[Date]

International
Business
Management
Assignment

Baskar M
ICHE-UGPA 13-16

Subject Name
.

: International Business
Management

Student Name

: Baskar M

Session

: 2013-2016

Batch

: Fall winter UG-A

Contact Number

: 96261-99981,

Mail

: baskar180@gmail.com

Submission Date

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Question 1:
a)

Outline the nature of international strategic management and

explain the following:
(i) Reaping experience curve benefits
(ii) Core competencies
(iii) Steps in strategic management process

b)

What do you understand by following:

(i) Environmental scanning
(ii) Mission statement
(iii) Value analysis

Answers:
a) (i) Reaping Experience curve Benefits:
This equation describes the basis for what is called the unit curve. In this
equation, Y represents the cost of a specified unit in a production run.
For example, If a production run has generated 200 units, the total cost
can be derived by taking the equation below and applying it 200 times
(for units 1 to 200) and then summing the 200 values. This is
cumbersome and requires the use of a computer or published tables of
predetermined values. [The following information may be helpful: When
the equation for Yx below is associated with a unit improvement curve it
is called a Crawford unit curve. When exactly the same equation
for Yx below is called a cumulative average learning curve, it is called a
Wright cumulative average. To calculate a Wright xth unit cost, Px, from
its cumulative average, we have

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Now the equation for the unit curve is given by:

where

K is the number of direct labour hours to produce the first

unit
Yx is the number of direct labour hours to produce
the xth unit
x is the unit number
b is the learning percentage (expressed as a decimal)

(ii) Core Competences:

A core competency is a concept in management theory introduced by, C.
K. Prahalad and Gary Hamel. It can be defined as "a harmonized
combination of multiple resources and skills that distinguish a firm in the
marketplace".
Core competencies fulfill three criteria:
1. Provides potential access to a wide variety of markets.
2. Should make a significant contribution to the perceived customer
benefits of the end product.
3. Difficult to imitate by competitors.
For example, a company's core competencies may include precision
mechanics, fine optics, and micro-electronics. These help it build
cameras, but may also be useful in making other products that require
these competencies.
(iii) Steps in Strategic Management Process:

Goal setting
Analysis
Strategy Formulation
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Strategy Implementation
Evaluation & Control

B). (i) Environmental Scanning:

Environmental scanning is one of the essential component of the global
environmental analysis. Environmental monitoring,
environmental forecasting and environmental assessment complete the
global environmental analysis. The global environment refers to
the macro environment which
comprises industries, markets, companies, clients andcompetitors.
Consequently, there exist corresponding analyses on the microlevel. Suppliers, customers and competitors representing the micro
environment of a company are analyzed within the industry analysis.

(ii) Mission Statement:

A mission statement is a statement which is used as a way of
communicating the purpose of the organization. Although most of the
time it will remain the same for a long period of time, it is not
uncommon for organizations to update their mission statement and
generally happens when an organization evolves. Mission statements
are normally short and simple statements which outline what the
organization's purpose is and are related to the specific sector an
organization operates in.

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(iii) Value Analysis:

the systematic and critical assessment by an organization of every
feature of a product to ensure that its cost is no greater than is
necessary to carry out its functions.

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Question 2:
a)

b)

Explain balance of payments. What are the major types of

international financial markets?
Management must have specific orientation for IB. In the light of
the above statement explain multiple options available to strategic
management to enhance MNC's profitability as also outline
environmental scanning methodology.

Answer:
a). Balance of Payments:
The balance of payments, also known as balance of international
payments and abbreviated BoP, of a country is the record of all
economic transactions between the residents of the country and the
rest of the world in a particular period (over a quarter of a year or more
commonly over a year). These transactions are made by individuals,
firms and government bodies. Thus the balance of payments includes all
external visible and non-visible transactions of a country .
It represents a summation of country's current demand and supply of
the claims on foreign currencies and of foreign claims on its
currency. These transactions include payments for the
country's exports and imports of goods, services, financial capital,
and financial transfers. It is prepared in a single currency, typically the
domestic currency for the country concerned. Sources of funds for a
nation, such as exports or the receipts of loans and investments, are
recorded as positive or surplus items. Uses of funds, such as for imports
or to invest in foreign countries, are recorded as negative or deficit
items.
When all components of the BOP accounts are included they must sum
to zero with no overall surplus or deficit. For example, if a country is
importing more than it exports, its trade balance will be in deficit, but
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the shortfall will have to be counterbalanced in other ways such as by

funds earned from its foreign investments, by running down central
bank reserves or by receiving loans from other countries.
While the overall BOP accounts will always balance when all types of
payments are included, imbalances are possible on individual elements
of the BOP, such as the current account, the capital account excluding
the central bank's reserve account, or the sum of the two. Imbalances in
the latter sum can result in surplus countries accumulating wealth, while
deficit nations become increasingly indebted.
The term balance of payments often refers to this sum: a country's
balance of payments is said to be in surplus (equivalently, the balance of
payments is positive) by a specific amount if sources of funds (such as
export goods sold and bonds sold) exceed uses of funds (such as paying
for imported goods and paying for foreign bonds purchased) by that
amount. There is said to be a balance of payments deficit (the balance of
payments is said to be negative) if the former are less than the latter.
Types of International Financial Market:
Within the financial sector, the term "financial markets" is often used to
refer just to the markets that are used to raise finance: for long term
finance, the Capital markets; for short term finance, the Money markets.
Another common use of the term is as a catchall for all the markets in
the financial sector, as per examples in the breakdown below.

Capital markets which to consist of:

Stock markets, which provide financing through the issuance of
shares or common stock, and enable the subsequent trading
thereof.
Bond markets, which provide financing through the issuance
of bonds, and enable the subsequent trading thereof.
Commodity markets, which facilitate the trading of commodities.
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Money markets, which provide short term debt financing and

investment.
Derivatives markets, which provide instruments for the management
of financial risk.
Futures markets, which provide standardized forward contracts for
trading products at some future date; see also forward market.
Foreign exchange markets, which facilitate the trading of foreign
exchange.
Spot market
Interbanks market

B).
Phase I: Basic Financial Planning
Most companies trace the origins of a formal planning system to the
annual budgeting process where everything is reduced to a financial
problem. Procedures develop to forecast revenue, costs, and capital
needs and to identify limits for expense budgets on an annual basis.
Information systems report on functional performance as compared
with budgetary targets.
Companies in Phase I often display powerful business strategies, but
they are rarely formalized. Instead, they exist. The only concrete
indication that a business strategy exists may be a projected earnings
growth rate, occasionally qualified by certain debt/equity targets or
other
Phase II: Forecast-based Planning
The complexities of most large enterprises, however, demand more
explicit documentation of the implicitly understood strategies of Phase I.
The number of products and markets served, the degree of
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technological sophistication required, and the complex economic

systems involved far exceed the intellectual grasp of any one manager.
The shoe usually pinches first in financial planning. As treasurers struggle
to estimate capital needs and trade off alternative financing plans, they
and their staffs extrapolate past trends and try to foresee the future
impact of political, economic, and social forces. Thus begins a second
phase, forecast-based planning. Most long-range or strategic planning
today is a Phase II system.
At first, this planning differs from annual budgeting only in the length of
its time frame. Very soon, however, the real world frustrates planners by
perversely varying from their forecasts.
Phase III: Externally Oriented Planning
In an environment of rapid change, events can render market forecasts
obsolete almost overnight. Having repeatedly experienced such
frustrations, planners begin to lose their faith in forecasting and instead
try to understand the basic marketplace phenomena driving change. The
result is often a new grasp of the key determinants of business success
and a new level of planning effectiveness, Phase III.
In this phase, resource allocation is both dynamic and creative. The
Phase III planners now look for opportunities to shift the dot of a
business on a portfolio matrix into a more attractive sector, either by
developing new business capabilities or by redefining the market to
better fit their companies strengths. A Japanese conglomerate with an
underutilized steel-fabricating capacity in its shipyard and a faltering
high-rise concrete smokestack business combined them into a successful
pollution control venture.
The SBU Concept

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A distinguishing characteristic of Phase III planning in diversified

companies is the formal grouping of related businesses into strategic
business units (SBUs) or organizational entities large and homogeneous
enough to exercise effective control over most factors affecting their
businesses. The SBU concept recognizes two distinct strategic levels:
corporate decisions that affect the shape and direction of the enterprise
as a whole, and business-unit decisions that affect only the individual
SBU operating in its own environment. Strategic planning is thus
packaged in pieces relevant to individual decision makers, and strategy
development is linked to strategy implementation as the explicit
responsibility of operating management.
There are limitations to the SBU concept. Many enterprises, such as
vertically integrated companies in process-oriented industries, cannot
be neatly sorted out into discrete business units because their
businesses share important corporate resourcessales, manufacturing,
and/or R&D. In other situations, strategy may dictate a concerted thrust
by several business units to meet the needs of a shared customer group,
such as selling to the automotive industry or building a corporate
position in Brazil. In still other cases, the combined purchasing power of
several SBUs or the freedom to transfer technologies from one business
to another can be more valuable than the opportunity to make profitoriented decisions in discrete business units.
Phase IV: Strategic Management
Phase IV joins strategic planning and management in a single process.
Only a few companies that we studied are clearly managed strategically,
and all of them are multinational, diversified manufacturing
corporations. The challenge of planning for the needs of hundreds of
different and rapidly evolving businesses, serving thousands of
product/markets in dozens of distinct national environments, has
pushed them to generate sophisticated, uniquely effective planning
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techniques. However, it is not so much planning technique that sets

these organizations apart, but rather the thoroughness with which
management links strategic planning to operational decision making.
This is largely accomplished by three mechanisms:
1. A planning framework that cuts across organizational boundaries and
facilitates strategic decision making about customer groups and
resources.
2. A planning process that stimulates entrepreneurial thinking.
3. A corporate value system that reinforces managers commitment to
the companys strategy.
Planning Framework
As noted previously, many Phase III companies rely on the SBU concept
to provide a planning frameworkoften with disappointing results.
However, there are frequently more levels at which strategically
important decisions must be made than the two implicit in SBU theory.
Moreover, todays organization structure may not be the ideal
framework in which to plan for tomorrows business, and a strategically
managed company may arrange its planning process
Planning Process
While planning as comprehensively and thoroughly as possible, Phase IV
companies also try to keep their planning process flexible and creative.
A principal weakness of Phase II and III strategic planning processes is
their inescapable entanglement in the formal corporate calendar.
Strategic planning easily degenerates into a mind-numbing bureaucratic
exercise.
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Question 3:
a)
b)

Explain concept of marketing at a global level.

Strategic alliances are cooperative agreements between firms that
go beyond normal company to company dealings.
Explain the following:
(i) Non equity alliances
(ii) Equity alliances
(iii) Joint ventures.

Answers:
a) Marketing at Global Level:
Global marketing is marketing on a worldwide scale reconciling or
taking commercial advantage of global operational differences,
similarities and opportunities in order to meet global objectives
Not only do standard marketing approaches, strategies, tactics and
processes apply, global marketing requires an understanding of global
finance, global operations and distribution, government relations, global
human capital management and resource allocation, distributed
technology development and management, global business logic, inter
firm and global competitiveness, exporting, joint ventures, foreign direct
investments and global risk management.
The standard Four Ps of marketing: product, price, place, and
promotion are all affected as a company moves through the five
evolutionary phases to become a global company. Ultimately, at the
global marketing level, a company trying to speak with one voice is faced
with many challenges when creating a worldwide marketing plan. Unless
a company holds the same position against its competition in all markets
(market leader, low cost, etc.) it is impossible to launch identical
marketing plans worldwide. Nisant Chakram(Marketing Management)
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Product
A global company is one that can create a single product and only have
to tweak elements for different markets. For example, Coca-Cola uses
two formulas (one with sugar, one with corn syrup) for all markets. The
product packaging in every country incorporates the contour bottle
design and the dynamic ribbon in some way, shape, or form. However,
the bottle can also include the countrys native language and is the same
size as other beverage bottles or cans in that same country.
Luxury products, high-tech products, and new innovations are the most
common products in the global marketplace. They are easier to market
in a standardized way than other products because there are no
traditional cultural values attached to their meanings.
Price
Price will always vary from market to market. Price is affected by many
variables: cost of product development (produced locally or imported),
cost of ingredients, cost of delivery (transportation, tariffs, etc.), and
much more. Additionally, the products position in relation to the
competition influences the ultimate profit margin. Whether this product
is considered the high-end, expensive choice, the economical, low-cost
choice, or something in-between helps determine the price point.
Place
How the product is distributed is also a country-by-country decision
influenced by how the competition is being offered to the target market.
Using Coca-Cola as an example again, not all cultures use vending
machines. In the United States, beverages are sold by the pallet via
warehouse stores. In India, this is not an option. Placement decisions
must also consider the products position in the market place. For
example, a high-end product would not want to be distributed via a
dollar store in the United States. Conversely, a product promoted as
the low-cost option in France would find limited success in a pricey
boutique.
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Promotion
After product research, development and creation, promotion
(specifically advertising) is generally the largest line item in a global
companys marketing budget. At this stage of a companys development,
integrated marketing is the goal. The global corporation seeks to reduce
costs, minimize redundancies in personnel and work, maximize speed of
implementation, and to speak with one voice. If the goal of a global
company is to send the same message worldwide, then delivering that
message in a relevant, engaging, and cost-effective way is the challenge.
Effective global advertising techniques do exist. The key is testing
advertising ideas using a marketing research system proven to provide
results that can be compared across countries. The ability to identify
which elements or moments of an ad are contributing to that success is
how economies of scale are maximized. Market research measures such
as Flow of Attention, Flow of Emotion and branding moments provide
insights into what is working in an ad in any country because the
measures are based on visual, not verbal, elements of the ad.

B) (i) Non-Equity Alliances: is an alliance where two or more firm develop

a contractual relationship to share some of their advantages, unique
resources and capabilities to create a competitive advantages.
(ii) Equity Alliances: is an alliance where two or more firm holding
different percentage of the company they have formed by combining
some of their resources and capabilities to create a competitive
advantages.
(iii) Joint Ventures: is a strategic alliance in which two or more company
creates independent company to share some of their resources and
capabilities to create a competitive advantages.
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Question 4:
An international business must procure, motivate, retain and effectively
utilise services of people, both at the corporate office and foreign plants.
In the light of the above statement compare:
(a) Domestic and International HRM.
(b) Managing international HR activities to promote IB
(c) Three approaches to staffing in IB.
Answer:
a). Domestic & International HRM:
there are some commonalities in IHRM and domestic HRM practices,
particularly in areas like; HR planning and staffing, recruitment and
selection, appraisal and development, rewards, etc the main
distinctions, however, lies in the fact that while domestic HRM is
involved with employees within only one national boundary, IHRM deals
with three national or country categories, i.e., the parent country where
the firm is actually originated and headquartered; the host country
where the subsidiary is located; and other countries from where the
organization may source the labour, finance or research and
development. This is because there are three types of employees in an
international organization, i.e.
Parent country nationals (PCNs);
A parent-country national is a person working in a country other
than their country of origin. Such a person is also referred to as an
expatriate. Long periods of assignment (perhaps 4 5 years or
more) may run the risk of de facto employee status in the host
country, so that labor laws or the host country apply.
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Host country nationals (HCNs); and

They are those employees of an organization who are the citizens of
the country in which the foreign subsidiary is located.
Third country nationals (TCNs).
Third Country National (TCN) describes and individuals of other
nationalities hired by a government or government sanctioned
contractor who represent neither the contracting government nor
the host country or area of operations. This is most often those
performing on government contracts in the role of a private military
contractor.
Third Country Nationals
These are the citizens of a country other than the country where
the organization is headquartered and the country that is hosting
the subsidiary.
There are two major factors therefore which differentiate domestic
HRM from IHRM. First, the complexities of operating in different
countries (and therefore in different cultures) and secondly, employing
different national categories of workers. This suggests that international
HRM is concerned with identifying and understanding how MNCs
manage their geographically dispersed workforces in order to leverage
their HR resources for both local and global competitive advantage.
Globalization has brought new challenges and increased complexity such
as the challenge of managing newer forms of network organization. In
recognition of such developments, new requirements of IHRM is to play
a key role in achieving a balance between the need for control and
coordination of foreign subsidiaries, and the need to adapt to local
environments.

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International HRM differs from domestic HRM in a number of ways. One

difference is that IHRM has to manage the complexities of operating in,
and employing people from, different countries and cultures. A major
reason for the failure of an international venture is the lack of
understanding of the differences between managing employees in the
domestic environment and in a foreign one. A management style
successful in the domestic environment often fails if applied to a foreign
environment without the appropriate modifications. The reasons that
IHRM is more complex than domestic HRM are described below.
1. International HRM addresses a broader range of activities than
domestic HRM. These include international taxation, coordinating
foreign currencies and exchange rates, international relocation,
international orientation for the employee posted abroad, etc.
2. Human resource managers working in an international environment
face the problem of addressing HR issues of employees belonging to
more than one nationality. Hence, these HR managers need to set up
different HRM systems for different locations. Human resource
managers in a domestic environment administer HR programmes to
employees belonging to a single nationality.
3. International HRM requires greater involvement in the personal life of
employees. The HR manager of an MNC must ensure that an executive
posted to a foreign country understands all aspects of the compensation
package provided in the foreign assignment, such as cost of living, taxes,
etc. The HR manager needs to assess the readiness of the employees
family to relocate, support the family in adjusting to a foreign culture
through cross-cultural training, and to help in admitting the children in
schools. The HR department may also need to take responsibility for
children left behind in boarding schools in the home country by the
employees on foreign postings. In the domestic environment, the
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involvement of the HR manager or department with an employees

family is limited to providing family insurance programmes or providing
transport facilities in case of a domestic transfer.
4. There is heightened exposure to risks in international assignments.
These risks include the health and safety of the employee and family. A
major aspect of risk relevant to IHRM today is possible terrorism. Several
MNCs must now consider this factor when deciding on international
assignments for their employees. Moreover, human and financial
consequences of mistakes in IHRM are much more severe than in
domestic business. For example, if an executive posted abroad returns
prematurely, it results in high direct costs as well as indirect costs.
5. International HRM has to deal with more external factors than
domestic HRM. For example, government regulations about staffing
practices in foreign locations, local codes of conduct, influence of local
religious groups, etc. If an American organization is sanctioned license
by the Indian government to set up its subsidiary in India, the American
company is under legal obligations to provide employment to local
residents.
6. International HRM Addresses a broad range of HRM activities.
Whereas domestic HRM deals with issues related to employees
belonging to single nationality.
7. Greater exposure to risks in international assignments; human and
financial consequences of mistakes in IHRM are very severe.
b) Managing IHR to Promote IB:
1. Stages of International Involvement:

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When an organization initiates international operations, then it has been

passed through five stages which are as follows.

Domestic Operations
Export Operations
Joint Ventures or Subsidiaries
Multinational Operations
Transactional Operations
As the organization passes from a lower stage to a higher stage, the
human resource functions need to be more adapted to the diverse
economic, cultural, legal & political environments. For example, when
the human resource management is passing through stage five
(transactional stage), policies & procedures should be developed &
implemented that maintain diversified employees belonging to different
cultural backgrounds in order to develop the identity of share
corporation along with a common vision. The global business evolves
through the following stages.
Exporting
Licensing
Franchising
Multinational Corporation
Global Corporation
It really enhances the importance of human resource management for
multinational companies.

2. Global Human Resource Management:

The human resource policies & procedures should be employed that
best meet the global requirements so that the wider organizational
objectives can be achieved. The human resource management in an
internal business should be operated similar to the domestically
operated HRM by promoting the more integrated working system.

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3. Global Staffing:
For the achievement of the goals of the international organization, the
specific jobs should be filled with specific individuals at the proper time
and proper place. For this purpose, there must be global human
resource planning, recruitment & selection procedures for obtaining of
the required employees.

Types of Staff Members:

Following are different types of employees that can be acquired by
global organizations.
Expatriate: Expatriate is an employee who is working in an international
organization and he is not the citizen of that country in which he is
currently working, but he is the citizen of the country in which the head
quarter of the international organization is located.
Host Country National (HCN): Host country national is the employees
who are working in the international organization & he is also the citizen
the country in which he is currently working. But the head quarter of the
organization is located in some other country. Most of the employees
working in the international organizations are host country nationals.
Third Country National: Third country national is the employee belongs
to one country and who works in the international organization in
another country, but the head quarter of the international organization
is located at some third country.
Approaches to Global Staffing:
Following are some of the approaches to global staffing.
Ethnocentric Staffing: The higher level foreign positions in an
international organization are filled with the expatriate employees.
Polycentric Staffing: In this kind of staffing, most employees of the host
country are hired by the international organization for many top to
bottom level positions.

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Regiocentric Staffing: It is similar to polycentric staffing, but in this case

the regional subsidies of the international organization works together
as a single unit.
Geocentric Staffing: In this kind of staffing, the international business
used worldwide integrated strategy.
In all kinds of above staffing methods, global training & development is
required because of the differences in the people, jobs and
organizations.
4. Global Human Resource Development:
Expatriate Development:
In this kind of training & development, the process is initiated
immediately after the selection of the employees and even if the
operations of the international organization do not start.

Repatriation Orientation & Training:

Before the repatriation, training & development are essential to be
started in which the expatriates bring back to the home. The employees
and their families are provided with orientation & training to prepare
them for the return to the culture of the home country & to prepare
other supervisors & subordinates of the expatriates for the return.

5. Global Compensation & Benefits:

Because of the pressures of high wage rate, the organizations are
compelled to operate tinother area of the world in order to maintain
competition globally. Generally the level of global compensation is
lower. However, when the global compensation packages are developed
by the organization, certain factors must be considered prior like living
costs, variations in the laws, tax policies etc.
6. Global Safety & Health:
When the employees in the (international) organization are safe &
health, they are turned into more productive & beneficial. So the human
resource management in an international organization prepares &
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implements certain safety & health related programs for making their
employees more beneficial & productive. Usually the US based global
operations are regarded as the much healthier & safer than the
operation of any other host country. But the operations conducting in
the United States of America are much safer & healthier. So, all the
international organizations should consider the working environment
standards & other safety programs of the organizations that are
belonging to and working in the United States of America.
C) Approaches to Staffing in IB:
In international human resource management, the types of staffing
policy approaches are as follows:
Ethnocentric staffing
Polycentric staffing
Geocentric staffing
The ethnocentric policy approach to staffing designates home country
nationals as top ranking employees in global operations. For instance,
executive positions are given to Americans in an office of an American
company located in Indonesia. The main benefit of this staffing policy
approach is that it allows the organization to ensure that the people in
the top positions are experienced in the business of the firm. This is
especially the case where the host country does not have enough
qualified workers for staffing top positions in the organization. The
ethnocentric staffing policy approach is also used to ensure that the
culture of the entire organization is unified rather than diversified.
However, the problem with the ethnocentric policy approach is that it
does not fully support the transfer of local knowledge to the company.
Also, this staffing policy approach could block locals from promotion in
the organization.

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The polycentric policy approach to staffing assigns home country

workers to top positions in the central offices or headquarters, and
overseas local workers to other positions. The main advantage of this
policy approach is that it facilitates organizational learning on local
markets. This staffing policy approach also provides better opportunities
for locals to improve their careers through promotion. However, this
promotion is limited to key positions in the local operations, and does
not include central or corporate top positions. This staffing policy
approach is disadvantageous because it could create knowledge and
performance gaps between overseas managers and managers in the
home country.
The geocentric policy approach to staffing assigns job positions to any
person best suited for the position, regardless of the employees
background, culture or country of origin. The main advantage of this
staffing policy approach is that it is highly flexible. It can increase the
firms cultural knowledge about the different markets and countries.
However, a disadvantage of this staffing policy approach is that it could
be difficult to apply. Immigration policies, costs of worker relocation and
diversity management create pressure on HR management.

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