2. Liberalization of Cross-Border Movements. The World Trade Organization (WTO, discussed in Chapter 6) and other international trade agreements have reduced barriers to the movement of goods and services across national boundaries.
3. Development of Supporting Services. International banking, international document delivery, and other services have tremendously simplified the conduct of international business.
4. Increase in Global Competition. It is becoming increasingly important that firms have international operations in order to be able to shift production across countries and take advantage of new production location and marketing opportunities to stay ahead of other international competitors.
5. Exports are goods and services produced in one country and then sent to another country. Imports are goods and services produced in one country and then brought in by another country. Information about exports and imports helps us to explain the impact of international business on the economy.
6. Foreign direct investment (FDI) is equity funds invested in other nations. Industrialized countries have invested large amounts of money in other industrialized nations and smaller amounts in less developed countries (LDCs), such as those in Eastern Europe, or in newly industrialized countries (NICs), such as Hong Kong, South Korea, and Singapore. Most of the world’s FDI is in the US, the European Union (EU), and Japan. As nations have become more affluent, they have pursued FDI in geographic areas that have economic growth potential. The Japanese, for example, have been investing heavily in the EU in recent years.
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8. Exporting is the selling of products in overseas domestic markets.
9. Usually a low cost, low risk way of penetrating into global markets.
10. · Sole traders and SME“s commonly use intermediaries to export their goods, in a process known as indirect exporting.
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12. Involves a higher level of commitment’ money, equipment and personnel transfers do occur.
13. Usually requires large amounts of capital, therefore the players are usually multinational or transnational corporations.
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17. “Buy Local” Legislation. Buy local legislation represents laws that are intended to favour the purchase of domestically sourced products over imported products, particularly with respect to government procurement. Local content requirements, i.e., costs incurred within the local country (usually measured as a percentage of total costs), fall within this category.
18. Standards and Labels. The professed purpose of standards is to protect the safety or health of the domestic population. However, countries may also devise classification, labelling, and testing standards that facilitate the sale of domestic products but obstruct the sale of foreign-sourced products.
19. Specific Permission Requirements. An import (and export) license requires that firms secure permission from government authorities before conducting trade transactions. Such procedures directly restrict trade when permission is denied and indirectly restrict trade because of the cost, time, and uncertainty involved in the process. A foreign exchange control requires an importer of a given product to apply to a government agency to secure the foreign currency to pay for the product.
20. Administrative Delays. Intentional administrative delays create uncertainty and increase the cost of carrying inventory. However, competitive pressures can motivate countries to improve inefficient administrative systems.
21. Reciprocal Requirements. Governments may require that foreign suppliers accept products in lieu of money. Barter, i.e., the direct exchange of products between two parties, and offsets, i.e., the agreement by a foreign firm to purchase products with a specified percentage of the proceeds from an original sale within the importing country, both represent forms of countertrade.
22. Restrictions on Services. Countries restrict trade in services such as transportation, insurance, advertising, consulting, and banking for reasons of essentiality, the maintenance of standards, and employment.
23. Essentiality. Countries consider certain services industries to be essential because they serve strategic purposes or provide social assistance to citizens. Private companies of any sort may be prohibited, and in other cases, price controls may be imposed by the government; government-owned operations are often subsidized. Essential services can include the transportation, postal, banking, utilities, security, and communications sectors.
24. Standards. Governments may limit foreign entry into particular service professions in order to assure that practitioners are qualified. Licensing standards vary by country and extend to a wide variety of occupations. Prerequisites for taking certification examinations may be lengthy.
25. Immigration. Government regulations often require that an organization, whether domestic or foreign, demonstrate that the skills needed for a particular job are not available locally before hiring a foreignerCASE STUDY QUESTION’s<br />Q1) What overall mission Co. Is trying to achieve – huge expansion across widest geography while global slow down? – Explain giving examples.<br />Strengthen presence in traditional and niche market &Establish regional alliances for marketing<br />The company has a strategy in place for the next stage of its expansion. Tata has been able to exchange expertise. For example after the Daewoo acquisition the Indian company leaned work discipline and how to get the final product µright first time. The companys dealership, sales, services and spare parts network comprised over 3500 touch points.<br />TATA motors has been famous to introduce newvehicles, this is possible just because of the strong research and development.<br />Long term strategy<br />Develop ´Truck of the future& Leverage technical capabilities for product development<br />Tata Motors was interested in acquiring JLR as it would reduce the company's dependence on the Indian market, which accounted for 90% of its sales. The company was of the view that the acquisition would provide it with the opportunity to spread its business across different geographies and across different customer segments. Tata Motors had formed an integration committee with senior executives from the JLR and Tata Motors, to set milestones and long-term goals for the acquired entities.One of the major problems for Tata Motors could be the slowing down of the European and US automobile markets. It was expected that the company would address this issue by concentrating on countries like Russia, China, India, and the Middle East. Forming a part of the purchase consideration were JLR's manufacturing plants, two advanced design centers in the UK10, national sales companies spanning across the world, and also licenses of all necessary intellectual property rights. <br />Tata Motors had several major international acquisitions to its credit. It had acquired Tetley, <br />South Korea-based Daewoo's commercial vehicle unit, and <br />Anglo-Dutch Steel maker Corus. <br />Tata Motors' long-term strategy included consolidating its position in the domestic Indian market and expanding its international footprint by leveraging on in-house capabilities and products and also through acquisitions and strategic collaborations.<br />Analysts were of the view that the acquisition of JLR, which had a global presence and a repertoire of well established brands, would help Tata Motors become one of the major players in the global automobile industry.<br />Tata Motors, and Marcopolo will provide know-how in processes and systems for bodybuilding and bus body design.Tata and Marcopolo have launcheda low-floor city bus which is widely used by Chennai, Delhi, Mumbai, Lucknow and Bangloretransport corporations.<br />Tata Motors also formed a joint venture with Fiat and gained access to Fiat diesel engine technology.Tata Motors sells Fiat cars in India and is looking to extend its relationship with Fiatand Iveco to other segments. Tata has also formed several JV's with many small companies in various countries around the world<br />137160086360<br />Q2) “Acquiring widest range in passenger as well in commercial vehicles” Explain very high risks Co. Is undergoing?<br />Economic slowdown resulting in adverse impact on the sales<br />In Feb 2009, the sales in commercial vehicles segment showed a decline of 53% as compared to that of Feb 2008.<br />Tata Motors bought Jaguar Land Rover from Ford Motor Company for $2.3 billion. A bridge loan from a syndicate of banks was used to finance the deal.] The success of the takeover depends on the ability of TTM to fully integrate with Jaguar Land Rover and turn around the Jaguar Land Rover business. The economic slump has led to a drop in sales of the cars and made turnaround of the business difficult. TTM had to refinance the bridge loans in order to adjust for the lower sales. <br />TTM has lost market share in its passenger car and utility vehicles segment because of no new product launch. Although new variants have been introduced time and again, they have not been able to sustain the consumer interest as competitors have come up with new product launches. The Nano plant in Singur, West Bengal also had to be abandoned because of public protest and political complications. This has caused delays in the launch of Nano, which was originally scheduled to be launched in Feb 2009. <br />Operating in numerous countries across the world, Tata Motors functions with a global economic perspective while focusing on each individual market. Because Tata is in a rapid growth period, expanding or forming a joint venture in over five countries world-wide since 2004, a global approach enables Tata Motors to adapt and learn from the many different regions within the whole automotive industry. They have experience and resources from five continents across the globe, thus when any variable changes in the market they can gather information and resources from all over the world to address any issues. For instance, if the price of the aluminum required to make engine blocks goes up in Kenya, Tata has the option to get the aluminum from other suppliers in Europe or Asia who they would normally get from for production in Ukraine or Russia. <br />Tata Motors also has to pay close attention to shifts in currency rates throughout the world. Currency fluctuations can equate to higher or lower demands for Tata vehicles which in turn affect profitability. It can also mean a rise in costs or a drop in returns. But they also have to pay attention to not just the domestic currency, the rupee, but also to the dollar, euro, bhat, won, and pound, to just name a few. Just because the rupee is strong against the dollar does not mean it is strong against all the other currencies. Attention to currency is important because it influences where capital investment will develop and prosper.<br />In 2004, Tata Motors acquired Daewoo Commercial Vehicles Company, which was at the time Korea’s second largest truck maker. Rather than using de-culturation or assimilating Daewoo, Tata took an integrated approach, and continued building and marketing Daewoo’s current models as well as introducing a few new models globally just as it had been done under Korean management. <br />Q3) Will these global expansion help Tata motors long struggling- Nano and Indica Range of products to go global? - Suggest strategies.<br />Tata Motors is able to maintain, as well as increase, their market share by capitalizing on their core competencies. Tata Motors is active, competitive, and dynamic in all aspects of the automotive industry, which means that there must be many different activities going on in all areas of the company.<br /> As a result of the ever evolving automotive industry Tata Motors must always be changing and one way to stay at the forefront of the industry is to make continuous improvements in technology through research and development. <br /> One way that Tata Motors has done this is by producing one of the most efficient and low cost vehicles on the market. Acquisitions, mergers, and expansion is another core competency that Tata Motors has is embedded in their company structure and philosophy. <br />Another core competency that Tata Motors holds is being located in the India. This location has allowed them to understand not only the Indian market but also the dynamics of emerging and developing markets. This market understanding and knowledge allows Tata Motors to manufacture their products at lower costs, sell them to emerging markets while making profits as well as take advantage of the strong labor base in India. <br />Tata Motors excels when it comes to innovation through intensive research and development. Their ability to make the least expensive car on the market, the Nano which will retail for $2,500, is far beyond what any other car dealership has created. This innovation gives Tata Motors their main competitive advantage. <br /> Tata Motors makes everything from tractor-trailers to the world’s least expensive car. This product diversity grants them a competitive advantage over their competitors because they can satisfy more markets and customer needs. <br />Another strength that Tata Motors possesses is high corporate responsibility. They donate a portion of their profits from stock increases towards a specific charity. This highlights Tata Motors overall desire for community improvement while also emphasizing Tata Motors’ high morals and values which is something money can not buy. <br />Tata Motors is also a very eco-friendly company. One of their goals is to produce an emission friendly car, and in 2000 Tata Motors launched the first compressed natural air bus. This air bus requires the owner to plug the car into a standard electric plug for four hours to fill the air tanks. This brought the concept of an “air-car” to reality and the name for this compressed natural air car is “OneCAT.” OneCAT has no gas costs or fossil fuel emissions which makes it a very attractive car for the more mature markets but also the upper classes in developing countries at this point. <br />It is also a great car to have in highly populated countries, such as China and India, because pollution with its adverse effects is a very large concern. OneCAT also is more efficient that any other present Hybrid car, so when inventors think they have the best product out on the market, they actually do not. There will always be something else to invent or improve on and Tata Motors is a prime example of that.<br />Tata Motors is unique in a way in which when it buys a company. Tata Motors keeps the original management of that company intact. The company that Tata Motors purchases will look exactly the same in terms of management and organizational structure as if it was never purchased by Tata Motors. <br />International strategy based on the competitive advantage:<br />New product (eg. Tata Nano, the cheapest car in the World).<br />Acquisitions (eg. Land Rover and Jaguar brands from Ford Motors).<br />Partnership with established companies (eg. Alliance with Fiat since 2006) to enhance the product portfolio and knowledge exchange.<br />Facilities for learning from other companies.<br />Developing programmes for intensive management development.<br />Consolidate position in India by exploiting opportunities:<br />New mobility of young Indians.<br />Government’s substantial road-building program<br />GDP growth<br />Q4) In global widest acquisition – what competitive advantage Co. May have in domestic markets against competitors?<br />Today companies not only face competition from domestic players but also from global players entering in to the market due to free trade and huge opportunities. In India, there is huge competition to attract new customers by offering newer and newer products. One of the strategies adopted by today’s companies is that go for mergers and expansion in order to gain a larger market share and to cash on brands of the company so acquired/ merged.<br />Like Tata motors which have acquired so many companies in short period of 6 years from a company which was specialised in day to day product i.e., Tata Tetley to company manufacturing high end aspirational products i.e., Jaguar and land Rover. With all these acquisition Tata have emerged as a good option for people against its competitors as Tata can now offer more variety in the existing products and also the products with new technologies that Tata have got in the acquisition.By going global there is a twofold benefit, one to acquire global market and second to increase the domestic market with latest and never known before products of the other countries. Domestic market in comparing two companies/ products will always look for new technology used or new innovation bought, thus companies which are going global can get the benefit of all the improved techno, as domestic market instead of going for foreign company can go for domestic company with foreign technology.<br />As in the case of Tata motors, they can even go for skimming pricing strategy for the newly acquired Jaguar and Land Rover unit as they are comparatively the well know brand in foreign and commands a good status therefore when these premium cars are launched in India by Tata motors, it can keep the price high as customers will be more attracted to the premium products of Tata, which already enjoy a good mind share in domestic market.<br />But also these acquisitions and mergers can take a long time to provide the synergies due to some unsystematic risk prevailing in the markets but one has to be patient as sooner or later if right strategies are adopted, and the market in which these companies are going to operate are understood properly and efficient management is there, these synergies are bound to take place<br />