Advantage and Disadvantage of International Business. Advantage: 1.

Large scale activities and revenues that enable an organization to defend its markets and develop competencies at a cost that only few small organization can afford. 2. Access to inputs (people, materials, energy and even building) at lower rate because of greater buying power. 3. Economies of scale in all aspects of operations from R&D to distribution. 4. The opportunity to position the organization and develop its brands at a global and therefore more influential level. 5. Manipulation of income and expenses to minimize tax liabilities across country borders. 6. More broad and up-to-date market information. (Retail) 7. Greater diversity in management perspective. (Employing merger and diff. culture) 8. Risk spreading. (Other risk as tech/regulatory can be reduced bcoz of merging) Disadvantage: 1. Complication of the business design and coordination process, increasing the risk or likelihood of poor decision making. 2. Diverse environment and resources in international business leading to greater compromise and less chance of meeting all needs. 3. Challenge for MNCs in understanding local politics, regulation and in many countries, simply getting fair deal. 5. Notoriously slow pace of international business developments, which require strategic planning periods beyond the planning horizon.

Value creation Firm can achieve higher profitability and higher profit growth rates through value creation. The more customers value a product, the more theyll be willing to pay for it! So, we say that the value created by a firm is measured by the difference between what it can charge for the product given the competitive environment, and the cost of producing the product. How can a firm increase profits? Firms can increase their profits by adding value to a product so that customers are willing to pay more for it, or by lowering their costs. The strategies used by firms are the differentiation strategy where the focus is on increasing the attractiveness of the product, and through a low cost strategy where the focus is on lowering costs. You can probably think of countless products that are differentiated. Take the soft drink industry for example. You can buy cola with caffeine, without caffeine, with sugar or with sugar substitutes, with lemon flavoring, or cherry flavoring, and so on. In contrast, companies like Air Tran, rather than offering extra frills, are focused on providing a service at a lower cost than competitors, and so it flies to smaller airports that have lower costs as a means of keeping prices low. Value Chain A firms operations can be thought of a value chain of the firm as a value chain composed of distinct value creation activities like production, marketing, materials management, R&D, human resources, and so on. Each of these activities has to be managed efficiently. We can categorize these activities as primary activities and support activities. Primary activities are those that involve creating the product, marketing and delivering it to buyers, and providing support and after-sales service to customers. Usually we divide primary activities into four functions, R&D, production, marketing and sales, and customer service. Support activities are just what youd think, activities that allow the primary activities to occur. They include things like information systems that manage inventory or track sales, logistics, and human resources. While you might think theyre not as important as primary activities, in fact they are! Without support activities, Dell Computer for example, would be lost! How IB stimulates local economy. market price / customer expectations / taxes / available finance / credit terms / political stability / levels of education / the availability and competency of support services, such as consultant / employee attitudes to work / the availability of good employees. Government policies and FDI Governments can encourage outward FDI - government-backed insurance programs to cover major types of foreign investment risk Governments can restrict outward FDI - limit capital outflows, manipulate tax rules, or outright prohibit FDI Governments can encourage inward FDI - offer incentives to foreign firms to invest in their countries

- gain from the resource-transfer and employment effects of FDI, and capture FDI away from other potential host countries Governments can restrict inward FDI - use ownership restraints and performance requirements Three major drawbacks by host country. -firm could give away valuable technological know-how to a potential foreign competitor -does not give a firm the control over manufacturing, marketing, and strategy in the foreign country -the firms competitive advantage may be based on its management, marketing, and manufacturing capabilities