International Business Launch Project

 

This project will consist of your business plan and an Excel spreadsheet of anticipated cash flows (expenses and income) with the resulting bottom line (profit or loss) for each year.

For this project, you are responsible for presenting your analysis and conclusions on the following:

• The rationale for choosing your product.
• The rationale for choosing your target market.
• The rationale for choosing the country where your product will be made, including a brief background of the industry in the market, as well as competitors.
• The strategy you will employ to launch your product; items to include should include competitive strategy, entry decisions, and intended mode of entry. You will also compare the differences in global and domestic markets and how the differences support or challenge your strategy.
• The organizational structure you selected to support the launch.
• Sales, marketing, logistics, cultural, legal, and political aspects.
• Financial management, government policies, and economic considerations for the launch, including foreign currencies, tariffs, and overall foreign market exchange considerations (unemployment, disposable income, etc.).
• Cash Flow statement (within an Excel spreadsheet) where you itemize your various expenses and your income over an initial 5-year period. Create your own numbers but those figures should be realistic.

This paper will give you the opportunity to integrate all aspects of this course into a real-world scenario. Please be as realistic as possible. Show that you understand how to apply the concepts of this course in a practical project.

While your instructor is more interested in your initiative, and the quality and realism of your analysis and conclusions versus the length of the paper, it is expected that the paper follow the aforementioned requirements.

Things to Remember!

• Your paper should be 7 to 10 pages in length (not including title and reference pages).
• Your paper should be double-spaced, with 1-inch margins, in-text citations and references for all sources following proper APA formatting.

I have already picked the product, market and country which can be found in the project proposal. Since i was the one who chose these things, I will take care of the first 3 bullets of the paper which discusses my rational for choosing these things. I only need you to do the last 5 bullets of the paper, which should equate to about 6-8 pages in length. Please be sure to stich with the product and market chosen and somewhat follow the outline provided. If you need to stray from the outline a little that is fine as long as the paper generally follows the outline I have provided. I also uploaded the class notes so that you may incorporate the course content into the paper. 

FinalProject Proposal

Brianna Garcia

Department of Business, Excelsior College

Bus435: International Business

Sheila Calhoun

Trying to launch new products over seas can be a daunting task. Things that must be considered before even trying are the differences in culture, taste pallets, and what is considered ethical or not ethical in that culture. There is also the fear of failure or bruised brand image to think about as well. For example, Starbucks has yet to open a shop in Italy mostly out of fear of doing badly in comparison to the smaller, higher quality espresso shops they operate within Italy. For that reason, Starbucks has not even attempted to infiltrate that market possible to market saturation. Companies hoping to enter a foreign market must consider multiple things before attempting to do so.

After closer review, I have decided to tackle the task of introducing girl scout cookies into the Italian market. The reason I chose girl scout cookies is because they are a well-respected brand with a mission that most people can get behind. They also sell a quality product which I feel could satisfy most taste pallets. Another reason I chose girl scout cookies, especially in Italy is because Italians love their espresso and girl scout cookies could make a great pairing with said espresso. I feel like girl scout cookies could be easily accepted in Italian culture and would be ethically approved by the country.

References

Business Culture In Italy. (2014). Atma Global.

Hochberg, M., & Hochberg, L. (2020). International Business Needs Grand Strategy. Journal of Competitiveness Studies, 28(2), 81–102.

LOCKWOOD, L. (2021). More Than A Cookie. WWD: Women’s Wear Daily, 22.

Santos, J. H. D. A. (2019). International Business Strategy. Society Publishing.

Wood, D. F. (2002). International Logistics: Vol. 2nd ed. AMACOM.

1

Final Project Outline

Brianna Garcia

Shelia Calhoun

BUS435: International Business

April, 18 2021

Intro

1. The what and the why on

a. Girl scout cookies

b. Italy

c. Esspresso/baked goods market within italy

Main Body

1. Considerations regarding both U.S and Italian exchange

a. Government policies on imports and exports

b. Economic considerations

c. Foreign market exchange

d. Cultural differences between the U.S and italy and how that plays a role

2. Strategy

a. Competitive strategy

i. Sales and marketing in Italy

ii. Cultural accomidations

b. Logistical strategy

i. Intended mode of entry

ii. Amazons support role in the launch

c. Legal and political approcah

d. Financial approach

i. Forighn currencies and tarrifs

ii. Cash flow statement

Conclusin

References

Hofstede, Geert H. (1980), Culture’s Consequences: International Differences in Work-Related Values. Newbury Park, CA: Sage Publications.

Hultink, Erik & Hart, Susan & Robben, Henry & Griffin, Abbie. (2000). Launch Decisions and New Product Success: An Empirical Comparison of Consumer and Industrial Products. Journal of Product Innovation Management.

Italy. (2013, October 22). Retrieved April 19, 2021, from

Italy

Kogut, Bruce , and Singh, Harbir (1988), “The Effect of National Culture on the Choice of Entry Mode,” Journal of International Business Studies

Lubin, G. (2011, March 24). How the girl scouts built their cookie empire. Retrieved April 19, 2021, from

https://www.businessinsider.com/how-the-girl-scouts-built-their-cookie-empire-2011-3

Porter, Michael E. (1980), Competitive Strategy. New York: The Free Press.

Wind, Yoram , Douglas, Susan P. and Perlmutter, Howard V. (1973), “Guidelines for Developing International Marketing Strategies,” Journal of Marketing

Class Notes

Module 1 Notes:

Economic

,

Political

, and

Legal

Environments’ effect on International Business Operations

In this module, we begin exploring the definition and some examples of international business. What is a business? A business is an organization involved in the trade of goods, services, or both, to consumers. It can also be called an enterprise or a firm, and can be for-profit or non-profit. How does one define international business? In the simplest of definitions, an international business is one that comprises all commercial transactions that take place between two or more regions, countries, or nations. The opposite of an international business is a domestic business, or one that operates within a country’s borders. To move from domestic to international, the business goods (sale or purchase) must cross a country’s border. Examples of international business would be placing a foreign retail store in another country, operating a manufacturing plant overseas, exporting products to foreign countries, importing products from foreign companies, or investing in businesses in external countries.

Before moving into the first three international business environments, we need to start with an understanding of what a domestic business is. According to Punnett and Turner (2014), in the Encyclopedia of International Business,

Domestic and international enterprises, in both the public and private sectors, share the business objectives of functioning successfully to continue operations. Private enterprises seek to function profitably as well. Why, then, is international business different from domestic? The answer lies in the differences across borders. Nation-states generally have unique government systems, laws and regulations, currencies, taxes and duties, and so on, as well as different cultures and practices. An individual traveling from his home country to a foreign country needs to have the proper documents, to carry foreign currency, to be able to communicate in the foreign country, to be dressed appropriately, and so on. Doing business in a foreign country involves similar issues and is thus more complex than doing business at home (p. 351).

In the United States, these business affairs can be within one state or across numerous states. Typically, these businesses begin with a local focus and then may turn toward foreign expansion. There are a myriad of examples, but in the simplest of illustrations, a company operating in Florida, Texas, and California would be considered a domestic business. However, once that business turns its focus to operating in France, it moves into the international business realm.

Now that we have a basic understanding of a domestic business, let’s take a look at the first three international business environments.

Economic

This environment exists outside of the scope or control of an international business. This statement holds true, because businesses do not typically affect the economic environment. Economic factors can be studied so that any particular business can change their processes to meet a changing economic landscape. Moreover, the economic environment concerns the health of the economy where the business operates. The focus should be on how the economy can impact the business. Factors to look at would be unemployment rate, gross domestic product, and consumer confidence.

To see an example of the economic environment within an international business, one could look at the impact of oil on a global scale. There are numerous domestic oil companies (within several independent countries’ borders), and as oil prices fluctuate, so does the effect on each country’s economic sector. Even here in the United States, as oil prices change (whether demand or supply), so too does the variation in the economy.

Political

In this external business environment, an international business would look to government policy on international investment and possibly the need for lobbying or political negotiation. The political system in a foreign country can make business difficult on an international scale. Some of the factors to review in this environment are the type of governmental system, types of trade agreements, and trade barriers (tariffs, taxes, and regulations). For instance, we want to examine what type of government is in place. Is it a democracy? Is it authoritarian? By looking into these details, one can see how the country is run, and study any political barriers that may become obstacles to placing a corporate product within that country. Several of the political factors are closely tied to the legal environment.

Legal

The third environment in this module is the external legal environment, and it is here that business leadership would review the different laws on companies and possibly the regulation of trade or employment in that external country. Businesses have to accomplish legal research, prior to entering an international market.

First, we should review a few basic legal definitions pertaining to international business.

Public International Law the system of rules or principles that govern the conduct of, and relationships between, states and international organizations.

Private international law is the relationship between persons and organizations that are engaged in international transactions (specifically addressing which laws are applicable when parties are in legal dispute).

Foreign law is a law enacted by a foreign country.

Companies that engage in international business must be familiar with public, private, and foreign laws, because complicated legal affairs can arise. Some of the more common legal issues that may occur in international business include health and safety standards within the business, environmental practices, customs and duty taxes, and employment practices.

So far in this module, we have reviewed how the economic, political, and legal environments could affect international business operations. Additionally, we started to examine some specific reasons why businesses would care about global political, legal, and economic systems around the world. Even though companies may do well by expanding outside national borders and entering into a globalized business world, they still must adhere to the rules, regulations, and economies of the host countries. In the following activities, you will have the opportunity to dig a bit deeper and understand the importance of these first three environments.

Module 2 Notes: Ethical and Financial Environments’ effect on International Business Operations

Notebook and pencilAlong with good corporate governance, ethical behavior should be an integral part of everything that a company does. Moreover, unethical behavior might damage a firm’s reputation and make it less appealing to stakeholders, which could result in decreased profits. Finance, or money, is an important resource for all businesses, whether public or private. The fiscal goals of a private-sector firm include making a profit. However, in the public arena, the main objective is to make the best use of financial resources. Being a good fiscal steward for a company goes hand-in-hand with solid ethical principles. Two prime examples of not following these principles are the accounting practices of Enron and telecommunications giant WorldCom. Feel free to review Forbes Magazine’s “The Corporate Scandal Sheet (Links to an external site.)” (2002). In this module, we will delve into both of these environments and study their effect on international business operations.

The more one knows ethics, the more it is used and the more useful it becomes. – Plato

Despite trading laws and declarations set up through international governing bodies, countries continue to face challenges surrounding ethical trading and business practices. Why? Some would argue that the increased mixing of financial markets between countries leads to consistent, and seamless, trading practices. Yet, others take the position that with international trade, income disparities between the rich and poor are worsened. International trade represents a significant part of the gross domestic product in some countries. Additionally, the rise of industrialization, globalization, and technological innovation has increased the importance of international trade, as well as its significance to the economic, legal, and political environments (covered during Module 1). Internationally recognized ethical practices such as the U.N. Global Compact have been instituted to facilitate cooperation between governments, businesses, and public institutions (Mitchell, 2009). Nevertheless, countries will continue to face challenges around ethical trading and business practices, especially regarding economic inequalities and human rights violations.

Business executives, regardless of geographic location, at some point have probably faced a decision that challenges their ethical standards. Having high ethical standards in international business is of paramount importance to succeeding. If a company has a bad reputation (especially based on unethical interactions) the likelihood of staying in business is low. Since all organizations are in business to stay in business and ultimately make a profit, it is important the organization operate in an ethical manner. In the world of international business, there are boundless opportunities for ethical dilemmas. The constant interaction between customers and employees and the competing forces involved in achieving business results can be ethically challenging. Finally, understanding the importance of the ethical environment in international business should help managers and leaders reach better decisions and conduct themselves well in the international business arena.

According to Mitchell (2009), “Philosophers have been debating the concept of ethics since before the time of Socrates, more than 2,500 years ago. Many would say there has been little progress, and even less agreement on exactly what ethics are. In its simplest form, the concept involves learning what is right, or wrong, and then doing the right thing. The real problem lies in coming to an agreement on just what ‘the right thing is’ at any particular time” (pp. 8-9). When companies grow outside national borders, they enter into a realm that encompasses ethical influence on a global scale. When considering the ethical environment, companies must understand the importance of law in the countries that they operate in. Good ethical conduct, on an international scale, is in a company’s own interest.

Is it less dishonest to do what is wrong, because it is not expressly prohibited by written law? – Thomas Jefferson

Turning our attention to the financial environment, we can see that due to a rise in international business, world economic and financial markets have become increasingly integrated. Balance of payments accounts track the trade and finance interactions between countries. When reviewing international business trade patterns, one must study the foreign exchange market, and look at the behavior of international currencies. When studying international payments, one would examine both the current account (trade, services, and income balances) and the financial account (foreign investments and securities investments). Additionally, international business executives focus a large portion of their day-to-day activities on world trade, foreign exchange markets, international monetary systems, and the international flow of their own goods and capital.

When specifically focusing on the financial environment, executives need to comprehend how exchange rates are moving over time, how exchange rates can be forecast over time, how the international monetary system affects their company abroad, and the impact of foreign markets on their own corporate goods. Menkhoff (2013), asserts, “the world economy is changing towards a continuously increasing importance of emerging market economies. This move is particularly pronounced in foreign exchange as advanced economy countries are not the main owners of currency reserves anymore” (p. 1187).

Taking this discussion one step further, when dealing with an international business, the overall exchange of currencies occurs in foreign markets. These markets are a network of international banks, of which the three largest markets are in London, New York, and Tokyo. These markets are what enable and facilitate international trade and investment. Firms that expand outside national borders must understand how to operate in this fiscal environment. Finally, global businesses need to also understand the international monetary system. These systems were set up to facilitate international trade and promote stable global exchange rates. With everything discussed above, one should readily see that companies that engage in international business must be familiar with not only sound fiscal principles, but also solid ethical standards.

So far in this module, we have reviewed how the ethical and financial environments could affect international business operations. Additionally, we discussed a few reasons why businesses would care about global ethical and financial systems. On the ethical front, having high ethical standards in international business is of paramount importance to achieving success. If a company has a bad reputation (especially based on unethical interactions) the likelihood of staying in business is low. Fiscally speaking, international business executives focus a large portion of their day-to-day activities on world trade, foreign exchange markets, international monetary systems, and the international flow of their own goods and capital. Even though companies may do well by expanding out of national borders and entering into a globalized business world, they still must adhere to solid ethical principles, and institute sound fiscal decisions. In the following activities, you will have the opportunity to delve into both the ethical and financial international business environments.

Module 3 Notes: The Influence of Culture on a Country’s Business Strategy

Notebook and PencilWhy is cultural knowledge important to the future of an international business? Culture is present in every business interaction, transaction, and decision. One can infer that if we understand a countries culture, and we consider that understanding with business planning, we can increase corporate productivity (or decrease down time spent on working through cultural issues). Additionally, if operating out of more than one country, it may not be feasible to be an expert in various cultures; however, it is possible to incorporate external cultural understandings in a corporation’s workforce. At the completion of this module, you should have a solid understanding of culture, but also comprehend how culture can influence international business strategies.

We are living in a time where trade is becoming more global by the day. With the globalization of trade, conducting business on a global basis requires a good understanding of various cultures. What works in one country might not work in another…in fact, it might be interpreted as an offense. For example, the okay sign in the United States is a very offense gesture in Germany, yet in Japan it refers to money and in France to signify zero. A pivotal role of a manager is to understand, or be aware, of cultural issues in the country you are operating out of.

To examine culture on a globalized scale (i.e. an international business scale), one must review several cultural factors. One must look at societal cultural themes for the country they are going to operate in. These themes could have a substantial impact on how business is accomplished in that particular culture. For example, in the country, do they haggle, or bargain, when they negotiate? Additionally, communication can be a cultural challenge on a business. This communication can be verbal or non-verbal cues, and failing to understand the cultural aspects of verbal/non-verbal communication, can jeopardize business objectives. Another cultural area to research would be how group interactions, or dynamics, occur within the country. In this area, one would need to comprehend how individuals interact. Pertaining to business, this would specifically target the sales and purchasing departments. A final cultural area one should assess is what is referred to as time-orientation. Societies look at the concept of time differently. In Western cultures, the phrase “if you are not early, you are late”, or, “time is money” is mentioned in business operations. Whereas, other countries may close down business operations for several hours in the afternoon, and call it “the after lunch break”.

Looking toward running an international business, firms also need to be able to identify the four characteristics of culture. Personnel may know enough to comprehend basic etiquette before entering a new country, however, “ fewer people have developed sufficient cultural intelligence to be sensitive to more profound issues when they embark on efforts to enter other countries” (Rothwell, 2012, p. 39). When reviewing these four characteristics, businesses should look at language (verbal and non-verbal), religion, a countries values, beliefs, and attitudes, education, customs, and social institutions to name a few.

After understanding culture and the characteristics of culture that separate various nations, business managers need to evaluate how culture can affect operations. There are several examples here to draw upon. One, managers should understand that U.S. management styles might conflict with management styles of other cultures. Additionally, how a firm advertises in a country must be adapted to their specific culture. Additionally, business leaders, especially front-line managers, have to understand the importance of communication. The use of slang, or jargon, is deemed inappropriate in several cultures, and definitely affects business operations. Several of these characteristics are readily visible in Finding the right fit: Why culture is key (Links to an external site.), where the author offers tips for international businesses on the need to be culturally aware of various differences in human resource practices including employee recruitment, turnover, and orientation.

In closing, please review Rothwell’s (2012) article on 13 practical tips for training in other countries (Links to an external site.). The author covers how global opportunities have prompted professionals to seek out cultural training opportunities in other countries. Rothwell (2012) asserts “Few people have developed sufficient cultural intelligence to be sensitive to issues when they embark on efforts to enter other countries” (p. 1). This is where training and research play a role. 13 tips are identified such as cultural sensitivity, dress, religious beliefs, and values, to name a few.

In this module, we have reviewed the importance of cultural knowledge during global business operations. Additionally, while operating a business outside of national borders, culture is present in every interaction, transaction, and decision. Moreover, one should appreciate that if a firm understands a countries culture, and they account for that understanding during business planning, they could increase overall productivity. You should have the beginnings of understanding the importance of culture in international business operations, and now you will have a chance to discuss specifically an international culture. To visually see some of the aforementioned items, please view the two required weekly videos. In Understanding Culture (Links to an external site.), one will see cultural understanding as a key to communication. Moreover, in Inner Dimensions of Culture (Links to an external site.), the topic of time-orientation is covered. Both of these videos solidify topics addressed in the opening segment of this module.

Module 4 Notes: Globalization and the Challenges and Opportunities it Presents to International Business

Notebook and pencilGlobalization is driven by policies that have opened up economies both domestically and internationally. In the years following the Second World War, and especially in the past two decades, many governments have adopted free-market economic systems. These systems not only vastly increased their own productive potential, but also created a myriad of new opportunities for international trade and investment. Governments have also reduced barriers to commerce and established international agreements that promote trade in goods, services, and investments. Taking advantage of the opportunities in foreign markets, organizations have built foreign factories and formalized production arrangements with foreign partners. One defining feature of globalization is the international industrial, financial, and technological business structure.

Before moving into a discussion on globalization, we must first define globalization and understand the concept as it applies to an international business. In the most basic of definitions, globalization is a process of interaction and integration among the people, companies, and governments of different nations. Moreover, globalization “has collapsed time and distance” and one must understand that globalization has come about, or at a minimum expanded its reach, through changes in national policies (Friedman, 2005, p. 32). Moreover, countries have seen barriers removed from the movement of goods, services, and technology. Nations have strengthened the various roles of the private sector and are supporting free-market pricing. Finally, globally we are seeing a promotion of trade transparency and support for various trade laws.

Prior to the 21st century, globalization occurred when businesses expanded from developed countries to emerging or developing countries. Today, that flow of trade is bi-directional. In fact, the remarkable growth of international trade over the past two to three decades has been both a cause and effect of globalization. Moreover, according to World Trade Organization (WTO) statistics, the volume of global trade has increased twenty-seven fold from $296 billion in 1950 to $8 trillion in 2005 (2014). By taking advantage of international trade, consumers around the world enjoy a larger selection of products than they would have access to domestically. Furthermore, increased international trade has stimulated economic growth globally, raising incomes, creating jobs, and reducing prices. Global trade can also bring about economic, political, and social disruption. With globalization interconnecting countries, when one economy, or country suffers a recession, the effects are felt globally. Moreover, if trade decreases, jobs are lost. Globalization has many benefits for international trade, but it can also have devastating effects. Finally, in response to the ever-increasing flow of goods and services, numerous U.S. government agencies and international institutions were established to manage these rapidly developing movements.

Three of these institutions are the International Monetary Fund, the World Bank, and the World Trade Organization. The International Monetary Fund (IMF) was created to promote global monetary and exchange stability, facilitate the expansion and balanced growth of international trade, and assist in the establishment of a multilateral system of payments for current transactions. The basic role of the IMF is to monitor economic and financial developments, lend funds to countries that are having payment difficulties, and provide fiscal assistance and training to countries requesting support. The World Bank is an international financial institution that is part of the United Nations. Its primary role is to provide loans to developing countries for capital programs. It actually consists of five organizations, and its charter evolved from post-World War II reconstruction. Finally, the World Trade Organization’s primary focus is on “monitoring the global rules of trade between nations and to ensure that trade flows smoothly, predictably, and as freely as possible” (WTO Mission, 2014, para. 3). All three of these institutions create or enforce policies that promote globalization. For example, the IMF directly influences exchange rate and stability in countries around the world. Furthermore, the WTO, with its mission on global trade, can enact policy on free trade.

One of the initial premises behind globalization is that a worldwide openness of trade should promote the inherent wealth of nations across the globe. Moreover, just as there are a myriad of nations that trade globally, so too there are a myriad of global trade policies. Some of these interactions are through policy, while some are through agreements. An example of an agreement is the Free Trade Agreement that the U.S. had with its allies throughout the Cold War. A free trade agreement refers to the lack of a trade barrier between participating nations. These barriers are usually in the form of taxes, or tariffs, and they are primarily used to raise revenue. Another important trade agreement (one that international businesses need to be aware of) is the General Agreement on Tariffs and Trade (GATT). The GATT “was signed during October 1947 to liberalize trade, to create an organization to administer more liberal trade agreements, and to establish a mechanism for resolving trade disputes” (Gorman, 2003, p. 154). Finally, although only two specific agreements were discussed in this module, there are numerous other agreements and policies that affect global businesses. Additional agreements include the Agriculture Agreements, Service Agreements, and Technology Agreements to name a few. Each of these are linked to tariff and trade agreements, such as the GATT, and the institutions that govern these agreements, such as the IMF.

Although there are numerous Technology Agreements affecting international business operations, technology is still a principal driver of globalization. Advances in transportations, communication, and overall information technology all help drive globalization. Transportation advances in road, rail, and air have reduced the amount of time it takes to get a good from country to country. Just in the last decade alone, there have been drastic developments in communications that make conducting international business much easier. Examples of some developments include the Internet, video calls, voice mail, cell phones, and more. Finally, advances in information technology have significantly transformed economic life. Information technology has given all levels of international interaction (consumers, investors, and businesses) tools for identifying and pursuing global business opportunities. As discussed at the beginning of this segment, technological developments are the main catalyst and driving force for a majority of the globalization process.

Some would argue that commercial activities on the Mediterranean in ancient times could be labeled as globalization. The world back then had a simpler form of globalization, which included technological developments in navigation and transportation. With reduced barriers in communication and transportation costs, businesses are free to move to places where conditions are favorable (the global business scene). In this section we have reviewed these technologies, along with policies, and studied how they are controlled through global institutions such as the IMF and WTO. Finally, we reviewed the expansion of business to an international scale via globalization.

Module 5 Notes: International Trade and Investment

Notebook and pencilInternational trade generally poses three types of issues. The first issue is based on patterns of trade flows between at least two nations. The second refers to the nature and extent of gains or losses to an economy. Finally, the third issue concerns the effects of trade policies on an economy. Most theories of international trade are dedicated to the first issue, trade flow between nations. This includes items such as import and export tariffs, and is watched, and can be sanctioned, by the World Trade Organization. Trade flow is also used to analyze and forecast world economies. We will now turn to how professionals in the industry view these elements by focusing on classical trade theory, factor proportion theory, and product life cycle theory. Looking to investment theories, we will review both the market imperfections theory and the international production theory.

Classical trade theory dictates that how much a country imports and exports relates to its trading pattern with other nations. That is, countries can gain if they devote resources to the generation of goods and services in which they have an economic advantage (Marin, 1992). Therefore, classical trade theory describes the scenario where a country generates goods and services in which it has an advantage for indigenous consumption, and exports the surplus. Consequently, it is sensible for countries to import those goods and services in which they have an economic disadvantage.

Classic trade theory has a foundational basis in two additional theories.

The theory of absolute advantage is the ability of a country to produce a product with fewer inputs than another country.

The theory of comparative advantage is the notion that although a country may produce both products more cheaply than another country, it is relatively better at producing one product than the other.

Historically, there were two primary contributors to this theory. Adam Smith described the division of labor, whereby industrial societies increase output while using same the same amount of labor-hours as pre-industrial society.

David Ricardo developed the concept of comparative advantage, meaning that a country with no obvious benefit from trade can specialize in production, and trade for products it does not produce.

Finally, through trade, a nation can achieve consumption levels beyond what it could produce by itself. Smith wanted to explain why countries trade, and why some countries grow faster and wealthier than others through trade.

Moving into factor proportion theory, we can see that there are two factors of production, labor and capital. According to this theory, a country that is relatively labor or capital abundant should specialize in the production and export of a product which is relatively labor or capital intensive. The factor proportion theory, in contrast to classical trade theory discussed above, provides an explanation for the differences in advantage exhibited by trading countries. According to this theory, countries will tend to generate and export goods and services that harness large amounts of abundant production factors that they possess, while they will import goods and services that require large amounts of production factors which may be relatively scarce (Hecksher & Ohlin, 1933). Moreover, this theory broadens the concept of economic advantage by considering the costs of factors of production.

The final theory we will review in this module is the product life cycle theory. This theory was found to be a useful framework for explaining and predicting international trade patterns. This theory suggested that a trade cycle emerges where a product is produced by a parent firm, then by its foreign subsidiaries, and finally anywhere in the world where costs are at their lowest possible (Vernon, 1966). Furthermore, the theory shows how a product could emerge as a country’s export, work through the life cycle, and ultimately become an import.

Technology is a pivotal factor in creating and developing new products, while market size and structure are influential in determining the extent and type of international trade. Therefore, under the product life cycle theory, technological innovation and market expansion are critical for explaining patterns of trade.

Before moving into our weekly discussion, let us review two investment theories, the market imperfections theory and the international production theory.

The market imperfections theory states that firms constantly seek market opportunities. Company’s advantages are explained by market imperfections for products and factors of production. The theory of perfect competition dictates that firms produce standardized products and enjoy the same level of access to factors of production. However, the reality of imperfect competition determines that a company can gain different types of competitive advantage to varying degrees. The bottom line is that the company’s decision to invest overseas is explained as a strategy to capitalize on certain capabilities not shared by competitors in foreign countries.

International production theory suggests that the tendency of a firm to initiate foreign production will depend on the specific attractions of its home country compared with the resource implications and advantages of locating in another country. This theory makes it clear that not only do resource differences and the advantages of the firm play a part in determining investment activities, but foreign government actions may also significantly influence the piecemeal attractiveness and entry conditions for firms.

For centuries, economists, managers, and scholars have offered theories regarding the economic rationale behind international trade and investment. Moreover, they have debated why nations should promote trade and investment with other nations. In this module, we have covered three trade theories (classical trade theory, factor proportion theory, and product life cycle theory) and two investment theories (market imperfections theory and international production theory). Now that you have a foundation of knowledge of these five theories, let us apply what has been gained in our discussion.

Module 6 Notes: Government Policy toward International Trade and Investment

Global Trade Words Means Planning For International Commerce

International trade generally presents three types of issues: trade flows between nations, gains or losses to an economy, and the effects of trade policies on an economy. Free trade is trade between countries that occurs without government restrictions. Government policies that interfere with trade usually take the form of tariffs, quotas, or import/export restrictions or restraints. A tariff is a tax imposed by a government on imports. A quota is a numeric limit imposed by a government on the quantity of a good that can be imported into the country. An import/export restriction or restraint is an agreement negotiated between two countries that places a numerical limit on the quantity of a good that can be imported by one country from the other country. In the previous module, we discussed how the World Trade Organization could impose trade sanctions. These trade sanctions are one way a government can impose policy on trade and investment. Government subsidies, quotas, and import/export restrictions can also directly affect international trade and investment.

I think an American private citizen or an American company should have the right to visit any place on earth and the right to trade with any other purchaser or supplier on earth. Jimmy Carter, 2002

To start this module’s discussion, we should look at the question of why governments would restrict trade. The term “free trade” has different meanings to different groups. The free trade debate is complex because of how people, industries, and governments view the events around them. Even though economists have a reputation for disagreeing about everything, one thing that almost all economists have genuinely agreed on is the desirability of free trade. However, it is also well known that matters of government trade policy can be all about political motives and not about the economic benefits of free trade. Along these lines, a prime area of concern is how to protect a nation’s domestic industry from unfair trade. If a country subsidizes a trade export industry, buying cheaper exports will hurt the sales of domestic products that compete with those industry items, although domestic consumers will benefit. Additionally, dumping exports is another unfair trade practice that is widely seen. Dumping can hurt particular workers and organizations and is prohibited under most domestic laws. Historically, dumping of exports has been used to drive domestic producers out of business, lessen competition, and increase the market share, all of which function against a nation’s economic interest and welfare.

A prime way a nation could slow or restrict trade is through tariffs (or import taxes). Tariffs are taxes imposed on imported goods as they enter a country. These tariffs, or import taxes, are usually calculated as a percentage of the value of a given imported product. For example, if the United States imposes a 15% tariff on imports of coffee, then a merchant bringing a $100 shipment of coffee into the United States would be required to pay 15% of $100, or $15, to the U.S. government. If a nation wanted to slow, or stop, the flow of certain good, all that would be required is to keep increasing the tariffs. Increased tariffs restrict or discourage imports by making these imported goods more expensive than domestic goods. There might be a small number of purchasers in the import nation that could pay the increased prices, but the total number of purchased goods may not be favorable to the company supplying them. In this example, if imported widgets cost more than domestic widgets, consumers would be consuming fewer imported widgets, even if they are thought to be superior in quality to the domestic ones. Tariffs can vary widely from country to country and from product to product within a country. Most countries impose no tariffs at all on some imports, but most imports are subject to at least minimal tariffs.

An import quota is a limit on the quantity of a good that can be produced abroad and sold domestically. This form of government policy protection (or trade restriction) sets a limit on the quantity of a good that can be imported into a country over a given period. The goal of placing import quotas is to protect domestic producers from foreign competition. This is especially true if the foreign competition is intentionally trying to drive the price of select goods down in price. Additionally, quotas can be used in international trade to regulate the volume of trade between countries. In this instance, quotas could be imposed on specific goods or services to reduce imports. This reduction in imports should drive an increase in domestic production. The theory behind this government policy is to protect domestic production by restricting foreign competition. Quotas are different from tariffs, because tariffs place a tax on imports or exports that move in and out of a country. However, quotas and tariffs are both viewed as government-imposed protective policy measures to control trade between countries.

The final government policy to cover in this module is import/export restrictions, or restraints. An import/export restriction is a limitation on the quantity of goods imported or exported in a specific country by a government. Import/export restrictions might be imposed to prevent a shortage of goods in the domestic market. Governments may want to enact policy to manage the effect on domestic markets due to imported and exported goods. A global governing body, such as the World Trade Organization, may restrict imports and exports to sanction trade between nations. A prime example of this is the restriction of arms between nations where these items may be used in terrorism, or nuclear, biological, or chemical warfare. Finally, these government policies may be enacted to restrict import/export trade to embargoed nations (nations who have an official ban on trade or other commercial activity).

There are many good arguments for allowing free trade among nations. Trade helps economies grow and facilitates the most efficient production of goods and services across the globe. One might think that governments would want to encourage this efficiency and would agree to let trade occur unregulated. In practice, however, governments often try to manipulate trade in a variety of ways; primarily this is accomplished by restricting imports and encouraging exports. They do this to achieve a wide array of economic, political, and diplomatic objectives. Now that you have a foundation of knowledge of government policy as it relates to international trade, let us apply this in our discussion.

Module 7 Notes: Entry Strategies for Economic Integration for Regional and Global Businesses

Besides importing, there are five common entry modes for international expansion. These are exporting, licensing and franchising, acquisition, partnering (or strategic alliances) and establishing a new subsidiary (also known as green field ventures). In this module, we will explore all five of these entry modes. More importantly, we will cover the advantages and disadvantages of each. Organizations that are venturing into international waters will need to evaluate their options and choose the entry mode that best aligns with their strategic goals. For example, an organization may want to partner with another firm. One successful partnership of this nature was Starbucks’ partnership with Kraft Foods; this partnership brought Starbucks coffee into supermarkets around the world.

Five components of Regional and Global Integration. Acquisition, partnering, licensing and franchising, establishing new subsidiaries, and exporting.To start this module, we will look at exporting. Exporting is typically one of the easiest ways to enter an international market, and most organizations start their international expansion by using this mode of entry. Exporting, by definition, is the sale of products and services in foreign countries that are sourced from the home country (or specifically, sales of goods across national borders). An advantage of this mode of entry is that firms can avoid the expense of establishing operations in foreign countries. Organizations must, however, have a way to distribute and market their products in the selected country. Most, but not all, organizations will enter this market by using an agreement with a company or distributor in the host nation. Organizations will need to review product labeling, packaging, and pricing to be prepared for the market. A primary concern when exporting in foreign lands is translating the product into the language of the other country. This can be complicated by local rules and regulations, or simply by the host nation’s culture. On a side note, these language transitions have not always been accomplished successfully. For example, an ink pen company mislabeled a pen it was exporting; instead of the pens being labeled “terrific,” there were “terrifiantes,” which translated to “terrifying” (Ricks, 2009). Disadvantages with exporting goods include the cost of transporting goods, tariffs on goods going into a country, and loss of control (or less control) over operations.

Licensing and franchising are two specific modes of entry an organization can use to expand internationally. Licensing and franchising are considered contractual entry modes, because they are typically tied to a contract, versus an organizational investment. Licensing is the granting of permission by the licenser to the licensee to use intellectual property rights, such as trademarks, patents, brand names, or technology, under defined conditions. Global economists believe that licensing makes for a flatter world, because it creates a legal vehicle for taking a product or service delivered in one country and providing a nearly identical version of that product or service in another country. With licensing, an organization grants rights to its product for a predefined period of time. The advantage of licensing is that the company’s products will be manufactured and made available for sale in the foreign country (or countries) where the product or service is licensed. Moreover, the organization does not have to expend its own resources to manufacture, market, or distribute the goods. A disadvantage is that costs could be driven down and there could be a lower potential return on investment between organizations. Franchising is similar to licensing, because under a franchising agreement, the organization grants rights on its intangible property for a specified period of time and receives a royalty in return. The difference is that the franchiser provides a bundle of services and products to the franchisee. A prime example is Starbucks expanding internationally through franchises. Each franchisee pays Starbucks a franchise fee and a percentage of its sales, and is required to purchase certain products from the franchiser. In return, the franchisee gets access to all of Starbucks’ products, systems, services, and management expertise.

We now turn to acquisition, which is a transaction where an organization gains control of another organization by purchasing its stock, exchanging the stock for its own, or, in the case of a private organization, paying the owners a purchase price. Acquisitions are appealing because they give the organization quick, established access to a new market. However, they can also be expensive, which has at times made them unattainable for companies in the developing world. Without going too deeply into global economics, the strength of different currencies has lessened the acquisition gap for some countries. An advantage of an acquisition is that it is a good strategy if a particular industry is consolidating. However, a disadvantage is that it can be extremely risky. Many acquisitions, especially those that are overvalued, can fail to increase market value.

Partnering, or entering a strategic alliance with another organization, is another method of entry. A strategic alliance involves a contractual agreement between two or more enterprises stipulating that the involved parties will cooperate in a certain way for a certain time to achieve a common purpose (Steinhilber, 2008). To determine if the alliance is good for the organization, it must first decide what value the partner could bring to the venture. The advantages of partnering with an organization, especially one that is local to a foreign market the organization wants to enter, is that the local organization already understands the culture, market, and ways of doing business. Partners are advantageous if they are recognized, reputable, and have existing relationships with customers. Two disadvantages of partnering are a lack of direct control of the partner organization, and the possibility that the partner’s goals differ from the other organization’s goals.

Finally, organizations can establish a new subsidiary (also known as green field ventures). The process of establishing a new subsidiary is often complex and potentially costly, but it can allow the organization maximum operational control and has the potential to provide above-average return on investments. A disadvantages of this mode of entry is that costs and risks of establishing operations in a new country could be high. Additionally, the organization may also have to acquire market knowledge and expertise from the host nation. The prime advantage of establishing a new subsidiary is that the organization retains control of all operations.

There are many reasons it may be advantageous for a business to expand into foreign markets. An organization’s domestic profit margins are reduced if competition starts to saturate the home market. Moreover, an organization can use its current competitive advantages in production, technology, and management to capture new business opportunities abroad. Organizations can also reduce or minimize overall costs by outsourcing their operations or gaining access to lower-cost inputs in overseas locations. Now that you have a foundation of the five common entry modes for international expansion, let us apply this knowledge in our discussion.

Module 8 Notes: Global versus Domestic Markets

A strategic business plan is a step-by-step document that an organization creates to ensure organizational success. Depending on the type of organization and the business it does, the global and domestic marketing plans can be drastically different from each other. International considerations are a major part of a strategic plan, and affect the domestic portions of the plan too. As mentioned in previous modules, a strategic business plan includes a vision for the organization, a mission statement, a well thought-out financial plan, human resource strategies, and an overall situational analysis for either the domestic or global market. In the following segment, we will turn our attention to several of the differences between doing business globally and doing business domestically.

Doing business internationally is not the same as doing business domestically. There are not only new skills to learn, but also new knowledge to acquire about the country the organization is entering. Organizations need to learn about the different laws and regulations, along with customer purchasing habits. Moreover, organizations may be required to change their marketing strategies, and possibly the materials used in product development, to appeal to the global market they are entering. It is important to understand that the way the organization operates the business will be determined by the culture of the international market they are entering. There may or may not be a link with this culture to the domestic market. Organizations should not be inhibited by the differences between domestic and international business, but should look at this as an opportunity for success.

When it comes to promoting a product or service, one size doesn’t fit all. Certain aspects of the marketing plan may need to change depending on whether the organization is marketing domestically or globally.

Domestic Marketing

Domestic marketing is selling within one’s own country. Typically, this is the primary area where organizations seek to market their goods or services. The organization is likely familiar with domestic elements such as the market, customer needs, geography, demographics, and distribution methods. The home country is often the easiest place for an organization to launch a product. Product, price, place, and promotion are easier for companies to determine within the domestic market. Finally, there are no language barriers in domestic marketing, and obtaining and interpreting data on local marketing trends and consumer demands is easier and faster. This allows the company to make decisions and develop marketing strategies that are effective and efficient. Local markets are not as broad as international markets.

Global Marketing

Global marketing is when an organization offers its products or services worldwide. As mentioned in the previous segment, most organizations begin marketing their goods or services within their own country, and then expand to the global market-space. This global expansion is typically in order to capture greater market share and open up new avenues for sales. Every country has independent business laws, and any organization that aims to enter into business in another country must first know about these laws. Consumer preferences may also differ, so marketing strategies should be formulated to meet the needs of various international consumers. International marketing requires more time and effort, and can also be more risky. This risk occurs because the international market is very uncertain; a company must always be ready for sudden changes. Finally, a company requires a higher level of commitment to succeed in an international market.

There are a number of additional items that need to be considered when thinking about the differences between domestic and global markets. These items include culture, data accessibility and reliability, span of control, product mix, customer preferences, overall business operations, and currency.

Culture: No two cultures are the same, and understanding the business culture in another country is one of the first keys to success in international business. Culture defines everything a society does, including business practices, responses to advertising and marketing, and overall sales. It is important to conduct research on the culture of the country that an organization intends to enter. Understanding these areas allows an organization to be better prepared to enter the global market.

Data Accessibility and Reliability: The degree of technology can vary substantially in global markets. If an organization’s product or service requires a high degree of technology to use or implement, then markets with low levels of technology will not be suitable or sustainable for operations.

Competition: In today’s global markets, every organization is pitted against worldwide competitors with consistently improving productivity, better performance, and shrinking prices. Typically, the lowest cost producer usually wins. Many global producers accept lower profit margins, which increases competitive pressures.

Consumer Preferences: The success of your marketing strategy involves gaining a comprehensive understanding of the particular markets that an organization serves. A large portion of these markets may be based on consumer preferences. A simple method of identifying consumer preferences is to answer the questions, who is buying the goods and why are these consumers purchasing these items.

Product Mix: When gathering market information on the product the organization intends to introduce, it is important to understand the overall product market, the competition and the product market entry strategy. It can be difficult to find information for some markets; however, it is important for organizations to gather as much information as possible in order to enter the market successfully.

Business Operations (Logistics): Worldwide shipping (transportation and logistics) must take into consideration costs, time delays, and country restrictions. Each country has its own laws governing what goods may be imported. Companies must comply with all importation laws, and must be willing to invest time to learn the various rules and regulations concerning exports and imports.

Currency: Pricing products for a global marketplace can be challenging. In addition to online sellers needing currency converters, or payment processing systems that accept multiple currencies, organizations must also be aware of pricing sensitivities by country, by product and by market.

Characteristics International Marketing Domestic Marketing

1. Culture Multicultural Typically single culture

2. Data accessibility Difficult Easy

3. Data reliability Typically low High

4. Competition Intense Less than globally

5. Consumer preferences Country dependent Vary to a small extent

6. Product mix Adaptability required Standardization required

7. Business operation More than one country Home country only

8. Currency exposure Required Required only if importing

Marketing is the efficient and effective management and use of a company’s resources to meet the consumers’ demands and the company’s objectives. It involves selling the company’s products to satisfy the needs of consumers. This marketing could be performed nationally or internationally. For international markets, it is important for organizations to understand that the way they conduct day-to-day business will be affected by cultural aspects of the international market they are entering. These aspects will be different than in the domestic market. We will now use this newfound knowledge in our discussion on organizational issues in global markets.

11/3/2017 003 BT Master Template BUS341_NO ACC

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SBT_BUS341_M8A1 Final Project Rubric

Levels of Achievement

Criteria Unacceptable MinimallyResponsive Satisfactory Exemplary

Topic &
Introduction

0 Points
The organization
is irrelevant to the
specified area
and no
introduction is
given.

17 Points
The organization
has some
relevance in the
specified area,
but the
introduction
provides little
information on
the topic.

21 Points
The selected
organization is
relevant, but the
introduction
provides too
much or too little
information about
the topic, and
does not lead-in
to the paper.

25 Points
The selected
organization is
relevant and the
introduction
presents a
concise lead-in to
the paper.

Content and
analysis

0 Points
No discussion of
the organization’s
environment and
managerial
functions. No
analysis is
provided.

17 Points
Information
addresses the
organization’s
environment and
managerial
functions at
times. Analysis is
vague or too
general.

21 Points
Information
provides
reasonable
support for the
organization’s
environment and
managerial
functions
consistently and
displays evidence
of a basic
analysis of the
significant topic.

25 Points
lanced
presentation of
relevant and
legitimate
information that
clearly supports
the organization’s
environment and
managerial
functions is
offered and
displays evidence
of a thoughtful,
in-depth analysis
of the significant
topic.

Organization 0 Points
The writing is not
logically
organized. Most
of the time, ideas
fail to make
sense together or
are unrelated to
the topic.

7 Points
The writing is
presented in a
somewhat logical
order. Needs
more effort in
putting the ideas
together to make
sense/support the
topic.

12 Points
In general, the
writing is
arranged logically
and usually ideas
make sense
together in a way
that supports the
topic.

15 Points
The ideas are
arranged logically
to support the
purpose or
argument. They
flow smoothly
from one to
another and are
clearly linked to
each other.

Name

Description

Rubric Detail

11/3/2017 003 BT Master Template BUS341_NO ACC

https://mycourses.excelsior.edu/webapps/rubric/do/course/manageRubrics?dispatch=view&context=course&rubricId=_211402_1&course_id=_47576_1 2/2

Levels of Achievement
Criteria Unacceptable MinimallyResponsive Satisfactory Exemplary

Synthesis &
Conclusion

0 Points
No conclusions
and/or
recommendations
to improve the
organization’s
operations were
presented.

17 Points
Presented
illogical,
ambiguous, or
unsupportable
conclusion and
recommendations
regarding the
organization’s
operations.

21 Points
Presented a
conclusion and
recommendations
to improve the
organization’s
operations that
were somewhat
related to the
findings.

25 Points
Presented a
conclusion and
recommendations
to improve the
organization’s
operations that
were insightful,
clear, and
logically taken
from the findings.

APA
Style/Writing
Mechanics

0 Points
Does not follow
APA style
guidelines.
Grammar/
spelling errors
are so frequent
and distracting
that the paper is
almost impossible
to read.

6 Points
Attempted to
follow APA style
guidelines, but
has major errors.
Grammar and/or
spelling errors
are so frequent
that the paper is
difficult to
understand.

8 Points
Followed APA
style guidelines
with only minor
errors. Grammar
and spelling are
typically correct.

10 Points
Followed APA
style guidelines
and all grammar
and spelling are
correct.

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