MGT611 International Business Strategy: Barkley Smokehouse China

This report presents a strategic analysis for Barkley Smokehouse, an Australian business, aiming to expand into the Chinese market. It begins with an abstract summarizing the paper's focus on market analysis, opportunities, and threats within China, supported by relevant international business theories. The report delves into Porter's Diamond Model to assess the company's competitive advantage, followed by an examination of Foreign Direct Investment (FDI) theories, including the Production Cycle Theory and Internationalization Theory. It explores Dunny's electric Paradigm (OLI) and discusses constitutional reforms and corruption in international business, providing strategies to mitigate corruption risks. The analysis covers China's country conditions, including political, economic, social, technological, legal, and environmental factors, and examines Foreign Direct Investment in China. The report also addresses overcoming the liabilities of foreignness, international joint ventures, and the application of the CAGE framework, culminating in a conclusion that synthesizes the findings and recommendations for Barkley Smokehouse's international business strategy. References and an appendix with relevant figures are included.

INTERNATIONAL BUSINESS STRATEGY
Name of the Student:
Name of the University:
Author note:

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ABSTRACT
The current paper focuses on establishing a suitable market for Barkley Smokehouse. The paper
seeks to analyze the whole market and find out whether Barkley business has good scope for
international business. The assignment briefly explains the current opportunities and threats in
the market of China. The assignment elaborates theories and concept which supports the
emerging market in the global era. The international trade theories support the business to
overcome the threats and weakness in order to achieve its goal.

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Table of Contents
Introduction......................................................................................................................................5
Discussion........................................................................................................................................6
Potters Diamond Model...............................................................................................................6
Foreign Direct Investment Theories............................................................................................8
Theories of International Trade...................................................................................................9
Dunny’s electric Paradigm (OLI)................................................................................................9
Constitutional Reforms..............................................................................................................10
Corruption in International Business.........................................................................................11
Strategies for coping with the Corruption.............................................................................12
Corruption Perception Index..................................................................................................13
Country Condition in emerging Market....................................................................................13
Foreign Direct Investment in China..........................................................................................15
Overcoming the Liabilities of Foreignness................................................................................16
International Joint Venture........................................................................................................16
Uni Med Case............................................................................................................................16
Strategies fit in emerging market...............................................................................................17
CAGE....................................................................................................................................18
International Trade FDI.............................................................................................................19
Conclusion.....................................................................................................................................21

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Reference and Bibliography..........................................................................................................22
Appendix........................................................................................................................................24

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Introduction
In the world of contemporary business international business is highly emerging. The
transaction of economic resource which include people, skills and capital for the purpose of the
international trading such as insurance, banking, finance and construction. This international
business is referred as globalization. The current assignment focuses on developing strategies
into the emerging market of China. The paper also elaborates on the various theories in order to
justify the choice of all the elements of strategy. Barkly Smokehouse is a small business in
Australia; the business wants to expand in China as in global market. . In this report, Barkly
Smokehouse in Australia has been taken into consideration to analyses the internal and external
environment to expand the business in the market of China

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Discussion
Potters Diamond Model
Porter’s Diamond Model can be used to study if a particular organization, in our case an
Australian supplier Barkly Smokehouse; can thrive in the competition in international markets.
Porter saw that companies in some countries were capable of handling high competition in
international markets but some do not. He argued that a company’s ability to succeed in the
market depends upon a interrelated factors that depends upon the companies geographical
location.
Figure1:
Porter’s Diamond Model

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Firm Strategy, Structure and Rivalry:
The more the rivalry and competition in the home country, the more will be the focus on
innovation and efficiency as the struggle to survive is more difficult. This background prepares
the companies to succeed in highly competitive international markets (Aydiner, et al, 2019).
Barkly Smokehouse operates in the fast food industries mainly focusing on the cities on
Australia. There are many fast food shops in cities and hence the competition is high and forces
the company to adopt a lean management structure for overall profit.
Factor Conditions:
Australia is high wage country in international standards which means people, especially
the youth which is the company’s target demographic, can afford to spend money on fast food.
The quality of education is also above average compared to international standards. Overall the
conditions are suitable for the growth of company like Barkly Smokehouse in a place like
Australia.
Demand Conditions:
Barkley Smokehouse has a lot of domestic competition in cities where people can spend
and hence demand is usually high. If the home country has a high and changing demands in a
competitive market, it forces the companies to innovate new techniques of sustainable growth
and prepares it earlier to predict customer trends in the international market.
Related and Supporting Industries: A well-resourced supporting industry always is a boost for
the growth of a company. There usually is a good framework of supporting organizations in
cities in Australia.

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Government: Australian government has been conducive to growth of home grown companies
that compete successfully elsewhere.
Chance: Although not included by Porter himself in the model, the case of wars or economic
collapse has been seen to benefit or disrupt a company. Australia and China are in stable in those
respects for a company to grow and innovate.
Foreign Direct Investment Theories
The theories of foreign direct investments can be classified as:
Production Cycle Theory of Vernon
The production cycle theories explain certain types of foreign direct investment which is
made by the U.S companies. The basic theory of the production cycle is introduction, growth,
maturity and decline. The first stage of the production cycle, there is development of new
product for consumption and is served in the market. The manufacturers will standardize the
product, but there will be companies will copy it. Therefore, the European firms have initiated
imitating American products that the United States wee exporting to those countries.
Exchange Rates on Imperfect Capital Markets
This theory states that the real exchange rate increase the stimulated FDI made by USD,
while a foreign currency appreciation has reduced American FDI. The theory also states that the
dollar appreciation has reduced in U.S foreign direct investment by 25%.
Internationalization Theory
This theory tries to explain the growth of transnational companies and motivation for
achieving foreign direct investment. The theory demonstrates that the transnational companies

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are organizing their internal activities in ore to develop specific advantages, which then to be
exploited.
Theories of International Trade
The international trade theories incorporates Heckhscher-Ohlin model- This theory states
that the trade is not just concerned or determined by the technological differences, but it also
does reflect the differences in factor endowments across the countries.
Trade Theory: Gain from trade
Figure1: Gain from Trade framework
Dunny’s electric Paradigm (OLI)
This model is basically a mixture of three different theories of FDI.
O- Ownership advantage

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This theory refers to the intangible assets for exclusive possesses of the company and may be
transferred within the transnational companies at very low cost, which leads to either reduced
costs or higher income.
L-Location
After the first condition is fulfilled, it is advantageous if the companies who owns the asset and
use them itself rather than renting or selling them to the other foreign firms.
I-Internalization
If the first two theories are met or condition are met, then it must be profitable if the use these
advantages with collaboration with at least some of the external factors of country origin. This
theory shows that OLI parameters are different from the company to company and depend on the
business macro environment such as political, economic, social and technology of the host
country.
Constitutional Reforms
Since, Barkley Smokehouse aims to expand in international market, certain policies and
laws need to be followed by the business in order to maintain ethical and legal norms and to
sustain in the foreign market. The constitutional reforms constitute the main tool like
privatization, governance, trade and foreign exchange, price liberalization and competition
policy.
Business licensing- All the companies which include foreign invested enterprise must receive a
business license which permits them to operate only within specific area of business.

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A liberal 'negative list' approach, first used in China's free trade zones (FTZs), which has now
been extended nationwide and is set out in the PRC Foreign Investment Law, on 15 March 2019
effective from January 1 2020.
Encouraged catalogue- According to the introduction of negative list, NDRC and MOFCOM
are maintaining a separate list of projects where the FDI is encouraged. This is referred as
Catalogue of Industries Encouraged for Foreign Industries.
Corruption in International Business
Corruption is defined as the abuse or illegal behavior of entrusted power by the powerful
people for the private gain. Corruption in the international business is concerned about making of
illegal payment to the government official and politicians. The key causes of corruptions are
multidimensional which include factors such as economic, political, legal, cultural and other
institutional factors which vary from country to country. In the year 1977 the Foreign Corrupt
practice Act was passed in order to prohibit the bribes and illegal gifts to the foreign officials as
an approach of influencing business and the government decisions. This act also limit the
payment of fee, bribes and gifts to the low ranking government officials and also to mandate
financial reporting of those expenditures. At present, the corruption in International Business is
quite prevalent. The government laws and regulations of many countries in the international
business are no existent and even not comprehensive. In order to eradicate and cope with
corruption there are theories and concepts which involves strategies is adapted. One such is two
dimension of Corruption with matrix pervasiveness and arbitrariness (Aydiner, et al., 2019). The
pervasiveness of corruption reflects the number and frequency of transaction with which the firm
deals over the course of a fixed time period that involves illicit activities. The arbitrariness is the
disorganized corruption network emerges when the government agent act independently and

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capriciously in an effort in order to maximize their own bribe revenue while disregarding the
effects of their efforts on other officials.
Figure2:
(The Two Dimension of Corruption)
Strategies for coping with the Corruption
Avoidance- Avoidance is effective against pervasive and arbitrary corruption and helps to bypass
the problem.
Adjusting the entry mode- This is effective against pervasive and arbitrary corruption and allows
the firm to maintain participation in the market while avoiding exposure to the corruption.
Corporate codes of conduct- This strategy is effective for pervasive and arbitrary corruptions, the
main advantage is it could incorporate the major MNEs around the world.