IBDM

What is International Business?

International Business conducts business transactions all over the world. These transactions include
the transfer of goods, services, technology, managerial knowledge, and capital to other countries.
International business involves exports and imports.

Features of International Business

1. Large scale operations : In international business, all the operations are conducted on a very
huge scale. Production and marketing activities are conducted on a large scale. It first sells
its goods in the local market. Then the surplus goods are exported.

2. Intergration of economies : International business integrates (combines) the economies of

many countries. This is because it uses finance from one country, labour from another
country, and infrastructure from another country. It designs the product in one country,
produces its parts in many different countries and assembles the product in another
country. It sells the product in many countries, i.e. in the international market.

3. Dominated by developed countries and MNCs : International business is dominated by

developed countries and their multinational corporations (MNCs). At present, MNCs from
USA, Europe and Japan dominate (fully control) foreign trade. This is because they have
large financial and other resources. They also have the best technology and research and
development (R & D). They have highly skilled employees and managers because they give
very high salaries and other benefits. Therefore, they produce good quality goods and
services at low prices. This helps them to capture and dominate the world market.

4. Benefits to participating countries : International business gives benefits to all participating

countries. However, the developed (rich) countries get the maximum benefits. The
developing (poor) countries also get benefits. They get foreign capital and technology. They
get rapid industrial development. They get more employment opportunities. All this results
in economic development of the developing countries. Therefore, developing countries open
up their economies through liberal economic policies.

5. Keen competition : International business has to face keen (too much) competition in the
world market. The competition is between unequal partners i.e. developed and developing
countries. In this keen competition, developed countries and their MNCs are in a favourable
position because they produce superior quality goods and services at very low prices.
Developed countries also have many contacts in the world market. So, developing countries
find it very difficult to face competition from developed countries.

6. Special role of science and technology : International business gives a lot of importance to
science and technology. Science and Technology (S & T) help the business to have large-scale
production. Developed countries use high technologies. Therefore, they dominate global
business. International business helps them to transfer such top high-end technologies to
the developing countries.
 7. International restrictions : International business faces many restrictions on the inflow and
outflow of capital, technology and goods. Many governments do not allow international
businesses to enter their countries. They have many trade blocks, tariff barriers, foreign
exchange restrictions, etc. All this is harmful to international business.

8. Sensitive nature : The international business is very sensitive in nature. Any changes in the
economic policies, technology, political environment, etc. has a huge impact on it.
Therefore, international business must conduct marketing research to find out and study
these changes. They must adjust their business activities and adapt accordingly to survive
changes

International Business Approaches

International business approaches are similar to the stages of internationalization or globalization.

Douglas Wind and Pelmutter advocated four approaches of international business. They are:

1. Ethnocentric Approach

The domestic companies normally formulate their strategies. Their product design and their
operations towards the national markets, customers and competitors. But, the excessive to competition
or due to changes in customer preferences push the company to export the excessive production to
foreign countries. The domestic company continues the exports to the foreign countries and views the
foreign markets as an extension to the domestic markets just like a new region. The executives at the
head office of the company make the decisions relating to exports and, the marketing personnel of the
domestic company monitor the export operations with the help of an export department. The company
exports the same product designed for domestic markets to foreign countries under this approach.
Thus, maintenance of domestic approach towards international business is called ethnocentric
approach.
 Managing

Director

Manager Manager Manager Manager Manager

R&D Finance Production Human Marketing

Assistant Assistant Assistant

Manger Manager Manager

North India South India Exports

Organization structure of Ethnocentric Company

This approach is suitable to the companies during the early days of internationalization and also to the
smaller companies.

2. Polycentric Approach

The domestic companies, which are exporting to foreign countries using the ethnocentric approach,
find at the latter stage that the foreign markets need an altogether different approach. Then, the
company establishes a foreign subsidiary company and decentralizes all the operations and delegate‟s
decision-making and policy-making authority to its executives. In fact, the company appoints
executives and personnel including a chief executive who reports directly to the Managing Director of
the company. Company appoints the key personnel from the home country and the people of the host
country fill all other vacancies.
 Managing

Director
CEO

Foreign
Subsidiary

Manager Manager Manager Manager Manager

R&D Finance Production Human Marketing

Under polycentric approach in other countries of the region, but with different market strategies.

3. Regiocentric Approach

The company after operating successfully in a foreign country thinks of exporting to the neighboring
countries of the host country. At this stage, the foreign subsidiary considers the regions environment
(for example, Asian environment like laws, culture, policies etc.) for formulating policies and
strategies. However, it markets more or less the same product designed
 Managing

Director
CEO

Foreign
Subsidiary

Manager Manager Manager Manager Manager

R&D Finance Production Human Marketing

4. Geocentric Approach

Under this approach, the entire world is just like a single country for the company. They select the
employees from the entire globe and operate with a number of subsidiaries. The headquarter
coordinates the activities of the subsidiaries. Each subsidiary functions like an independent and
autonomous company in formulating policies, strategies, product design, human resource policies,
operations etc.
What are the operational strategies?

By definition, an operational strategy is a map that helps companies to reach their targets and
objectives. Enterprises develop operational strategies to identify their business flaws, evaluate the
quality and strength of their resources, assess their workflow, create effective plans, and implement
them in their business ventures. Operations Strategy also enables entrepreneurs to connect long-term
goals with the short-term ones and execute the plans efficiently.

Operational strategies importance in corporate world

Corporate Strategies are made up keeping in mind the company as a system, which has been created
by several parts, which are interconnected parts, just like the parts of the body. It is considered that all
the parts of the company are important and must function healthily together to keep the lifeline of the
company running.

Customer-Oriented Strategies are concerned with the needs and requirements of the target customer
belt, stay abreast of all the changes and challenges evolving in the market, making changes in the
strategy accordingly, while simultaneously improvise upon the core competencies and look out for
new skill sets and strengths and incorporate them in fresh strategies.
Developing core competencies involve assessing the resources and enhancing them on an ongoing
basis. This may include the reshuffling of the teams, improving the marketing strategies, or even
reframing the infrastructure. These approaches pave a smooth way toward customer satisfaction.

Companies should keep in mind the competitive scenario of the market. Assessing the rival
companies thoroughly and developing strategies accordingly make the base of competing priorities.
Also, it is important to look out for innovation in strategies which may be helpful in gaining the first-
movers‟ advantage for the company.

The Positive Influence of Cultural Diversity in International

Organizational Behaviours
Reach a Broader Client Base

In a global economy, cultural diversity gives you a competitive edge. Whether your clients
exist across the globe, throughout the country, or next door, the more you can relate to them,
the more you will be able to meet their needs. That means having a staff that knows how to
market, sell and speak to a broad range of stakeholders. Cross-cultural business experience is
most easily achieved by actually having a diverse culture within your organization. If you‟re
selling to someone in southwestern China, you could make an effort to train your staff in
Mandarin, or you could pull from some of the 3.8 million Chinese who live in the U.S.

Create Better-Performing Teams

Diverse teams perform more swiftly and more efficiently than non-diverse teams. Culturally
diverse teams are also more innovative and are more likely to come up with creative
strategies and solutions. When you look at business challenges from a single point-of-view,
you‟re more likely to limit potential answers to entrenched questions and problems. But
culturally diverse groups consider problems and potential solutions from a broad array of
angles. A recent study from McKinsey found that diverse executive boards had a 95-percent
higher return on equity than those with non-diverse boards.

Find and Retain More Employees

More than 25 million people currently working in the U.S. are foreign born. If you limit
yourself to only one sector of the population or to a narrow demographic, you are limiting
your hires. If you want the most talented people you can find, you need to be willing to look
for them from wherever they come. Diverse and inclusive teams are also better able to retain
employees. When you create a positive work environment, employees want to stay.

Become a Better Corporate Citizen

The message of diversity reverberates throughout your business and throughout the industry
you serve. It can lift your brand image and create the kind of organization that customers and
relevant stakeholders will want to support and buy from. Alternatively, brands that have
become pegged as sexist, racist, homophobic, anti-Semitic, anti-Muslim, or anti-any-other
group often experience negative repercussions. Product and business boycotts affect an
organization‟s image and its bottom line.

Negative Effects of Diversity in the Workplace

Communication Barriers

When you build a workforce with employees from different cultures and countries, you increase the
number of communication filters and language barriers that impact internal and external
communication processes. Work cultures that are more heterogeneous usually find communication
easier because employees do not have to work as hard to overcome language and culture issues. Some
larger organizations hire interpreters and diversity trainers to help employees work through
communication challenges of diversity.

Cultural Resistance

In "Diversity in the Workplace: Benefits, Challenges and Solutions," in The Multicultural Advantage,
Josh Greenberg, president of employee-survey firm AlphaMeasure in Boulder, Colorado, points out
that resistance to change is common in workplaces. When companies become more diverse, it
changes the relationships and nature of the workplace. These changes can cause stress among
employees and contribute to negative working relationships and poor workplace morale, if not well-
planned and managed. Training employees about diversity is important if it will effect their work
roles and processes.

Discrimination Issues

Often, companies that intentionally hire a diverse workforce have human resources processes in place
to manage diversity. However, companies that slowly become diverse without a strategic plan may
find more discrimination between managers and subordinates and between employees. Consider that
discrimination is unfair treatment of someone because of distinguishing traits. Naturally, if you have a
diverse workforce there is more opportunity for discrimination since diversity is based on
distinguishing traits among workers.

Increased Costs

In his recommended steps to effective diversity management, Greenberg includes diversity

assessment, development and implementation of diversity workplace plans and various approaches to
diversity training. All of these processes have direct and indirect costs associated. Use of supplies,
consultants and outside professionals, and other materials are direct costs. Indirect costs include the
significant time involved by company employees providing and receiving training and participating in
other aspects of analyzing and implementing diversity management.

Overcoming Negativity

Ultimately, the negative effects of diversity are self imposed and they only flourish under poor
leadership. Cultural diversity, ethnic diversity and the presence of multiple perspectives stand to
benefit a company when leadership is focused on positive outcomes and a team-building environment.
Need a Continuous Improvement program
The purpose of the Continuous Improvement process blade is to enable people within your
organization to easily share their improvement learnings with one another in a systematic way. There
are several reasons why you want to have a continuous improvement program within your
organization:

1. Shorten the time from idea to implementation. Improvement ideas can come from anyone,
at any time, from anywhere in your organization. As a result you want to have organizational
mechanisms to identify and explore those ideas so that they get to the person(s) most suitable
to implement them quickly.

2. Increase skills and knowledge sharing. The high-collaboration environments that are typical
of agile teams are wonderful for sharing skills and knowledge within each team, but fellow
team members aren‟t the only people within your organization that you can learn from. An
important goal of a continuous improvement program is to motivate and enable people to
share their skills and knowledge outside of their immediate team. You can do this through
strategies such as communities of practice, online discussion forums, practitioner
presentations and many others.

3. Maximize your “failure ROI”. A fundamental of lean thinking is to learn from your failures,
to treat each “failure” as an opportunity to improve. Having said that, every team doesn‟t need
to experience all of the same failures. One team, or a handful of teams in some cases, can fail
in similar ways and then share those learnings with others. This way other teams can avoid
that type of failure and thereby increase the value of the learnings to your organization. But
we can only do that when it‟s safe to fail and better yet recognize that failures should be
celebrated and the learnings shared with others.

4. Increase the opportunity for radical improvements. The challenge with the Japanese
concept of kaizen, which is to continuously make small incremental improvements, is that
you can get on an improvement path that will never lead to a quantum leap in your process.
Yes, things are getting better, but you may be missing opportunities to make things a lot
better. For example a team following the Scrum-based Agile/Basic lifecycle may never
identify the strategy of continuous deployment (CD) on their own because having a two-week
iteration may preclude the idea of releasing several times a day into production. Yet, if people
on your team were to hear about other teams in your organization working that way, they
might soon choose to start experimenting with CD techniques. This in turn could lead to the
“radical” process improvement of abandoning the idea of time-boxed iterations and moving to
something much closer to DA‟s Continuous Delivery lifecycle.
CONTINUOUS IMPROVEMENT TOOLS AND TECHNIQUES

Kanban

Kanban helps you harness the power of visual information by using sticky notes on a whiteboard to
create a “picture” of your work. Seeing how your work flows within your team‟s process lets you not
only communicate status but also give and receive context for the work.

Unlike other methods that force fit change from the get-go, Kanban is about evolution, not revolution.
It hinges on the fundamental truth that you can‟t get where you want to go without first knowing
where you are.

There are four big ideas in Kanban:

 Visualize your process

 Limit work in process

 Focus on flow

 Continuously improve

Learn more about them here. Kanban be used to manage individual, team, or even organization-wide
work. Although popularized by software teams, Kanban can be applied to virtually any process that
has distinct steps, and is frequently used by marketing, sales, finance, and other disciplines.

A3

A3 is a structured approach to problem solving used by Lean and Agile organizations. The term A3
describes a type of oversized paper which is used to plan projects. The purpose of an A3 is to:

 Document the learning, decisions, and planning involved with solving a problem

 Facilitate communication with people in other departments

 Provide structure to problem-solving so as to maximize learning (source)

A3s usually include the following elements:

 Theme

 Background

 Current condition

 Cause analysis

 Target condition

 Implementation Plan

 Follow-up and benefits

They are incredibly useful for planning, especially for work conducted across cross-functional teams.
Teams and organizations can also use A3s to implement continuous improvement ideas.
Plan-Do-Check-Act (PCDA) Cycle

The (Plan-Do-Check-Act) PCDA Cycle is another excellent continuous improvement technique.

Similar to the scientific method, the PCDA cycle is a way of identifying and testing hypotheses. The
four steps of the PDCA Cycle are:

 Plan: Identify an opportunity and plan for change.

 Do: Implement the change on a small scale.

 Check: Use data to analyze the results of the change and determine whether it made a
difference.

Act: If the change was successful, implement it on a wider scale and continuously assess your results.
If the change did not work, begin the cycle again. (source)

Gemba Walks

Lean leaders recognize that the vast majority of the value generated in their organizations is by the
people with their hands on the product. The best ideas for improving their organizational processes
can only come from those employees. And leaders can only tap into that knowledge by getting out of
their offices and, to use another Japanese term, going to the gemba — the place where things are
really happening.

Gemba walks are informal, casual opportunities for leaders to get a sense of what‟s happening in the
organization. Our research shows that executive sponsorship is a key component of practicing
continuous improvement - and executives can‟t support initiatives wholeheartedly if they don‟t
understand the problems behind them.

The 5 Whys

The 5 Whys is a thinking tool for identifying the root causes of problems. By using the 5 Whys, teams
practicing continuous improvement are able to move past blame, think beyond the specific context of
a problem, and identify a proper, sustainable solution to resolve the issue.

The 5 Whys is very simple in practice: You start with a problem statement, and then ask “why” until
the root cause is revealed and the answers become absurd. Here is an example a marketing team might
experience:

Problem: Our blog writing process is slow.

Why? Blogs are usually tossed around between several team members and go through several editing
cycles.

Why? Because we don‟t have anyone owning that process, so it seems like it‟s everyone‟s
responsibility and no one‟s responsibility at the same time.

Why? Because we never decided on a clear process for blogging.

Why? Because…. we‟re busy?

The last response here is a little absurd, of course. The root cause seems to have been revealed after
the third Why?: The team never created a process for blogging, therefore blogging doesn‟t follow a
process, therefore the „process‟ is slow. Instead of pointing fingers, the team can now work together to
create an effective, streamlined blogging process with clearly defined roles and steps.

Value Stream Mapping (VSM)

Lean value stream mapping is gaining momentum in knowledge work because it encourages systems
thinking, resulting in better communication, more effective collaboration, and more team wins. Any
team can enjoy the improved productivity and collaboration that mapping your process can provide.
Although advanced mapping software and complex metrics can be incredibly valuable, they‟re not
required for teams to begin to enjoy the benefits of value stream mapping. Teams can get started
easily by gathering around a whiteboard and defining the various steps involved in seeing their
product, project, or service from start to finish