Functional area of IB

Global Production/ Operations mgmt.

Global Prodn. / mfg.

Outsourcing.

Benefits of Outsourcing.

Risks/ Challenges of Outsourcing/ Global Sourcing

Logistics

Managing global supply chain.

Total Quality Mgmt.

Quality circle.

Six Sigma.

Inventory Mgmt.

Just In Time (JIT).

Foreign Trade Zones (FTZs)

Transport mgmt.

Concept of Global marketing/ Marketing Strategy.

GLOBAL MARKETING.

GLOBAL MARKETING STRATEGY.

Global marketing strategy:

ADAPTATION:

STANDARDIZATION.

Product strategies:

PRODUCT.

Global Branding

New product development

Why product innovation is essential?

Pricing & Strategy

PRICE DISCRIMIATION

Pricing Strategies

1. Standardize pricing and local pricing

2. Cost-based pricing

3. Aggressive Export Pricing

4. Penetration/ Skimming Price

5. Transfer pricing

Factors affecting Int’l Pricing

Marketing communication & Strategy

Strategy on Standardization & Adaptation

Strategy on Media choice and communication/ Advt. Method

Strategy on Creative Communication

Distribution & Strategies

Types of int’l distribution channel/ Intermediaries

1. Home country-channel

2. Foreign country channel

3. Alternative distribution structures

Int’l Distribution Strategies

Major factors Affecting consideration for Developing Int’l Distribution strategy

1. Retail Concentration

2. Channel Length

3. Channel Exclusivity

4. Other marketing considerations

a) Consumer/ Market Consideration

b) Company consideration

c) Product consideration.

d) Competitive environment – homogenous product direct channel

e) Costs – incl. channel cost (commission, discount, incentive), Physical cost (transport, storage, inventory).

f) Intermediary considerations.

Issues in int’l Distribution.

Global E-Marketing Strategy

STRATEGIES:

Alternative E-Biz Strategies.

Strategy in E-Documentation of Trade

Financial Mgmt. in IB.

Key function of Financial Mgmt

Sources of Funds for Int’l Operations.

Sources of global Debt-financing

Offshore Financial Centers (OFCs)

Investment Decisions

Tax practices

TAX TYPES. Tax Heaven.

Eliminating Multiple Taxation

Currency Risk Mgmt

Types of Currency Exposure Risks

Lessard-Lorange Model

Int’l HR Mgmt

Staffing Policy

Developing staffing policies

Diversity Mgmt

Labor Relation

Management Issues in Labor Relation

Preparing Employees for Repatriation

Global Production/ Operations mgmt.

Function that concerns with transformation of material resources inputs into output.
Opt./ prodn. Mgmt. has increased its role as:
- Globally need to formulate strategy of mass production
- Blending with concept of TQM
Effective utilization of resources making it
- Cost effective manner
- Satisfying increasing demand of customer
- Through qualitative & quantitative needs
Firm need to make prodn. & logistics more efficient
Helps to improve firm’s competitive position which is possible by:
- Lowering cost of value creation
- Performing value creation activities
3 issues should be considered
- Where to produce,
- What to make & buy
- How to coordinate globally
3 components of global prodn. Operation mgmt. are
- Global production/ mfg.
- Global sourcing and logistics
- Supply chain mgmt.

Global Prodn. / mfg.

Basically, concerns with Where to produce,
While choosing location of prodn.
Firm choose particular country coz. Of location-specific advantages of the country.
Enter in market through FDI
- Other market entering strategy
Use Virtual mfg. strategy to subcontract the mfg. to other firm in foreign country.
- E.g. Nike don’t mfg., they subcontract to other companies in world
Manager should consider following factor:
- Country Factor:
  - Influence factor cost, political economy, national culture on production cost
  - Allowing presence of location externalities
- Technological factor:
  - Include fixed cost of setting up production facilities,
  - Minimum efficient scale of prodn.
  - Available mfg. tech. for mass customization
- Product Factor:
  - Consists of value-to-weight ratio of product
  - Whether product serves universal needs
Global mfg. strategy depends on 4 key factors:
- Compatibility- efficiency, cost, quality, flexibility, innovation
- Configuration- centralize mfg., mfg. facility at specific region, multidomestic facility,
- Coordination- linking & integration activity
- Control- ensure manager implement the strategy as planned

Outsourcing

Function to outsource a firm’s production & operation activities from foreign countries
IB manager build/ manage supplier networks,
- They will have to globally source production inputs.
Companies may make components domestically,
- Or buy from foreign independent suppliers which
  - Provides greater flexibility for vertical integration.
Designed to win more orders for firm form a country
- By pushing sub contracts.

Benefits of Outsourcing

Cost efficient- adv. of large gap between advance economy & emerging market
High tech products- get product components based on better technology
Better quality product- specialize in given product
Better delivery service- maintain timetable delivery of ordered component

Risks/ Challenges of Outsourcing/ Global Sourcing:

Cost lower then expected cost saving
Environmental factor- currency fluctuation, tariff, costs, energy cost,
Weak legal env. – china, India, Nepal,- weak IPR laws
Inadequate/ low skilled labor
Risk of creating competitors

Logistics:

Part of supply chain process that
- Plans, implement, control efficient/ effective flow & storage of G/S and
- Related info. from point of origin to point of consumption… to meet consumer needs
Covers all the activities that move materials to
- prodn. Facility like factory through
- prodn. Process and distribution system to user
Physically moves goods through supply chain
Incorporates:
- Information
- Transportation
- Inventory
- Material handling
IB manager reduce moving & storage cost by using JIT

Managing global supply chain

Company’s supply chain involved the
- Coordination of material, info, fund, from
- From initial raw material supplier to ultimate consumer
Mgmt. of value-added process from supplier to customers
Global Supply Chain refers to the firm’s integrated network of
- Sourcing, prodn, distribution, organization
- On world scale and located in countries
- Where competitive advantage can be maximized.
Value chain is collection of activities intended
- To design, produce, market, deliver, support G/s
Supply chain is collection of logistics specialists & activities
- That provides input to mfg.er/ retailer
Supply chain mgmt. involved series of value-adding activities
- that connect a company’s supply side.
Supply chain mgmt. differs from Material mgmt.
Material Mgmt. focuses more on transport/ storage of materials & final goods
Whereas supply chain mgmt. extends beyond that,
- Includes mgmt. of supplier & customer reln.

Supply chain mgmt. strategy includes following elements:

Customer service requirement
Inventory mgmt.
Business process
Information system
Performance goal

Total Quality Mgmt.

Process that aims eliminating all the defect in prodn.
Stressing on 3 principles:
- Customer satisfaction
- Employee involvement
- Continuous improvement in quality

Quality circle

Small work groups that meet periodically to discuss
- Ways to improve their functional areas &
- Product quality continuously

Six Sigma

Statistically based philosophy that aims
- To reduce defects
- Boost productivity
- Eliminate wastage
- Reduce cost through out a company.
Prodn. Should be so much accurate that there could be only
- 3.4 defects in a million units.

Inventory Mgmt.

Focuses more on transportation & storage of materials, final goods
- So that production efficiency & productivity
- Can be achieved without affecting flow of prodn.

Just In Time (JIT)

Sourcing raw materials and other parts
- Just as they needed in the mfg. process
System gets raw materials, part, components to org.
- Just in time for use without spending on inventory.

Foreign Trade Zones (FTZs)

Special locations for storing domestic and imported inventory
- Avoiding paying duties until inventory is used in prodn. / sold
Same thing is with Export Processing Zone (EPZ)
- To boost competitiveness in int’l trade.

Transport mgmt.

Relates to managing/ building transportation networks
- For global operations of business
Transportation links together= supplier & mfg. companies – then customers
Involves decisions on selecting/ using most suitable, efficient
- Means of transportation
Int’l trade takes place by air, ropeways, road

Concept of Global marketing/ Marketing Strategy

GLOBAL MARKETING

Multinational process of planning and executing
- Conception, pricing, promotion, distribution of ideas, goods, services
- To create exchanges that satisfy ind. & org. Goals
It is performance of biz. Activities that directs
- Flow of company’s good/ service
- To consumer/ users in more than one nation.
Global marketing is marketing process of focusing
- The resources & objectives of company on global marketing opportunity
It consists in 4 major areas:
- Product strategy
- Pricing strategy
- Promotion/ marketing communication strategy
- Distribution strategy

GLOBAL MARKETING STRATEGY

Plan of action the firm develops for foreign markets
- That guides its decision making on:
  - How to position itself & its offerings
  - Which customer segments to target
  - To what degree standardize programming elements

Global marketing strategy:

ADAPTATION:

Strategy in which firm modifies
- One or more elements of its global marketing program
- To accommodate specific customer requirements
- In particular foreign market

STANDARDIZATION

Strategy that makes marketing program elements uniform.
- With same product/ service in different target market
- Even in global market place.
It is remarkable for 3 outcomes:
- Cost reduction
- Improved planning/ control
- Ability to develop consistent image and
- Build global brand

Product strategies:

PRODUCT

Firm’s offering that can satisfy needs of customers
- In socially acceptable way
- Which consists of
  - Physical goods … Services
  - Ideas and information
  - Events …. IPRs

CONSIDERATION IN PRODUCT STRATEGY AND PLANNING:

Branding	Packaging	Labelling
Warranty	Country of origin	IPLC – Int’l product life cycle

Global Branding:

Brand that reach the world’s mega market and
- Perceived as same brand by consumers and internal constituents
It can increase effectiveness of marketing strategy of firm
- Allows to charge higher prices and
- Deal more effectively in marketing + competitors
Provides sense of trust and confidence in purchasing decision

New product development:

It is to develop new product for new foreign market
Variation on product adaptation strategy
Adaptation policy makes modification on existing product line
New product development policy involves developing noticeably different product

NEW PRODUCT DEVELOPMENT PROCESS

Idea generation idea screening
Concept of development marketing strategy development
Business analysis product development & testing
Test marketing commercialization

Why product innovation is essential?

Innovative product carry export potential
Marketer facing decline sales can find another foreign market (IPLC)
Innovative product improves staying power in market

Pricing & Strategy:

Fair price is either low/ high
- As it reflects perceived value of product
Too high price discourage buyers
Too low price incur loss to marketing firm

PRICE DISCRIMIATION

Consumer in different countries are charged
- Different prices for same product/service
Strategy to maximize their profits
Effective in national market where there is price elasticity of demand

PRICE ESCALATION

Challenge for exporters in pricing coz.
- It raises the prices for end-user (customers)
- To very high levels in export market

GRAT MARKET ACTIVITY:

Price variation leads to gray market activity
Legal importation of genuine products into country
- By intermediaries other than
- Other than authorized distributors
Also known as parallel imports

Pricing Strategies:

Firm uses pricing strategy as strategy
- To survive and win competition
Key pricing strategies are:

1. Standardize pricing and local pricing

Int’l firm uses standardize price in foreign markets
- In which same price is charged for all products in foreign market
Local pricing- different prices are charged in different market
- Reflecting difference in factors like:
  - Consumer purchase power
  - Distribution cost / Tax system

2. Cost-based pricing

Price of product depend in cost structure measured in terms of
- Fixed, variable costs, profit, tariff, etc.
- Involved in production, mgmt., distribution, etc.

3. Aggressive Export Pricing:

Aggressive export pricing is one adopted
- To gain market share or
- To remain competitive in int’l market
E.g. Dynamic Incremental pricing it assumes that it will have certain fixed costs
- Whether or not it exports its product overseas

4. Penetration/ Skimming Pricing:

Penetration pricing:

Policy in which product is first priced
- Below the price of competitors product
- So that it could quickly penetrate in market
- Then raise it to target level

Skimming Pricing:

Policy in which product is priced
- Above the competitors’ product when
- Competition is minimal and
- Firm can quickly recover investment

5. Transfer pricing:

Pricing product for intra-corporate (within org.) SALES
Policy used in intra-firm sales for commercial transaction
- Between two units of same MNC
E.g. Dabor Nepal produce 1000 units (WIP) and
- Sell them in Dabor India (Finished goods)
- Pricing applied there in would be transfer pricing

Factors affecting Int’l Pricing:

Cost of production
Production cost incurred to produce a product would determine price
Exchange rates
- Foreign exchange rate is critical issue in int’l marketing
  - But it has no impact in domestic marketing
Market share and nature of product
- Company with bigger market share enjoy pricing flexibility
- Market share can be bought with low pricing
Tariff and Distribution cost
- Products cost higher in host country
  - Due to tariff and foreign country distribution costs
Promotion costs
- If company spends more money in advt. in foreign market
  - It would see increase in promo cost
Cultural factors:
- E.g. south Asia have strong bargaining culture
  - When it comes to price of product

Marketing communication & Strategy”

Also known as marketing promotion
Companies use marketing comm.
- To provide info. / communicate with
- Potential & existing consumers
- With aim of creating demand
Concentrates more on advertising strategy

Int’l promotion & advt. strategy relates

Firm’s attempt on communicating with target customer in foreign market
Communicating with customers in foreign markets is important
- Due to geographical/ psy. Distances
Int’l communication strategy focuses more particularly
- On Advt. as Personal selling is not possible
There can be
- Direct marketing
- Sales promotion

Strategy on Standardization & Adaptation:

Standardization:
- Process of globalizing company’s promotional policy/ strategy
  - So that promotional message is uniform in all target market
Adaptation:
- Act of changing company’s promotional mix to each country/ market
  - Creating local campaign

Strategy on Media choice and communication/ Advt. Method

Print media – newspaper, magazine, journal, catalogues
Audio-visual – TV, Films, Slides
Internet/ mobile – webpage, email message, SMS
Mural/ display media- wall painting, hoarding board, neo lights

Strategy on Creative Communication

Language factor – must be short, avoid slang/ idioms. Visual ads are best
Legal factor – must not be used if foreign country does not permit. Nepal govt. avoid tobacco ads
Socio-cultural factor – must consider cultural diversity. Local manager share imp. Input/ info
Production/ Cost factor – highly artful advt. is symbol of creativity & costly to produce

Distribution & Strategies:

Links mfg.er and final int’l consumers
Vary from one region to another/ one market to another
Consumer product channel of distribution
- Tend to be longer than industrial product channel

Types of int’l distribution channel/ Intermediaries

There are 2 alternatives:

Using estd. Channel- already existing channel is used
Building company’s own channel- creating new distribution channels

Manager should have understanding on what type of channel that can operate in international distribution system:

1. Home country-channel

Export mgmt. companies – researching, representing, screening, shipping
Trading companies – provide service, min. risk, financial assistance
Home country brokers/ agents – middlemen to bring int’l buyer and seller together
Foreign sales corporation (FSC)- allow exemption is home country income tax.
Export merchants – export jobber to carry goods

2. Foreign country channel

Merchant middle men- import jobbers to purchase goods
Agents and brokers

3. Alternative distribution structures

Network marketing – approach to sell at same time using network through distribution structure.

Int’l Distribution Strategies:

Distribution Strategy is means for delivering product to target consumer
- the way product is delivered to consumer is determined
- by firm’s entry strategy

Major factors Affecting consideration for Developing Int’l Distribution strategy:

1. Retail Concentration

In concentrated system. Few retailers supply most of the market
In fragmented system, there are many retailers, none of which has major share in market
Strategy:
- When buyers are concentrated, direct distribution is practical
- i.e. sales through mfg.er’ s sales depot/ sales branches is feasible
- direct sales is impractical due to high travel cost
  - and excess use of intermediaries
LINE OF Demarcation:
- It is drawn between developed/ developing countries
  - In extend of retail concentration
- In developed countries there is tendency for greater retail concentration
  - While fragmented in developing country

2. Channel Length:

Channel is long when mfg.er require
- To move its product through several middlemen like:
- Import agent, wholesaler, retailers,
Channel is short when product has to change hands once or twice
Channel is direct when mfg.er sells product directly to final consumer
Channel is long in fragmented retail system

3. Channel Exclusivity:

Exclusive distribution channel is one
- Using specific channel exclusively for a given product
- That is difficult for outsiders to access
E.g. in star hotel, new farmer/ their groups have difficult access for supplying vegetables

4. Other marketing considerations:

a) Consumer/ Market Consideration

Type of consumer- in org. wholesaler play important role, retailer in consumer market
Channel coverage- at small consumer, mfg. use direct sales to user
Order size – big order, mfg. use direct sells to consumer

b) Company consideration

Desire for control- mfg. willing to distribute product use direct channel, no middlemen involve
Managerial ability and experience – mfg. lacking managerial ability, use middle men
Financial resources – good financial company use less middlemen
Service required – mfg. may have after sale/ before sale technical services

c) Product consideration

Nature of product – perishable goods use direct channel
Unit value of product – high unit value require short/ direct channel
Technical products – distributed directly to industrial users; requires trained salesmen for post-sale service

d) Competitive environment – homogenous product direct channel

e) Costs – incl. channel cost (commission, discount, incentive), Physical cost (transport, storage, inventory)

f) Intermediary considerations

Service provided by intermediary – mfg. can’t provide marketing service to ultimate user
Availability of desired intermediary – producer do not want to add middlemen as extra line
Sales volume possibilities- if middlemen increase sales volume, middlemen is hired
Middlemen’s attitude-

Issues in int’l Distribution

International Physical Distribution mgmt. (IPDM)
Containerization
Material and document handling – during customers in foreign countries

Global E-Marketing Strategy:

Marketing that uses electronic means/ methods
- To conduct marketing activities such as
- Buying, selling, distributing G/s in global market
It transforms marketing process from
- Physical marketplace to Virtual Marketing space
It has given raise to reverse marketing
- Where marketing activities initiated by customers rather than marketing firm

STRATEGIES:

B2B- biz of one country conduct marketing with biz firm to another country
- Reduce cost of processing transaction
- Enhance efficiency
- Improve marketing linkage
B2C- earliest root is found in online retailing or e-tailing
- Involves biz transaction with customer by gathering info, purchasing goods/ services
C2B- allows individual professional- lawyers, accountant, engineers,
- To offer their service to biz
- That allows individual to offer their service to biz.
C2C- horizontal interaction between consumer who
- Share their product-related experiences via chat-room/ social media like FB, Twitter
G2B (govt to govt)
- If biz takes initiative to market product to govt. of another country, it is B2C
- If govt. takes marketing initiative, it will be G2B

Alternative E-Biz Strategies

Brick & Mortar
- Website is used only as firm’s brochure so that
  - It can market its biz online
- Uses brick and mortar to provide info to customer
  - Generate strategy through marketing efforts
Pure Click
- Firm carries out entire marketing activities online only
  1. Very little physical presence of marketing actions
- Incl. search engine, commercial sites, ISP, content sites, etc.
Brick and click
- Strategy to conduct marketing activity both: online and Offline
- Try to reduce channel-conflict between
  - Online marketing & sales by Traditional Marketing Channels

Strategy in E-Documentation of Trade:

Strategy to benefit efficient documentation in int’l trade
- Through the online facilities
Manual documentation and processing both are
- Costly and inefficient
Electronic Data Interchange (EDI) has been introduced where firm
- Can achieve efficiency with time/ cost saving
- In its global marketing efforts like
  - Order placement, order-processing, distribution

Financial Mgmt. in IB

Operating globally need to focus themselves towards:
- Receivables, cash mgmt., inventory mgmt.
Every single aspects of finance leads to effectiveness in operating biz. Houses
Financial mgmt. has 2 major functions
- Acquisition of finance
- Allocation of finance

Key function of Financial Mgmt.

Deciding capital structure:
- Involves determining proper mix of debt & equity in org.
- Capital structure is mix of long term financing- equity/ debt financing
  - That support int’l activities
Raising Funds for Int’l Operations:
- Raise money in global capital market
- Equity financing is obtained throughout the world
  - Where investor and firm meet to buy/sell shares of stock
- Debt financing is where firm borrow Eurocurrency market
  - Which uses currency banked outside its country of origin
Mgmt. of Working capital and Cash Flow
- Mgmt. of company’s currency assets and liabilities (cash, account receivables, inventory)
- Firm would pool funds into its centralized depository from
  - Firms network of subsidiaries and
  - Affiliates to distribute to units that firm funds.
- Various methods for transferring funds
  - Within MNC include dividend pay, Royalty Payment, Transfer Pricing, Loan
Capital Budgeting for int’l operation
- Relates to analyzing investment opportunities so that
  - Capital expenditure realize better returns
- Mgmt. undertakes to evaluate viability of proposed int’l projects
- Mgmt. calculates NPV of proposed projects
  - To decide whether it should be implemented
Mgmt. of Currency Risk:
- IB involves multiple currencies, currency risk
  - Due to forex fluctuation & other factors
Mgmt. of Int’l Accounting & Tax Practices
- Diversity of accounting standards and tax practices in different countries
  - Which should be properly managed in int’l biz.

Sources of Funds for Int’l Operations

GLOBAL EQUITY FINANCING

Equity financing is selling shares to investors,
- Which provides them percentage if ownerships in firm
- As well as pay dividends
Firms also retain earnings that firm can
- Reinvest profit rather than paying it out as dividend to investor
Firms obtain capital without debt

International Financial Centers (IFCs)

Global capital market is concentrated in major financial centers: New York, London, Tokyo
Firm can access major suppliers of capital
- through banks, stock, exchange, venture capitalist
Europe has largest share of Over-the-Counter (OTC)
Refers to the process of how securities are traded for companies
- that are not listed on a formal exchange such as the New York Stock Exchange (NYSE).
Securities that are traded over-the-counter are traded
- via a broker-dealer network as
- opposed to on a centralized exchange.

DEBT FINANCING

Borrowing of money from bank or financial intermediaries or
- Sale of corporate bonds to individual or institution
- To raise capital
They are done from 2 sources:
- Loan from banks
- Financial intermediaries
- Sale of corporate bonds
Advantage: does not sacrifice any ownership to obtain needed capital

Sources of global Debt-financing:

Int’l Loan:
- Firm borrow from banks in its home market or foreign market
- Int’l complicated by
  - differences in national banking regulation
  - inadequate banking infrastructure
  - shortage of loanable funds
  - fluctuating currency values
Eurocurrency market:
- Currency banked outside of its country of origin
- Role if declined in favor of euro
- EURODOLLARS are US Dollar held in banks outside USA
  1. Including foreign branches of US banks
- Deposits tend to provide yield more than domestic deposits
London Inter-Bank Offered Rate (LIBOR)
1. Deposit rate that applies to inter-bank loans within LONDON

Offshore Financial Centers (OFCs)

Provide large amount of fund currencies other than their own.
Enables companies to take advantage of favorable tax rates
Financial services operate in Hong Kong, Singapore, Switzerland, New York
Off shore banking is mode of OFS,
OFCs offer low to zero taxation, moderate,

Benefits of OFCs

Could have tax benefits
Include high level of confidentiality
Internationally accepted debit card

Investment Decisions:

Construction of mfg. facility in another country
Investment board is justifiable if Positive NPV
Refers to capital budgeting decisions of the firms
Construction of capital budget in process of
- Projecting net operating cash flows of potential investment
- To determine if it is indeed a good investment
While investing abroad, manager need to evaluate:
- Cash flow from local operation
- Cash flows from projects to parent company

CAPITAL BUDGETING:

Purpose of capital budgeting is to help manager
- Decide which international project provide best financial return
Mgmt. undertakes to evaluate viability of proposed international projects
Calculates NPV of proposed project
- To decide whether it should be implemented or not.

Tax practices:

Wants to tax all companies within its territory
Tax practice & taxation system varies from country

TAX TYPES

Direct Tax:
- Calculated on actual income
- Either individual or firm impose tax on incomes like
  1. Profits, capital gain, intra-firm, royalties, interest, etc.
- Common form of direct tax is corporate income tax
Indirect tax:
- Sales tax, tariff, value added tax,
  - Applied to purchase price, material cost, etc.
- Sales tax is flat percentage of tax on value of goods/ services
  - Paid by ultimate user

Tax Heaven

Countries with low tax are friendly to business / investment
Panama, Switzerland, Monaco, Norway, Denmark, etc. are tax heaven country
They are among highest GNI

Eliminating Multiple Taxation:

Firms have to pay doubt or triple taxes on same product or Transaction in two or more countries

There are 2 methods:

Tax treaties:
- Country has sovereign right to levy taxes on all income generated
- MNC run into a problem when their income is taxed in foreign country
  1. As well as parent country
  1. It results double taxation
- To avoid such doubt tax, countries sign tax treaties
- Tax treaties has 2 objectives:
  1. Preventing double taxation
  1. Providing remedies to double taxation
- Tax treaties covers: Income Tax, Inheritance tax, Value Added Tax
- EU agreed in multilateral agreement with respect to VAT
- Tax treaties tend to reduce taxes of one treaty country.

Nepal’s Tax Treaties:

Nepal signed DTAA (Double Tax Avoidance Agreement) with Bangladesh on 2015
Nepal has signed treaties with 11 countries till now.
Nepal has still prohibited Nepali investment abroad.

Foreign Tax Credits:
- Automatic reduction in domestic tax liability when firm can prove
  - It has already paid income tax abroad.
  - When these two countries have tax treaties
- Bangladesh has signed treaties DTAA as tax treaties
- Ensures that MNC has paid taxes in one country and
  - Stop companies from evading tax

Currency Risk Mgmt.

Manager try to protect corporate assets from exchange losses ie.
- Losses due to forex rate changes/ fluctuation
Currency exchange rate can influence rupees equivalent of foreign currency.
To become successful in financial mgmt. there is
- Foreign Exchange Risk mgmt. or
- Currency Risk Mgmt.
As major financial risk in int’l biz arise from exchange rate changes
Currency Risk Mgmt. in global operations involves:
- Defining exposure
- Setting up monitoring
- Adopting policy
- Formulating strategy

There are 2 types of strategies:
- Operational strategy: involve balancing exposed assets with exposed liabilities
  - Using lead and lags in Cash Flow &
  - Balancing revenues in one currency with expenses in same currency
- Financial Strategy: include using forward contract, options, other forex instruments
  - to limit exposed position

Types of Currency Exposure Risks

Transaction exposure:
- Firm faces exposure when outstanding A/c receivable/ payable are
  - Dominated in foreign currencies
Economic Exposure:
- Results from exchange rate fluctuations affecting
  - Pricing of product,
  - Cost of input
Translation Exposure:
- Firm combines financial statement of foreign subsidiary into
  - Parent’s financial statement.
  - Process of consolidation

Lessard-Lorange Model:

Suggest that firms can deal with problems of exchange rates and control in 3 ways:

Initial Rate: spot exchange rate when – budget is adopted

Projected Rate: spot exchange rate – forecast for end of budget picture

Ending Rate: spot exchange rate when- budget and performance are being compared

Suggests the firm to use projected spot exchange rate
- To translate budget and performance figures into corporate currency

Int’l HR Mgmt.

Consideration of int’l labor and managers
When firm go global, operate in multiple country,
- Org. function of HR gain global dimension
- Which should be handled through mgmt. strategies
HRM is strategic function of global biz. Mgmt.
MNC’s whose HRM Policy support its
- Strategy created superior value in global market
To develop effective HRM policies/ strategies
- It’s a big challenge for most of MNC
HRM refers to mgmt. function through which
- Global manager acquire, develop, motivate, maintain
- Effective team of HR who come from different background.

Staffing Policy

Concerned with selecting employees who have
- Knowledge, abilities, skills, and attitude
- Required for performing particular jobs
Tool for developing & promoting MNC corporate image
People who have knowledge and skills
- Required for performing particular jobs
It also wants to hire people whose
- Behavioral styles, believe, and value are consistent

Developing staffing policies:

Ethnocentrism Staffing:
- Fill mgmt. position with home country nationals
  - When staffing employee for MNC
- It believes that not only employees of home country
  - But principles & mgmt. of home country is implemented
- Stress in hiring home country employees which is easier to adopt
- Its drawback: result competencies as managers are home nationals
  - Lacks local coordination of host countries
Polycentric Staffing:
- Directs MNC manager to staff host country nationals
  - To fill up mgmt. positions of each subsidiary
- Considers differences between operations in home/ host countries
- Considers host country’s political, legal, economic conditions
- Disadvantage: Creates gap between home & host operations as
  - Fail to create company differences due to employees
Regio-centric Staffing:
- Hire nationals from countries of home country region
  1. For filling up mgmt. position of MNC
- Particular region that heavily shares common cultural values and practice
- Given top priority to people from region where home country staff is preferred
Geocentric Staffing:
- Seeks the best people for key jobs throughout the world
  - Regardless of their nationality
- Seeks hire people from across the world
  - on basis of their attitude & skills
- benefits is beyond, as it draws people from any country
  - If they meet criteria
- Offers great leaning opportunities
  - That help generate ideas/ enhance competencies
- Economic factor, decision making routines and legal problems
  - Complicate the geocentric staffing policy

EXPATRIATION:

Employees are placed for foreign assessment;
Sending managers/ employees for foreign assessment is called expatriation

REPATRIATION:

After completing long term abroad, he/she repatriate back home
It is known as repatriation

Diversity Mgmt.

Int’l labor force has been diverse and
- Getting more diverse
Labors come from different socio-cultural, educational, political, racial backgrounds
There are different diversity as enumerated below: As Diversity in
- Attitude towards women, culture, race, language, education
Further Guidelines are proved to be effective in managing diversity:
- Equality & social justice
- Careful selection of members
- Cultural harmonization
- Estd. Equal power
- Discovering positive feedback

Labor Relation:

It is relationship between employees/ employer/ govt
Labor relation influence prodn., efficiency, industrial peace,
- Harmony & org. stability
Int’l labor relation is the
- Degree to which organized labor can limit the choice
- Of int’l biz.
Ability to integrate and consolidate global operations
- Limited by org. labor

Management Issues in Labor Relation

Unionization of Labor
- Trade unionism has become strong global phenomenon
- Important in molding employees relations or industrial relations
  1. In domestic & int’l organization
- Trade union is legal authority to bargain & negotiate with firms
  1. On behalf of employees on various issues
- Workers have right to organize & bargain collectively
LR dimensions
- Employee relation (ER) is reln. Between employees & their employer
- Industrial relation (IR) is reln. Between employer and labor in industrial sector
- Policy makers have increasingly understood that
  1. Sound labor reln. Essential to industrial development
  1. Filling gap of poverty, illiteracy, unemployment
- Inappropriate labor related decisions
  1. Leading to poor and unfriendly labor relation
- Key issue in int’l labor relation is
  1. Degree to which organized labor can limit their choices
  1. Of int’l biz.
- Int’l firm ability to integrate global operations to realize experience curve.
Codetermination
- Industrial relations practice in which
  - Trade union represents on corporate board and
  - Participate in decision making activities
Collective Bargaining Practice:
- Process used to make agreements between mgmt. and labor union
- Collective bargaining in US is highly regulated
- US govt. play relative bargain role in estd. Agreements
- Labor union and mgmt. representative
  1. Meet and negotiate a contract
- Contract governs collective working relationship until it expires
ILO Role and Influence:
- Int’l Labor Org. is between, govt, workers, employers,
- ILO sides itself with social justice, harmony, development
- Global firm operates across national boundaries,
  1. But labor union do not
- Due to this, balance of power in MNC clearly rests with mgmt.
- Unions are pushing hard for int’l labor standards
- They prefer ILO labor standards

Preparing Employees for Repatriation:

Repatriation is act of returning home from a foreign assignment after completing it.

Preparation:
- Repatriation gives mixed feeling to employees
- Concerns with professional & personal changes
- Individual experiences reverse cultural shock
- As they spent several yrs. Abroad in foreign assignment,
  - As adjustment to life back to home is stressful
Counselling:
- HR manager can provide counselling in types of problem employees
  1. Face upon retuning home
- Firm can provide counselling to address psy. Needs
Monitoring compensation:
- Firm need to monitor his compensation & career path
- Firm can adjust it as Equal to/ better than before – went abroad
- Companies struggle to determine proper degree to which
  - They should equalize pay for the same job.
Interim Financial Support:
- Firm can provide bridge loan and
  - Interim financial assistance +
  - Counselling on financial aspects to address financial needs.

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