ASA University Bangladesh

(ASAUB)

AN ASSIGNMENT
On

COURSE CODE
COURSE NAME
PROGRAM NAME
SEMESTER

:
:
:
:

IBT 501
INTERNATIONAL BUSINESS
MBA (R)
FALL - 2013

SUBMITTED TO
Professor
Faculty of Business
ASA UNIVERSITY BANGLADESH (ASAUB)
SUBMITTED BY

MD.SAMSUL ALAM
ID
BATCH NUMBER
SECTION

:
:
:

13-2-14-0026
19th
A

Date of Submission:

28th December, 2013

LETTER OF TRANSMITTAL

28th December, 2013

To,
Dr. A. K. M. Helal uz Zamam

Professor
Faculty of Business
ASA University Bangladesh (ASAUB)
Subject: Submission of Assignment.

Dear Sir,
I am very glad to inform you that under your kind guidance & Instruction.
I have Completed my Assignment paper on International Human
Resource Management . I have tried my best to make it a good
one within given time. Any sort of suggestion regarding this term paper
would be gladly appreciated and we would be gratified if this paper
serves its purpose.
We are pleased to provide you this term paper with necessary notes,
reference and we shall be available for any clarification, if required.

Sincerely Yours,
..
Md. Samsul Alam
ID: 13-2-14-0026
Batch: 19th
Program: MBA ( R)
ASA University Bangladesh (ASAUB)

Declaration
I do hereby solemnly declare that the work presented in this Assignment
paper Carried Out by me and has not been previously to any others
University/Collage/Organization.
The work I have presented dose not breach any exciting copyright
no portion of this Assignment paper is copied from any work done .
I further undertake to indemnify the department Against any loss or
damage arising from breach of the forgoing obligation .

Md. Samsul Alam

ID: 13-2-14-0026
Batch: 19th
Program: MBA ( R)
ASA University Bangladesh (ASAUB)

Table of Contents

SL No.

Particulars

Acknowledgements

Introduction

Objective

Importance of International strategy

Identifying International Opportunities

Determinants of National Advantage

International business-level strategy

International corporate-level strategy

ENTRY STRATEGIES

10

Risks in an International Environment

11

SUMMARY

12

Findings

Introduction:
Provides an overview framework for understanding international
strategy. Observes that international strategy draws on much of the
same theory as corporate strategy.

The same tests that can be applied to justify expansion across

businesses--the better off and ownership tests--also apply to expansion
across borders. What is different about international strategy is that
widening a firm's domain to the entire globe introduces substantively
different degrees of heterogeneity, scale, and volatility across markets.
These three factors create new opportunities and trade-offs for
multinationals. Effective international strategy is based on a source of
competitive advantage that capitalizes on one of these factors and aligns
the configuration of all its activities in support of that advantage.
Multinationals need to choose the products they offer, the countries in
which they compete, the location of their activities, and their
organizational design contingent on their international strategy.

Objective of International Strategic:

International strategy is A strategy through which
the firm sells its goods or services outside its
domestic market.

Companies adopt an international strategy when they aim to leverage

their core competencies by expanding opportunistically into foreign

markets. International firms include the likes of McDonald's, Kellogg,

Google, Hair, Wal-Mart, and Microsoft.
The international model relies on local subsidiaries in each country to
administer business as instructed by headquarters. Some subsidiaries
may have freedom to adapt products to local conditions as well as to set
up some light assembly operations or promotion Programs. Still, ultimate
control resides with managers at headquarter who reason they best
know the basis and potential extension of the companys core
competencies.
Historically, critical elements of the companys value chain, such as
research and development to branding, have been centralized at
headquarters.

Importance of International strategy:

International strategy is important because it prevents stronger
countries from taking advantage of weaker ones. Furthermore, it is
important when it comes to establishing a product or service which can
compete successfully in the international market.
International strategy is important because it will establish the product or
service as a competitive product among other products of the
international country and could garner major profits for the company
releasing the product or service. It can also establish the company as an
international competitor and it may be a first step to setting up bases in
other countries in order to support potential international operations
which will give growth to the company and increase profits on the bottom
line. Strategy is important overall because it is the only way to effectively

use the resources the company has in order to increase profits and use
the least amount of resources possible.
Domestic strategic planning only includes the product and strategy that
has to do with that product and target markets. International strategic
planning includes different cultures so for each culture the product may
have to be modified. Some countries may also allow bribes and expect it
in order to allow the product into their country. All these factors have to
account for when introducing the product while domestically, these
issues do not exist. Certain legal issues also need to be looked at and
analyzed in order to make sure that everything is done legally and all the
proper paperwork is done in order to ensure that in the end the product
or its marketing is not breaking any laws. A market study needs to also
be done to make sure the product doesn't offend the people in that
market.

 INTERNATIONAL STRATEGY TO
EXPAND BUSINESS OF
BANGLADESH

bangladesh business policy:

To act on commercial consideration with due regard to the interest of
industry, commerce, depositors, investors and to the public in general.
To provide financial assistance to projects subject to their economic
and commercial viability.
To arrange equity support and loans for projects singly or through
consortium of financial institutions including banks.

To encourage and develop entrepreneurship in the country.

To diversify investments.
To inspire small and medium savers for investment in securities.
To create employment opportunities
To encourage and broaden the base of Investment in agro and
information & communication technology (ICT) sectors.

Export Policy Of Bangladesh:

Bangladesh exports about 168 different products and services to almost
186 countries. The main exportable are Readymade Garments,
Knitwear, Home Textile, Frozen Food, Leather & Leather goods, Jute
and goods which contribute near about 89% of our total export. On the
other hand the main export destination of Bangladesh are USA, Canada,
EU Countries including U.K, Germany, France, Italy, Sweeten etc
contributing almost 93% of total export. The export statistics reveals that
Bangladesh is proceeding with positive export growth since 1974-75 .
Anexxure-17 presents the export trend from the year1974-75 to 2010-11
as well as the export performance in July-June, 2011.

Procedure of Export
A company or individual businessmen with trade license is capable of
doing export business. But before that he/the company has to obtain
export registration certificate (ERC) from the office of Chief Controller of
Import and Export (CCI&E), 111-113 Motijheel Commercial Area, Dhaka.

Generally Trade License, Bank Balance Certificate, Membership from

respective trade associations are required for obtaining ERC.
For starting a business in Bangladesh, it starts with registering the
company name at the Office of the Registrar of Joint Stock Companies &
Firms. The office is located at 24-25 Dilkusha, Commercial Area, Dhaka.
This Office accords registration of Companies, Associations and
Partnership Firms under the Companies Act, other related acts, rules,
orders and ensures lawful administration of them.
The new entities should also obtain trade license from the city
corporation where it is located. Depending on the type of the business it
may also have to obtain license or certificate from BSTI, BRTA, etc.
For some products the exporters have obtain quality assurance
certificate from BSTI/ Department of Fisheries (DOF)/ Respective Trade
Associations etc.
The exporter can export with or without Letter of Credit (LC). The
Contract/ Agreement with foreign buyer or CAD or Advance TT methods
etc. are also allowed for export. The exporters then submit EXP form to
bank and prepare bill of export. With all these documents exporters then
approach at the customs authority of the port through which they want to
ship his exportable. After examining all the papers the customs authority
allows them to export and after boarding the products the authority gives
them a bill of lading. After shipment the customs authority assures them
stamping a seal in the back of bill of lading and provide Export General
Manifest (EGM).
Export Law, Rules and Policies
The Export and Import Control Act 1950 (Annexure-1) provide the
Government power to administer the import and export of Bangladesh
under which a three yearly Export Policy is published. The Export Policy
(Export Policy 2009-12, Annexure-2) generally guide the over all export
of Bangladesh and help facilitate the exporters. The salient features of
the Export Policy 2009-12 are as follows:
Products which cannot be exported and which can be freely
exportable
Export Prohibited Products: Some Products cannot be exported. The
list of such prohibited products can be found in Annex -1 of the Export
Policy 2009-12.

Products under Conditional Export: Products which are exportable

under some
conditions can be exported only after fulfilling those
conditions. Such products have been listed in Annex-2 of Export Policy
2009-12.
Exportable Products: All other products except the products enlisted in
Annex-1 and Annex-2 of the Export Policy 2009-12 i.e. export prohibited
products and the products under conditional export shall be freely
exportable.
Export of Samples which don't have commercial values: Samples of
exportable can be exported freely but with some conditions outlined in
para 2.2.1.2 of Export Policy 2009-2012.

Entre-pot and Re-export Trade

Entre-pt trade and re-export shall have to be conducted under the
procedures stipulated in the Public Notice No. 42 (2003-2006)/import
dated June 28, 2005 (14 Ashar 1412 Bangla) (Annexure-3) issued by
the Office of the Chief Controller of Import and Export.
Entre-pt trade means the export of an imported product at a price at
least 5% higher than the import price. No change whatsoever in the
quality, quantity, shape or any other aspect is necessary in this respect.
Products under entre-pt trade shall not come out of the port boundary.
However, the products can be brought out of the port boundary under
special authorization.
Re-export means the export of an imported product within a specific
period of time with a value addition of at least 10% to the imported price
by changing the quality or shape or both of the products by means of
local reprocessing.
Export facilities and incentives
The government formulates the Export Policy principally with a view to
facilitate the exporters so as to develop and promote export of
Bangladesh. Chapter 3-7 of the Export Policy detail the techniques of
export development and of providing facilities to the exporters. The

policy details the lists of export facilities. Chapter-1 of the Export Policy
2009-12 introduces the title of the policy, its scope and strategy,
Chapter-2 describes the general rules of export, Chapter-3 explain
export diversification mechanism, Chapter-4 lists the general facilities of
export, Chapter-5 describes about sector based facility, Chapter-6
presents about service export and Chapter-7 highlights some special
facilities and incentives.
Cash incentives: As listed in Annexure-4, for 17 exportable, the
government is providing 5-20% cash incentives against FOB price of
exported items. The exporter can directly claim for cash incentive in his
merchant bank.
Duty Drawback: Duties which are paid at customs authority is
refundable in case of re-export business or imported materials which
after making finished products will be exported.
Bonded Facilities: For bonded ware house with a view to 100% export
materials can be imported without any duties.
Assistance in searching for foreign market: For exploring foreign
market Export Promotion bureau (EPB) organize/help the exporters
participate about 30-35 international trade fair every year. EPB generally
bear the costs of stalls including other incidental costs. Normally the
exporters will have to bear only traveling and their accommodation cost.
Besides, EPB and Ministry of Commerce often organize Marketing
Mission abroad for searching new export market. The Mission comprises
representatives from business leaders and exporters.
Export Loan at lower rate of interest: At only 7% rate of interest export
loans are being provided. Besides, there is a fund named Export
Promotion Fund (EPF) in Export Promotion Bureau (EPB) which provide
export loan for ICT and handicrafts exportable at only 4.5% rate of
interest without any co-lateral. There is an Export Development Fund
(EDF) in Bangladesh Bank to provide export loans up to USD 400
million(Annexure-5).
Awarding CIP status and National Export Trophy: Every year CIP
status (Annexure-6) and National Export Trophy (Annexure-7) are
awarded to the best exporters of different sectors in recognition of
producing new products, diversifying of products, enhancing exports,
etc.

Export Preferences to (trade relations with) Foreign Countries

Bangladesh maintains excellent trade relations with foreign countries.
Bangladesh became a member of World Trade Organization (WTO)
from its inception. Bangladesh is also the member of South Asian Free
Trade Area (SAFTA), Asia Pacific Trade Agreement (APTA), BIMSTEC
and, Organization of Islamic Conference (OIC). Through those
organizations and some times bilaterally Bangladesh enjoy preferential
treatment on export trade. Of all those preferential treatments the most
important one is Generalized System of Preference (GSP). In this
system as an LDC, we get some preferential advantages including duty
free or concession and quota free access. We are getting GSP in 37
Countries including 27 EU countries and 10 others like USA, Canada,
Japan, Norway, Switzerland etc.

Identifying International Opportunities:

A strategy through which the firm sells its goods or services outside its
domestic market
Reasons for an International Strategy:
Potential new opportunities
Innovation occurs in home-country market and demand for
product develops in other countries
Extend product life cycle
Secure needed resources
Pressure for global integration and globally branded products
Global economies of scale
High potential demand for products and services
Currency fluctuations and tariffs

International Strategy Benefits:

Increased Market Size

Domestic market may lack the size to support efficient

scale manufacturing facilities.
Return on Investment
Large investment projects may require global markets to
justify the capital outlays.
Weak patent protection in some countries implies that
firms should
expand overseas rapidly in order to preempt
imitators.

Economies of Scale (or Learning)

Expanding size or scope of markets helps to achieve
economies of scale in manufacturing as well as marketing,
R&D or distribution.
Can spread costs over a larger sales base.
Can increase profit per unit.
Location Advantages
Low cost markets aid in developing competitive advantage
by providing access to:
Raw materials
Transportation
Lower costs for labor
Key customers
Energy

Determinants of National
Advantage:
Factors of production
The inputs necessary to compete in any industry
Labor

Land Natural resources

Capital

Infrastructure

Basic factors
Natural and labor resources

Advanced factors
Digital communication systems and an educated
workforce

 Demand Conditions
Characterized by the nature and size of buyers needs in
the home market for the industrys goods or services.

Size of the market segment can lead to scale-efficient

facilities.

Efficiency can lead to domination of the industry in other

countries.

Specialized demand may create opportunities beyond

national boundaries.

Related and Supporting Industries

Supporting services, facilities, suppliers and so on.

Support in design

Support in distribution

Related industries as suppliers and buyers

Firm Strategy, Structure and Rivalry

The pattern of strategy, structure, and rivalry among firms.

Common technical training

Methodological product and process improvement

Cooperative and competitive systems

International Strategies:
Firms can choose one or both of two basic types of International
Strategies:

International business-level strategy:

Follows generic strategies of low cost, differentiation, focused low cost,
focused differentiation, or integrated low cost and differentiation
There are four generic strategies that are used to help organizations
establish a competitive advantage over industry rivals. Firms may also
choose to compete across a broad market or a focused market. We also
briefly discuss a fifth business level strategy called an integrated
strategy.
1. Cost Leadership Organizations compete for a wide customer
based on price. Price is based on internal efficiency in order to have a
margin that will sustain above average returns and cost to the customer
so that customers will purchase your product/service. Works well when
product/service is standardized, can have generic goods that are
acceptable to many customers, and can offer the lowest price.
Continuous efforts to lower costs relative to competitors is necessary in
order to successfully be a cost leader. This can include:

Building state of art efficient facilities (may make it costly for

competition to imitate)
Maintain tight control over production and overhead costs
Minimize cost of sales, R&D, and service.

Porters 5 Forces Model

Earlier we discussed Porters Model. A cost leadership strategy may
help to remain profitable even with: rivalry, new entrants, suppliers
power, substitute products, and buyers power.

Rivalry Competitors are likely to avoid a price war, since the low
cost firm will continue to earn profits after competitors compete
away their profits (Airlines).
Customers Powerful customers that force firms to produce
goods/service at lower profits may exit the market rather than earn
below average profits leaving the low cost organization in a
monopoly positions. Buyers then loose much of their buying
power.
Suppliers Cost leaders are able to absorb greater price
increases before it must raise price to customers.
Entrants Low cost leaders create barriers to market entry
through its continuous focus on efficiency and reducing costs.
Substitutes Low cost leaders are more likely to lower costs to
entice customers to stay with their product, invest to develop
substitutes, purchase patents.

How to Obtain a Cost Advantage?

Determine and Control Cost

Reconfigure the Value Chain as Needed

Risks

Technology
Imitation
Tunnel Vision

Value Chain A framework that firms can use to identify and evaluate
the ways in which their resources and capabilities can add value. The
value of the analysis lays in being able to break the organizations
operations or activities into primary (such as operations, marketing &
sales, and service) and support ( staff activities including human
resources management & procurement) activities. Analyzing the firms
value-chain helps to assess your organizations to what you perceive
your competitors value-chain, uncover ways to cut costs, and find ways
add value to customer transactions that will provide a competitive
advantage.

2. Differentiation - Value is provided to customers through unique

features and characteristics of an organizations products rather than by

the lowest price. This is done through high quality, features, high
customer service, rapid product innovation, advanced technological
features, image management, etc. (Some companies that follow this
strategy: Rolex, Intel, Ralph Lauren)
Create Value by:

Lowering Buyers Costs Higher quality means less breakdowns,

quicker response to problems.
Raising Buyers Performance Buyer may improve performance,
have higher level of enjoyment.
Sustainability Creating barriers by perceptions of uniqueness
and reputation, creating high switching costs through differentiation
and uniqueness.

Risks of Using a Differentiation Strategy

Uniqueness
Imitation
Loss of Value

Porters Five Forces Model Effective differentiators can remain

profitable even when the five forces appear unattractive.

Rivalry Brand loyalty means that customers will be less sensitive

to price increases, as long as the firm can satisfy the needs of its
customers (audiofiles).
Suppliers Because differentiators charge a premium price they
can more afford to absorb higher costs and customers are willing
to pay extra too.
Entrants Loyalty provides a difficult barrier to overcome.
Substitutes (trans. 4-26) Once again brand loyalty helps combat
substitute products.

3. Focused Low Cost- Organizations not only compete on price, but

also select a small segment of the market to provide goods and services
to. For example a company that sells only to the U.S. government.

4. Focused Differentiation - Organizations not only compete based on

differientation, but also select a small segment of the market to provide
goods and services.
Focused Strategies Strategies that seek to serve the needs of a
particular customer segment (e.g., federal government).
Companies that use focused strategies may be able serve the smaller
segment (e.g. business travelers) better than competitors who have a
wider base of customers. This is especially true when special needs
make it difficult for industry-wide competitors to serve the needs of this
group of customers. By serving a segment that was previously poorly
segmented an organization has unique capability to serve niche.

Risks of Using Focused Strategies:

Maybe out focused by competitors (even smaller segment)

Segment may become of interest to broad market firm(s)

5. Using an Integrated Low-Cost/Differentiation Strategy

This new strategy may become more popular as global competition
increases. Firms that use this strategy may see improvement in their
ability to:

Adaptability to environmental changes.

Learn new skills and technologies
More effectively leverage core competencies across business units
and products lines which should enable the firm to produce
produces with differentiated features at lower costs.

Thus the customer realizes value based both on product features and a
low price. Southwest airlines is one example of a company that does
uses this strategy.
However, organizations that choose this strategy must be careful not to:
becoming stuck in the middle i.e., not being able to manage successfully
the five competitive forces and not achieve strategic competitiveness.
Must be capable of consistently reducing costs while adding
differentiated features.

International corporate-level strategy:

The type of corporate strategy selected will have an impact on
the selection and implementation of the business-level
strategies.
Some strategies provide individual country units with the
flexibility to choose their own strategies.
Other strategies dictate business-level strategies from the
home office and coordinate resource sharing across units.

 Focuses on the scope of operations:

Product diversification
Geographic diversification
Required when the firm operates in:
Multiple industries, and
Multiple countries or regions
Headquarters unit guides the strategy
But business or country-level managers can have substantial
strategic input.

Multidomestic Strategy:

 Strategy and operating decisions are decentralized to strategic

business units (SBU) in each country.
Products and services are tailored to local markets.
Business units in one country are independent of each other.
Assumes markets differ by country or regions.
Focus on competition in each market.
Prominent strategy among European firms due to broad variety of
cultures and markets in Europe.

Global Strategy:
Products are standardized across national markets.
Business-level strategic decisions are centralized in the home
office.
Strategic business units (SBU) are assumed to be interdependent.
Emphasizes economies of scale.
Often lacks responsiveness to local markets.
Requires resource sharing and coordination across borders (hard
to manage).

Transnational Strategy:
Seeks to achieve both global efficiency and local responsiveness.
Difficult to achieve because of simultaneous requirements:
Strong central control and coordination to achieve efficiency
Decentralization to achieve local market responsiveness
Firm must pursue organizational learning to achieve competitive
advantage.

HOW DO FIRMS
STRATEGIES:

GO

INTERNATIONAL?

ENTRY

Foreign market entry strategies differ in degree of risk they present, the
control and commitment of resources they require and the return on
investment they promise. There are two major types of entry modes:
1) non-equity mode, which includes export and contractual agreements,
2) equity mode, which includes joint venture and wholly owned
subsidiaries.
The market-entry technique that offers the lowest level of risk and the
least market control is export and import. The highest risk, but also the
highest market control and expected return on investment are connected
with direct investments that can be made as an acquisition (sometimes
called Brownfield) and Greenfield investments

Exporting and importing

The first and the most common strategy to be an international company
is: import and export of goods, materials and services. Exporting is the
process of selling goods or services produced in one country to other
countries.
There are two types of exporting: direct and indirect. Indirect export
means that products are carried abroad by other agents and the firm
doesnt have special activity connected with international market,
because the sale abroad is treated like the domestic one. For these
reasons it is difficult to say that it is an internationalization strategy. In
the case of direct exporting, the firm becomes directly involved in
marketing its products in foreign markets.

Licensing
Licensing is another way to enter a foreign market with a limited degree
of risk. The international licensing firm gives the licensee patent rights,
trademark rights, copyrights or know-how on products and processes. In
return, the licensee will: produce the licensors products, market these
products in his assigned territory and pay the licensor fees and royalties
usually related to the sales volume of the
products. This type of agreement is generally welcomed by foreign
public authorities because it brings technology into the country.

Franchising
Franchising is similar to licensing except that the franchising
organization tends to be more directly involved in the development and
control of the marketing program .The franchising system can be defined
as a system in which semi-independent business owners (franchisees)
pay fees and royalties to a parent company (franchiser) in return for the
right to become identified with its trademark, to sell its products or
services, and often to use its business format and system. Compared to
licensing, franchising agreements tends to be longer and the franchisor
offers a broader package of rights and resources which usually includes:
equipments, managerial systems, operation manual, initial trainings, site
approval and all the support necessary for the franchisee to run its
business in the same way it is done by the franchisor. In addition to that,
while a licensing agreement involves things such as intellectual property,
trade secrets and others in franchising it is limited to trademarks and
operating know-how of the business.
Advantages of the international franchising mode are as follows:
low political risk
low cost
allows simultaneous expansion into different regions of the world
well selected partners bring financial investment as well as managerial
capabilities to the operation.
There are also disadvantages of the international franchising mode:
franchisees may turn into future competitors

 demand of franchisees may be scarce when starting to franchise a

company, which can lead to making agreements with the wrong
candidates
a wrong franchisee may ruin the companys name and reputation in
the market
comparing to other modes such as exporting and even licensing,
international franchising requires a greater financial investment to attract
prospects and support and manage franchisees.

Joint Ventures
Foreign joint ventures have much in common with licensing. The major
difference is that in joint ventures, the international firm has an equity
position and a management voice in the foreign firm. A partnership
between host- and home-country firms is formed, usually resulting in the
creation of a third firm .
This type of agreement gives the international firm better control over
operations and also access to local market knowledge. The international
firm has access to the network of relationships of the franchisee and is
less exposed to the risk expropriation thanks to the partnership with the
local firm. This type of agreement is very popular in international
management. Its popularity stems from the fact that it permits the
avoidance of control problems of the other types of foreign market entry
strategies. In addition, the presence of the local firm facilitates the
integration of the international firm in a foreign
Environment.

Risks in an International Environment:

Political Risks
Instability in national governments
War, both civil and international
Potential nationalization of a firms resources
Economic Risks

 Differences and fluctuations in the value of different

currencies
Differences in prevailing wage rates
Difficulties in enforcing property rights
Unemployment

SUMMARY:
In the international competitive environment, the ability to develop a
transnational organizational capability is the key factor that can help the
firm adapt to the changes in the dynamic environment. As the fast rate of
globalization renders the traditional ways of doing business irrelevant, it
is vital for managers to have a global mindset to be effective.
Globalization of business has led to the emergence of global strategic
management. A combination of strategic management and international
business will result in strategies for global cooperation. However, there
are obstacles to progress along the way.
The problems caused by these obstacles can be solved by cooperative
ventures based on mutual advantages of the parties involved. Proper
effective communication will be a key element for global strategies
because what is proper and effective in one culture may be ineffective
and improper in
another. Marketing products globally is complex and difficult because of
several factors including: International Strategic Alliances, coordination
and control of international marketing, communication, regional trade
blocks, and choice of global strate
gy. The firm with the choice of an effective global that takes into
consideration its strengths and weaknesses in the face of the
opportunities and
threats in the environment, will survive

Findings :
This study found that high business relatedness between a subsidiary
and parent firm are positively associated with a broad market scope and

differentiation strategy. Secondly, international experience is positively

associated with a differentiation strategy. The study also found that
perceived competition is positively associated with a broad market scope
and perceived low competition influences a narrow product/market
scope. Finally, perceived barriers positively impact a differentiation
strategy.