International management
Lecture 1: Introduction
International management
The process of planning, organizing, directing, and controlling the
organization, which individuals use to achieve an organization’s goals
when the organization is involved in cross-border activities or functions
outside its nation-state
* Navigating the complexities of operating across multiple countries
* Integrating global perspectives into business strategies
* Effectively managing a diverse and geographically dispersed
organization
Cross-border activities
* International suppliers or customers, export and import
* Employees located in other countries
* Outsourcing
* Foreign direct investments (stores or factories located abroad)
* Franchising or licencing abroad (McDonalds, use license)
* International joint ventures (companies that work together)
* Cross-boarder M&A
Multinational corporation MNC
Company that operates in its home country, as well as in other countries
around the world. It maintains a central office located in one country,
which coordinates the management of all of its other offices, such as
administrative branches or factories.
1
,Reasons for internationalization
* Market expansion: access to new customers and markets
* Access to cheaper resources: labour and materials
* Access to better resources: human capital (knowledge) and
technologies
* Gaining competitive advantage
* Managing regulatory environments: align global regulatory
standards to make it easier entering new markets
* Risk diversification
Market expansion
Bron global company
A business organization that, from inception, seeks to derive significant
competitive advantage from the use of resources and the sale of outputs
in multiple countries. They internationalize rapidly, often within a few
years of their founding.
Difference in resources (cost and quality)
Labour is a major cost of most businesses, accounts for 20-70% of gross
sales, depending on the industry. Therefor, it is a significant driver of
internationalization.
Drivers of and barriers to internationalization
Facilitators of internationalization
* Decreasing barriers to cross-border trade and investment
* Converging of consumer tastes
2
, * Decrease of transportation and communication costs
But significant differences still exists among national markets. There are
still some processes that counteract the globalization like protectionism
and environmental laws.
Companies struggle going abroad
* Challenging for companies foreignness
* Unfamiliarity with local business environments and cultural
differences
* Fewer resources than local competitors
* Facing costs that they do not have in their home market
The CAGE Distance framework
It is a model to understand why countries and market differ from each
other and how these differences impact trade and investments between
nations. The framework helps companies analyse the distance or barriers
they need to overcome when expanding internationally.
Administrative Geographic
Cultural distance Economic distance
distance distance
* Different languages * Absence of shared * Physical remoteness * Difference in
Attributes creating
* Different ethnicities monetary or political * Lack of common consumer income
* Different religions association border * Difference in costs
distance
* Different social norms * Political hostility * Lak of sea and quality of natural
* Government policies * Weak transportation resources, financial
* Institutional link resources,
weakness * Differences in infrastructure,
climates information
3
, * Cultural identity Government * Products have low * Nature of demand
Industries or products affected * Product features vary involvement is high in value-to weight ratio varies with income
* Country-specific industries that are: * Products are fragile * Companies need to
associations * Producer of staple * Communications and be responsive
* Linguistic content goods connectivity is * Distribution or
* Large employers important business system are
* Large supplier to gov. * Local supervision different
* National champions requirements are * Labor and other
* Subject to high sunk high factor costs are
costs different
* Economies of scale
are important
Decreasing the distance
* Introduction of direct flights
* Introduction or increased use of online communication tools
* Acquisition of foreign companies: spread of corporate culture and
technologies
* Appointment of local managers: improve communication with local
team, increased trust
* Create alliances with local companies: better understanding of local
culture
* Adaptation of business model to local conditions
CAGE Framework applications
* Strategic market selection: in which countries do they need to invest
* Entry mode decisions: joint venture or subsidiary
* Adaptation strategies: adapt to local preferences
* Risk management: identify risk
* Competitive advantage: come up with strategies against
competitors
4
Lecture 1: Introduction
International management
The process of planning, organizing, directing, and controlling the
organization, which individuals use to achieve an organization’s goals
when the organization is involved in cross-border activities or functions
outside its nation-state
* Navigating the complexities of operating across multiple countries
* Integrating global perspectives into business strategies
* Effectively managing a diverse and geographically dispersed
organization
Cross-border activities
* International suppliers or customers, export and import
* Employees located in other countries
* Outsourcing
* Foreign direct investments (stores or factories located abroad)
* Franchising or licencing abroad (McDonalds, use license)
* International joint ventures (companies that work together)
* Cross-boarder M&A
Multinational corporation MNC
Company that operates in its home country, as well as in other countries
around the world. It maintains a central office located in one country,
which coordinates the management of all of its other offices, such as
administrative branches or factories.
1
,Reasons for internationalization
* Market expansion: access to new customers and markets
* Access to cheaper resources: labour and materials
* Access to better resources: human capital (knowledge) and
technologies
* Gaining competitive advantage
* Managing regulatory environments: align global regulatory
standards to make it easier entering new markets
* Risk diversification
Market expansion
Bron global company
A business organization that, from inception, seeks to derive significant
competitive advantage from the use of resources and the sale of outputs
in multiple countries. They internationalize rapidly, often within a few
years of their founding.
Difference in resources (cost and quality)
Labour is a major cost of most businesses, accounts for 20-70% of gross
sales, depending on the industry. Therefor, it is a significant driver of
internationalization.
Drivers of and barriers to internationalization
Facilitators of internationalization
* Decreasing barriers to cross-border trade and investment
* Converging of consumer tastes
2
, * Decrease of transportation and communication costs
But significant differences still exists among national markets. There are
still some processes that counteract the globalization like protectionism
and environmental laws.
Companies struggle going abroad
* Challenging for companies foreignness
* Unfamiliarity with local business environments and cultural
differences
* Fewer resources than local competitors
* Facing costs that they do not have in their home market
The CAGE Distance framework
It is a model to understand why countries and market differ from each
other and how these differences impact trade and investments between
nations. The framework helps companies analyse the distance or barriers
they need to overcome when expanding internationally.
Administrative Geographic
Cultural distance Economic distance
distance distance
* Different languages * Absence of shared * Physical remoteness * Difference in
Attributes creating
* Different ethnicities monetary or political * Lack of common consumer income
* Different religions association border * Difference in costs
distance
* Different social norms * Political hostility * Lak of sea and quality of natural
* Government policies * Weak transportation resources, financial
* Institutional link resources,
weakness * Differences in infrastructure,
climates information
3
, * Cultural identity Government * Products have low * Nature of demand
Industries or products affected * Product features vary involvement is high in value-to weight ratio varies with income
* Country-specific industries that are: * Products are fragile * Companies need to
associations * Producer of staple * Communications and be responsive
* Linguistic content goods connectivity is * Distribution or
* Large employers important business system are
* Large supplier to gov. * Local supervision different
* National champions requirements are * Labor and other
* Subject to high sunk high factor costs are
costs different
* Economies of scale
are important
Decreasing the distance
* Introduction of direct flights
* Introduction or increased use of online communication tools
* Acquisition of foreign companies: spread of corporate culture and
technologies
* Appointment of local managers: improve communication with local
team, increased trust
* Create alliances with local companies: better understanding of local
culture
* Adaptation of business model to local conditions
CAGE Framework applications
* Strategic market selection: in which countries do they need to invest
* Entry mode decisions: joint venture or subsidiary
* Adaptation strategies: adapt to local preferences
* Risk management: identify risk
* Competitive advantage: come up with strategies against
competitors
4
