International Business Strategy
(lec 1)

International business refers to business activities that involve the transfer of resources,
goods, services, knowledge, skills, or information across national boundaries.
Motives to go International:
The case of Haier:
 Market-seeking and cost-reduction/efficiency-seeking motives (is USA the best choice?)
 Strategic motives
- Aspiration (both TMT & the government)
 How did they compete with companies with American or well known brands?
- Niche market and scales
- Three-in-one operating framework: design (LA)-manufacturing (Caroline)-marketing (NY)
- Social engagement
The Strategy Tripod
Institution-based view: The role of formal institutions (lec 2)
Institutions
What do institutions do??
Uncertainty - Key role is to reduce uncertainty by influencing individuals’ and firms’ decision making
by signalling which conduct is legitimate and acceptable and which is not.
 Transaction costs - costs associated with economic transactions, costs of doing
business.
 Opportunism - self-interest seeking with guile
Political systems:
Political systems can be assessed according to:
 the degree to which they emphasize collectivism (socialism) as opposed to
individualism
 The degree to which they are democratic or totalitarian/ authoritarian.
Democracy
 Refers to a political system in which government is by the people, exercised either
directly or through elected representatives.
Totalitarianism (Authoritarism)
 Is a form of government in which one person or political party exercises absolute
control over all spheres of human life, and opposing political parties are prohibited.
 Four major forms of totalitarianism:
Communist totalitarianism:
This form of totalitarianism advocates achieving socialism through totalitarian dictatorship;
Communism, however, is in decline worldwide and most of the Communist Party dictatorships have
collapsed since 1989. In many respects, the governments of China, Vietnam and Laos are
communist in name only since those nations now adhere to market-based economic reforms.
Theocratic totalitarianism:
In this model political power is monopolised by a party, group or individual that governs according to
religious principles. The most common form of theocratic totalitarianism is based on Islam and is
exemplified by states such as Iran and Saudi Arabia.
Tribal totalitarianism:
Under tribal totalitarianism a political party that represents the interests of a particular tribe
monopolises power. Tribal totalitarianism has arisen from time to time in African countries such as
Zimbabwe, Tanzania, Uganda and Kenya.
Right-wing totalitarianism:
Individual economic freedom is allowed but individual political freedom is restricted in the belief
that it could lead to communism. A common feature of many right-wing dictatorships is an overt
hostility to socialist or communist ideas. Many right-wing totalitarian governments are backed by
the military, and in some cases the government may be made up of military officers.
Legal systems
 What is a legal system?
-
Refers to the rules, or laws, that regulate behaviour, along with the processes by
which the laws of a country are enforced and through which redress for grievances
is obtained.
 Different legal systems
-
Common law: based on tradition, precedent and custom, a common law system is
found in most of Great Britain’s former colonies, including the US.
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Civil law: based on a very detailed set of laws organised into codes. Over 80
countries, including Germany, France, Japan and Russia, operate with a civil law
system.
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Theocratic law: Islamic law is the most widely practiced theocratic law system
(based on religious teachings) in the modern world.
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Contract law: is the body of law that governs contract enforcement.
 Product Origin laws: frequently determine duties and tariffs to be paid.
 Product Liability laws: determine liability and allowable damages for product safety.
 Competition laws: like antitrust regulations and insider trading laws.
 Marketing and Distribution laws: determine allowable practices.
 Corruption laws…