MICROLINK INFORMATION AND BUSINESS COLLEGE

POSTGRADUATE PROGRAM (MBA) SPECIALIZED BY PROJECT MANAGEMENT

COURSE: PROJECT PLANING

ASSIGNMENT (WORKING AREA) =GOVERENMENT (FOCUSED ON COMMUNITY

SERVICE

GROUP MEMBERS

1. Weldihans Tekle (9977/23)

2. Weldegbreal Tesfay (0510/23)

3. Siyum Weldu

4. Tikue Gebrezgabiher (9912/21)

5. Selamawiet Gebretsadik (0217/23)

SECTION –C, Group -six

INSTRUCTOR: Kahsu Mebrahtu Areaya, Assistant Professor

1. Definition of International Business

 International business refers to the commercial activities that involve the exchange of goods,
services, technology, capital, and knowledge across national borders. It includes trade,
investment, and business transactions between firms, governments, and individuals from
different countries.

2. Importance of Learning International Business Management

  Globalization Awareness: Helps understand market trends, trade regulations, and international
policies.
 Cultural Competence: Develops skills to work with diverse teams and consumers.
 Competitive Advantage: Equips businesses with strategies to enter and compete in foreign
markets.
 Risk Management: Identifies economic, political, and financial risks associated with international
operations.
 Career Opportunities: Expands job prospects in multinational corporations, international trade,
and consultancy.

3. Factors Contributing to the Increased Role of International Business

 Globalization: Increased interconnectedness of markets.

 Technological Advancements: Improved communication and logistics.
 Liberalization of Trade Policies: Reduced tariffs and trade restrictions.
 Economic Growth in Emerging Markets: Expansion of businesses into developing regions.
 Multinational Corporations (MNCs): Their expansion drives cross-border trade and investment.

4. Reasons for Firms' International Expansion

 Market Growth: Access to larger customer bases.

 Profit Maximization: Increased revenue through global sales.
 Resource Acquisition: Access to cheaper labor, raw materials, and technology.
 Competitive Pressure: Competing with global firms.
 Risk Diversification: Reducing dependence on a single market.

5. Assumptions Underlying Trade Theories

 Mercantilism: Wealth is measured by gold and silver reserves.

 Absolute Advantage (Adam Smith): Countries should specialize in goods they produce efficiently.
 Comparative Advantage (David Ricardo): Countries benefit from specializing in goods with the
lowest opportunity cost.
 Heckscher-Ohlin Theory: Countries export goods that use abundant factors of production.
 Product Life Cycle Theory (Raymond Vernon): Trade patterns depend on product maturity.
 New Trade Theory: Economies of scale and first-mover advantage influence trade.

6. Criticism of Trade Theories

 Mercantilism: Encourages protectionism and ignores mutual benefits of trade.

  Absolute & Comparative Advantage: Assume perfect labor mobility and ignore transport costs.
 Heckscher-Ohlin: Does not always predict trade patterns correctly.
 Product Life Cycle: Fails to explain modern production shifts.
 New Trade Theory: Overemphasizes large firms and market power.

7. Applicability of Each Trade Theory

 Mercantilism: Historical perspective, used in protectionist policies.

 Absolute & Comparative Advantage: Used in free trade agreements.
 Heckscher-Ohlin: Applied in resource-based trade (e.g., oil from the Middle East).

 Product Life Cycle: Used in technology-driven industries.

 New Trade Theory: Explains industries with high fixed costs (e.g., aerospace).

8. Practical Examples of Trade Theories

 Mercantilism: Colonial trade policies.

 Comparative Advantage: China producing electronics efficiently.
 Heckscher-Ohlin: Saudi Arabia exporting oil due to resource abundance.
 Product Life Cycle: Mobile phone production shifting from the U.S. to Asia.
 New Trade Theory: Boeing and Airbus competing in aircraft manufacturing.

9. Raymond Vernon's Three-Stage International Product Life Cycle

 1. Introduction Stage: Innovation occurs in the home country, with local production and high
prices.
 2. Growth Stage: Increased demand leads to exports and foreign production.
 3. Maturity Stage: Production shifts to low-cost countries, and the product becomes
standardized.

Adler & Ghadar's Fourth Stage:

 Globalization Stage: Companies establish multinational production networks, and products are
adapted to regional markets.

10. Inward-Looking vs. Outward-Looking Perspectives in International Business

 Inward-Looking: Focuses on domestic self-sufficiency and limiting foreign dependence (e.g.,

import substitution policies).
  Outward-Looking: Encourages international trade and foreign investment (e.g., export-led
growth in East Asia).

11. Types of International Business Operations

Exporting & Importing

 Foreign Direct Investment (FDI)

 Licensing & Franchising
 Joint Ventures & Strategic Alliances
 Multinational Corporations (MNCs)

Example: Multinational Corporation (MNC)

Coca-Cola operates in over 200 countries, adapting its marketing and production strategies to local
cultures and preferences while maintaining a global brand identity.

12. International Management

 International management involves overseeing business activities in multiple countries,

addressing challenges like cultural differences, legal systems, and market dynamics.

Similarities with Domestic Management:

 Planning, organizing, leading, and controlling business activities.

Differences:

 Cultural Adaptation: Managing diverse workforces.

 Legal & Political Risks: Complying with different regulations.
 Currency & Economic Factors: Handling exchange rate fluctuations.

Ch 2

1. Advantages and disadvantages of modes of entry:

  Exporting: Advantages include low risk, low investment, and ease of entry. Disadvantages
include limited control, dependence on foreign distributors, and potential for cultural
differences.
 Licensing: Advantages include low investment, low risk, and access to local expertise.
Disadvantages include limited control, potential for technology transfer, and dependence on
local partners.
 Franchising: Advantages include low risk, established brand reputation, and access to local
expertise. Disadvantages include high investment, dependence on local partners, and potential
for cultural differences.
 Joint ventures: Advantages include shared resources, shared risks, and access to local expertise.
Disadvantages include potential for conflicts, shared control, and dependence on local partners.
 Wholly-owned subsidiaries: Advantages include full control, access to local resources, and ability
to integrate operations. Disadvantages include high investment, high risk, and potential for
cultural differences.

2. Conditions for suitable modes of entry:

 Exporting: Suitable for small and medium-sized enterprises, low-risk products, and markets with
established distribution channels.
 Licensing: Suitable for technology-driven industries, low-risk products, and markets with
established legal and regulatory frameworks.
 Franchising: Suitable for service-oriented industries, established brand reputation, and markets
with established legal and regulatory frameworks.
 Joint ventures: Suitable for industries with high risks, complex technologies, and markets with
established legal and regulatory frameworks.
 Wholly-owned subsidiaries: Suitable for industries with high risks, complex technologies, and
markets with established legal and regulatory frameworks.

3. Practical Examples of Each Mode of Entry

1. Exporting

 Apple selling iPhones to foreign retailers

 Toyota exporting cars from Japan
 Nestlé exporting Nescafé to different markets
 Boeing selling aircraft to international airlines
 Samsung exporting smartphones to Europe
 Nike exporting sports apparel
 Volvo exporting trucks to Latin America
 Indian pharmaceutical firms exporting generic drugs
 Italian wineries selling to the U.S. market
 Swiss watchmakers selling luxury watches internationally
2. Licensing

 Disney licensing its characters to toy manufacturers

 Microsoft licensing Windows OS to PC manufacturers
 Coca-Cola licensing bottling rights in different countries
 Pharmaceutical firms licensing drug patents
 Intel licensing chip designs to other tech firms
 McDonald's licensing operations in select markets
 Adidas licensing production to local manufacturers
 Universal Studios licensing movie content for streaming
 Gillette licensing razor technology to foreign brands
 Sony licensing PlayStation games to third-party developers

3. Franchising

 McDonald’s franchises worldwide

 KFC expanding through franchising
 Subway operating in global markets
 Domino’s Pizza franchising in India
 Marriott hotels expanding globally
 Starbucks franchising in some markets
 7-Eleven stores franchising in Asia
 Dunkin’ Donuts entering the Middle East through franchising
 Hertz car rental franchising internationally
 Hilton Hotels franchising luxury brands

4. Globalization

Definition

Globalization refers to the increasing interconnectedness of economies, cultures, and people through
trade, investment, technology, and communication.

Features of Globalization

 Free trade and movement of goods/services

 Cross-border investments and multinational corporations
 Technological advancements (internet, AI, automation)
 Cultural exchange and integration
 Harmonization of policies and international cooperation

Drivers of Globalization
  Technological innovations (internet, digital payments, automation)
 Trade liberalization (WTO, free trade agreements)
 Global supply chains (offshoring, outsourcing)
 Multinational corporations (MNCs) expanding globally
 Improved transportation (faster shipping, lower costs)
 Financial integration (international banking, capital flow)

5. International Business Environment

The international business environment refers to external factors that influence global trade and
business operations. It includes political, economic, social, technological, legal, and environmental
conditions.

Characteristics and Effects on International Business

Key Considerations for International Business Organizations

1. Market Research – Understanding consumer behavior and competition

2. Legal Compliance – Following regulations in different countries

3. Cultural Sensitivity – Adapting products/services to local culture

4. Currency and Economic Factors – Managing exchange rate fluctuations

5. Risk Management – Preparing for political, economic, and legal risks

6. Technology Adaptation – Investing in automation and digital tools

7. Sustainability Practices – Reducing environmental impact for global acceptance

Ch3

1. International Organizational Models

International organizations adopt different organizational models based on their strategies, operational
needs, and global expansion plans. The main international organizational models include:

a) International Division Model

A separate division is created to handle international operations, while domestic and foreign operations
are managed independently.

Suitable for companies in the early stages of international expansion.

b) Global Functional Model

The organization is structured around core business functions (e.g., marketing, production, finance)
rather than geography.

Used by companies with strong centralized control and standardized products.

c) Geographic/Regional Model

Business is divided based on geographic regions (e.g., North America, Europe, Asia).

Each region operates semi-independently with its own management and strategies.

d) Global Product Model

Business is organized based on product lines instead of geography.

Each product division is responsible for its global operations.

e) Matrix Model

A hybrid structure where employees report to both functional and regional/product managers.

Balances global standardization and local adaptation.

f) Transnational Model

Combines aspects of global, functional, and geographic structures to maximize efficiency and local
responsiveness.

Used by multinational companies seeking both global integration and local differentiation.

2. Examples of international organizational models include:

 International branch offices: McDonald’s, Starbucks, and Coca-Cola

 International subsidiaries: Toyota, Samsung, and Sony
 International joint ventures: BP and Rosneft (oil and gas), Airbus and Boeing (aircraft
manufacturing)
 International strategic alliances: Apple and Foxconn (electronics manufacturing), Google and
Tencent (internet services)
  International licensing agreements: Coca-Cola and FEMSA (bottling), McDonald’s and Alsea
(restaurant operations).

3. Advantages and disadvantages of international organizational structures:

 International branch offices: Advantages include cost savings, shared resources, and centralized
control. Disadvantages include limited autonomy, cultural differences, and potential conflicts
with local laws.
 International subsidiaries: Advantages include local responsiveness, flexibility, and autonomy.
Disadvantages include higher costs, complexity, and potential conflicts with parent company.
 International joint ventures: Advantages include shared resources, local knowledge, and risk
sharing. Disadvantages include potential conflicts, cultural differences, and shared control.
 International strategic alliances: Advantages include shared resources, local knowledge, and risk
sharing. Disadvantages include potential conflicts, cultural differences, and shared control.
 International licensing agreements: Advantages include low cost, low risk, and access to local
markets. Disadvantages include limited control, potential conflicts, and dependence on local
partner.

Ch4

1. International Staffing as a Two-Tiered Process

International staffing is a two-tiered process because it involves:

Tier 1: Staffing at Headquarters (HQ)

 The headquarters of a multinational company (MNC) is responsible for setting global strategies,
policies, and corporate goals.
 Key leadership roles (e.g., CEO, CFO, HR Director) manage international operations, ensuring
consistency across subsidiaries.

 HQ often appoints expatriates (employees from the home country) to key positions in
subsidiaries to maintain corporate culture and control.

Tier 2: Staffing at Subsidiary Level

 Subsidiary managers and employees are hired from the local country or region.
 They handle local operations, regulatory compliance, and market-specific strategies.
 MNCs may use local nationals (host-country nationals - HCNs) or expatriates (parent-country
nationals - PCNs) based on business needs.
Why is it Two-Tiered?

1. Control & Strategy Alignment – HQ ensures global consistency, while subsidiaries focus on local
adaptation.

2. Talent Optimization – Expatriates provide corporate knowledge, while local managers offer market
insights.

3. Cost & Efficiency – Using a mix of expatriates and local employees optimizes costs and performance.

2. Comparison: Subsidiary Managers vs. HQ Top-Level Managers

Key Differences

Subsidiary managers focus on local markets, while HQ managers drive global strategy.

HQ managers have higher decision-making power, while subsidiary managers execute those decisions at
the operational level.

---

3. Comparison: Subsidiary Managers vs. HQ Middle-Level Managers

Key Differences
Subsidiary managers handle operations on the ground, while HQ middle managers work within HQ to
support global operations.

Middle managers focus on internal processes, whereas subsidiary managers focus on external/local
market execution.

---

Conclusion

International staffing is a two-tiered process to balance global corporate strategy with local execution.
Top-level HQ managers focus on overall strategy, while subsidiary managers adapt it to specific markets.
Middle-level HQ managers act as intermediaries, ensuring that corporate policies are effectively
implemented across different regions.

2. Subsidiary Managers vs. HQ Top-Level Managers

| **Aspect** | **Subsidiary Managers** | **HQ Top-Level Managers** |

|---|---|---|

| **Focus** | Local market, subsidiary performance | Global strategy, overall MNC performance |

| **Responsibilities** | Implement HQ strategies, adapt to local conditions, manage subsidiary

operations, achieve subsidiary goals | Develop global strategies, allocate resources, oversee overall MNC
performance, manage relationships with stakeholders (investors, governments) |

| **Decision-making** | Operational and tactical decisions, some strategic decisions within subsidiary
mandate | Strategic decisions impacting the entire MNC, including major investments, acquisitions, and
divestitures |

| **Perspective** | Local, subsidiary-centric | Global, MNC-centric |

| **Accountability** | To HQ, for subsidiary performance | To board of directors and shareholders, for
overall MNC performance |

| **Skills** | Operational management, local market knowledge, cross-cultural communication |

Strategic thinking, global business acumen, financial management, leadership |

**Similarities:**

* Both are responsible for achieving organizational goals.

* Both need strong leadership and communication skills.

* Both must be able to adapt to changing environments.

**Differences:**

* Subsidiary managers focus on the local context, while HQ top-level managers have a global
perspective.

* Subsidiary managers implement strategies developed at HQ, while HQ managers are responsible for
formulating those strategies.

* Subsidiary managers are accountable for subsidiary performance, while HQ managers are accountable
for the overall MNC performance.

3. Subsidiary Managers vs. HQ Middle-Level Managers

| **Aspect** | **Subsidiary Managers** | **HQ Middle-Level Managers** |

|---|---|---|

| **Focus** | Local market, subsidiary performance | Specific functional area (e.g., marketing, finance)
across the MNC |

| **Responsibilities** | Implement HQ strategies, adapt to local conditions, manage subsidiary

operations, achieve subsidiary goals | Develop and implement functional strategies, coordinate activities
across subsidiaries, provide support to subsidiaries |
| **Decision-making** | Operational and tactical decisions, some strategic decisions within subsidiary
mandate | Functional decisions impacting multiple subsidiaries, some input into overall MNC strategy |

| **Perspective** | Local, subsidiary-centric | Regional or functional, MNC-centric |

| **Accountability** | To HQ, for subsidiary performance | To HQ top-level managers, for functional

area performance |

| **Skills** | Operational management, local market knowledge, cross-cultural communication |

Functional expertise, coordination and communication skills, understanding of MNC operations |

**Similarities:**

* Both play a crucial role in implementing MNC strategies.

* Both need strong communication and interpersonal skills.

* Both must be able to work effectively with others.

**Differences:**

* Subsidiary managers have a broader scope of responsibility within the subsidiary, while HQ middle-
level managers focus on a specific functional area across multiple subsidiaries.

* Subsidiary managers are more directly involved in day-to-day operations, while HQ middle-level
managers are more involved in coordination and support.

* Subsidiary managers are accountable for the overall performance of the subsidiary, while HQ middle-
level managers are accountable for the performance of their functional area across the MNC.

**In conclusion:**

* Subsidiary managers are responsible for the performance of their specific subsidiary, adapting global
strategies to the local context.

* HQ managers, whether top-level or middle-level, have a broader perspective, focusing on the overall
MNC strategy and performance.
* Top-level managers set the overall direction and make major strategic decisions, while middle-level
managers focus on specific functional areas and coordinate activities across subsidiaries.

Understanding these differences is crucial for effective management within multinational corporations.

4. Communication Challenges in Multinational Companies vs. Domestic Organizations

Multinational Companies (MNCs) face more complex communication challenges than domestic
businesses due to:

1. Language Barriers – Employees from different countries may struggle with a common business
language (e.g., English).

2. Cultural Differences – Communication styles vary (e.g., direct vs. indirect communication).

3. Time Zone Differences – Scheduling global meetings can be difficult.

4. Technology Gaps – Different countries may use different communication tools.

5. Legal & Ethical Standards – Information sharing may be restricted by local laws.

6. Corporate vs. Local Priorities – Subsidiaries may misinterpret HQ messages due to differing goals.

5. Developing International Management Capacity

MNCs prepare managers for global roles through:

1. Cross-Cultural Training – Helping managers understand different business cultures.

2. Global Mobility Programs – Sending managers to different countries for hands-on experience.

3. Leadership Development – International MBA programs, executive training.

4. Language Training – Improving communication in foreign markets.

5. Mentorship & Networking – Learning from experienced global managers.

6. Digital Learning & AI Tools – Virtual reality training for cross-border management.