology sharing
– Conforming the govt. regulations.

18. OUTSOURCING
• It is cost effective strategy used by companies to reduce the costs by
transferring portions of work to outside suppliers rather than
completing it internally.
• Advantages
– Swiftness and expertise in operations
– Concentration in core process rather than the supporting ones .
• Disadvantages
– Risk of exposing confidential data
– Hidden cost

19. FRANCHISING
• In this mode an independent firm called the franchisee does the business using
the name of another company called the franchisor. In franchising, the
franchisee has to pay a fee or a fraction of profit to the franchisor.
• Advantages
– Low investment
– Low risk
– Franchisor understands market culture, customs and environment of the
host country
– Franchisor learns more from the experience of the franchisees
– Franchisee gets the R&D and brand name with low cost
– Franchisee has no risk of product failure.

21. TURNKEY PROJECTS
• It is a special mode of carrying out international business. It is a
contract under which a firm agrees – for a remuneration – to
fully carry out the design, create, and equip the production
facility and shift the project over to the purchaser when the
facility is operational.
• Turnkey Projects can be various types:
– BOD – Build, Owned, and Developed
– BOLT – Build, Owned, Leased, and Transferred
– BOOT – Build, Owned, Operate, and Transferred

23. LICENSING
• In this mode of entry, the manufacturer of the home country leases the right of
intellectual properties, i.e., technology, copyrights, brand name, etc., to a
manufacturer of a foreign country for a predetermined fee. The manufacturer that
leases is known as the licensor and the manufacturer of the country that gets the
license id known as the licensee.

24. FOREIGN DIRECT INVESTMENT
• Foreign Direct Investment involves a company entering an overseas market by making a
substantial investment in the country.
• This strategy is viable when the demand or the size of the market, or the growth potential of the
market in the substantially large to justify the investment.

26. STRATEGIC ALLIANCE
• strategic alliance is a type of cooperative agreements between different firms, such
as shared research, formal joint ventures, or minority equity participation.
• The modern form of strategic alliances is becoming increasingly popular and has
three distinguishing characteristics:
– They are frequently between firms in industrialized nations.
– The focus is often on creating new products and/or technologies rather than
distributing existing ones.
– They are often only created for short term duration, non equity based
agreement in which companies are separated and are independent.

27. PORTER'S DIAMOND MODEL
Michael Porter's Diamond Model (also known as the Theory of National Competitive
Advantage of Industries) is a diamond-shaped framework that focuses on explaining why
certain industries within a particular nation are competitive internationally, whereas
others might not.

28. PORTER'S DIAMOND MODEL

29. DEMING ECLECTIC OLI MODEL
The eclectic paradigm, also known as the OLI Modelor OLI Framework (OLI stands for
Ownership, Location, and Internalization), is a theory in economics. It is a further
development of the internalization theory and published by John H. Dunning in 1979.

30. DEMING ECLECTIC OLI MODEL

31. ASSIGNMENT 2

32. INTERNATIONAL
COMPETITIVE ADVANTAGE

33. COMPETITIVE ADVANTAGE
Competitive advantage is a set of qualities that give businesses leverage
over their competition. It allows businesses to offer their target market a
product or service with higher value than industry competitors. In the long
term, this boosts the business' position in their industry and drives a greater
number of sales than competitors.

35. THROUGH EXTERNAL
CHANGES
• Changes in PEST factors
• Company’s ability to respond fast to changes

36. BY DEVELOPING THEM
INSIDE THE COMPANY
• Unique competences
• Innovative capabilities

37. PORTER’S GENERIC MODEL

39. APPLE COMPETITIVE
ADVANTAGE
Differentiation advantage is hugely essential to Apple's (AAPL - Get
Report) competitive advantage. They have a strong brand and intuitive
design that sets them apart from other technology companies, giving
them a large following of brand loyalists. Apple has long made a distinct
impression on consumers and competitors alike with its innovative design
choices. In fact, most of their competitors are now releasing products that
are virtually identical to Apple designs.

40. TESLA'S COMPETITIVE
ADVANTAGE
Tesla (TSLA - Get Report) is an interesting study in competitive
advantage, as they are at once a luxury car and technology company. In
some sense, they currently have no direct competitors

41. CONCEPT OF INTERNATIONAL
STRATEGIC ALLIANCES
International strategic alliance is typically defined as a collaborative arrangement
between firms headquartered in different countries. ... The majority of existing studies are
about International strategic alliances formed between a foreign firm and a local firm
(i.e., home-host)

42. INTERNATIONAL STRATEGIC
ALLIANCES

43. EXAMPLE
APPLE
According to “An overview of strategic alliances,” Apple has partnered with Sony,
Motorola, Philips, and AT&T in the past. Apple has also partnered more recently with
Clearwell in order to jointly develop Clearwell’s E-Discovery platform for the Apple
E-discovery is used by enterprises and legal entities to obtain documents and
information in a “legally defensible” manner.

44. CHARACTERISTICS OF INTERNATIONAL
STRATEGIC ALLIANCES
There are three necessary and sufficient characteristics:-
• Independence of partners
• Shared benefits
• Ongoing Contribution

45. TYPES OF STRATEGIC ALLIANCES
• There are three types of strategic alliances: Joint Venture, Equity Strategic Alliance, and
Non-equity Strategic Alliance.
Joint Venture
• A joint venture is established when the parent companies establish a new child company.
For example, Company A and Company B (parent companies) can form a joint venture by
creating Company C (child company).
• In addition, if Company A and Company B each own 50% of the child company, it is defined
as a 50-50 Joint Venture. If Company A owns 70% and Company B owns 30%, the joint
venture is classified as a Majority-owned Venture.

46. Equity Strategic Alliance
An equity strategic alliance is created when one company purchases a certain equity percentage of
the other company. If Company A purchases 40% of the equity in Company B, an equity strategic
alliance would be formed.
Non-equity Strategic Alliance
A non-equity strategic alliance is created when two or more companies sign a contractual
relationship to pool their resources and capabilities together.

47. GLOBAL MERGERS
AND ACQUISITIONS

48. MERGERS
• Mergers is the combination of two companies to form one
• In the case of Merger, the acquired company ends to exist and becomes part of the
acquiring company.

49. TYPES OF COMPANY
MERGERS
Conglomerate
A merger between firms that are involved in totally unrelated business activities. There
are two types of conglomerate mergers: pure and mixed. Pure conglomerate mergers
involve firms with nothing in common, while mixed conglomerate mergers involve firms
that are looking for product extensions or market extensions.
Horizontal Merger
A merger occurring between companies in the same industry. Horizontal merger is a
business consolidation that occurs between firms who operate in the same space, often
as competitors offering the same good or service. Horizontal mergers are common in
industries with fewer firms, as competition tends to be higher and the synergies and
potential gains in market share are much greater for merging firms in such an industry.

50. Market Extension Mergers
A market extension merger takes place between two companies that deal in the same
products but in separate markets. The main purpose of the market extension merger is
to make sure that the merging companies can get access to a bigger market and that
ensures a bigger client base.
Product Extension Mergers
A product extension merger takes place between two business organizations that deal in
products that are related to each other and operate in the same market. The product
extension merger allows the merging companies to group together their products and
get access to a bigger set of consumers. This ensures that they earn higher profits.
Vertical Merger
A merger between two companies producing different goods or services for one specific
finished product. A vertical merger occurs when two or more firms, operating at different
levels within an industry's supply chain, merge operations. Most often the logic behind
the merger is to increase synergies created by merging firms that would be more

51. ACQUISITIONS
Acquisitions is one company taken over by the other.
In the case of Acquisition, the acquiring company takes over the majority stake in the
acquired company, and the acquiring company continues to be In existence. In short one
in acquisition one business/organization buys the other business/organization.

52. TYPES OF ACQUISITIONS
FRIENDLY ACQUISITION:- in this type, the target company’s board negotiate or accept
the offer In a friendly or welcoming manner.
HOSTILE ACQUISITION:- Within this type up the target company’s board Is not willing to
be bought or the target’s company has no prior knowledge of this offer.

53. REASONS FOR MERGERS
AND ACQUISITIONS
• Improving company’s performance and accelerate growth
• Diversification for higher growth products or markets
• Diversification for higher growth products or markets
• Strategic realignment and technological change
• Diversification of risk

54. MERGERS AND
ACQUISITIONS PROCESS
• Phase 1: Pre-acquisition review
• Phase 2: Search and screen targets
• Phase 3: Investigate and valuation of the target
• Phase 4: Acquire the target through negotiations
• Phase 5:Post merger integration

55. RECENT MERGERS AND
ACQUISITIONS

56. CASE STUDY : SUN PHARMACEUTICALS
ACQUIRES RANBAXY
• This is a classic example of a share swap deal. As per the deal, Ranbaxy shareholders
will get four shares of Sun Pharma for every five shares held by them, leading to
16.4% dilution in the equity capital of Sun Pharma.
• Reason for the acquisition: This is a good acquisition for Sun Pharma as it will help
the company to fill in its therapeutic gaps in the US, get better access to emerging
markets and also strengthen its presence in the domestic market. Sun Pharma will
also become the number one generic company in the dermatology space. (currently in
the third position in US) through this merger.

57. THANK YOU