1、International Business Management,IIBD 0105 Dr. Tang,Course Structure,Module I: Globalization pc$: private consumption KWH: electricity;stl: steel consumptioncem: cement production Tele: telephone in usecars in useTV in use,Proxy ,Tire purchase = 1.6 x Car registration Satellite dish, imported car i

2、n street for other luxury goods Refrigerators = 0.2 marriage+0.3 divorce+0.1 house start,Comparable Income Segment ,PPP Exchange rate Big Mac Index 1S$ = 25 Baht S$5000 = 125,000 Baht 1 big Mac = 1 big Mac 5S$= 50 Baht 1S$= 10 BahtS$5000 = 50,000 Baht,Big Mac Index,PPP Exchange Rate,Resources ,Avail

3、ability, Cost, Reliability Infrastructure, Human, Capital, Raw Materials, Intermediate Goods, Machinery & Equipment, Geographic proximity,Economic Risk,Internal Balance Recession or inflation Demand misalignment or structural problem External Balance BOP Balance (trade & capital) Exchange rate,Econo

4、mic Risk ,Foreign debt default Moratorium debt service ratio (interest + principal due)/exports Foreign exchange risk Interest rate risk Inflation risk,Internal & External Balance,Internal & External Balance,Political Risk ,Change in leader or policies Civil disorder Animosity between host & other c

5、ountries Sanction (restraint against commerce: technology, tariff, loan etc.) Embargo (comprehensive sanction) Ownership risk Operation risk Transfer risk,Political Risk Perception,Ownership Risk,In 1960s to 1980s,Analysis Of Political Risk,Managing Political Risk ,Integral part of the host country

6、Intensive use of local resource Contribution Joint venture Insurance coverage,Legal Risk ,Uncertainty of law & law enforcement Extraterritoriality (outside boarders) Burma sanction FCBA Incomparable legal requirement Property right protection Product safety & liability Environment & workplace standa

7、rd Corruption (Foreign Corrupt Business Act),Porters Diamond ,Management Ideology Industrial Structure,Supporting Industry (component & tool),Demand Condition (size & sophistication),Factor Condition (natural & advanced),Government,Chance,Eclectic Theory of Entry Mode ,Ownership Advantage Competitiv

8、e advantage over the rivals Location Advantage Why host country Internalization Advantage In source or out source,Location Advantage ,Low input cost Market R & D facilities Logistic Administration Economic, political, legal & cultural system,Opportunity Risk Grid ,Country VariablesWeightA BCD Accept

9、able/Unacceptable Allow 100% ownershipUAAA Opportunity (H: preferable) Size of investment needed0-5-433 Direct cost0-3-312 Tax rate0-2-212 Market size (now)0-4-324 Market size 3-10 years0-2-212 Risk (H: Preferable) Loss making0-4-421 Exchange rate0-3-023 Political unrest0-3-312 Total211319,BERI (Bus

10、iness Environment Risk Index) ,Criteriaweight Multiply 0-4OVERALL Political stability3 Economic growth2.5 Currency convertibility2.5 Labor cost/productivity2 Short-term credit2 Long-term credit2 Attitude towards foreign investment1.5 Nationalization1.5 Monetary inflation1.5 BOP1.5 Enforceability of

11、contract1.5 Bureaucratic delays1 Communications1 Local Management1 Provisional Service & Contractors 0.5 TOTAL25Max=100,1=poor, 2=average 3=above average 4=superior,80: favorable 70-79: not so favorable 55-69: immature with potential 40-54: high risk 40: very high risk,Country Attractiveness & Compe

12、titive Strength ,Unilevers Global Profile ,product,brand,region,country,Module III: Strategy & Entry Mode,IIBD Dr. Tang,Agenda,Preliminary Globalization Imperative STEP Environment Task Environment Competence Profile Strategic Management Model Anatomy of strategy Business Model & Business Plan Strat

13、egic choices Entry Mode & Practice Export vs. Local Production Whole Ownership vs. Alliance Green Field vs. M &A Entry Tactics Take-over & Anti take-over Tactics Alliance Tactics,Globalization Imperatives ,Growth imperative First mover advantage Efficiency imperative Scale & cost Knowledge imperativ

14、e Leading edge customer, innovative competitor & supplier, R & D Globalization of customers: international & mobile Globalization of product: irrelevance of national product Globalization of competition: multi market cross subsidizing,Five Force Model,Five Source Model ,Journal of General Management

15、, 21-1 pp1-23,Competitive Advantage ,Market Value & Capital,Resource Analysis,Simplified Value Chain ,augmentation,Competitive Triangle,Competitive Benchmarking ,Competence Profile ,Strategic Management Model ,Environment Scanning External Societal Task Internal Structure Culture Resource,Strategy F

16、ormulation Mission reason for existence Objectives results to accomplish Strategies plan,Strategy Implementation Programs activities Budgets resource allocation Procedures sequence of steps Policies guideline,Evaluation & Control Monitor & corrective action,Balanced Scorecard for Planning,Balanced S

17、corecard for Planning,Du Ponts Mission ,“To be the worlds most successful energy & chemistry based company, dedicated to creating high quality, innovative materials that make peoples lives better & easier”,Objectives ,Measurable results Sales Market share Profitability Turnover,Strategy Formation Pr

18、ocedure,Strategy Formation Procedure,Strategy Formation Procedure,Anatomy of Strategies ,Action plan to reach objectives Corporate Focus (geographic region, product, & process) Business Method of Competition (price, quality, image, speed) Functional Marketing Operation Financing HRM R & D,Winning Bu

19、siness Idea ,Exceptional Utility Irresistible Price Deliver with Tidy Profit: Business Model Supported by Stake Holder: Adoption Hurdle,Business Model ,Structure of A Business Plan ,Executive summary Situation Analysis The Target market Product Team & alliance Competitive Advantage (USP) Marketing s

20、trategy Operation strategy (business process) Financial projection & funding requirement Implementation schedule Exit strategy Appendices (Financial statement),Strategic Choice,Choice of Product ,entire portfolio vs. sub set,Choice of Market ,Strategic Choice: Du Pont Model ,Return on Assets = Profi

21、t Margin x Asset Turnover capacity constraint net income/sale ROA= net income/assets competition constraint sales/assets,Strategic Choice: Global Integration,Choice of Entry Mode ,Export vs. Local Production 100% export finished goods Local Assembly 100% local production Whole Ownership vs. Alliance

22、 0%: franchise & license Contact alliance Joint Venture 100% ownership Green Field vs. M &A Start from 0 Using existing capacity,Progress of Entry,Export vs. Local Production ,Size of local market for the minimum efficient scale Shipping & tariff cost Need for local customization Local content requi

23、rement Local resource & supporting industry,Whole Ownership vs. Alliance Based ,Physical, linguistic & cultural distance Operational integration requirement Risk of asymmetric learning Adequacy of capital Local equity participation requirement,Transaction Cost Analysis ,Hollensen, S. 2002 Global Mar

24、keting, Prentice Hall p55,Internalization vs. Externalization ,Hollensen, S. 2002 Global Marketing, Prentice Hall p57,Export,Alliance,Full Internalization,Green Field vs. M &A ,Uniqueness of Corporate Culture Management practice, operation mode Speed to the Market Intensity of local competition New

25、capacity addition,Export ,Agent or broker: commission Dealer or Distributor: inventory Direct sales: end user Case 8-1,Licensing ,Rights to use the intangible property Patent Know-how not subjected to patent Technical or marketing advice and assistance Trade mark Royalty Critical components Cross li

26、censing DVD machine, PC, Nintendo games Case 7-2,Franchising ,Special form of licensing Product & trade mark franchising (cola) Business format franchising (conveniences stores and fast foods) More control & operational assistance Store & layout information, promotion, training, supplies (central pu

27、rchasing), quality assurance Case 7-3,Difference between Franchising & Licensing,Les Nouvelles 22-4 pp155-8,Contract Alliance ,Manufacturing Contract: Out source the manufacturing, Nike, Mega toy Management Contract: Managing a business for a fee Hilton Hotel (logo, management, global booking) Disne

28、y Land Turnkey Operations: Design, construct & equip a, ready to use facility Nuclear power plant, air port, oil refinery BOT Alliance in Marketing, Financing & R & D, Mattel (barbie) & Bandai (Power ranger), Star alliance 20th Century Fox & Paramount (Titanic) Intel, Samsung, Siemens (DRAM chips),J

29、oint Venture ,Partnership or co-owned corporation with a new legal entity and shared equity to achieve common objectives Case 8-2,M & A ,Merger Companies join together (through exchange of shares) Acquisition The buyer purchases the assets or stock of the seller,Entry Modes Compared ,Samsungs Allian

30、ce ,Entering Asia Pacific ,Long Range Planning 29-1 pp13-30,Take-over Tactics ,Negotiation Open market purchase Tender offer Contingent on the tender of a fixed number of shares Proxy fight Control in corporate voting Leveraged buyout Debt financing With the asset of the target company as collateral

31、,Anti Take-over Tactics ,Poison pill Poison Shares (more voting power when activated) Poison puts (debt securities callable when activated) White knight (acquirer) & White squire (shareholder) Self tender (replacing equity with debt) Charter amendment (e.g. Supermajority) Golden parachute (special c

32、ompensation),Poison Pill ,Shareholders right activated At Kick-in threshold To increase take-over cost More shares outstanding (flip in: buy own stocks at a higher price) To dilute the acquirers ownership position Convertible in the case of 100% takeover (flip over: convertible to acquirers stock at

33、 a lower price),Choice of Alliance Partner,Choice of Intermediary,Joint Venture Formation,International Market Entry & Development, Prentice Hall,Stage & Document for M & A,Alliance Tactics,Walling off (Modularization) Boeing (R & D, marketing vs. production technology) Contract safeguard TRW (auto

34、part: restriction of markets) Swap of Critical Resources Cross licensing (Motorola & Toshiba) Credible Commitments Licensing vs. JV (Xerox & Fuji),Contract Issues ,ContractswithIntermediary,System of Control &International HRM,IIBD 0105 Dr. Tang,Agenda,Control Mechanism Procedure Instruments Infrast

35、ructure Choice of Controlling Strategy Vertical Differentiation Horizontal Differentiation Choice of Control System Choice of Leadership Style Culture & International HRM,Procedure of Control ,Set standards Measure actual performance Identify deviation Initiate corrective actions,Instruments of Cont

36、rol ,Budget plan of resource allocation Profit & loss, capital expenditure, cash flow: Scheduling timing & sequence Best Practice Key Success Factors Balanced Score Card Comprehensive Evaluation Plan Case 9-2: Control in Nestle,Budget,Best Practice ,The Example in Xerox: 9 practices identified and d

37、istributed: Australian practice in retaining customers Italian practice in market intelligence Spanish practice in handling new account,Key Success Factors ,Bench Marking in the case of IBM,Balanced Score Card,Balanced Score Card,Balanced Score Card,Balanced Score Card,BSC: Financial,BSC: Customer,B

38、SC: Process,BSC: R & D,BSC: Human Resource,EFQA,EP2M (effective progress & Performance Measurement),7-S Framework,The Essence of Marketing,Comprehensive Evaluation Plan ,Comprehensive Evaluation Plan ,Comprehensive Evaluation Plan ,Comprehensive Evaluation Plan ,Marketing Evaluation Plan,Marketing E

39、valuation Plan,Principles & Practice of Marketing, McGraw Hill,Early Performance Indicator,International Marketing, Macmillan,Infrastructure ,Organization structure (Distribution of information, power & responsibility) International division Global product, region or function Matrix Policies & proce

40、dure Corporate culture,International Division ,Typical Functional Structure International Division Case 9-1: Organization & Reorganization,Global Product vs. Region ,Global Product (SBU): diversified product,Global Regions: diversified market,Global Functional ,Global Matrix ,Case 1: Shell Australia

41、 & Shell Chemical division, London,Policies & Procedure ,Guideline for decision with allowable discretion refund policy, 1% revenue on advertising travel reimbursement procedure,Corporate Culture ,shared value that provides meaning & guide for action Case 9-3: Corporate culture of GE & Privatized SO

42、E,Module VForeign Exchange & Multinational Financial Management,Dr. Tang,Agenda,Foreign Exchange Rate Foreign Exchange Derivatives Future Currency Options Swap Multinational Financial Management Tax Management Currency Management Transaction Exposure Economic Exposure Translation Exposure Funds Mana

43、gement Covered interest arbitrage Capital Budgeting Capital Structure Working Capital Management,Foreign Exchange Rate ,Direct & Indirect Direct: local/foreign (7.6HK$/$) Indirect: foreign/local (0.132$/HK$) Bidding & Asked Bidding: the bank buys foreign currency (7.5 HK$/$) Asked: the bank sells fo

44、reign currency (7.7 HK$/$) Spread: A-B (7.7-7.5=0.2) Spot & Forward Spot: immediate delivery (within 2 days) Forward: settlement in future Forward premium (discount) Exchange Rate, Interest Rate & Inflation Rate,bidding,asked,Spot & Forward,Outright quoting,The forward spread should always be wider

45、than the spot spread,Forward Premium/Discount ,Determination of Exchange Rate,Trade balance (exportimport: appreciate) Capital movement (inflowoutflow: appreciation) Inflation (higher domestic inflation: depreciation) Speculation Government intervention,Basic Relationships ,Future ,Standard contract

46、 (size & maturity) Less counterparty risk (the exchange guarantee) Margin account & marking to market 10% margin, 75% maintenance, Future contact: $1000, B40/$ Margin account: 1000 x 40 x 10% = 4000 Baht Maintenance: 4000 x 75% = 3000 Baht If spot rate 38 Baht/$: loss 2x1000=2000 Baht: margin call,F

47、uture Contract ,Margin of Future Contract ,International Monetary Market, Chicago Mercantile Exchange,Application Of Future Contract,An American firm has to pay 250,000 SF on March 1st. Analyze his decision to buy a future contract on February 1st with the following data,Application Of Future Contra

48、ct ,February 1st: buy future (0.6655 x 250,000 = $166,375) March 1st: Sell future (0.7650 x 250,000=$191,250) Buy spot: (0.7658 x 250,000 = $191,450) Profit: Foreign exchange gain: 191,250-166,375=$24,875 Foreign exchange loss 191,450-166,675=$24,775 Net profit: 24,875-24,775=$100,February 1 spot 0.

49、6667 x 250000,Currency Options ,Currency Options ,Profit & Loss in Options ,Strike at $1.5 per , and a Premium of $0.1 per CallPut,Application Of Currency Options,An American firm has to pay 625,000 marks on June 1st. It may purchase a mark call option on February 1st, with a strike price of $0.5 an

50、d a premium of 0.03 cents. Analyze its decision if the spot rate on February 1st is $0.49, and the spot rate on June 1st might be $0.6 or $0.48.,Application Of Currency Options,The premium paid: 0.03/100 x 625,000=$187.5 June 1st spot rate: $0.6 No option: 625,000 x 0.6 =$ 375,000 With option: 625,0

51、00 x 0.5 +187.5 = $312,687.5 Saving: 375,000-312,687.5 = $62,312.5 June 1st spot rate: $0.48 No option: 625,000 x 0.48 =$ 300,000 With option: 625,000 x 0.48 +187.5 = $300,187.5 Loss: 300,000-300,187.5 = -$187.55,Swap ,Exchanging obligation Chase Manhattan March 2 2000,Application of SWAP,A firm may

52、 issue a fixed rate bond with a 12.75% coupon. If this firm could issue commercial paper (CP) at LIBOR plus 0.375%, should this firm enter an interest rate swap, paying 11.27% in exchange for the LIBOR?,Application of SWAP,12.75 -(11.27-LIBOR+0.375+LIBOR) =1.105 yes,SWAP: Back to Back Loan ,Cost of

53、A (borrow SFr): 10%+5.5%-10.75%=4.75%save 0.25% Cost of B (borrow US$): 6%+10.75%-5.5%= 11.25% save 0.25%,A,B,5.5%,10.75%,Bank,Bank,10%,6%,Case: 6-1,Tax Management,Arms Length Price ,Price between unrelated parties Comparable uncontrolled price Resale price (subtract mark up from sale price) Cost pl

54、us (plus mark on sellers cost),Fronting Loans ,Deposit $1 millionLoan $1 million Pay 8% interest rate Pay 9% interest rate (tax deductible),Parent Company In a low tax country,International Bank,Subsidiary in a high tax country,Transaction Exposure ,Source: Contractual payment Management: Natural he

55、dging: offsetting inflow & outflow $ debt paid by $ sales Contractual hedging Currency risk sharing plan (case 5-1) Forward Contracts Shot term borrowing Discounting (B/E) Factoring (P/N),Currency Risk Sharing Plan ,Forward Contracts ,Forward options (optional date forward) Optional maturity within

56、specific period Forward swap: Forward/forward: (payment delayed) May 1: Sell $ matured June 30 May 20th: Buy $ matured June 30th, Sell $ matured July 31st Forward/spot (payment earlier) May 1: Sell $ matured June 30 May 20th: Buy $ matured at June 30th, Sell $ spot May 20th,Forward Contracts Example

57、 ,May 1spot37.5838.32 2 months (30/6)forward-16-12 May 20spot36.0036.74 40 day (30/6)forward-16-12 71 day (31/7) forward-16-12 July 31spot35.0035.74,A Thai exporter made a contract on May 1st to receive $1000 in future. He sold forward $ matured on June 30th. On May 20th, he was confirmed that the p

58、ayment could be received on July 31st. Help him to arrange forward swap, using the following in formation,Forward Contracts Example ,May 1spot37.5838.32 2 months (30/6)forward-16-12 May 20spot36.0036.74 40 day (30/6)forward-16-12 71 day (31/7) forward-16-12 July 31spot35.0035.74,May 1: sell 2 month

59、forward: 1000 x 37.42 = B 37420 May 20: buy 40 day forward: 1000 x 36.62 = B 36620 sell 71 day forward: 1000 x 35.84= B 35840 With SWAP Net receipt: 37420-36620+35840=36640 Without SWAP: 1000 x 35=35000,Forward Contracts Example ,May 1spot37.5838.32 2 months (30/6)forward-16-12 May 20spot36.0036.74 40 day (30/6)forward-16-12 71 day (31/7) forward-16-12 July 31spot35.0035.74,A Thai exporter made a contract on May 1st to receive $1000 in future. He sold forward $ matured on June 30th. On May 20th, he received th