MODULE 6(3 members)

The Top 7 Skills Needed for Success in International Business

 Cross-cultural communication skills

 Excellent networking abilities
 Collaboration
 Interpersonal influence
 Adaptive thinking
 Emotional intelligence
 Resilience

National Competitive Advantage:

Porter’s Diamond

In 1990 Michael Porter of the Harvard Business School published the

results of an intensive research effort that attempted to determine why
some nations succeed and other fail in international competition
Porters theorizes that four broad attributes of a nation shape the
environment in which local firms compete. These attributes are

 Factor endowment – a nation’s position in factors of production such as

skilled labor or the infrastructure necessary to compter in a given indus-
try.
 Demand condition – the nature of home demand for the industry’s
product or service
 Relating and supporting industries –the presence or absence of Sup-
plier industries and related industries that are internationally competitive.
 Firm strategy, structure and rivalry – the conditions governing how
companies are created, organized and managed and the nature of domes-
tic rivalry.

Porter speaks of these four attributes as constituting the diamond.

Firm Strategy,
Structure and
Rivalry

Demand
Factor Condition
Endowment

Related and
Supporting
Industries

Determinants of National Competitive Advantage: Porter’s

Diamond
 Competitive Advantage

Porter’s Value Chains

Harvard professor Michael Porter is the person who is most often identified with the
topic competitive advantage.

Primary Activities

Primary activities relate directly to the physical creation, sale, maintenance and
support of a product or service. They consist of the following:

 Inbound logistics – These are all the processes related to receiving,

storing, and distributing inputs internally. Your supplier relationships are a
key factor in creating value here.
 Operations – These are the transformation activities that change inputs into
outputs that are sold to customers. Here, your operational systems create
value.
 Outbound logistics – These activities deliver your product or service to
your customer. These are things like collection, storage, and distribution
systems, and they may be internal or external to your organization.
 Marketing and sales – These are the processes you use to persuade clients
to purchase from you instead of your competitors. The benefits you offer,
and how well you communicate them, are sources of value here.
 Service – These are the activities related to maintaining the value of your
product or service to your customers, once it's been purchased.

Support Activities
These activities support the primary functions above. In our diagram, the dotted
lines show that each support, or secondary, activity can play a role in each primary
activity. For example, procurement supports operations with certain activities, but it
also supports marketing and sales with other activities.
 Procurement (purchasing) – This is what the organization does to get the
resources it needs to operate. This includes finding vendors and negotiating best
prices.
 Human resource management – This is how well a company recruits, hires,
trains, motivates, rewards, and retains its workers. People are a significant source
of value, so businesses can create a clear advantage with good HR practices.
 Technological development – These activities relate to managing and processing
information, as well as protecting a company's knowledge base. Minimizing
information technology costs, staying current with technological advances, and
maintaining technical excellence are sources of value creation.
 Infrastructure – These are a company's support systems, and the functions that
allow it to maintain daily operations. Accounting, legal, administrative, and general
management are examples of necessary infrastructure that businesses can use to
their advantage.

The primary and support value activities are nitrated by linkages to form a value chain, as
illustrated below.
 Firm Infrastructure
Human resource management
support Technology development
activities Procurement

Inbound Operations Outbound Marketing Services

logistics logistics & Sales

Primary Activities

10 Key Steps To Expanding Your Business Globally

1. Perform a “Deep Dive” Due Diligence

Before going global, it is critical to understand what the full impact on your business will be.

2. Develop a Strategy and Business Plan

Each market has its own nuances due to economic, cultural, governmental, and market
conditions.

3. Establish a Beachhead Team

Many global companies try to launch with executives from the parent company or rapidly
build a local team from scratch.

4. Product Readiness

Review government- and industry-specific regulations to ensure that compliance and

certifications are obtained if needed.

 5. Organizational Readiness

Cultural differences, whether it is language, regulations, or customs, requires a firm to be

flexible in the policies and procedures implemented in an international operation to ensure
employees are engaged and executing on the company’s plans.

6. Establish a Go-to-Market Strategy

The effective selling and marketing of your products or services requires a comprehensive,
cohesive strategy that addresses sales strategy, sales delivery.

7. Legal Readiness

Some countries are known for being highly litigious. Government agencies have strict
requirements that necessitates legal documentation be in place prior to operating within the
country.

8. Tax and Finance Readiness

The proper tax and finance infrastructures need to be set up early on to ensure that you are
receiving timely reporting and that your foreign entity is adhering to local corporate policies
and procedures.
9. Prepare Your Final Budget Preparation

 Develop a 3-year budget and a 12-month business plan with detailed key performance
indicators, and update every 6 months.

10. Establish Close Relationships with Local Businesses

Gain a strong competitive advantage by creating a supporting ecosystem of complimentary

products and services

Module 7 (3members)

Property rights and corruption

In a legal sense, the term property refers to a resource over which an individual or
business holds a legal title, that is, a resource that is own. Resource include land, building,
equipment and intellectual property( ideas, which are protected by patents, copyright and
trademark. Property rights refer to the legal rights over the use to which a resource is put
and over the use made of any income that may be derived from the resources. Property
rights can be violated in two ways- through private action and through public action

a) Private action refers to theft, piracy, blackmail and the like by private individuals or
groups.

b) Public Action to violate property rights occurs when public officials such as politicians
and government bureaucrats, extort income, resources or property itself from prop-
erty holders.

The Protection of Intellectual Property

Intellectual property refers to property that is the product of intellectual activity,

such as computer software, song, or a chemical formula for a new drug. Patents,
copyright and trademark establish ownership rights over intellectual property. A
patent grants the inventor of a new product or process exclusive rights for a defined
period to the manufacture, use or sale of that invention. Copyrights are the
exclusive legal right of authors, composers, artist and publisher to publish and
disperse their work as they see fit. Trademarks are designs and names, often
officially registered, by which merchant or manufacturers designate and differentiate
their products.

Product safety and Product Liability

Product safety laws set certain safety standards to which a product must adhere.
Product liability involves holding a firm and its officers responsible when a product
causes injury, death or damage. Product liability can be much greater if a product
does not conform to required safety standards. Both civil and criminal product
liability laws exist.

Economic transformation refers to the continuous process of (1) moving

labour and other resources from lower- to higher-productivity sectors
( structural change or structural transformation) and (2) raising within-
sector productivity growth. As such, economic
transformation emphasizes the movement from low- to high-productivity
activities within and across all sectors (which can be tasks or activities
 that are combinations of agriculture, manufacturing and services).

The Nature of Economic Transformation

The shift toward a market-based economic system often entails a number of steps:
deregulation, privatization, and creation of a legal system to safeguard property rights.

a) Deregulation involves removing legal restrictions to the free play of markets,

establishing private enterprises, and operating private enterprises in different ways.
b) Privatization transfers the ownership of state property into the hands of private
individuals, frequently by the sale of state assets through an auction. Privatization is
seen as a way to stimulate gains in economic efficiency by giving new private owners
a powerful incentive—the reward of greater profits, search for increases in
productivity and to enter new markets.
c) A legal system is a procedure or process for interpreting and
enforcing the law.

Factors influencing Foreign Investment

Tax Concessions. If their governments are anxious to enhance the profitability of a newly established
business or expansion of a business, that will help the country’s economic advance.

Income Tax Deferral and Exemption. Many techniques have been developed in recent years to
accelerate the tax-free recovery of a capital investment by cutting or postponing income tax.

The Philippines for its part has enacted a number of laws conferring tax exemption benefits or privilages
to investors, both local and foreign. Among such laws are: Republic Act No. 35, as amended by Republic
Ac No. 901 which granted exemption form the payment of taxes and duties to new and necessary
industries for a specified number of years.

Investment Incentives Act. The Investment Incentives Act (Republic Act No. 5186) seeks “to accelerate
the sound development of the national economy in consonance with the principles and objectives of
economic nationalism.

Employment of Aliens. In a number of countries of the world, especially in underdeveloped regions

where there is felt an acute need for foreign capital, laws are enacted permitting the entry of foreign
investors and their representatives into their territories whose stay is guaranteed for a sizeable number
of years.

In connection, let us take note of Republic Act No. 5171 which amends Section 9 of Commonwealth Act
No. 613, otherwise known as the Philippine Immigration Act of 1940, as amended.

Equal Treatment. A few countries have guaranteed equal treatment to both foreign and domestic
capital. This is to say that all rights, immunities and privileges being enjoyed by domestics business firms
and industries are made available on equal terms to foreign establishments engaged in the same line of
industry.

Transfer of Earning. Foreigners in approved business enterprise are authorized to transfer a part of
their earnings to their home country at the prevailing official rate of exchange in accordance with the
contract of employment, but with prior consent of the appropriate government agency in charge in the
underdeveloped country.

Exemption from Appropriation or Requisition. Investors are assured that their assets and property are
free form the risks of appropriation. These same assets are exempted from requisition by the State ,
even when the Armed Forces may want to use them in time of war, except as provided in the
Constitution of the country.

Ownership of Real Estate. As further inducement to the entry of foreign capital, some countries go
further by allowing foreigner to own real estate or other natural resources.

Economic Development and Future Possibilities. It is not surprising that foreign investors are attracted
most strongly to develop countries. These are the countries where markets are larger and in many
cases, growing most rapidly. So why do foreigners invest at all in the poor countries? In some instances,
there are particular advantages of raw materials and cheap labor to exploit for export production.

Factors That Deter the Inflow of Foreign Capital

Size of the Market. The size of the market could act as a deterrent to the entry of foreign investment. It
may even block the advantageous investment of accumulated funds by businessmen.

Vicious Cycle of Poverty. A common characteristics of underdeveloped countries is that they are caught
in a vicious cycle of poverty. A “vicious cycle of poverty” is difficult to describe inasmuch as it has no
starting point.

Absence of Social Overhead.The absence of social overhead in the form of transportation and
communication facilities, waterworks, power station, repair and maintenance services.

Political Instability. Loans given to a country with an unstable government are accompanied by greater
risks that those with a politically stable government.

Other obstacles. Recent years have been observed as characterized by a trend toward a wide display of
nationalism, some of which borders on the extreme. Thus, where this feeling and attitude pervade a
country’s atmosphere, it is not uncommon to observe the passage of nationalistic laws intended to
prevent the entry of foreign capitalist from places where they hold a controlling interest in importing.