STRATEGY & STRUCTURE OF

INTERNATIONAL BUSINESS

UNIT 5
Strategy = greek word strategos means generalship
actual direction of military force
Strategy means art of general or planned course of
action

International strategy- long term- profits, short term

improving day to day operations
 Michael Porters Five forces Model

Potential Entrants

Industry

Competitors Buyers
Suppliers
Rivalry

Substitutes
Value chain strategy
 Coordination in value chain

1. Operational obstacles
2. National cultures
3. Learning effects
4. Subsidiary networks
 Strategic choice

Decision which determines the future strategy of the

firm
Strategies:
1. Ethnocentric- home country oriented
2. Polycentric different market for each country
3. Geocentric difference & similarities
 Factor affecting strategic choice

1. External constraints
2. Managerial power relations
3. Value & preference
4. Impact of past strategy
5. Time constraints
6. Information constraints
7. Competitors reaction
 Entry mode of international business

1. Direct export 8. Joint ventures

2. Indirect exports 9. Strategic alliance
3. Licensing 10. Merger
4. Franchising 11. Acquisition
5. Contract 12. Wholly owned
manufacture subsidiary
6. Turnkey operation 13. Assembly
7. Management operations
contracts
 Factors affecting entry modes

External factors Internal factors

1. Market size 1. Company objectives

2. Market growth
2. Company resources
3. Government regulation
3. Level of commitment
4. Level of competition
5. Physical infrastructure 4. International
6. Level of risk- political,
experiences
economical, operational 5. Flexibility
7. Production cost
8. Lower cost
 Exporting & importing

Foreign trade (development & regulation) Act 1992,

Foreign exchange management act 1999
Customs act 1962
Exports(quality control & inspection) Act 1963
EXIM policy
 Exporting

Export means -ship the goods and services out of the

port of a country
Export refers to selling of goods & service producing
in home country to other markets
 Export procedure

1. Registration stage registration of organisation,

opening Bank account- current ac, obtaining IEC
No or code, obtaining PAN, obtaining Sales tax
NO, Registration with export Promotion council,
Registration with ECGC(export credit& guarantee
corporation), Reg with other authorities CII,
FIEO
2. Pre-shipment stage
I. Approaching foreign buyers
II. Inquiry & offer
III. Confirmation of order
IV. Opening letter of credit
V. Arrangement of pre-shipment finance
VI. Procurement of goods
VII. Packing & marking
VIII.Pre- shipment inspection
IX. Central excise clearance
X. Obtaining insurance cover
XI. Appointment of C&F agent
3. Shipment stages
I. Reservation of shipping spaces
II. Arrangement of internal transportation
III. Process of shipping document LOC,
commercial Invoice- 2 copies, packing list,
certificate of origin, GR form, ARE 1 form,
Certificate of inspection, Marine insurance
policy
IV. Customs clearance
V. Obtaining carting order from port trust
VI. Customs examination & issue of let export
order
VII. Obtaining let ship order from customs
preventive officer
VIII.Obtaining mate receipt & bill of lading
4. Post shipment stage
I. Submission of document by C&F agent to
exporters
II. Shipment advice to importer
III. Presentation of document to bank for negotiation
IV. Dispatch document
V. Acceptance of bill of exchange
VI. Processing of GR form
VII. Realisation of Export incentives
 Promise & pitfalls of exporting

Promise Pitfalls

1. Market diverisfication 1. Financial

2. Source of revenue management effort
3. Use excess products 2. Customer demand
4. Leverage
3. Communication
5. Business operations
technologies
6. Product life cycle
improvement
7. Power unit cost
4. Management
8. Economies of scale
9. Untapped market
mistakes
 Export financing

1. Pre-shipment finance
I. Packing credit
II. Advance payment
2. Post shipment finance
I. Letter of credit
II. Export order
III. Export bills
IV. Goods advance
V. Retention money
VI. Duty drawbacks
 Export assistance India

Production assistance Export marketing

1. Special economic zones 1. Marketing development

2. Manufacture in Bond
fund 1975
2. Cash compensatory
3. Machinery & equipment
support
4. Production inputs 3. Foreign exchange
5. Technology up 4. Trade fairs
gradation 5. Export risk insurance
6. Packing credit 6. Pre shipment
inspection
 Importing

Import procedure
1. Making trade enquiry- offer
2. Obtaining import license
3. Obtaining foreign exchange FEMA, RBI
4. Placing order
5. Arranging letter of credit
6. Getting shipping documents
7. Appointing clearing agent
8. Clearing agent
9. Taking delivery of goods
10. Making payment
 Benefits of imports

1. Development of economy
2. Meet shortages
3. Standard of living
4. Improve production
5. Comparative advantages
6. Resources
7. Trade agreements
 Counter trade

Types
1. Barter
2. Counter purchase
3. Off set trading
4. Switch trading
5. Buyback trading
 Counter trade

Advantages disadvantages

1. Only option 1. Disposal of goods

2. Competition 2. Internal expertise
3. Foreign presence 3. Length of time
4. Non trade benefits 4. Results uncertain
End of unit 5