Defining International
Business
International Business
Strategy
LON301BUS
Unit: 2 Knowledgecast: 1
Module Learning Outcomes
• Demonstrate a sound appreciation of current strategic
management concepts
• Assess current developments in the organisational
environment and alternative responses related to
strategy
What is International Business?
“ Performance of trade and investment
activities by firms across national
borders.”
–
(Cavusgil et al 2008:4)
Key Concepts
International Trade
Exporting
Importing or Global Sourcing
International Investment
Foreign Direct Investment
Evolving Theory of FDI
• International Capital Theories: FDI driven by return equalization,
portfolio diversification
• Location Theories: FDI driven by countries’ comparative advantage
• Product Cycle Theory: FDI driven by firms’ management of the
global product life cycle
• Oligopolistic Behavior Theories: FDI driven by firms’ search for, or
defense of, competitive advantage
• Internalization Theory: FDI driven by organizations’ internal
transaction efficiency (hierarchy vs. markets)
• Eclectic Theories: FDI driven by many shifting forces
Pre-requisites for Internationalisation
•
Foreign countries must offer location-specific
advantages

To motivate the company to invest there
•
Company must have strategic competencies or
ownership-specific advantages

To counteract its relative unfamiliarity with foreign markets
•
Company must have organizational capabilities

To get better returns from leveraging strengths internally rather
than through external market mechanisms such as contracts and
licenses
Process of Internationalisation
• Classic internationalization process:
 Incremental process of increasing commitment and understanding
of foreign market (Uppsala Model)
• Today many companies short-cut this process
 In an Internet Age, many are even “Born Global”
Control over foreign activities
Process of Internationalisation (2)
High
Wholly-owned
subsidiary
Franchising
Joint venture
(local partner)
Licensing
Export (agent
or distributor)
Low
Indirect
Export
Low
Amount of resources committed to foreign market
High
Knowledgecast Summary
• Demonstrate a sound appreciation of current strategic
management concepts
• Ensure you are familiar with the key concepts of international
business (Slide 5)
• Assess current developments in the organisational
environment and alternative responses related to
strategy
 There are a number of ways in which businesses can
internationalise including an evolving theory related to FDI
Seminar
Whirlpool’s Dramatic Turnaround Through Internationalisation
Read the closing case on page 23 of your text by Cavusgil,
Knight and Reisenberger ‘International Business’ in
preparation for this seminar.
Be prepared to answer Questions 1 – 4 from page 24 regarding this
case.
Group Activity
Assessment Preparation
This is your first opportunity as a group to read through the major case
study and the assessment brief (see Unit 5) collectively and highlight
key points.
What note taking process did you choose to use?
• Bullet points
• Mind Map
• Short sentences
• Highlighting/underlining and annotating text
Group Activity
Assessment Preparation
This is your first opportunity as a group to read through the major case
study and the assessment brief (see Unit 5) collectively and highlight
key points.
Discuss as a team;
1. What are the key activities involved in this assessment
2. Who will be responsible for each activity
3. When the activities will need to be completed
4. How you can guarantee SUCCESS (what will success look/feel/sound
like?)
Be prepared to share your plans with your tutor.