GLOBAL BUSINESS MANAGEMENT

Unit -I

INTRODUCTION:
In the modern world, there is mutual interdependence of the various national economies. Today
it is hard to find the example of a closed economy. All economies of the world have become
open. But the degree of openness varies from one country to another. Thus, in the modern world
no country is completely self-sufficient. Self-sufficiency, in the sense used here, means the
proportion of the goods and services consumed to their total output produced with in a country.
Several benefits that can be identified with reference to international trade are as follows:

1) Greater Variety of Goods Available for Consumption: International trade brings in

different varieties of a particular product from different destinations. This gives consumers a
wider array of choices which will not only improve their quality of life but as a whole it will help
the country grow.

2) Efficient Allocation and Better Utilization of Resources: Efficient allocation and better
utilization of resources since countries tend to produce goods in which they have a comparative
advantage. When countries produce through comparative advantage, wasteful duplication of
resources is prevented. It helps save the environment from harmful gases being leaked into the
atmosphere and also provides countries with a better marketing power.

3) Promotes Efficiency in Production: International trade promotes efficiency in production as

countries will try to adopt better methods of production to keep costs down in order to remain
competitive. Countries that can produce a product at me lowest possible cost will be able to gain
larger share in the market.

Therefore an incentive to produce efficiently arises. This will help to increase the standards of
the product and consumers will have a good quality product to consume.

4) More Employment: More employment could be generated as the market for the countries’
goods widens through trade. International trade helps generate more employment through the
establishment of newer industries to cater to the demands of various countries. This will help
countries to bring-down their unemployment rates.

5) Consumption at Cheaper Cost: International trade enables a country to consume things

which either cannot be produced within its borders or production may cost very high. Therefore
it becomes cost cheaper to import from other countries through foreign trade.

6) Reduces Trade Fluctuations: By making the size of the market large with large supplies and
extensive demand international trade reduces trade fluctuations. The prices of goods tend to
remain more stable.

7) Utilization of Surplus Produce: International trade enables different countries to sell their
surplus products to other countries and earn foreign exchange.
8) Fosters Peace and Goodwill: International trade fosters peace, goodwill, and mutual
understanding among nations. Economic interdependence of countries often leads to close
cultural relationship and thus avoid war between them.

DOMESTIC AND INTERNATIONAL BUSINESS

Comparison Chart
BASIS FOR
DOMESTIC BUSINESS INTERNATIONAL BUSINESS
COMPARISON

Meaning A business is said to be domestic, when International business is one which is

its economic transactions are conducted engaged in economic transaction with
within the geographical boundaries of several countries in the world.
the country.

Area of operation Within the country Whole world

Quality standards Quite low Very high

Deals in Single currency Multiple currencies

Capital investment Less Huge

Restrictions Few Many

Nature of Homogeneous Heterogeneous

customers

Business research It can be conducted easily. It is difficult to conduct research.

Mobility of factors Free Restricted

of production

Key Differences Between Domestic and International Business

The most important differences Between domestic and international business are classified as
under:
1. Domestic Business is defined as the business whose economic transaction is conducted
within the geographical limits of the country. International Business refers to a business
which is not restricted to a single country, i.e. a business which is engaged in the
economic transaction with several countries in the world.
2. The area of operation of the domestic business is limited, which is the home country. On
the other hand, the area of operation of an international business is vast, i.e. it serves
many countries at the same time.
 3. The quality standards of products and services provided by a domestic business are
relatively low. Conversely, the quality standards of international business are very high
which are set according to global standards.
4. Domestic business deals in the currency of the country in which it operates. On the
contrary, the international business deals in the multiple currencies.
5. Domestic Business requires comparatively less capital investment as compared to
international business.
6. Domestic Business has few restrictions, as it is subject to rules, law taxation of a single
country. As against this, international business is subject to rules, law taxation, tariff and
quotas of many countries and therefore, it has to face many restrictions which are barriers
in the international business.
7. The nature of customers of a domestic business is more or less same. Unlike,
international business wherein the nature of customers of every country it serves is
different.
8. Business Research can be conducted easily, in domestic business. As against this, in the
case of international research, it is difficult to conduct business research as it is expensive
and research reliability varies from country to country.
9. In domestic business, factors of production are mobile whereas, in international business,
the mobility of factors of production are restricted.

WHY IS INTERNATIONAL BUSINESS IMPORTANT?

Organizations perform international business are mainly involved in exporting and importing.
The international business is really crucial to enhance the company’s efficacy by using modern
management techniques. Let’s talk about the importance of international business in detail.

 High living standards: Comparative cost theory indicates that the countries which have
the advantage of raw materials, human resources, natural resources and climatic conditions in
producing particular goods can produce the products at low cost and also of high quality.
 Increased Socio-Economic Welfare: International business enhances consumption
level, and economic welfare of the people of the trading countries. For example, the people of
China are now enjoying a variety of products of various countries than before as China has
been actively involved in international business like Coca-Cola, McDonald’s range of
products, electronic products of Japan and coffee from Brazil.
 Wider Market: International business widens the market and increase the market size.
Therefore, the companies need not depend on the demand for the product in a single country
or customer’s tastes and preferences of a single country.
 Reduced effect of Business Cycles: The stages of business cycles vary from country to
country. Therefore, MNCs shift from the country, experiencing a recession to the country
experiencing ‘boom’ conditions. Thus, international business firms can escape from the
recessionary conditions.
 Reduced risks: Both commercial and political risks are reduced for the companies
engaged in international business due to spread in different countries.
 Large scale economies: Multinational companies due to wider and larger markets
produce larger quantities, which provide the benefit of large-scale economies like reduced cost
of production, availability of expertise, quality, etc.
 Potential untapped markets: International business provides the chance of exploring
and exploiting the potential markets which are untapped so far. These markets provide the
opportunity of selling the product at a higher price than in domestic markets.
 Provides the opportunity for and challenge to domestic business: International
business firms provide the opportunities to the domestic companies. These opportunities
include technology, management expertise, market intelligence, product developments, etc.
 Division of labor and specialization: International business leads to division of labor
and specialization. Brazil specializes in coffee, Kenya in tea, Japan in automobiles and
electronics. India in textiles garments, etc.
 Economic growth of the World: Specialization, division of labor, enhancement of
productivity, posing challenges, development to meet them, innovations and creations to meet
the competition lead to overall economic growth of the world nations.
 Optimum and proper utilization of World Resources: International business provides
for the flow of raw materials, natural resources and human resources from the countries where
they are in excess supply to those countries which are in short supply or need most.
 Cultural Transformation: International business benefits are not purely economical or
commercial; they are even social and cultural. It does not mean that the good cultural factors
and values of the East are acquired by the West and vice versa. Thus, there is a close cultural
transformation and integration.
 Knitting the World into a Closely Interactive Traditional Village: International
business ultimately knits the global economies, societies and countries into a closely
interactive and traditional village where one is for all and all are for one.

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. Integration of economies: International business integrates (combines) the economies of

many countries. This is because it uses finance from one country, labor 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 favorable 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.

 
INDIA’S FOREIGN TRADE: JANUARY 2018 

I. MERCHANDISE TRADE

EXPORTS (including re-exports)

Exports during January 2018 have exhibited positive growth of 9.07per cent in dollar terms vis-
à-vis January 2017. Exports have been on a positive trajectory since August 2016 to January
2018 with a dip of 1.1 per cent in the month of October 2017.

Exports during January 2018 valued at US$ 24383.97 million as compared to US$ 22356.32
million during January 2017. In Rupee terms, exports were valued at Rs.155172.00 crore as
compared to Rs.152202.70 crore during January 2017, registering a rise of 1.95per cent.          
During January 2018, Major commodity groups of export showing positive growth over the
corresponding month of last year are Engineering Goods (15.77%), Petroleum Products (39.5%),
Gems & Jeweler (0.89%), Organic & Inorganic Chemicals (33.6%) and Drugs &
Pharmaceuticals (8.6%).

Cumulative value of exports for the period April-January 2017-18 was US$247896.55 million
(Rs1596591.91crore) as against US $221823.46million (Rs1490544.21 core) registering a
positive growth of 11.75 per cent in Dollar terms and 7.11 per cent in Rupee terms over the same
period last year.

Non-petroleum and Non Gems & Jeweler exports in January 2018 were valued at US$ 17523.24
million as against US$ 16607.36 million in January 2017, an increase of 5.51%. Non-petroleum
and Non Gems and Jeweler exports during April-January 2017-18 were valued at US$
181238.18 million as compared to US$ 161281.88 million for the corresponding period in 2016-
17, an increase of 12.37%.

IMPORTS

Imports during January 2018 were valued at US$ 40682.44 million (Rs258890.43 core) which
was 26.10 per cent higher in Dollar terms and 17.87 per cent higher in Rupee terms over the
level of imports valued at US$ 32261.14 million (Rs. 219635.13 core) in January 2017.
Cumulative value of imports for the period April-January 2017-18 was US$ 379052.07million
(Rs. 2441180.27 core) as against US$ 310160.46 million (Rs. 2084786.99crore) registering a
positive growth of 22.21 per cent in Dollar terms and 17.09per cent in Rupee terms over the
same period last year.

Major commodity groups of import showing high growth in January 2018 over the
corresponding month of last year are Petroleum, Crude & products (42.64%), Electronic goods
(12.19%), Machinery, electrical & non-electrical (29.11%), Pearls, precious & Semi-precious
stones (55.71%) and Coal, Coke & Briquettes, etc. (31.67%).

CRUDE OIL AND NON-OIL IMPORTS:

Oil imports during January 2018 were valued at US$ 11659.07million which was 42.64percent
higher than oil imports valued at US$ 8173.96million in January 2017.Oil imports during April-
January 2017-18 were valued at US$ 87807.92 million which was 26.35per cent higher than the
oil imports of US$ 69493.68 million in the corresponding period last year.

In this connection it is mentioned that the global Brent prices ($/bbl) have increased by 25.69%
in January 2018 vis-à-vis January 2017 as per World Bank commodity price data (The pink
sheet).

Non-oil imports during January 2018 were estimated at US$ 29023.37 million which was 20.49
per cent higher than non-oil imports of US$ 24087.18 million in January 2017 Non-oil imports
during April-January 2017-18 were valued at US$ 291244.15 million which was 21.02 per cent
higher than the level of such imports valued at US$ 240666.78 million in April-January, 2016-
17.

II. TRADE IN SERVICES (for December, 2017, as per the RBI Press Release dated 15th
February 2018)

EXPORTS (Receipts)

Exports during December2017 were valued at US$ 16,005million (Rs. 102819.83Crore)

registering appositive growth of 3.98per cent in dollar terms as compared to positive growth of
8.76per cent during November2017 (as per RBI’s Press Release for the respective months).

IMPORTS (Payments)

Imports during December2017 were valued at US$ 9,859million (Rs. 63336.50Crore) registering
a positive growth of 2.20per cent in dollar terms as compared to positive growth of 10.89per cent
during November2017 (as per RBI’s Press Release for the respective months).

III.TRADE BALANCE

MERCHANDISE: The trade deficit for January 2018 was estimated at US$ 16298.47millionas
against the deficit of US$ 9904.82million during January 2017.

SERVICES: As per RBI’s Press Release dated 15th February 2018, the trade balance in
Services (i.e. net export of Services) for December, 2017 was estimated at US$ 6,146million.

OVERALL TRADE BALANCE: Taking merchandise and services together, overall trade
deficit for April-January 2017-18 is estimated at US$ 80215.52million as compared to US$
40021.00million during April-January 2016-17. (Services data pertains to April-December2017-
18 as December2017 is the latest data available as per RBI’s Press Release dated 15th
February2018)

Further Details: http://pib.nic.in/newsite/PrintRelease.aspx?relid=176576

World trade: https://www.wto.org/english/res_e/statis_e/wts2017_e/wts2017_e.pdf

TRENDS IN INDIA’S FOREIGN TRADE

1 Openness of India’s Trade

With the changes in trade policy regime in India, the degree of openness which is measured as
the share of India’s trade in world trade has changed accordingly. In case of merchandise trade,
India’s share in the total world trade was 1.77% in 1950 which had declined to 0.64% in 1970
and 0.57% in 1980 as the country followed the restrictive trade policy regime for over three-
decades. The policies of the Government, aimed directly at curbing imports, would by
themselves have resulted in a trade sector diminishing in importance over time.
2 Export-Import Growth Scenarios and Balance of Trade
Over the last sixty years after independence, the total volume of merchandise exports and
imports has increased significantly, along with an increasing deficit in Balance of Trade (BOT).
The trade balance and growth rates of exports and imports from 1950-51 to 2010-11. From the
data on India’s foreign trade since 1950-51 till date the following observations can be made
regarding the trends in the growth of India’s foreign trade.
3.Rapid Growth of Imports: Over the years India’s imports grew at a much faster rate than
exports. During the second half of the 1950s and the first half of the 1960s, imports grew at a
relatively higher rate of around 7% on account of heavy emphasis on industrialization,
particularly that of public enterprises which emanated from the Second Five-year Plan
4.Inadequate Growth of Exports: Broad trend in the value of exports growth, as evident from
Table 3.3, for the period 1950-51 to 1969-70 was near stagnation with small variations by year to
year fluctuations as the country decisively followed a trade policy regime during this period
which gave greater emphasis on import substitution and lesser attention to export stimulation
measures.
Widening Trade Deficit: Over the last sixty years after independence India’s Balance of Trade
(BOT) remained unfavorable (Table 3.3). Imports have exceeded exports, showing a trade
deficit. Trade balance was positive in only two years, that is, in 1972-73 and 1976-77 during the
entire period of 1950-51 to 2010-11 (Government of India, Economic Survey, 2010-11).

COMPOSITION AND DIRECTION OF INDIA’S MERCHANDISE TRADE

1 Composition of India’s Merchandise Exports

An examination of the composition of foreign trade of a country enables us to analyze the rate
and speed of structural changes operating in it. Sometimes the speed with which a country
changes its pattern of trade is considered as an indication of the pace of development of the
country.
2 Destinations of India’s Merchandise Exports
In the pre-independence period, the direction of India’s foreign trade was determined not
according to the comparative advantage of India but by the colonial relations between India and
Britain (Bhattacharyya, 1979). A major portion of India’s trade was either directly with Britain
or its colonies. This pattern continued for some years after independence as well since India had
not till then explored the possibilities of developing trade relations with other countries of the
world. When political and diplomatic contacts developed with other countries with the passage
of time, economic relations also made headway.
3 Composition of India’s Merchandise Imports
Let us now discuss the composition of India’s merchandise imports. The composition of India’s
imports (share in %) during 1960-61 to 2010-11.In Table 3.6 imports are classified into three
categories: food and live animals, raw materials and intermediates, and capital goods. The import
share of foods and live animals category declined sharply from 19.0% in 1960-61 to 3.0% in
1980-81. Thereafter it lost its importance. At the product level cereals and cereal preparations
Were the main items but its share in total imports decreased significantly over the same period.
Imports of food grains are virtually eliminated as the country has become self-sufficient in food
grains and accumulated large reserves.
4 Sources of India’s Merchandise Imports
Traditionally, Germany, Japan, the UK and the US were the important trade partners of India.
However, the importance of these countries has subsided in terms of their market share. The new
import partners from the developing countries of Africa and Asia have emerged and are
increasingly gaining importance as sources of India’s import in the reform period. In fact,
subsequent to the opening up, India’s imports are being sourced from a wider range of countries.

INDIA’S SERVICES TRADE

Attention towards trade in services came into focus during the eighties in the wake of
multilateral trade negotiations under the General Agreement on Trade in Services (GATS) that
was concluded under Uruguay Rounds. International trade in services has become more
important with developments in information and communication technologies and the greater
market access resulting from the widespread deregulation of the public utilities. In India too,
trade in services has been growing rapidly since the latter half of the 1990s, following significant
domestic liberalization and access to a growing overseas market for services.

VOLUME OF INDIA’S FOREIGN TRADE AND TRADE BALANCE:

In Table 27.1 we have given the value of India’s exports and imports and trade balance since
2000-01.

It will be seen from the table that value of India’s exports increased from 44,560 million US
dollars in 2000-01 to 178751 million US dollars in 2009-10—about 400 times increase in 10
years period.

Further, it will be seen that value of imports of India increased from 50536 million US dollars in
2000-01 to 288373 million US dollars in 2009-2010, that is, more than 400 times increase in ten
years period. As a result, larger increase in imports as compared to growth in exports, deficit in
our trade balance which was 5976 million US dollars in 2000-01 rose to an alarming figure of
109622 million US dollars in 2009-10, and farther to 184558 million US dollars in 2011-12.
DIRECTION OF INDIA’S FOREIGN TRADE:

There has been significant market diversification in India’s trade. Region-wise, while India’s
exports to Europe and America have declined, its exports to Asia and Africa have increased.
However, in 2012-13 (April-November), the share of India’s exports to the USA increased to
13.5 per cent.

Within Asia, while the share of North East Asia (consisting of China, Hong Kong, Japan) and
ASEAN (Association of South East Asian Nations) fell from 14.8 per cent and 12.0 per cent in
2011-12 to 13.1 per cent and 10.3 per cent respectively in 2012-13 (April-November), there was
a noticeable rise in the share of West Asia-GCC (Gulf Cooperation Council) countries from 14.9
per cent in 2011-12 to 17.7 per cent in 2012-13 (April-November).

In 2012-13 (April-November), compared to 2000-01, the share of India’s imports from Europe
has declined to 16.7 per cent from 27.6 per cent, while that from Asia has increased substantially
to 61.1 per cent from 27.7 per cent.

The share of America in India’s imports also increased to 11.5 per cent from 7.9 per cent. India’s
top 15 trading partners have nearly 60 per cent in share in its trade with the top three contributing
nearly half of this share. While Iran and UK are out of this top 15 list in 2011-12, Iraq and
Kuwait are the new entrants.

The musical chairs for the top slot among the top three trading partners seems to be continuing
with the USA relegated to third position in 2007-8 from first, UAE relegated to second position
from first in 2011-12 by China, and China in turn relegated to second position by the UAE in
2012-13 (April-November).
The final word for 2012-13 is not yet out as the USA is inching closer to China with its share
increasing by around one percentage point and that of China falling. At 10 per cent in 2011-12
India’s trade deficit as a per cent of GDP is one of the highest in the world. Export-import ratios
reflecting the bilateral trade balance show that among its top 15 trading partners, India had
bilateral trade surplus with four countries in 2011-12, viz. the UAE, USA, Singapore, and Hong
Kong.

In 2012-13 (April-November), India’s trade balance with the UAE has turned slightly negative
while it has improved further with the USA and Hong Kong. Another important trend is the
growing trade deficit of India with China and Switzerland, increasing from $ 28 billion and $
24.1 billion in 2010-11 to $ 39.4 billion and $ 31.3 billion respectively in 2011-12. In 2012-13
(April-November), the export-import ratio with China worsened further to 0.23 from 0.31 in
2011 -12.

TRADITIONAL PRODUCTS

Our India is known for our traditions and culture throughout the world, India is also famous for
our traditional products like hand-loom items, handicrafts and traditional food items.
As we all know our India is a land of “Unity in Diversity”, every state of our India as its own
different traditions and culture. The handicrafts and traditional products made in every state are
according to their culture and traditions.
Our Every State has their own different types of traditional products,
Here are some traditional products which are famous in India
1. Handicrafts of India
The crafts of India have been valued throughout time; their existence today proves the efforts put
into their preservation.
Some of the numerous tribal crafts manufactured in India include: Antiques, Art, Baskets, Paper
Mache, Ceramics, Clock Making, Embroidery, Block Printing,
Decorative Painting, Glass Work, Fabric, Furniture, Gifts, Home Décor, Jewellery, Leather
Crafts, Metal Crafts, Paper Crafts, Pottery, Puppets, Stone and Wood Works.
the handicrafts in India is divided as a state wise as shown below:
 Crafts of Bihar
 Crafts of Rajasthan
 Crafts of Gujarat
 Crafts of Assam
 Crafts of South India
2. Handloom products of India
Handloom fabrics and handloom weavers form an integral part of the rich culture, heritage and
tradition of India. Apart from providing one of the basic needs of human beings, along with a
sizable contribution to GDP and export, this Industry provides direct and indirect employment to
lakhs of people in the rural and urban areas. Handloom is one of the largest employment
providers after agriculture in India.
Handloom sarees are a traditional textile art of Bangladesh and India. The production of
handloom sarees are important for economic development in rural India. Completion of a single
saree takes two to three days of work. Several regions have their own traditions of handloom
sarees.
There are many types of hand-loom sarees and cloth materials of every states of India, every
state of India has 3–4 kind of famous hand-loom sarees and cloth materials.
3.Traditional food items of India
The traditional food of India has been widely appreciated for its fabulous use of herbs and spices.
Indian cuisine is known for its large assortment of dishes. The cooking style varies from region
to region and is largely divided into South Indian & North Indian cuisine. India is quite famous
for its diverse multi cuisine available in a large number of restaurants and hotel resorts, which is
reminiscent of unity in diversity.
As we all know our Indian food items have its own value in the world because of the delicious
taste & health-friendly items, recently our Indian cuisine as got 4th rank for the best food items
in the world among 174 countries. India is mainly famous for the delicious and mouth watering
sweets, there are hundreds and thousands of different items and kinds of sweets in India.
Every State in India as its own cuisine and has its own different taste not in termas of sweet but
in every dishes.

NON TRADITIONAL PRODUCTS

Ghana now exports yams, cassava, gari, bananas, plantain, pineapples, citrus, coffee, wheat bran,
cocoa shell, waste cocoa beans, shea nuts, textiles, ceramics, handicrafts and charcoal under the
Non-Traditional Export (NTE) drive that started in 1994.

Figures made available to the Ghana News Agency by Mr. Castro Kumi Adjei-Sam, Export
Manager of Ghana Ports and Harbours Authority (GPHA) showed that NTE which was on a
small scale started increasing in 1992 and 1993 when 145,288 metric tonnes were exported.

Between 1994 and 1999, a total of 933,309 metric tonnes were exported but revenue generated
was not immediately available.

However, in the year 2000, with 4,725 ship trips made at the Tema Port, 250, 268 metric tonnes
of products were exported to earn350 million dollars.

Between January and September 2001, the frequency of shipment was 4,741, and 242,866 metric
tonnes of the products were expected to yield 250 million dollars.
These non-traditional products were consigned to Belgium, Denmark, India, United Kingdom,
United States, Germany, Holland, Greece, Italy, Brazil, Australia, Russia, Singapore, Indonesia
and the Netherlands among other places.

From all indications Africans living abroad patronise the foodstuffs since they do not want to be
cut off from their roots, or they relish their traditional food.

Ghana's non-traditional products are also exported to a number of African countries including
Nigeria, Sierra-Leone, South Africa, Liberia, Benin, Cote d'Ivoire, Morocco, Cameroon,
Democratic Republic of Congo, the Gambia and Kenya.

Mr. Adjjei-Sam said 90 per cent of non-traditional products are exported through the Port of
Tema and the remaining 10 per cent through the Kotoka International Airport, adding that
nationwide, export made in 2000 and 2001 was estimated at 750 million dollars.

Twelve major products are frequently exported - fresh pineapples, frozen fish, timber products,
canned tuna, cocoa products, shea nuts and fresh banana.

The rest are cottonseed, fresh yam, raw cotton, aluminum products and raw coffee.

To meet the expansion of the NTE, the GPHA in 1994, converted shed nine at the main harbour
for non-traditional exports and it has since been named the "Export Shed" which has a storage
capacity of between 8,000 and 9,000 metric tonnes.Though the shed is not air-conditioned, the
products do not go bad because they are normally brought in to coincide with the arrival of the
ships, which turn around soon after lading. As food items are stored in the shed, cleanliness is
strictly observed to ensure that nothing gets contaminated before shipment. For this reason the
items are parked orderly according to the type of foodstuff or items.

While it is desirable to sustain the NTE because it generates foreign exchange and employment
and enables Africans in the Diaspora to maintain their roots, sight should not be lost of the
periodic food shortages experienced in the country as result of the export of large consignments
of foodstuffs.
The NTE is now complementing cocoa and gold as major export earners and announcing the
arrival of Ghana at the market of the "Global Village".

IMPORT
An import is a good brought into a jurisdiction, especially across a national border, from an
external source. The party bringing in the good is called an importer. An import in the receiving
country is an export from the sending country. Importation and exportation are the defining
financial transactions of international trade.

In international trade, the importation and exportation of goods are limited by import quotas and
mandates from the customs authority. The importing and exporting jurisdictions may impose a
tariff (tax) on the goods. In addition, the importation and exportation of goods are subject to
trade agreements between the importing and exporting jurisdictions.

BALANCE OF TRADE

Balance of trade represents a difference in value for import and export for a country. A country
has demand for an import when domestic quantity demanded exceeds domestic
quantity supplied, or when the price of the good (or service) on the world market is less than the
price on the domestic market.
The balance of trade, usually denoted NX, is the difference between the value of the goods (and
services) a country exports and the value of the goods the country imports
NX=X-I, I=X-NX
TYPES OF IMPORT
There are two basic types of import:

1. Industrial and consumer goods

2. Intermediate goods and services
Companies import goods and services to supply to the domestic market at a cheaper price and
better quality than competing goods manufactured in the domestic market. Companies import
products that are not available in the local market.
There are three broad types of importers:

1. Looking for any product around the world to import and sell.
2. Looking for foreign sourcing to get their products at the cheapest price.
3. Using foreign sourcing as part of their global supply chain.

INDIA’S IMPORT POLICY: PROCEDURES AND DUTIES

In India, the import and export of goods is governed by the Foreign Trade (Development &
Regulation) Act, 1992 and India’s Export Import (EXIM) Policy.
India’s Directorate General of Foreign Trade (DGFT) is the principal governing body
responsible for all matters related to EXIM Policy. 

Importers are required to register with the DGFT to obtain an Importer Exporter Code
Number (IEC) issued against their Permanent Account Number (PAN), before engaging in
EXIM activities. After an IEC has been obtained, the source of items for import must be
identified and declared.

The Indian Trade Classification – Harmonized System (ITC-HS) allows for the free import of
most goods without a special import license.
Certain goods that fall under the following categories require special permission or
licensing.
1) Licensed (Restricted) Items – Licensed items can only be imported after obtaining an import
license from the DGFT. These include some consumer goods such as precious and semi-precious
stones, products related to safety and security, seeds, plants, animals, insecticides,
pharmaceuticals and chemicals, and some electronic items.

2) Canalized Items – Canalized items can only be imported via specified transportation channels
and methods, or through government agencies such as the State Trading Corporation (STC).
These include petroleum products, bulk agricultural products such as grains and vegetable oils,
and some pharmaceutical products.

3) Prohibited Items – These goods are strictly prohibited from import and include tallow fat,
animal rennet, wild animals, and unprocessed ivory.

IMPORT PROCEDURES

All importers must follow detailed customs clearance formalities when importing goods into
India. A comprehensive overview of EXIM procedures can be found on the Indian Directorate of
General Valuation’s website.

Bill of Entry
Every importer is required to begin by submitting a Bill of Entry under Section 46. This
document certifies the description and value of goods entering the country. The Bill of Entry
should be submitted as follows:
1) The original and duplicate for customs
2) A copy for the importer
3) A copy for the bank
4) A copy for making remittances

Under the Electronic Data Interchange (EDI), no formal Bill of Entry is required (as it is
recorded electronically) but the importer is required to file a cargo declaration after prescribing
particulars required for processing of the entry for customs clearance. Bills of Entry can be one
of three types:
1) Bill of Entry for Home Consumption – This form is used when the imported goods are to be
cleared on payment of full duty. Home consumption means use within India. It is white colored
and hence often called the ‘white bill of entry’.

2) Bill of Entry for Housing – If the imported goods are not required immediately, importers may
store the goods in a warehouse without the payment of duty under a bond and then clear them
from the warehouse when required on payment of duty. This will enable the deferment of
payment of the customs duty until goods are actually required. This Bill of Entry is printed on
yellow paper and is thus often called the ‘yellow bill of entry’. It is also called the ‘into bond bill
of entry’ as the bond is executed for the transfer of goods in a warehouse without paying duty.

3) Bill of Entry for Ex-Bond Clearance – The third type is for ex-bond clearance. This is used for
clearance from the warehouse on payment of duty and is printed on green paper.

It is important to note that the rate of duty applicable is as it exists on the date a good is removed
from a warehouse. Therefore, if the rate changes after goods have been cleared from a customs
port, the customs duty as assessed on a yellow bill of entry (Bill of Entry for Housing) and paid
on the value listed on the green bill of entry (Bill of Entry for Ex-Bond Clearance) will not be the
same.

Other non-EDI documents   

If a Bill of Entry is filed without using the Electronic Data Interchange system, the following
documents are also generally required:

 Signed invoice;
 Packing list;
 Bill of lading or delivery order/air waybill;
 GATT declaration form;
 Importer/CHA declaration;
 Import license wherever necessary;
 Letter of credit/bank draft;
  Insurance document;
 Industrial license, if required;
 Test report in case of chemicals;
 Adhoc exemption order;
 DEEC Book/DEPB in original, where applicable;
 Catalogue, technical write up, literature in case of machineries, spares or chemicals as
may be applicable;
 Separately split up value of spares, components, and machinery; and,
 Certificate of Origin, if preferential rate of duty is claimed.

IMPORT DUTIES

The Indian government levies several types of import duties on goods. These include:

Basic Customs Duty

Basic Customs Duty (BCD) is the standard tax rate applied to goods, or the standard preferential
rate in the case of goods imported from specified countries.
The rates of customs duties are outlined in the First and Second Schedules of the Customs Tariff
Act, 1975.
The First Schedule specifies rates of import duty and the Second specifies rates of export duty.
BCD is divided into standard and preferential rates, with goods imported from countries holding
trade agreements with the Indian central government eligible for lower preferential rates.

IGST and Compensation Cess

Additional duties of customs, commonly referred to as the Countervailing Duty (CVD) and
Special Additional Duty of Customs (SAD), has been be replaced by the levy of the Integrated
Goods and Services Tax (IGST), barring a few exceptions, such as pan masala and certain
petroleum products. The IGST replaces the previous system of federal and state categories of
indirect taxation.
A Customs Duty calculator is made available on the online portal of excise and customs,
the ICEGATE website. There are seven rates prescribed for IGST– Nil, 0.25 percent, 3 percent 5
percent, 12 percent, 18 percent, and 28 percent. The actual rate applicable to an item will depend
on its classification and will be specified in Schedules notified under Section 5 of the IGST Act,
2017.
Further, a few items such as aerated water products, tobacco products, and motor vehicles,
among others, will attract an additional levy of the GST Compensation Cess, over and above
IGST. The Cess is calculated on the transaction value or the price at which the goods are sold.
The Goods and Services Tax (Compensation to States) Act, 2017 was enacted to levy
Compensation Cess for providing compensation to Indian states for the loss of revenue arising on
account of implementation of the Goods and Services Tax from July 1, 2017. 
The Compensation Cess on goods imported into India shall be levied and collected in accordance
with the provisions of Section 3 of the Customs Tariff Act, 1975, at the point when duties of
customs are levied on the said goods under Section 12 of the Customs Act, 1962, on a value
determined under the Customs Tariff Act, 1975.

Anti-Dumping Duty
The central government may impose an anti-dumping duty if it determines a good is being
imported at below fair market price, and an importer will be notified if this is the case.
The duty cannot exceed the difference between the export and normal price (margin of
dumping).
This does not apply to goods imported by 100 percent Export Oriented Units (EOU) and units in
Free Trade Zones (FTZs) and Special Economic Zones (SEZs).
If an importer is notified by the federal government then an Anti-Dumping duty is to be imposed,
the notification will remain valid for five years with the possibility of being extended to 10 years.

Safeguard Duty
Unlike Anti-Dumping Duty, the imposition of Safeguard Duty does not require the central
government to determine a good is being imported at below fair market price.
Safeguard Duty is imposed if the government decides that a sudden increase in exports is
causing, or threatens to cause, serious damage to a domestic industry.
A notification regarding the imposition of Safeguard Duty is valid for four years with the
possibility of being extended to 10 years.

Protective Duty
A protective duty is sometimes imposed to protect domestic industry from imports.
If the Tariff Commission issues a recommendation for the imposition of a Protective Duty, the
central government may choose to impose this at a rate that does not exceed that recommended
by the Tariff Commission.
The federal government can specify the period up to which the protective duty will remain in
force, reduce or extend the period, and adjust the effective rate.

Social Welfare Surcharge

The Education Cess and Secondary and Higher Education Cess on imported goods is now
abolished and replaced by the Social Welfare Surcharge.
This surcharge will be levied at the rate of 10 percent of the aggregate duties of customs, on
imported goods.

Import Procedure:
Import trade refers to the purchase of goods from a foreign country. The procedure for import
trade differs from country to country depending upon the import policy, statutory requirements
and customs policies of different countries. In almost all countries of the world import trade is
controlled by the government. The objectives of these controls are proper use of foreign
exchange restrictions, protection of indigenous industries etc. The imports of goods have to
follow a procedure. This procedure involves a number of steps.

The steps taken in import procedure are discussed as follows:

(i) Trade Enquiry: The first stage in an import transaction, like any other transaction of
purchase and sale relates to making trade enquiries. An enquiry is a written request from the
intending buyer or his agent for information regarding the price and the terms on which the
exporter will be able to supply goods.
The importer should mention in the enquiry all the details such as the goods required, their
description, catalogue number or grade, size, weight and the quantity required. Similarly, the
time and method of delivery, method of packing, terms and conditions in regard to payment
should also be indicated.

In reply to this enquiry, the importer will receive a quotation from the exporter. The quotation
contains the details as to the goods available, their quality etc., the price at which the goods will
be supplied and the terms and conditions of the sale.

(ii) Procurement of Import Licence and Quota: The import trade in India is controlled under
the Imports and Exports (Control) Act, 1947. A person or a firm cannot import goods into India
without a valid import licence. An import licence may be either general licence or specific
licence. Under a general licence goods can be imported from any country, whereas a specific or
individual licence authorises to import only from specific countries.

The Government of India declares its import policy in the Import Trade Control Policy Book
called the Red Book. Every importer must first find out whether he can import the goods he
wants or not, and how much of a certain class of goods he can import during the period covered
by the relevant Red Book.

For the purpose of issuing licence, the importers are divided into three categories:

(a) Established importer,

(b) Actual users, and
(c) Registered exporters, i.e., those import under any of the export promotion schemes.
In order to obtain an import licence, the intending importer has to make an application in the
prescribed form to the licensing authority. If the person imported goods of the class in which he
is interested now during the basic period prescribed for such class, he is treated as an established
importer.
An established importer can make an application to secure a Quota Certificate. The certificate
specifies the quantity and value of goods which the importer can import. For this, he furnishes
details of the goods imported in any one year in basic period prescribed for the goods together
with documentary evidence for the same, including a certificate from a chartered accountant in
the prescribed form certifying the c.i.f. value of the goods imported in the selected year.

The c.i.f. value includes the invoice price of the goods and the freight and insurance paid for the
goods in transit. The quota certificate entitles the established importer to import upto the value
indicated therein (called Quota) which is calculated on the basis of past imports. If the importer
is an actual user, that is, he wants to import goods for his own use in industrial manufacturing
process he has to obtain licence through the prescribed sponsoring authority.

The sponsoring authority certifies his requirements and recommends the grant of licence. In case
of small industries having a capital of less than Rs. 5 lakhs, they have to apply for licences
through the Director of Industries of the state where the industry is located or some other
authority expressly prescribed by the Government.

Registered exporter importing against exports made under a scheme of export promotion and
others have to obtain licence from the Chief Controller of Exports and Imports. The Government
issues from time to time a list of commodities and products which can be imported by obtaining
a general permission only. This is called as O.G.L. or Open General Licence list.

(iii) Obtaining Foreign Exchange: After obtaining the licence (or quota, in case of an
established importer), the importer has to make arrangement for obtaining necessary foreign
exchange since the importer has to make payment for the imports in the currency of the
exporting country.

The foreign exchange reserves in many countries are controlled by the Government and are
released through its central bank. In India, the Exchange Control Department of the Reserve
Bank of India deals with the foreign exchange. For this the importer has to submit an application
in the prescribed form along-with the import licence to any exchange bank as per the provisions
of Exchange Control Act.

The exchange bank endorses and forwards the applications to the Exchange Control Department
of the Reserve Bank of India. The Reserve Bank of India sanctions the release of foreign
exchange after scrutinizing the application on the basis of exchange policy of the Government of
India in force at the time of application.

The importer gets the necessary foreign exchange from the exchange bank concerned. It is to be
noted that whereas import licence is issued for a particular period, exchange is released only for
a specific transaction. With liberalisation of economy, most of the restrictions have been
removed as rupee has become convertible on current account.

(iv) Placing the Indent or Order: After the initial formalities are over and the importer has
obtained the licence quota and the necessary amount of foreign exchange, the next step in the
import of goods is that of placing the order. This order is known as Indent. An indent is an order
placed by an importer with an exporter for the supply of certain goods.

It contains the instructions from the importer as to the quantity and quality of goods required,
method of forwarding them, nature of packing, mode of settling payment and the price etc. An
indent is usually prepared in duplicate or triplicate. The indent may be of several types like open
indent, closed indent and Confirmatory indent.

In open indent, all the necessary particulars of goods, price, etc. are not mentioned in the indent,
the exporter has the discretion to complete the formalities, at his own end. On the other hand, if
full particulars of goods, the price, the brand, packing, shipping, insurance etc. are mentioned
clearly, it is called a closed indent. A confirmatory indent is one where an order is placed subject
to the confirmation by the importer’s agent.

(v) Dispatching a Letter of Credit:Generally, foreign traders are not acquainted to each other
and so the exporter before shipping the goods wants to be sure about the creditworthiness of the
importer. The exporter wants to be sure that there is no risk of non-payment. Usually, for this
purpose he asks the importers to send a letter of credit to him.

A letter of credit, popularly known as ‘L/C or ‘L.C is an undertaking by its issuer (usually
importer’s bank) that the bills of exchange drawn by the foreign dealer, on the importer will be
honoured on presentation upto a specified amount.

(vi) Obtaining Necessary Documents: After despatching a letter of credit, the importer has not
to do much. On receipt of the letter of credit, the exporter arranges for the shipment of goods and
sends Advice Note to the importer immediately after the shipment of goods. An Advice Note is a
document sent to a purchaser of goods to inform him that goods have been despatched. It may
also indicate the probable date on which the ship is expected to reach the port of destination.

The exporter then draws a bill of exchange on the importer for the invoice value of goods. The
shipping documents such as the bill of lading, invoice, insurance policy, certificate of origin,
consumer invoice etc., are also attached to the bill of exchange. Such bill of exchange with all
these attached documents is called Documentary Bill. Documentary bill of exchange is
forwarded to the importer through a foreign exchange bank which has a branch or an agent in the
importer’s country for collecting the payment of the bill.

There are two types of documentary bills:

(a) D/P, D.P. (or Documents against payment) bills.

(b) D/A, D.A. (or Document against acceptance) bills.
If the bill of exchange is a D/P bill, then the documents of title of goods are delivered to the
drawee (i.e., importer) only on the payment of the bill in full. D/P bill may be sight bill or usance
bill. In case of sight bill, the payment has to be made immediately on the presentation of the bill.
But usually a grace period of 24 hours is granted.
Usance bill is to be paid within a particular period after sight. If the bill is a D/A bill, then the
documents of title of goods are released to the drawee on his acceptance of the bill and it is
retained by the banker till the date of maturity. Usually 30 to 90 days are provided for the
payment of the bill.

(vii) Customs Formalities and Clearing of Goods:After receiving the documents of title of the
goods, the importer’s only concern is to take delivery of the goods, when the ship arrives at the
port and to bring them to his own place of business. The importer has to comply with many
formalities for taking delivery of goods. Unless the following mentioned formalities are
complied with, the goods lie in the custody of the Custom House.
(a) To obtain endorsement for delivery or delivery order:

When the ship carrying the goods arrives at the port, the importer, first of all, has to
obtain the endorsement on the back of the bill of lading by the shipping company.
Sometimes the shipping company, instead of endorsing the bill in his favour, issues a
delivery order to him. This endorsement of delivery order will entitle the importer to take
the delivery of the goods.

The shipping company makes this endorsement or issues the delivery order only after the
payment of freight. If the exporter has not paid the freight, i.e., when the bill, of lading is
marked freight forward, the importer has to pay the freight in order to get green signal for
the delivery of goods.

(b) To pay Dock dues and obtain Port Trust Dues Receipts:

The importer has to submit two copies of a form known as ‘Application to import’ duly
filled in to the ‘Lading and Shipping Dues Office’. This office levies a charge on all
imported goods for services rendered by the dock authorities in connection with lading of
goods. After paying the necessary charges, the importer receive back one copy of the
application to import as a receipt ‘Port Trust Dues Receipt’.

(c) Bill of Entry:

The importer will then fill in form called Bill of Entry. This is a form supplied by the
custom office and is to be filled in triplicate. The bill of entry contains the particulars
regarding the name and address of the importer, the name of the ship, packages number,
marks, quantity, value, description of goods, the name of the country wherefrom goods
have been imported and custom duty payable.

The bill of entry forms are of three types and are printed in three colours-Black, Blue and
Violet. A black form is used for non-dutiable or free goods, the blue form is used for
goods to be sold within the country and the violet form is used for re-exportable goods,
i.e., goods meant for re-export. The importer has to submit three forms of bill of entry
along-with Port Trust Dues Receipt to the customs office.

(d) Bill of Sight:

If the importer is not is a position to supply the detailed particulars of goods because of
insufficiency of information supplied to him by the exporter, he has to prepare a
statement called a bill of sight. The bill of sight contains only the information possessed
by the importer along-with a remark that he is not in a position to give complete
information about the goods. The bill of sight enables him to open the package and
examine the goods in the presence of custom officer so as to complete the bill of entry.
(e) To pay Customs or Import Duty:

There are three types of imported goods:

(i) Non dutiable or free goods,

(ii) Goods which are to be sold within the country or which are for home
consumption,
(iii) Re-exportable goods i.e. goods meant for re-export. If the goods are duty
free, no import duty is to be paid at the custom office.
Custom authorities will permit the delivery of such goods after usual examination of the
goods. But if the goods are liable for duty, the importer has to pay custom or import duty
which may be based on weight or measurement of goods, called Specific Duty or on the
value of imported goods Ad-valorem Ditty.
There are three types of import duties. On some goods quite low duties are levied and
they are called revenue duties. On some others, quite high duties are charged to give
protection to home industries against foreign competition. While goods imported from
certain nations are given preferential treatment for the levy of import duties and in their
case full protective duties are not charged.

(f) Bonded and Duty paid Warehouses: The port trust and custom authorities maintain
two types of warehouses-Bonded and Duty paid. These warehouses are situated near the
dock and are very useful to importers who do not have godown of their own to store the
imported goods or who, for business reasons, do not wish to carry them to their own
godowns.

The goods on which the duty has already been paid by the importer can be kept in the
duty paid warehouses for which a receipt called ‘warehouse receipt’ is issued to him.
This receipt is a document of title and is transferable. The bonded warehouses are meant
for goods on which duty has been paid by the importer. If the importer cannot pay the
duty, he may keep the goods in Bonded warehouses for which he is issued a receipt,
called ‘Dock Warrant’. Dock Warrant, also like warehouses receipt, is a document of title
and is transferable.

The bonded warehouses are used by the importer when:

(i) He has no godown of his own.
(ii) He cannot pay the duty immediately.
(iii) He wants to re-export the goods and thereby does not want to pay the duty.
(iv) He wants to pay the duty in installments.
A nominal rent is charged for the use of these warehouses. One special advantage of
these warehouses is that the importer can sell the goods and transfer the title of goods
merely by endorsing warehouse receipt or dock-warrant. This will save the importer from
the trouble and expenses of carrying the goods from the warehouses to his godown.
 (g) Appointment of clearing Agents: By now we understand that the importer has to
fulfill many legal formalities before he can take delivery of goods. The importer may take
the delivery of the goods himself at the port. But it involves much of time, expenses and
difficulty. Thus, to save himself from the botheration of complying with all the
complicated formalities, the importer may appoint clearing agents for taking the delivery
of the goods for him. Clearing agents are the specialised persons engaged in the work of
performing various formalities required for taking the delivery of goods on behalf of
others. They charge some remuneration on performing these valuable services.

(viii) Making the Payment:The mode and time of making payment is determined according to
the terms and conditions as agreed to earlier between the importer and the exporter. In case of a
D/P bill the documents of title are released to the importer only on the payment of the bill in full.
If the bill is a D/A bill, the documents of title of the goods are released to the importer on his
acceptance of the bill. The bill is retained by the banker till the date of maturity. Usually, 30 to
90 days are allowed to the importer for making the payment of such bills.

(ix) Closing the Transactions: The last step in the import trade procedure is closing the
transaction. If the goods are to the satisfaction of the importer, the transaction is closed. But if he
is not satisfied with the quality of goods or if there is any shortage, he will write to the exporter
and settle the matter. In case the goods have been damaged in transit, he will claim compensation
from the insurance company. The insurance company will pay him the compensation under an
advice to the exporter.

PUSH AND PULL FACTORS IN INTERNATIONAL BUSINESS

Pull/ Proactive Forces- Attractiveness of the Foreign Markets:

 Profit advantage due to increase in volume: For companies, mostly in the developed

countries, which have been operating below their capacities, the developing markets offer
immense opportunities to increase their sales and profits.
 Low wage/ cheap labour attraction: Many multinational companies (MNCs) are
locating their subsidiaries in low wage and low cost countries to take advantage of low cost
production.
 Taking advantage of growth opportunities: MNCs are getting increasingly interested
in a number of developing countries as the income and population are rapidly rising in these
countries. Foreign markets, in both developed country and developing country, provide
enormous growth opportunities for the developing country firms too.
 Growth of regional trading blocs: Regional trading blocs are adding to the pace of
globalization. WTO, EU, NAFTA, MERCOSUR and FTAA are major alliances among the
countries. Trading blocs seek to promote international business by removing trade and
investment barriers. Integration among countries results in efficient allocation of resources
 throughout the trading area, promoting growth of some business and decline of others,
development of new technologies and products, and elimination of old.
 Declining trade and investment barriers: Declining trade and investment barriers have
vastly contributed to globalization. The free trade regime, business across the globe has grown
considerably. Goods, services, capital and technology are moving across the nations
significantly.

PUSH/ REACTIVE FORCES- COMPULSION OF THE DOMESTIC MARKET:

 Saturation of domestic demand: The market for a number of products tends to saturate

or decline in the advanced countries. This often happens when the market potential has been
almost fully tapped. For example, the fall in the birth rate implies contraction of market for
several baby products. Businesses undertake international operations in order to expand sales,
acquire resources from foreign countries, or diversify their activities to discover the lucrative
opportunities in other countries.
 Scale economies and technological revolution: Economies of scale are reductions in
unit production costs resulting from large-scale operations. The technological advances have
increased the size of the optimum scale of operation substantially in many industries making it
necessary to- have foreign market, in addition to the domestic market, to take advantage of
scale economies.
 Technological revolution: Revolution is a right word which can best describe the pace at
which technology has changed in the recent past and is continuing to change. Significant
developments are being witnessed in communication, transportation and information
processing, including the emergence of the internet and the World Wide Web.
 Domestic recession: Domestic recession often provokes companies to explore foreign
markets. One of the factors which prompted the Hindustan Machine Ltd. (HMT) to take up
exports very seriously was the recession in the home market in the late 1960s.
 Competition as driving force: Competition may become a driving force behind
internationalization. There might be intense competition in the home market but little in
certain foreign countries. A protected market does not normally motivate companies to seek
business outside the home market.
 Government policies and regulations: Government policies and regulations may also
motivate internationalization. There are both positive and negative factors which could cause
internationalization. Many governments offer a number of incentives and other positive
support to domestic companies to export and to invest in foreign investment.
 Improving image of the companies: International business has certain spin-offs too. It
may help the company to improve its domestic business; international business helps to
improve the image of the company. There may be the ‘white skin’ advantage associated with
exporting- when domestic consumers get to know that the company is selling a significant
portion of the production abroad, they will be more inclined to buy from such a company.
 Strategic vision: The systematic and growing internationalization of many companies is
essentially a part of their business policy or strategic management. The stimulus for
internationalization comes from the urge to grow, the need to become more competitive, the
need to diversify and to gain strategic advantages of internationalization.