Lesson 1

JOMO KENYATTA UNIVERSITY
OF
AGRICULTURE & TECHNOLOGY
JKUAT SODeL
SCHOOL OF OPEN, DISTANCE AND eLEARNING

P.O. Box 62000, 00200
©2014
Nairobi, Kenya
E-mail: elearning@jkuat.ac.ke
HCBA 3221 International Business Management
JJ II LAST REVISION ON January 21, 2014

J I
J DocDoc I
Back Close
HCBA 3221: International Business Management
This presentation is intended to covered within one week.
The notes, examples and exercises should be supple-
mented with a good textbook. Most of the exercises have
solutions/answers appearing elsewhere and accessible by
JKUAT SODeL
clicking the green Exercise tag. To move back to the same

page click the same tag appearing at the end of the solu-
tion/answer.
©2014
Errors and omissions in these notes are entirely the re-

sponsibility of the author who should only be contacted
through the Department of Curricula & Delivery
(SODeL) and suggested corrections may be e-mailed to
elearning@jkuat.ac.ke.
JJ II
J I
J DocDoc I
JKUAT: Setting trends in higher Education, Research and Innovation
Back Close 0
LESSON 1
Overview of international business
Learning Outcomes
JKUAT SODeL
At the end of this topic, the student should be able to;

Describe the concept of international business
Distinguish between international business and domestic
©2014
business
Describe levels various orientations in international busi-
ness
JJ II
J I
J DocDoc I
Back Close 1
1.1. Introduction
International business is a term used to collectively describe all
commercial that take place between two or more regions, coun-
tries and nations beyond their political boundary. The term
JKUAT SODeL
refers to all those business activities which involves cross bor-

der transactions of goods, services and resources between two or
more nations. Transaction of economic resources include capi-
©2014
tal, skills, people, e.t.c. for international production of physi-

cal goods and services such as finance, banking, insurance, con-
struction, e.t.c. It involves the simple extension of economic
activities across national boundaries. It is thus a quantitative
process, which leads to a more extensive geographical pattern
JJ II of economic activity. Proper international management of ac-
J I tivities requires that, organizational managers must have a wide
J DocDoc I
Back Close 2
variety of knowledge about markets they decide to enter. Inter-
national/global business is a human activity directed at satisfy-
ing wants and needs across borders. It consists of firms whose
activities involve crossing the borders. This definition not only
JKUAT SODeL
includes international trade (globalization) but also, the growing

service industry. It can also be defined as focusing the resources
and objectives of a firm on global or international opportuni-
©2014
ties. On the other hand, a multinational enterprise (MNE) is a

company that has a worldwide approach to markets and produc-
tion, or one with operations in more than one country. A MNE
can also be referred to as a multinational corporation (MNC) or
transnational company (TNC).
JJ II Today business operations have become truly global with
J I many innovations returning to their country or region of origin in
J DocDoc I
Back Close 3
a new form that expresses the tastes and preferences of a global
market. More than a century ago, a sweeping transformation
profoundly affected the people and more industries and many
nations. In this book, about international business management,
JKUAT SODeL
an organization that engages in international/global business fo-

cuses the management of its resources on a global/international
market opportunities and threats. One difference between man-
©2014
agement of domestic business and global business is in the scope

of activities. That is, a company that engages in global business
management conducts important operations outside the home
country market. This may involve the understanding of certain
concepts, considerations and strategies that must be skillfully
JJ II applied in conjunction with universal marketing fundamentals
J I to ensure success in a global market place.
J DocDoc I
Back Close 4
Therefore, world or international business management gives
an understanding of how to effectively manage business opera-
tions the world over. It is evident that something fundamental
is happening, or indeed has happened within the world econ-
JKUAT SODeL
omy, the issue of change. That is, everywhere around, what

seem to be seen are confusion of change and the acceleration of
uncertainty. Therefore, in today’s intensely competitive market
©2014
place, and even more certainly, tomorrow’s global pressures de-

mand that, companies compete on many more fronts than ever
before.
JJ II
J I
J DocDoc I
Back Close 5
1.2. Difference between International and Domestic busi-
ness
1.2.1. International Business
This is business carried out by companies overseas or across na-
JKUAT SODeL
tional borderlines. This strategy uses an extension of the tech-

niques used in the home country of a firm. It also refers to
©2014
the firm-level marketing practices across the border including

market identification and targeting, entry mode selection, mar-
keting mix, and strategic decisions to compete in international
markets. It can also be defined as the multinational process of
planning and executing the conception, pricing, promotion and
distribution of ideas, goods, and services to create exchanges
JJ II
that satisfy individual and organizational objectives (American
J I
J DocDoc I
Back Close 6
Marketing Association. In contrast to the definition of market-
ing only the word multinational has been added. In simple words
international business is the application of business principles to
across national boundaries.
JKUAT SODeL
1.2.2. Domestic Business

A business operation restricted to political boundaries of a coun-
©2014
try. That is, a company undertakes business activities within its

national boundaries and only has to consider domestic competi-
tion. Even if that competition includes companies from foreign
markets, it still has to focus on the competition that exists in
its home market which involves a familiar business environment,
JJ II as opposed to the international business environment which is
J I often unfamiliar. That is, products and services are developed
J DocDoc I
Back Close 7
for customers in the home market without the thought of how
the product or service could be used in other markets. That is,
all business decisions are made at headquarters/home country
level. The biggest obstacle facing domestic business managers
JKUAT SODeL
is the emerging factors in the global/international environment.

This is because the business managers do not generally focus on
the changes in the global marketplace, hence may not be aware
©2014
of a potential competitor who may be a market leader in the

market. In this case, the domestic business managers may be
considered ethnocentric as they are mostly concerned with how
the products are perceived in their home countries.
• Characteristics of international business organizations

JJ II
1. Import and export of a few selected products
J I
J DocDoc I
Back Close 8
2. Transaction business in a few selected countries
3. Products are either adapted or standardized
4. Methods of entry into the foreign market are either home
or foreign production
JKUAT SODeL
The implications of these factors are that, international or global

business is quite challenging, if not more delicate and must be
©2014
done with much care and tact. The differences between interna-
tional and domestic business are mainly due to the following;
1. Business environment - The environmental variables
tend to differ from one country to another. Therefore,
the environmental demands on a firm’s business practice
and strategy in a foreign market is likely to be different
JJ II
from the demands in the domestic market.
J I
J DocDoc I
Back Close 9
2. Number of markets - International business usually in-
volves business activities in more than one country and
therefore must be managed in quite a different manner
from that of the domestic business.
JKUAT SODeL
1.3. International Business Management Orientations

The orientation may involve the simple extension of economic
©2014
activities across national boundaries. It is essentially a quan-

titative process, which leads to a more extensive geographical
pattern of economic activity. Proper international business man-
agement of activities requires that, international managers must
have a wide variety of knowledge about markets they decide to
JJ II enter. Thus, it is expected that differences in the complexity
J I and sophistication of a company’s business activity depends on
J DocDoc I
Back Close 10
how each of the following orientations;
1.3.1. Domestic Market Extension/Expansion Concept

The domestic company that seeks sales extension of its domes-
JKUAT SODeL
tic products into foreign markets illustrates this orientation to

international business management. It views its international
operations as secondary to and an extension of its domestic op-
©2014
erations. The primary motive is to dispose of excess domestic

production. Thus, domestic business is a firm’s priority and
foreign sales are seen as a profitable extension of domestic op-
erations. While foreign markets may be vigorously pursued, the
orientation remains basically domestic. Its attitude toward in-
JJ II ternational sales is typified by the belief that if a product sells in
J I a domestic market, then it will sell anywhere else in the world.
J DocDoc I
Back Close 11
Minimal, if any, efforts are made to adapt the marketing mix to
foreign markets. The firm’s orientation is to market to foreign
customers in the same manner the company markets to domes-
tic customers. It seeks markets where demand is similar to the
JKUAT SODeL
home market and its domestic product is assumed acceptable to

all. Therefore, this domestic market expansion strategy can be
very profitable. It is appropriate to both large and small export-
©2014
ing companies that approach international operations from this

perspective.
1.3.2. Multi-Domestic Market Concept

Once a company recognizes the importance of the differences in
JJ II overseas markets and the importance of offshore business to the
J I organization, its orientation towards international business may
J DocDoc I
Back Close 12
shift to a multi-domestic market strategy. That is ,a company
guided by this concept has a strong sense that country markets
are vastly different despite the fact that they may be depending
on the product and that, market success requires an almost inde-
JKUAT SODeL
pendent program for each country. Firms with this orientation

market on a country-by-country basis with separate marketing
strategies for each country. To this extent, subsidiaries operate
©2014
independently of one another in establishing marketing objec-

tives and plans. That is, the domestic market and each of the
country markets have separate marketing mixes with little inter-
action among them. Products are adapted for each market with
minimum coordination with other country markets. For exam-
JJ II ple, advertising campaigns are localized as are the pricing and
J I distribution decisions. A company with this concept does not
J DocDoc I
Back Close 13
look for similarity among elements of the marketing mix that
might respond to standardization. Rather, it aims at adapta-
tion to local country markets. Control is typically decentralized
to reflect the belief that the uniqueness of each market requires
JKUAT SODeL
local marketing input and control.
1.3.3. Global Marketing Concept

©2014
This involves a complex activity of inter-related processes around

the world. Such tendencies are highly uneven in time and space.
It therefore, can be referred to as a process-oriented activity
involving not merely the geographical extension of economic ac-
tivities across national boundaries but also, involves the func-
JJ II tional integration of such internationally dispersed activities. It
J I refers to the world market as a common market place or a global
J DocDoc I
Back Close 14
village. A company guided by this orientation or philosophy is
generally referred to as a global company, its marketing activity
is global, and its market coverage is the entire world. A company
employing a global marketing strategy strives for efficiencies of
JKUAT SODeL
scale by developing a standardized product, of dependable qual-

ity, to be sold at a reasonable price to a global market.
Important to the global marketing concept is the premise
©2014
that world markets are being driven toward a converging com-

monalty that seeks much the same ways to satisfy their needs
and desires and thus, constitute significant market segments
with similar demands for the same product the world over (Levitt,
1983). With this orientation, a company attempts to standard-
JJ II ize as much of its effort as is practical on a world-wide basis.
J I Some decisions are viewed as applicable worldwide, while others
J DocDoc I
Back Close 15
require consideration of local influences. The world as a whole is
viewed as the market and the firm develops a global marketing
strategy (one strategy for all).
A global orientation means operating as if all the country
JKUAT SODeL
markets in a company’s scope of operations (including domes-

tic market) are approachable as a single global market thus and
to standardizing the marketing mix. A global orientation there-
©2014
fore does not mean following a single strategy of standardization

without regard for cultural differences nor does it imply that the
marketing effort be adapted to every cultural difference. It thus,
looks at market segments with similar demands that can be sat-
isfied with the same product, standardizing the components of
JJ II the marketing mix that can be standardized, and, where there
J I are significant cultural differences that require parts of the mar-
J DocDoc I
Back Close 16
keting mix to be culturally adapted, the firm should adapt to
the differences.
1.4. Decisions facing International Business Managers

JKUAT SODeL
1. Whether or not to enter International Markets

2. Opportunity analysis, i.e. micro & macro environments
©2014
3. Choice of competitive position, e.g. market leader, chal-

lenger, nicher or follower
4. Choice of market entry strategies to use for the interna-
tional market
5. Selection of markets to enter and products to sell
JJ II 6. Developing marketing programs- how to mix the 4Ps in
J I order to serve the international markets.
J DocDoc I
Back Close 17
7. Taking control measures to ensure that the strategies do
not result into massive losses.
Summary
JKUAT SODeL
This chapter looked at various dimensions of international/global

business management. It distinguished international business
from domestic business, traced the orientations to international
©2014
business and critical decisions facing business managers in the

world market place.
JJ II
J I
J DocDoc I
Back Close 18
Revision Questions

Example . How can the increased interest in international
business on the part of firms be explained?
Solution:
JKUAT SODeL
Increased globalization
Advanced technology
©2014
Convergence of consumer needs and wants

Increased competition
Improvement in infrastructure
Increased competition
Liberalization
JJ II Exercise 1. Explain why international business manage-

J I ment is very useful to the marketing managers today.
J DocDoc I
Back Close 19
Further References
Bennett, R. (2005). International Business: Frameworks,
Pearson Education, New Delhi.
Cateora, P.R. (1999). International Marketing, 10th Ed.
JKUAT SODeL
Irwin, McGraw-Hill, Boston,

Hill, C. W. (1996). International Business: Competing in
©2014
the Global Market Place, Richard D. Irwin, Chicago.

Keegen, W.J. (2002). Global Marketing Management, Prentice-
hall of India, New Delhi.
Warren, J.K. (2002). Global Marketing Management, 7th
Ed., Prentice- hall of India, New Delhi,
JJ II Weihrich, H, and Koontnz, H. (2002). Management: A
J I Global Perspective, 10th Ed., Mc Graw-Hill Inc., New
J DocDoc I
Back Close 20
York.
JKUAT SODeL
©2014
JJ II
J I
J DocDoc I
Back Close 21
Solutions to Exercises
Exercise 1.
Increased profitability
JKUAT SODeL
Diversification of business efforts

Greater opportunities in foreign markets
Disposal of excess capacity
©2014
Specialization
Increased choice, e.t.c.
Exercise 1
JJ II
J I
J DocDoc I
Back Close 22

Lesson 1

Uploaded by

Copyright:

Available Formats

You might also like

Lesson 1

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Lesson 1

Uploaded by

Copyright:

Available Formats

JOMO KENYATTA UNIVERSITY

SCHOOL OF OPEN, DISTANCE AND eLEARNING

HCBA 3221 International Business Management

JJ II LAST REVISION ON January 21, 2014

clicking the green Exercise tag. To move back to the same

Errors and omissions in these notes are entirely the re-

At the end of this topic, the student should be able to;

refers to all those business activities which involves cross bor-

tal, skills, people, e.t.c. for international production of physi-

includes international trade (globalization) but also, the growing

ties. On the other hand, a multinational enterprise (MNE) is a

an organization that engages in international/global business fo-

agement of domestic business and global business is in the scope

omy, the issue of change. That is, everywhere around, what

place, and even more certainly, tomorrow’s global pressures de-

tional borderlines. This strategy uses an extension of the tech-

the firm-level marketing practices across the border including

1.2.2. Domestic Business

try. That is, a company undertakes business activities within its

is the emerging factors in the global/international environment.

of a potential competitor who may be a market leader in the

• Characteristics of international business organizations

The implications of these factors are that, international or global

1.3. International Business Management Orientations

activities across national boundaries. It is essentially a quan-

1.3.1. Domestic Market Extension/Expansion Concept

tic products into foreign markets illustrates this orientation to

erations. The primary motive is to dispose of excess domestic

home market and its domestic product is assumed acceptable to

ing companies that approach international operations from this

1.3.2. Multi-Domestic Market Concept

pendent program for each country. Firms with this orientation

independently of one another in establishing marketing objec-

local marketing input and control.

1.3.3. Global Marketing Concept

This involves a complex activity of inter-related processes around

scale by developing a standardized product, of dependable qual-

that world markets are being driven toward a converging com-

markets in a company’s scope of operations (including domes-

fore does not mean following a single strategy of standardization

1.4. Decisions facing International Business Managers

1. Whether or not to enter International Markets

3. Choice of competitive position, e.g. market leader, chal-

This chapter looked at various dimensions of international/global

business and critical decisions facing business managers in the

 Convergence of consumer needs and wants

JJ II Exercise 1.  Explain why international business manage-

Irwin, McGraw-Hill, Boston,

the Global Market Place, Richard D. Irwin, Chicago.

 Diversification of business efforts

You might also like

Convergence of consumer needs and wants

JJ II Exercise 1. Explain why international business manage-

Diversification of business efforts