📘 MMPC-016: International Business Management Last Minute Short Notes

⭐⭐⭐⭐⭐ 1. Modes of Entry into International Markets

When a company wants to sell products in another country, it chooses an entry mode.

(A) Exporting

Selling products made in the home country to foreign countries.

Example:
An Indian tea company exports tea to the UK.

Advantages

• Low investment
• Less risk
• Easy to start

Disadvantages

• Transportation cost
• Import duties
• Less control over foreign market

Keyword: “Make at home, sell abroad.”

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(B) Licensing

A company allows another company to use its technology, patent, or brand in return for royalty.

Example:
A pharmaceutical company gives permission to another country’s firm to manufacture its medicine.

Pros

• Low cost
• Fast expansion

Cons

• Loss of control
• Risk of copying technology

Keyword: Permission + Royalty.

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(C) Franchising

A business model where the franchisee uses the brand name and business system.

Example:
McDonald’s gives franchise rights to local owners.

Advantages

• Rapid growth
• Lower investment

Disadvantages

• Maintaining quality standards

Keyword: Brand + Business Model.

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(D) Joint Venture (JV)

Two companies create a new business together.

Example:
An Indian automobile company and a Japanese company start a new manufacturing plant together.

Benefits

• Shared investment
• Local market knowledge

Risks

• Conflict between partners
• Profit sharing

Keyword: Partnership.

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(E) Wholly Owned Subsidiary

A company owns 100% of the foreign business.

Example:
Apple Inc. opening and fully owning its own stores in another country.

Advantages

• Full control
• Keeps all profits

Disadvantages

• High investment
• High risk

Keyword: Full Ownership.

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(F) Foreign Direct Investment (FDI)

Investment made by a company directly into another country’s business operations.

Example:
Hyundai Motor Company setting up a car factory in India.

Types

1. Greenfield Investment (new factory)
2. Brownfield Investment (buy existing business)

Benefits

• Employment generation
• Technology transfer
• Economic growth

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Factors Affecting Entry Mode

• Cost
• Risk
• Government policies
• Market size
• Competition
• Company resources
• Cultural differences

Simple Formula:

Low Investment → Exporting

Medium Investment → Licensing/Franchising

High Investment → JV/FDI/Subsidiary

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⭐⭐⭐⭐⭐ 2. Foreign Direct Investment (FDI) Theories

(A) Product Life Cycle Theory

Products pass through three stages:

1. New Product
2. Growth
3. Standardized Product

Initially production happens in the home country.
Later production shifts abroad to reduce costs.

Example:
Smartphones were first designed in developed countries but are now manufactured globally.

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(B) Internalization Theory

Companies prefer doing business themselves instead of licensing to avoid losing technology.

Example:
A software company opens its own foreign office instead of giving technology to another firm.

Reason: Better control.

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(C) Eclectic (OLI) Paradigm

Three conditions encourage FDI:

O = Ownership Advantage

Strong brand, technology, patents.

L = Location Advantage

Cheap labor, natural resources.

I = Internalization Advantage

Better to operate directly rather than license.

Easy Memory: OLI = Own + Locate + Invest.

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(D) Market Imperfection Theory

Markets are not perfect.
Companies invest abroad to gain competitive advantage.

Example:
A company enters another country because labor costs are lower.

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⭐⭐⭐⭐⭐ 3. Strategic Alliances

Meaning

An agreement between two or more companies to work together while remaining independent.

Example:
Two airlines sharing routes and ticketing systems.

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Types

1. Non-equity Alliance
• Contract only.
2. Equity Alliance
• One company buys shares in another.
3. Joint Venture
• New company formed together.

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Benefits

• Share resources
• Enter new markets
• Reduce costs
• Learn technology
• Share risks

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Risks

• Cultural differences
• Trust issues
• Profit conflicts
• Loss of business secrets

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Stages of Alliance Formation

1. Partner Selection
2. Negotiation
3. Agreement
4. Implementation
5. Evaluation

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International Joint Venture

A JV between companies from different countries.

Example:
An Indian company and a German company producing machinery together.

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⭐⭐⭐⭐⭐ 4. International Marketing

Meaning

Marketing products across national borders.

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Domestic vs International Marketing

Domestic	International
One country	Many countries
Same laws	Different laws
One culture	Multiple cultures
Less risk	More risk

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International Marketing Mix (4Ps)

Product

Adapt according to local needs.

Example:
Spicy food products for India.

Price

Depends on taxes, exchange rates.

Place

Distribution channels.

Example:
Retail stores, online platforms.

Promotion

Advertising suited to local culture.

Example:
Different advertisements for different countries.

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International Distribution Channels

Manufacturer → Wholesaler → Retailer → Customer

Or

Manufacturer → Online Platform → Customer

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Drivers of International Marketing

• Globalization
• Internet
• Better transportation
• Higher profits

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Challenges

• Language barriers
• Cultural differences
• Government regulations
• Currency fluctuations

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⭐⭐⭐⭐⭐ 5. International HRM

Managing employees across different countries.

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Expatriate Selection

Choosing employees to work abroad.

Qualities

• Technical skills
• Communication ability
• Cultural adaptability

Example:
An Indian manager sent to manage a Dubai branch.

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Training & Development

Employees receive:

• Language training
• Cultural training
• Job training

Purpose: Easy adjustment.

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Performance Appraisal

Evaluating employee performance abroad.

Criteria:

• Achievement of targets
• Leadership
• Adaptability

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International Compensation

Salary package includes:

• Basic salary
• Foreign allowance
• Housing allowance
• Travel allowance
• Medical benefits

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Cross-Cultural Issues

Problems due to differences in:

• Language
• Religion
• Customs
• Work habits

Example:
Meeting styles differ between Japan and India.

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⭐⭐⭐⭐ 6. Globalization

Meaning

Increasing economic and business connections among countries.

Importance

• Larger markets
• Better technology
• More employment
• Higher competition

Effects

Positive:

• Economic growth
• Better products
• Lower prices

Negative:

• Job losses in some sectors
• Cultural influence
• High competition

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⭐⭐⭐⭐ 7. WTO, GATT & Trade Blocs

GATT

General Agreement on Tariffs and Trade (1947).

Purpose:
Reduce trade barriers.

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WTO

Established in 1995.

Purpose:
Promote free and fair international trade.

Important Agreements

• Agriculture Agreement
• TRIPS (Intellectual Property)
• GATS (Services)

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GATT vs WTO

GATT	WTO
Started in 1947	Started in 1995
Temporary	Permanent
Goods only	Goods + Services + IP

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Trade Blocs

Groups of countries promoting free trade.

Types

• Free Trade Area
• Customs Union
• Common Market
• Economic Union

Benefits

• Increased trade
• Lower tariffs
• Economic growth

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⭐⭐⭐⭐ 8. International Logistics & Supply Chain

International Logistics

Managing movement of goods across countries.

Includes:

• Transportation
• Warehousing
• Customs clearance

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Marketing and Logistics Relationship

Marketing creates demand.

Logistics fulfills demand.

Simple Example:
Marketing sells the product.
Logistics delivers the product.

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Supply Chain Management (SCM)

Managing the entire flow:

Supplier → Factory → Warehouse → Retailer → Customer

Benefits

• Lower costs
• Faster delivery
• Better customer satisfaction

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⭐⭐⭐⭐ 9. Global Financial System

Foreign Exchange Market (Forex)

Market where currencies are exchanged.

Example:
Indian importer buys US dollars to pay an American supplier.

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International Cash Flows

Money moving between countries through exports, imports, investments, etc.

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Terms of Payment

Advance Payment

Buyer pays first.

Letter of Credit (LC)

Bank guarantees payment.

Documents Against Payment (D/P)

Documents given after payment.

Open Account

Goods first, payment later.

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⭐⭐⭐⭐ 10. Organizational Structures

Meaning

Framework showing authority and communication in a company.

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Types

Functional Structure

Departments like Marketing, Finance, HR.

Divisional Structure

Organized by product or region.

Matrix Structure

Employees report to two managers.

Global Functional Structure

Company organizes worldwide operations by functions.

Example:

CEO

→ Marketing

→ Finance

→ Production

→ HR

(All manage global operations.)

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Advantages

• Specialization
• Better coordination
• Efficient decision making

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Disadvantages

• Slow communication
• Departmental conflicts
• Less flexibility

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🔥 Super Short Revision (1 Minute)

Entry Modes: Exporting → Licensing → Franchising → JV → Subsidiary → FDI

FDI Theories: Product Life Cycle, Internalization, OLI, Market Imperfection

Strategic Alliance: Cooperation without merger.

4Ps: Product, Price, Place, Promotion.

IHRM: Expatriates, Training, Appraisal, Compensation.

Globalization: World becoming one market.

WTO: Promotes global trade.

SCM: Supplier → Factory → Warehouse → Customer.

Forex: Currency exchange market.

Organizational Structures: Functional, Divisional, Matrix, Global Functional.

Easy Memory Trick

“ELFJWF – OIMS – 4P – ETCA – GWLSO”

• Exporting
• Licensing
• Franchising
• Joint Venture
• Wholly Owned Subsidiary
• FDI

↓

• OLI
• Internalization
• Market Imperfection
• SProduct Life Cycle

↓

4Ps

↓

Expatriate
Training
Compensation
Appraisal

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Globalization
WTO
Logistics
Supply Chain
Organizational Structure

These are the topics that cover a large portion of typical MMPC-016 examination questions.