IPER ‐ Bhopal 9/10/2019

International Business Environment When globalization started…

Module -1

Global world has a long history of –

• Trade
• Migration
• People in search of work
• Movement of capital

1 2

Early Globalization Key Elements: THEN

Irish emigrants waiting to board the ship, by Michael

Fitzgerald, 1874

3 4

Key Elements-NOW Concept of Globalization

Growing integration of societies and

national economies

Free movement of goods, services,

capital information & people

Process of integration and

convergence of Economic, Financial,
Cultural and political systems across
the globe.

5 6

International Business Environment Class 
2019‐21 1
IPER ‐ Bhopal
7 8
Movers of Globalization
•Economic liberalization
•Technological breakthrough
•Multilateral institutions
•International economic integrations
•Move towards free marketing systems
•Rising research & development costs
•Global expansion of business operations
•Advents in logistics management
•Emergence of the global customer segment
9 10
Reasons for Support of Globalization
•Maximization of Economic Efficiencies
•Enhancing Trade
•Increased Cross-border Capital Movement
•Improves Efficiency of Local Firms
•Increases Consumer Welfare
11
International Business Environment Class 
2019‐21
9/10/2019
Factors Restraining Globalization
•Regulatory controls
•Emerging trade barriers
•Cultural factors
•Nationalism
•War and civil disturbances
•Management myopia
Criticism of Globalization
•Developed versus Developing Countries: Unequal
Players in Globalization
•Widening Gap between the Rich and the Poor
•Wipes out Domestic Industry
•Leads to Unemployment and Mass Lay-offs
•Brings in Balance of Payments Problems
•Increased Volatility of Markets
•Diminishing Power of Nation States
•Loss of Cultural Identity
•Shift of Power to Multinationals
12
2
IPER ‐ Bhopal 9/10/2019

Multinationals Companies
HISTORY OF MNC
– Driving Globalization
First MNC in world First MNC in India
Indian MNC

13 14

What is a Multinational Corporation…

 It is a corporation that:

Manages  And/or
Delivers 
production  services 

In more than 
one country

15 16

How Is A Company Classified As An Types of Multinationals

MNC On the basis of Investment
• Associates : An enterprise in which a non-resident
Subsidiaries investor owns between 10 to 50 per cent
in foreign Stakeholders
countries; are from • Subsidiaries : An enterprise in which a non-
Operations in different resident investor owns more than 50 percent
a number of High proportion countries.
countries; of assets in or/ • Branches : Unincorporated enterprises wholly or
and revenues
from global
jointly owned by a non-resident investor
operations;

17 18

International Business Environment Class 
2019‐21 3
IPER ‐ Bhopal 9/10/2019

On the basis of Operations On the Basis of Management Orientation

•Ethnocentric firms
•Polycentric firms
•Regiocentric firms
•Geocentric firms

19 20

SWOT Analysis of MNC Goals of an MNC

Strengths Weakness Manufacture in locations with greatest
competitive advantage.
• Low Cost • Location is often very distant
• Well Developed • Lack of Transportation facilities Buy and sell anywhere in the world.
Infrastructure • Relative Inflexibility
Utilise changes in labor cost, productivity,
currency fluctuations.
Opportunities
Expand or contract based on worldwide
Threats scenario.
• Leverage Government
• Create the necessary infrastructure
• Emergence of Private companies Rising return on investment in capital.
• Establishment of monopoly
• Attract new industries
Achieve greater sales.
Minimize risk in relation to profits.
Encounter fewer barriers.

21 22

Advantages of MNCs to the Host Country:
• Transfer of technology, capital and entrepreneurship.
• Increase in the investment level and thus, the income
and employment in the host country.
• Greater availability of products for local consumers.
• Increase in exports and decrease in imports.
• MNC’s generate jobs &income Technology transfer
• Cost reduction
Advantages of MNCs to the Home Country
• Acquisition of raw materials from abroad.
• Technology and management expertise acquired from
competing in global markets.
• Export of components and finished goods for assembly
or distribution in foreign markets.
• Inflow of income from overseas profits, royalties and
management contracts.

23 24

International Business Environment Class 
2019‐21 4
IPER ‐ Bhopal 9/10/2019

MNC In India
MNC In India
MNC in India are attracted
towards:
• vast population
 India’s large market potential • increasing its purchasing
power
 India presents a remarkable • emerging as the
business opportunity by virtue
of its sheer size and growth manufacturing and sourcing
location of choice for various
 Labor competiveness industries

 FDI attractiveness

25 26

The Indian MNCs ……………… Bottlenecks of MNC in India

• Paints – Asian Paints • Socio-economic challenges
• Auto & Components – Tata Motors, Bharat Forge • Language
• Culture
• Chemicals – Tata Chemicals, United Phosphorus
• Autonomy to “local” managers – how comfortable are we?
• Metals – Sterlite Industries, TISCO • Handling of potential liabilities related to Labour, IPR etc
• Packaging – Essel • Difficult operating environment
• Pharmaceuticals – Ranbaxy, Wockhardt, Sun, DRL • Weak infrastructure
• Oil & Gas – ONGC • And ………………Patience !

27 28

International powers of MNC’s Threats to MNC

• International - Large MNC’s influence in • Nationalization

international relations
• Tax competition- Tax breaks, pledges of govt. • Lack of Govt. assistance
assistance etc.
• Opposition by local traders.
• Market withdrawal-Eg. Pharmaceutical
companies
• Lobbying & Patents

29 30

International Business Environment Class 
2019‐21 5
IPER ‐ Bhopal 9/10/2019

What is International Business History of International Business

• Trade took place between China, India, and Japan as
many as 15,000 years ago.

• During the 11th century, England, France, Spain, and

Portugal all used ships to move products between
countries.

31 32

Similarities between Difference between DB and IB

Domestic and International Business
Domestic Business International Business

Both IB & DB are similar in some ways such as: Business rules are standarised
 Business rules are highly diverse
and unclear.
and matured.
Many languages and differences in
One language and culture.
• Involve buying and selling of goods & Services. culture.
Uniform financial climate.
• Profit is the main objective. Varied financial climate.
Single currency and taxation
• Success depends upon satisfying customers. system.
Multiple currencies and taxation
system.
• Product improvement and adaptation must for Relatively stable marketing
survival. environment.
Multiple &
environment.
unstable marketing

Control of business activities is

Control of business activities is
easy.
difficult.

33 34

Evolution of Trade Theories

• Mercantilism
• Factor Endowments
• Absolute advantage (Classical)
• Comparative advantage
• International Product Cycle
• National competitive advantage

35

International Business Environment Class 
2019‐21 6