International Business

International Business
Study Material
For
BBA-III Year
Course Instructor:Dr.Himanshu Saxena
(MBA,Ph.d,NET)
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UNIT-I
International business Meaning and Types
Business activities done across national borders is International Business. The
International business is the purchasing and selling of the goods, commodities and
services outside its national borders. Such trade modes might be owned by the state
or privately owned organization.
In which, the organization explores trade opportunities outside its domestic national
borders to extend their own particular business activities, for example,
manufacturing, mining, construction, agriculture, banking, insurance, health,
education, transportation, communication and so on.
Basically international business is a cross border transaction between individuals,
businesses, or government entities. The transaction can be of anything that has
value, examples include:
• Physical Goods
• Services such as banking, insurance, construction, etc.
• Technology such as software, arms, and ammunition, satellite technology, etc.
• Capital and
• Knowledge
For ease of understanding, in this article, the word “goods” will include all of the
above-mentioned items. For regular commodities, we will be using the word
“physical goods”.
Types of International Businesses

All the major international business conducted in the world can come under seven
main types. These can also be termed as modes of business.
1. Imports and Exports: Simplest and most commonly used method, imports
and exports can be seen as the foundation of international business. Imports
are an inflow of goods into the markets of home country for consumption, in
contrast, export means selling of goods to foreign countries. In short, imports
means inflow whereas export means outflow of goods in any form.
2. Licensing: Licencing is one of the easiest ways to expand a business
internationally. When a company has a standardized product with ownership
rights, it can use licensing to distribute and sell the products in the
international market. Licenses come in many forms, some of which are patent,
copyright, trademark, etc. Products such as books and movies are usually
distributed internationally through licensing agreements.
3. Franchising: A very effective method to expand a business nationally as well
as internationally, franchising is similar to licensing. In this, a parent
company gives the right to another company to conduct business using the
parent company’s name/ brand and products. The parent company becomes
the franchiser and the receiving company becomes the franchisee. Many of the
biggest restaurant chains in the world have used the franchisee model to
expand internationally. Some examples include – McDonald, Pizza Hut,
Starbucks, Domino’s Pizza and many more
4. Outsourcing and Offshoring: Outsourcing means giving out contracts to
international firms for certain business processes. For example, giving out
accounting function to an international firm. This is usually effective when the
cost of conducting these processes are comparatively much cheaper in some
other country than in the home country. For example, many developed
countries such as the USA, Australia, the UK, etc. outsource its functions to
companies in India, China, etc. because it is cheaper.
Offshoring is similar to outsourcing in the sense that a function is moved
away from the home country. However, it is different in the sense that the
facility is physically moved to another country but the management stays with
the company itself. For example, Apple Inc. is conducting its manufacturing
function in China, however, it is completely controlled by Apple Inc.
5. Joint Ventures and Strategic Partnerships: A joint venture is a contract
between two parties, one is an international company while another company
is local to where the business has to be conducted. Both parties contribute to
the equity and management of the company. As a result, both share the profit
as well. These parties can mutually decide the percentage of equity and profit
sharing. These types of ventures and partnerships come into existence when
both the party has something to offer. For example, the local company may
have the brand name and network within the country while the international
company may have advanced technology. A classic example of a joint venture
is Tata Jaguar collaboration in India. Sometimes there are government
restrictions to international companies against holding 100% equity in certain
areas such as defense. In such cases, international companies can take the
benefit of the new market by a joint venture.

6. Multinational Companies: Multinational companies, as the name suggests,
are companies that are conducting business in multiple countries. They
actually set up the whole business in multiple countries. Some such examples
are Amazon, Citigroup, Coca-Cola, etc. These companies have independent
operations in each country, and each country has its own set of offices,
employees, etc. In fact, even the products and marketing campaigns are
customized as per local needs. For example, Nestle introduced a Matcha flavor
Kit Kat in Japan as the flavor is very popular in that country, however, they
don’t offer the same flavor in India. This customization is one of the many
benefits of being a multinational company.
7. Foreign Direct Investment: Foreign direct investment is an investment
made by an individual or a company located in one country to the business
interest located in another foreign country. In this the investing company
usually commits more than capital, they share management, technology,
processes, etc, with the company that they have invested in. The foreign direct
investments can take many forms such as a subsidiary company, associate
company, joint venture, merger, etc.
Factors to Consider Before Starting International Business Operations
1. Geographical Factors:Simple challenges that come with the change in
geography have to be studied when considering international business. There
are differences in storage requirement, supply chain requirements,
connectivity issues,etc. Colgate-Palmolive will face a thousand challenges even
before its soaps and shampoos can reach rural areas of India where there is a
lack of basic necessities such as water, electricity, transportation, etc.
2. Social Factors:Social factors are very important in international business. It
is very difficult to set up shops in countries that are politically disturbed or are
going through some tensions.eg. disturbances in Afghanistan
3. Legal Policies:Every country has different laws and governing policies. A
company should check all the legal requirements in the country in which it
wants to conduct business. The basic laws that need attention are organization
laws, securities laws, consumer protection laws, employees protection laws,
and many more. The process can be lengthy but it is necessary.
4. Behavioral Factors:Every country has different cultures and beliefs, and
people can be very sensitive to these beliefs. An international company, if not
careful, can land a lot of issues if they don’t take care of the country’s
behavioral factors. For example, McDonald cannot sell its beef burgers in
India, else it will have to face the brunt of the Indian population that is
majority Hindu.
5. Economic Forces:These factors include the county’s currency values, market
size, cost, inflation, etc. These are important because it directly affects the
profitability of operations. Every company should consider these factors
before expanding internationally if they want to manage its bottom line.
All these above-mentioned factors play an important role in how successful or
unsuccessful an entity will be in its international business adventures. All
these factors should be considered in the research and planning stage to get
maximum benefit out of it.
Domestic Business v/s International Business
Trade refers to the exchange of goods and services for money, which can be
undertaken within the geographical limits of the countries or beyond the boundaries.
The trade which takes place within the geographical boundaries of the country is
called domestic business, whereas trade which occurs between two countries
internationally, is called international business.
Entities engaged in international business often face more difficulties than the
entities which conduct domestic business. Although international business enjoys
large customer base as they operate in multiple countries. Here is an article which
compiles the important differences between domestic and international business.
Domestic Business
The business transaction that occurs within the geographical limits of the country is
known as domestic business. It is a business entity whose commercial activities are
performed within a nation. Alternately known as internal business or sometimes as
home trade. The producer and customers of the firm both reside in the country. In a
domestic trade, the buyer and seller belong to the same country and so the trade
agreement is based on the practices, laws and customs that are followed in the
country.
There are many privileges which a domestic business enjoys like low transaction cost,
less period between production and sale of goods, low transportation cost,
encourages small-scale enterprises, etc.
International Business is one whose manufacturing and trade occur beyond the
borders of the home country. All the economic activities indulged in cross-border
transactions comes under international or external business. It includes all the
commercial activities like sales, investment, logistics, etc., in which two or more
countries are involved.
The company conducting international business is known as a multinational or
transnational company. These companies enjoy a large customer base from different
countries, and it does not have to depend on a single country for resources. Further,
the international business expands the trade and investment amongst countries.
However, there are several drawbacks which act as a barrier to entry in the
international market like tariffs and quota, political, socio-cultural, economic and
other factors that affect the international business.
Differences between Domestic and International Business
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 is 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.
INTERNATIONAL
DOMESTIC BUSINESS
BUSINESS
In Domestic Business
International business is one
economic transactions are
which is engaged in economic
Meaning conducted within the
transaction with several
geographical boundaries
countries in the world.
of the country.
Area of operation Within the country Whole world

Quality standards Quite low Very high
Deals in Single currency Multiple currencies
Capital
Less Huge
investment
Restrictions Few Many
Nature of
Homogeneous Heterogeneous
customers
It is difficult to conduct
Business research It can be conducted easily.
research.
Mobility of factors
Free Restricted
of production

Comparison
Carrying out the activities of international business and its management is far more
difficult than conducting a domestic business. Due to changes in political, economic,
socio-cultural environment across the nations, most business entities find it difficult
to expand their business globally. To become a successful player in the international
market firms need to plan their business strategies as per the requirement of the
foreign market.
Importance of International Business

1. Insufficiency of Domestic Demand
If the domestic demand for the product is not sufficient to consume the production,
the firm may take a decision to enter the foreign market. In this way he can equalize
the production and demand.
2. To Utilize Installed Capacity
If the installed capacity of the firm is much more than the level of demand of the
product in the domestic market, it can enter the international market and utilize its
un-utilized installed capacity. In this way it can export the surplus production.
3. Legal Restrictions
Sometimes the Government of a country imposes certain restrictions on the growth
and expansion of certain firms or on the production and distribution of certain
commodities in the domestic market in order to achieve certain social objectives.
4. Relative Profitability
The export business is more attractive for its higher rate of profitability. The higher
profitability rate also gives extra strength to the firm.
5. Less Business Risk
A diversified export business helps the exporting firm in mitigating the risk of sharp
fluctuations in the business activity of the firm.
6. Increased Productivity
Due to certain social and technological developments the industrial production has
increased to a great extent. The production will be higher at cheaper rate. The
surplus production can be exported.
7. Social Responsibility
In order to meet the social responsibility some business firms take the decision to
contribute to the National Exchequer by exporting their products.
8. Technological Improvements
Technological improvements also attract the business firm to enter foreign markets.
It introduces new products with latest technological improvements and faces the
competition successfully in the international markets.

9. Product Obsolescence
If a product becomes obsolete in domestic market it may be in demand in
International markets. The firm has to make a survey for introducing the product in
those markets.
10.International Collaboration
Developed countries fix their import quotas for different countries and for different
commodities. A county can export various commodities to these developed countries
to the extent of its quota.
11. International Business Brings Various Countries Closer
Better business relations are established among the countries. Government and non-
government business commissions or business representatives visit other countries
from time to time. The local representatives and other related persons came into
contact with foreign representatives and come to know their habits and customs.
12. Helps in Maintaining Good Political Relations
The economic relations between two countries help each other to improve their
political relations. Various countries having different political ideologies import or
export their products. To conclude it is now undisputable that export business
contributes to the national economy, national exchequer, individual exporting firms
and maintains international, economic cultural and political relations among various
countries. Countries have come closer on account of international business.
Importance of International Business: On the view of National Economy
1. It is important to meet imports of industrial needs.

2. Debt Servicing: This means to grant loan for and for their industrial
development.
3. For rapid economic growth.
4. For profitable use of natural resources.
5. To face competition successfully-better quality goods production having lower
or moderate prices. To improve the image of the producer as well as of the
country in the minds of foreign customers.
6. Increase in employment opportunities.
7. To increase national income.
8. Increase in standard of living of the people.

Major Participants of International Business :Four Major Participants of
1. Exporting:Exporting is often the first choice when manufacturers decide to
expand abroad. Simply stating, exporting means selling abroad, either directly
to target customers or indirectly by retaining foreign sales agents or/and
distributors. Either case, going abroad through exporting has minimal impact
on the firm’s human resource management because only a few, if at all, of its
employees are expected to be posted abroad.
2. Licensing:Licensing is another way to expand one’s operations
internationally. In case of international licensing, there is an agreement
whereby a firm, called licensor, grants a foreign firm the right to use
intangible (intellectual) property for a specific period of time, usually in return
for a royalty. Licensing of intellectual property such as patents, copyrights,
manufacturing processes, or trade names abound across the nations. The
Indian basmati (rice) is one such example.
3. Franchising:Closely related to licensing is franchising. Franchising is an
option in which a parent company grants another company/firm the right to
do business in a prescribed manner. Franchising differs from licensing in the
sense that it usually requires the franchisee to follow much stricter guidelines
in running the business than does licensing. Further, licensing tends to be
confined to manufacturers, whereas franchising is more popular with service
firms such as restaurants, hotels, and rental services.
One does not have to look very far to see how important franchising business
is to companies here and abroad. At present, the prominent examples of the
franchise agreements in India are Pepsi Food Ltd., Coca-Cola, Wimpy’s
Damino, McDonald, and Nirula. In USA, one in 12 business establishments is
a franchise. However, exporting, licensing and franchising make companies
get them only so far in international business. Companies aspiring to take full
advantage of opportunities offered by foreign markets decide to make a
substantial direct investment of their own funds in another country. This is
popularly known as Foreign Direct Investment (FDI). Here, by international
business means foreign direct investment mainly. Let us discuss some more
about foreign direct investment.
4. Foreign Direct Investment (FDI):Foreign direct investment refers to
operations in one country that ire controlled by entities in a foreign country.
In a sense, this FDI means building new facilities in other country. In India, a
foreign direct investment means acquiring control by more than 74% of the
operation. This limit was 50% till the financial year 2001-2002. There are two
forms of direct foreign investment: joint ventures and wholly-owned
subsidiaries. A joint venture is defined as “the participation of two or more
companies jointly in an enterprise in which each party contributes assets,
owns the entity to some degree, and shares risk”. In contrast, a wholly-owned
subsidiary is owned 100% by the foreign firm. An international business is any
firm that engages in international trade or investment. International trade
refers to export or import of goods or services to customers/consumers in
another country. On the other hand, international investment refers to the
investment of resources in business activities outside a firm’s home country.

Scope of International Business
1. Foreign Investments:Foreign investment is an important part of
international business. It contains investments of funds from the abroad in
exchange for financial return. Foreign investment is done through investment
in foreign countries through international business. Foreign investments are
two types which are direct investment and portfolio investment.
2. Exports and Imports of Merchandise:Merchandise are the goods which
are tangible. (those goods which can be seen and touched.) As mentioned
above merchandise export means sending the home country’s goods to other
countries which are tangible and merchandise imports means bringing
tangible goods to the home country.
3. Licensing and Franchising:Franchising means giving permission to the
new party of the foreign country in order to produce and sell goods under your
trademarks, patents or copyrights in exchange of some fee is also the way to
enter into the international business. Licensing system refers to the
companies like Pepsi and Coca-Cola which are produced and sold by local
bottlers in foreign countries.
4. Service Exports and Imports:Services exports and imports consist of the
intangible items which cannot be seen and touched. The trade between the
countries of the services is also known as invisible trade. There is a variety of
services like tourism, travel, boarding, lodging, constructing, training,
educational, financial services etc. Tourism and travel are major components
of world trade in services.
5. Growth Opportunities:There are lots of growth opportunities for both of
the countries, developing and under-developing countries by trading with
each other at a global level. The imports and exports of the countries grow
their profits and help them to grow at a global level.
6. Benefiting from Currency Exchange:International business also plays an
important role while the currency exchange rate as one can take advantage of
the currency fluctuations.eg. when the U.S. dollar is down, businessman can
benefit from the favourable currency exchange rate.
7. Limitations of the Domestic Market:If the domestic market of a country is
small then the international business is a good option for the growth of the
business in the host country. Depression of domestic market firms will force
to explore foreign markets.
Scope of International Business :International business is the process of

implying business across the boundary of the country at a global level. It
focuses on the resources of the globe and objectives of the organization on the
global business. IB refers to the global trade of goods/services outside the
boundaries of a country. It conducts business transactions all over the world,
it is also known as Global Business. It includes transaction between the parties
in different global location.The trade allows a country to specialize in
producing and exporting the most efficient products that can be produced in
that country. Internatioal Business consists of movement to other countries of
goods, products, technology, experience of management & resources.

UNIT-II
International Business Environment

International Business Environment In the context of a business firm,
environment can be defined as various external actors and forces that surround the
firm and influence its decisions and operations. The two major characteristics of the
environment as pointed out by this definition are: these actors and forces are
external to the firm these are essentially uncontrollable. The firm can do little to
change them.
The International Business Environment concentration provides a “macro” view of
markets and institutions in the global economy. It will prepare students for careers
involving international market analysis such as international commercial and
investment banking, portfolio analysis and risk assessment, new market
development, international business consulting, and international business law. The
foundational courses focus on an understanding of global markets and institutions.
The concentration will allow the student to combine courses in broader areas of
economic development, regional business environment, and/or international law,
management, marketing, trade, and finance. The student will be encouraged to
combine the core courses with supplemental coursework in related international
subjects such as language, history, politics, and culture.
Exports boost the economic development of a country, reduce poverty and raise the
standard of living. The world’s strongest economies are heavily involved in
international trade and have the highest living standards, according to the Operation
for Economic Co-operation and Development (OECD).
Countries like Switzerland, Germany, Japan and the Scandinavian countries have
high volumes of imports and exports relative to their gross domestic product and
offer high standards of living. Nations with lower ratios of international trade, such
as Greece, Italy, Spain and Portugal, face serious economic problems and challenges
to their living standards. Even with low wages, less developed countries can use this
advantage to create jobs related to exports that add currency to their economy and
improve their living conditions.
Importance of the International Business Environment

1. Exports Increase Sales:Exporting opens new markets for a company to
increase its sales. Economies rise and fall, and a company that has a good
export market is in a better position to weather an economic downturn.
Furthermore, businesses that export are less likely to fail. It’s not only the
exporting companies that increase sales; the companies that supply materials
to the exporters also see their revenues go up, leading to more jobs.
2. Exports Create Jobs:A company that increases its exports needs to hire
more people to handle the higher workload. Businesses that export have a job
growth 2 to 4 percent higher than companies that don’t; these export-related
jobs pay about 16 percent more than jobs in companies with fewer exports.
The workers in these export-related jobs spend their earnings in the local
economy, leading to a demand for other products and creating more jobs.

3. Imports Benefit Consumers:Imported products result in lower prices and
expand the number of product choices for consumers. Lower prices have a
significant effect, particularly for modest and low-income households. Studies
show that lower import prices save the average American family of four
around $10,000 per year. Besides lower prices, imports give consumers a
wider choice of products with better quality. As a result, domestic
manufacturers are forced to lower their prices and increase product lines to
meet the competition from imports. Even further, domestic vendors may have
to import more components of their products to stay price competitive.
4. Improved International Relations:International business removes rivalry
between different countries and promotes international peace and harmony.
Mutual trade creates a dependence on each other, improves confidence and
fosters good faith. A good example of co-dependency of nations is the
relationship between the United States and China. Even though these
countries have significant political differences, they try to get along because of
the huge amount of trade between them.
Their relationship evolved and changed a lot over the past decades. Not too
long ago, it was characterized by mutual tolerance, intensifying diplomacy and
bilateral economic relationships. This was a win-win for both parties. In July
2016, more than 800 hundred Chinese products became subject to a 25
percent import tax. The new tariff policy is expected to affect U.S.-China
relations. Financial experts believe that there’s no going back to how things
were. A policy of a free international trade environment strengthens the
economies of all countries. The competition from imports and exports leads to
lower prices, better quality of products, wider selections and improved
standards of living. While international trade may lead to the loss of some
jobs, it has a stronger synergistic effect on the creation of new jobs and
improved economic conditions.
International Business Environment: Political Environment, Economic

Environment, Technological Environment, Cultural Environment,
Competitive Environment, Legal and Financial Environment
1)Political Environment
The political environment refers to the type of the government, the government
relationship with a business, & the political risk in the country. Doing business
internationally, therefore, implies dealing with a different type of government,
relationships, & levels of risk.
There are many different types of political systems, for example, multi-party
democracies, one-party states, constitutional monarchies, dictatorships (military &
non-military). Therefore, in analyzing the political-legal environment, an
organization may broadly consider the following aspects:
• The Political system of the business

• Approaches to the Government towards business i.e. Restrictive or facilitating
• Facilities & incentives offered by the Government
• Legal restrictions for instance licensing requirement, reservation to a specific
sector like the public sector, private or small-scale sector

• The Restrictions on importing technical know-how, capital goods & raw
materials
• The Restrictions on exporting products & services
• Restrictions on pricing & distribution of goods
• Procedural formalities required in setting the business
2)Economic Environment
The economic environment relates to all the factors that contribute to a country’s
attractiveness for foreign businesses. The economic environment can be very
different from one nation to another. Countries are often divided into three main
categories: the more developed or industrialized, the less developed or third world, &
the newly industrializing or emerging economies.
Within each category, there are major variations, but overall the more developed
countries are the rich countries, the less developed the poor ones, & the newly
industrializing (those moving from poorer to richer). These distinctions are generally
made on the basis of the gross domestic product per capita (GDP/capita). Better
education, infrastructure, & technology, healthcare, & so on are also often associated
with higher levels of economic development.
Clearly, the level of economic activity combined with education, infrastructure, & so
on, as well as the degree of government control of the economy, affect virtually all
facets of doing business, & a firm needs to recognize this environment if it is to
operate successfully internationally. While analyzing the economic environment, the
organization intending to enter a particular business sector may consider the
following aspects:
• An Economic system to enter the business sector.

• Stage of economic growth & the pace of growth.
• Level of national & per capita income.
• Incidents of taxes, both direct & indirect tax.
• Infrastructure facilities available & the difficulties thereof.
• Availability of raw materials & components & the cost thereof.
• Sources of financial resources & their costs.
• Availability of manpower-managerial, technical & workers available & their
salary & wage structures.
3)Technological Environment
The technological environment comprises factors related to the materials &
machines used in manufacturing goods & services. Receptivity of organizations to
new technology & adoption of new technology by consumers influence decisions
made in an organization.
As firms do not have any control over the external environment, their success
depends on how well they adapt to the external environment. An important aspect of
the international business environment is the level, & acceptance, of technological
innovation in different countries.
The last decades of the twentieth century saw major advances in technology, & this is
continuing in the twenty-first century. Technology often is seen as giving firms a

competitive advantage; hence, firms compete for access to the newest in technology,
& international firms transfer technology to be globally competitive.
It is easier than ever for even small business plan to have a global presence thanks to
the internet, which greatly grows their exposure, their market, & their potential
customer base. For the economic, political, & cultural reasons, some countries are
more accepting of technological innovations, others less accepting. In analyzing the
technological environment, the organization may consider the following aspects:
• Level of technological development in the country as a whole & specific

business sector.
• The pace of technological changes & technological obsolescence.
• Sources of technology.
• Restrictions & facilities for technology transfer & time taken for the
absorption of technology.
4)Cultural Environment
The cultural environment is one of the critical components of the international
business environment & one of the most difficult to understand. This is because the
cultural environment is essentially unseen; it has been described as a shared,
commonly held body of general beliefs & values that determine what is right for one
group, according to Kluckhohn & Strodtbeck.
National culture is described as the body of general beliefs & the values that are
shared by the nation. Beliefs & the values are generally seen as formed by factors
such as the history, language, religion, geographic location, government, &
education; thus firms begin a cultural analysis by seeking to understand these
factors. The most well-known is that developed by Hofstede in1980.
His model proposes four dimensions of cultural values including individualism,
uncertainty avoidance, power distance & masculinity.
Individualism is the degree to which a nation values & encourages individual action
& decision making.
Uncertainty avoidance is the degree to which a nation is willing to accept & deal with
uncertainty.
Power distance is the degree to which a national accepts & sanctions differences in
power.
This model of cultural values has been used extensively because it provides data for a
wide array of countries. Many academics & the managers found that this model
helpful in exploring management approaches that would be appropriate in different
cultures.
For example, in a nation that is high on individualism one expects individual goals,
individual tasks, & individual reward systems to be effective, whereas the reverse
would be the case in a nation that is low on individualism.
• While analyzing social & cultural factors, the organization may consider the
following aspects:
• Approaches to society towards business in general & in specific areas;

• Influence of social, cultural & religious factors on the acceptability of the
product;
• The lifestyle of people & the products used for them;
• Level of acceptance of, or resistance to change;
• Values attached to a particular product i.e. the possessive value or the
functional value of the product;
• Demand for the specific products for specific occasions;
• The propensity to consume & to save.
5)Competitive Environment
The competitive environment also changes from country to country. This is partly
because of the economic, political, & cultural environments; these environmental
factors help determine the type & degree of competition that exists in a given
country. Competition can come from a variety of sources. It can be a public or a
private sector, come from the large or the small organizations, be domestic or global,
& stem from traditional or new competitors, GST registration. For a domestic firm,
the most likely sources of competition might be well understood. The same isn’t the
case when a person moves to compete in the new environment.
6)International Legal Environment
Firms operating internationally face major challenges in conforming to different
laws, regulations, and legal systems in different countries. The legal framework to
protect small and medium enterprises (SMEs), mainly to achieve social objectives,
adversely influences the expansion of manufacturing capacities and achieving
economies of scale in certain countries.
International managers need to develop basic understanding of the types of legal
systems followed in the countries of their operations before entering into legal
contracts.

UNIT-III
International Business Organizations

International Business conducts business transactions all over the world. These
transactions include the transfer of goods, services, technology, managerial
knowledge, and capital to other countries. International business involves exports
and imports. International Business is also known, called or referred as a Global
Business or an International Marketing. An international business has many options
for doing business, it includes,
• Exporting goods and services.

• Giving license to produce goods in the host country.
• Starting a joint venture with a company.
• Opening a branch for producing & distributing goods in the host country.
• Providing managerial services to companies in the host country.
International Business Organizations

The exciting world of international business beckons the brightest minds and
sharpest business performers to excel in relationships, governance, and financial
acuity in order to create a better future for all people. World changers need spaces in
which to gather to share ideas, spur one another on, create relational opportunism,
mingle with industry and governmental leaders, and dream of advanced systems to
enhance our daily lives. Many such venues exist but it’s not always easy to know
which ones with which to associate. This article discusses key places for the
entrepreneur to consider.
A plethora of international business organizations exist to promote education and
facilitate business transactions around the world. The following organizations are
among the most active and well known. Whether you are a business person
transacting international business or a student looking to learn and eventually get in
on the action, these organizations will open the door to your forward-looking
international worldview.
1. World Trade Organization
The World Trade Organization (WTO) is the premier worldwide group geared toward
the politics of international trade. Government officials meet together within the
WTO context to negotiate trade agreements and negotiate the politics of
international business. The WTO receives significant media attention while also
proactively publishing data related to accessing international markets. Check out
their annual World Trade Report for research, analysis, and featured member nation
stories. The WTO’s student-friendly approach contributes internships, a youth
ambassador program, and essay awards for young economists in the hope of
promoting business and friendship for young international professionals. The newly
created Youth Ambassador Programme gives young leaders a voice at the
international trade table to offer their unique opinions and perspectives. The
internship program for post-graduate university students develops knowledge,
understanding, and experience in global trade policy and compliance. Internships
can last up to 24 weeks and take place exclusively in beautiful Geneva, Switzerland.

2. International Chamber of Commerce
The International Chamber of Commerce (ICC) promotes world business by
providing forums, leadership development, and advocacy for nations who desire for
their citizens to enjoy a higher global standard of living while living in a world of
peace. The ICC conducts training events, arbitration conferences, financial summits
and numerous other programs to promote their agenda of building peace and
prosperity on earth.
ICC online training modules expose students and business professionals to
certification level expertise developed as ICC constituents intermingle on the world
stage at G20 Summits and United Nations forums. The ICC maintains policy
commissions in the areas of the digital economy, competition, the environment and
energy policy, intellectual property, and taxation, among other topics. Dispute
resolution, antitrust compliance, international sales contracts, arbitration provision
and anti-crime initiatives are just a sampling of the services proffered by the
International Chamber of Commerce.
Students can benefit specifically with the Young Arbitrators Forum (YAF). YAF is a
place for young professionals to learn from seasoned international practitioners
about issues related to arbitration and arbitration career development. Events are
held regularly all around the world.
3. International Association of Business Communicators
The International Association of Business Communicators (IABC) is a networking
association for communication professionals. The IABC promotes professional
development and communication standards worldwide. They tout a membership of
15,000 professionals in over 80 countries.
4. International Business Organization
The International Business Organization (IBO) is a group that serves the
international community who wants to do business in or immigrate to the United
States of America with a special purview related to the state of Florida. The IBO can
assist with real estate information, immigration services, health insurance, and
unique networking contacts.
5. The Federation of International Trade Associations
The Federation of International Trade Associations (FITA) is an online clearinghouse
of 8,000 international trade Web sites. FITA is comprised of 450 association
members and 450,000 linked company members. FITA brings together trade agents,
distributors, and service providers that contribute toward import and export
activities. Their market research tools and leads increase the capacity of members to
conduct international trade ethically and legally. Check out their Web site tools of the
trade including customs and tariffs, intellectual property rights, trade barriers,
logistics, and more. This fully-orbed research driven site will help you to determine,
among other things, how to import horses into China, how to franchise overseas, how
to fight against fraudulent individuals in Nigeria, and how to invest in Afghanistan.
The IBO Web site provides country profiles for more than half of the nations of the
world. Profiles contain demographics, country overview, currency and
communications information, and basic economic data.

6. The World Technology Network
The World Technology Network (WTN) brings innovative individuals together from
the science and technology communities to share ideas, discover synergies, and
create momentum within the realm of emerging technologies. Add in financiers and
futurists and the organization builds capacity for creating roadmaps into the rest of
the 21st Century. The community also includes marketers, writers, entrepreneurs,
government officials, and policy analysts – people who are bent on creating dynamic
systems to enhance world productivity and efficiencies. WTN’s headline event, The
World Technology Summit & Awards ceremony, has taken place annually for twelve
years. Awards are presented in the following categories: arts, biotechnology,
communication technology, design, education, energy, entertainment, environment,
ethics, finance, health and medicine, IT hardware, IT software, law, marketing
communications, materials, media and journalism, policy, social entrepreneurship,
and space. Awards are presented in these categories to both individuals and
corporations who best represent WTN goals and ideologies.
7. International Assembly for Collegiate Business Education
The International Assembly for Collegiate Business Education (IACBE) is a
professional accrediting organization related to business education. They promote
business educational standards and opportunities for students and the professional
educational community. Members include colleges and universities who are
committed to strengthening business educational capacities worldwide. IACBE
member services range from mentoring and consulting platforms to the Journal for
Excellence in Business Education. The International Business Education Consortium
enables members to share curriculum ideas, provide fresh experiences for business
students, create international teaching opportunities for faculty, and establish new
revenue tuition streams for member institutions.
8. International Executives Association
The International Executives Association is an elite type networking group for
companies and their respective top level employees. Their focus on inspiration and
camaraderie refreshes business executives enabling them to prosper as they share
business leads and referrals with one another. Most local chapters are located in
Canada and the United States.
9. Business Council for International Understanding
Started in 1955 as an initiative by President Dwight Eisenhower, the Business
Council for International Understanding (BCIU) exists to foster dialogue among
world business and political leaders. The BCIU organizes trade mission tours for
cross-fertilization of business opportunities both internationally and domestically-
hosted, roundtables for senior executives and politicians, and private meetings for
high level officials of influence. A commercial training program geared toward
embassy personnel and diplomats-in-training shows the diplomatic community how
to promote business interests wherever they serve in the world by understanding the
local business conditions and applying international standards for success. BCIU
meets annually in New York for an awards gala. BCIU provides fascinating internship
opportunities for college juniors and seniors to obtain experience in both private
sector and governmental contexts. Responsibilities include database management,
research, writing, and communications.

10.Coalition of Services Industries
The Coalition of Services Industries (CSI) represents the needs for the service
industries in the United States, industries such as banking, hospitality, logistics,
telecommunications, and insurance. They also promote international policies that
will benefit these industries seeking to develop business worldwide. Special working
groups have developed around the themes of financial services, insurance,
telecommunications, media, and information technology. In addition, groups focus
on the emerging economies of China and India.
Take the time to explore these organizations and you’ll see a world that contains
unlimited possibilities. Determine what it is that you are looking for and then narrow
down your search based upon geography, association fees, personal and professional
goals, membership opportunities and requirements, and the capacity for association
members to influence you to influence your sphere of the world.
Forms of International Organizations

1. Expo-documents against acceptance Department
Exports are often looked after by a company’s marketing or sales department in the
initial stages when the volume of exports sales is low. However, with increase in
exports turnover, an independent exports department is often setup and separated
from domestic marketing, as shown in Fig.1
Exports activities are controlled by a company’s home-based office through a

designated head of export department, i.e. Vice President, Director, or Manager
(Exports). The role of the HR department is primarily confined to planning and
recruiting staff for exports, training and development, and compensation.
Sometimes, some HR activities, such as recruiting foreign sales or agency personnel
are carried out by the exports or marketing department with or without consultation
with the HR department.
2. International division structure
As the foreign operations of a company grow, businesses often realize the overseas
growth opportunities and an independent international division is created which
handles all of a company’s international operations. The head of international
division, who directly reports to the chief executive officer, coordinates and monitors
all foreign activities.

The in-charge of subsidiaries reports to the head of the international division. Some
parallel but less formal reporting also takes place directly to various functional heads
at the corporate headquarters. The corporate human resource department
coordinates and implements staffing, expatriate management, and training and
development at the corporate level for international assignments. Further, it also
interacts with the HR divisions of individual subsidiaries.
The international structure ensures the attention of the top management towards
developing a holistic and unified approach to international operations. Such a
structure facilitates cross-product and cross-geographic co-ordination, and reduces
resource duplication. Although an international structure provides much greater
autonomy in decision-making, it is often used during the early stages of
internationalization with relatively low ratio of foreign to domestic sales, and limited
foreign product and geographic diversity.
3. Global Organizational Structures
Rise in a company’s overseas operations necessitates integration of its activities
across the world and building up a worldwide organizational structure. While
conceptualizing organizational structure, the internationalizing firm often has to
resolve the following conflicting issues:
• Extent or type of control exerted by the parent company headquarters over

subsidiaries.
• Extent of autonomy in making key decisions to be provided by the parent
company headquarters to subsidiaries (centralization vs. decentralization)
It leads to re-organization and amalgamation of hitherto fragmented organizational

interests into a globally integrated organizational structure which may either be
based on functional, geographic, or product divisions. Depending upon the firm
strategy and demands of the external business environment, it may further be
graduated to a global matrix or trans-national network structure.
(a) Global functional division structure
It aims to focus the attention of key functions of a firm, as shown in Fig. 2, wherein
each functional department or division is responsible for its activities around the
world. For instance, the operations department controls and monitors all production
and operational activities; similarly, marketing, finance, and human resource
divisions co-ordinate and control their respective activities across the world.

Such an organizational structure takes advantage of the expertise of each functional
division and facilitates centralized control. MNEs with narrow and integrated
product lines, such as Caterpillar, usually adopt the functional organizational
structure.
Such organizational structures were also adopted by automobile MNEs but have now
been replaced by geographic and product structures during recent years due to their
global expansion.
The major advantages of global functional division structure include:
• Greater emphasis on functional expertise

• Relatively lean managerial staff
• High level of centralized control
• Higher international orientation of all functional managers
The disadvantages of such divisional structure include:
• Difficulty in cross-functional coordination

• Challenge in managing multiple product lines due to separation of operations
and marketing in different departments
• Since only the chief executive officer is responsible for profits, such a structure
is favoured only when centralized coordination and control of various
activities is required.
(b) Global product structure

Under global product structure, the corporate product division, as depicted in Fig. 3
is given worldwide responsibility for the product growth.
The heads of product divisions do receive internal functional support associated with
the product from all other divisions, such as operations, finance, marketing, and
human resources. They also enjoy considerable autonomy with authority to take
important decisions and operate as profit centres.

The global product structure is effective in managing diversified product lines.
Such a structure is extremely effective in carrying out product modifications so as to
meet rapidly changing customer needs in diverse markets. It enables close
coordination between the technological and marketing aspects of various markets in
view of the differences in product life cycles in these markets, for instance, in case of
consumer electronics, such as TV, music players, etc.
However, creating exclusive product divisions tends to replicate various functional
activities and multiplicity of staff. Besides, little attention is paid to worldwide
market demand and strategy. Lack of cooperation among various product lines may
also result into sales loss. Product managers often pursue currently attractive
markets neglecting those with better long-term potential.
(c) Global geographic structure
Under the global geographic structure, a firm’s global operations are organized on
the basis of geographic regions, as depicted in Fig. 4. It is generally used by
companies with mature businesses and narrow product lines. It allows the
independent heads of various geographical subsidiaries to focus on the local market
requirements, monitor environmental changes, and respond quickly and effectively.
The corporate headquarter is responsible for transferring excess resources from one
country to another, as and when required. The corporate human resource division
also coordinates and provides synergy to achieve company’s overall strategic goals
between various subsidiaries based in different countries.
Such structure is effective when the product lines are not too diverse and resources
can be shared. Under such organizational structure, subsidiaries in each country are
deeply embedded with nationalistic biases that prohibit them from cooperating
among each other.

(d) Global matrix structure
It is an integrated organizational structure, which super-imposes on each other more
than one dimension. The global matrix structure might consist of product divisions
intersecting with various geographical areas or functional divisions. Unlike
functional, geographical, or product division structures, the matrix structure shares
joint control over firm’s various functional activities.
Such an integrated organizational structure facilitates greater interaction and flow of

information throughout the organization. Since the matrix structure has an in-built
concept of interaction between intersecting perspectives, it tends to balance the
MNE’s prospective, taking cross-functional aspects into consideration.
It facilitates ease of technology transfer to foreign operations and of new products to
different markets leading to higher economies of scale and better foreign sales
performance. Matrix structure is used successfully by a large number of MNEs, such
as Royal Dutch/Shell, Dow Chemical, etc.
In an effort to bring together divergent perspectives within the organization, the
matrix structure may also lead to conflicting situations. It inhibits a firm’s ability to
respond quickly to environmental changes in case an effective conflict resolution
mechanism is not in place.
Since the structure requires most managers to report to two or multiple bosses,
Fayol’s basic principle of unity of command is violated and conflicting directives
from multiple authorities may compel employees to compromise with sub-optimal
alternatives so as to avoid conflict which may not be the most appropriate strategy
for an organization as a whole.

(e) Transnational network structure
Such a globally integrated structure represents the ultimate form of an earth-
spanning organization, which eliminates the meaning of two or three matrix
dimensions. It encompasses elements of function, product, and geographic designs
while relying upon a network arrangement to link worldwide subsidiaries.
This form of organization is not defined by its formal structure but by how its
processes are linked with each other, which may be characterized by an overall
integrated system of various inter-related sub-systems. The trans-national network
structure is designed around ‘nodes’, which are the units responsible for coordinating
with product, functional and geographic aspects of an MNE. Thus, trans-national
network structures build-up multidimensional organizations which are fully
networked.
4. Evolution of Global Organizational Structures
Organizational structures often exhibit evolutionary patterns, as shown in Fig.,
depending upon their strategic globalization. The historical evolution of
organizational patterns indicates that in the early phase of internationalization, most
firms separate their exports departments from domestic marketing or have separate
international divisions.

Companies with emphasis on global business strategies move towards global product
structures whereas those with emphasis on location base strategies move towards
global geographic structures.
Subsequently, a large number of companies graduate to a matrix or trans-national
network structure due to dual demands of local adaptations pressures and
globalization. In practice, most companies hardly adopt either pure matrix or trans-
national structures; rather they opt for hybrid structures incorpora
WTO Structure, Functions & Roles in the International Business Scenario

The establishment of the World Trade Organization (WTO) as the successor to ,the
GATT on 1 January 1995 under the Marrakesh Agreement places the global trading
system on a firm constitutional footing with the evolution of international economic
legislation resulted through the Uruguay Round of GATT negotiations.
A remarkable feature of the Uruguay Round was that it paved the way for further
liberalization of international trade with the fundamental shift from the negotiation
approach to the institutional framework envisaged through transition from GATT to
WTO Agreement.
The GATT 1947 and the WTO co-existed for the transitional period of one year in
1994. In January 1995, however, the WTO completely replaced the GATT. The
membership of the WTO increased from 77 in 1995 to 127 by the end of 1996.
Structure of the World Trade Organization (WTO)
The Ministerial Conference (MC) is at the top of the structural organization of the
WTO. It is the supreme governing body which takes ultimate decisions on all
matters. It is constituted by representatives of (usually, Ministers of Trade) all the
member countries.
The General Council (GC) is composed of the representatives of all the members. It is
the real engine of the WTO which acts on behalf of the MC. It also acts as the Dispute
Settlement Body as well as the Trade Policy Review Body.
There are three councils, viz.: the Council for Trade in Services and the Council for
Trade-Related Aspects of Intellectual Property Rights (TRIPS) operating under the
GC. These councils with their subsidiary bodies carry out their specific
responsibilities
Further, there are three committees, viz., the Committee on Trade and Development
(CTD), the Committee on Balance of Payments Restrictions (CBOPR), and the
Committee on Budget, Finance and Administration (CF A) which execute the
functions assigned to them by e WTO Agreement and the GC.
The administration of the WTO is conducted by the Secretariat which is headed by
the Director General (DG) appointed by the MC for the tenure of four years. He is
assisted by the four Deputy Directors from different member countries. The annual
budget estimates and financial statement of the WTO are presented by the DG to the
CBFA for review and recommendations for the final approval by the GC.

Functions of the World Trade Organization (WTO)
The WTO consisting a multi-faced normative framework: comprising institutional
substantive and implementation aspects. The major functions of the WTO are:
1. To lay-down a substantive code of conduct aiming at reducing trade barriers

including tariffs and eliminating discrimination in international trade
relations.
2. To provide the institutional framework for the administration of the
substantive code which encompasses a spectrum of norms governing the
conduct of member countries in the arena of global trade.
3. To provide an integrated structure of the administration, thus, to facilitate the
implementation, administration and fulfillment of the objectives of the WTO
Agreement and other Multilateral Trade Agreements.
4. To ensure the implementation of the substantive code.
5. To act as a forum for the negotiation of further trade liberalization.
6. To cooperate with the IMF and WB and its associates for establishing a
coherence in trade policy-making.
7. To settle the trade-related disputes.
Features of the WTO: The distinctive features of the WTO are:

(i) It is a legal entity
(ii) World Bank (WB) it is not an agent of the United Nations.
(iii) Unlike the IMF and the World Bank, there is no weighted voting, but all the
WTO members have equal rights.
(iv) Unlike the GATT, the agreements under the WTO are permanent and binding to
the member countries.
(v) Unlike the GATT, the WTO dispute settlement system is based not on dilatory but
automatic mechanism. It is also quicker and binding on the members. As such, the
WTO is a powerful body.
(vi) Unlike the GATT, the WTOs approach is rule- based and time-bound.
(vii) Unlike the GATT, the WTOs have a wider coverage. It covers trade in goods as
well as services.
(viii) Unlike the GATT, the WTOs have a focus on trade-related aspects of intellectual
property rights and several other issues of agreements.
(ix) Above all, the WTO is a huge organizational body with a large secretariat.

Objectives of the WTO
The purposes and objectives of the WTO are spelled out in the preamble to the
Marrakesh Agreement. These are:
1. To ensure the reduction of tariffs and other barriers to trade.

2. To eliminate discriminatory treatment in international trade relations.
3. To facilitate higher standards of living, full employment, a growing volume of
real income and effective demand, and an increase in production and trade in
goods and services of the member nations.
4. To make positive effect, which ensures developing countries, especially the
least developed secure a level of share in the growth of international trade that
reflects the needs of their economic development.
5. To facilitate the optimal use of the world’s resources for sustainable
development.
6. To promote an integrated, more viable and durable trading system
incorporating all the resolutions of the Uruguay Round’s multilateral trade
negotiations.
Above all, to ensure that linkages trade policies, environmental policies with
sustainable growth and development are taken care of by the member countries in
evolving a new economic order.

UNIT-IV
International Financial Management

International Financial Management is a well-known term in today’s world
and it is also known as international finance. It means financial management in an
international business environment. It is different because of the different currency
of different countries, dissimilar political situations, imperfect markets, diversified
opportunity sets.
International Financial Management came into being when the countries of the
world started opening their doors for each other. This phenomenon is well known by
the name of “liberalization”. Due to the open environment and freedom to conduct
business in any corner of the world, entrepreneurs started looking for opportunities
even outside their country boundaries. The spark of liberalization was further aired
by swift progression in telecommunications and transportation technologies that too
with increased accessibility and daily dropping prices. Apart from everything else, we
cannot forget the contribution of financial innovations such as currency derivatives;
cross-border stock listings, multi-currency bonds and international mutual funds.
The resultant of liberalization and technology advancement is today’s dynamic
international business environment. Financial management for a domestic business
and an international business is as dramatically different as the opportunities in the
two. The meaning and objective of financial management do not change in
international financial management but the dimensions and dynamics change
drastically.
Difference between International and Domestic Financial Management
Four major facets which differentiate international financial management from
domestic financial management are an introduction of foreign currency, political risk
and market imperfections and enhanced opportunity set.
1. Foreign Exchange:It’s an additional risk which a finance manager is
required to cater to under an International Financial Management setting.
Foreign exchange risk refers to the risk of fluctuating prices of currency which
has the potential to convert a profitable deal into a loss making one.
2. Political Risks:Political risk may include any change in the economic
environment of the country viz. Taxation Rules, Contract Act etc. It is
pertaining to the government of a country which can anytime change the rules
of the game in an unexpected manner.
3. Market Imperfection:Having done a lot of integration in the world
economy, it has got a lot of differences across the countries in terms of
transportation cost, different tax rates, etc. Imperfect markets force a finance
manager to strive for best opportunities across the countries.
4. Enhanced Opportunity Set:By doing business in other than native
countries, a business expands its chances of reaping fruits of different taste.
Not only does it enhances the opportunity for the business but also diversifies
the overall risk of a business.

Just like domestic financial management, the goal of International Finance is also to
maximize the shareholder’s wealth. The goal is not only is limited to the
‘Shareholders’ but extends to all ‘Stakeholders’ viz. employees, suppliers, customers
etc. No goal can be achieved without achieving welfare of shareholders. In other
words, maximizing shareholder’s wealth would mean maximizing the price of the
share.
International level initiatives like General Agreement on Trade and Tariffs (GATT),
The North American Free Trade Agreement (NAFTA), World Trade Organization
(WHO) etc has to give promoted international trade and given it a shape. All because
of liberalization and those international agreements, we have a buzz word called
“MNC” i.e. Multinational Corporations. MNCs enjoy an edge over other normal
companies because of its international setting and best opportunities.
International Finance has become an important wing for all big MNCs. Without the
expertise in International Financial Management, it can be difficult to sustain in the
market because international financial markets have a totally different shape and
analytics compared to the domestic financial markets. A sound management of
international finances can help an organization achieve same efficiency and
effectiveness in all markets.
International finance analyzes the following specific areas of study:
• The Mundell-Fleming Model, which studies the interaction between the goods
market and the money market, is based on the assumption that price levels of
said goods are fixed.
• International Fisher Effect is an international finance theory that assumes
nominal interest rates mirror fluctuations in the spot exchange rate between
nations.
• The optimum currency area theory states that certain geographical regions
would maximize economic efficiency if the entire area adopted a single
currency.
• Purchasing power parity is the measurement of prices in different areas using
a specific good or a specific set of goods to compare the absolute purchasing
power between different currencies.
• Interest rate parity describes an equilibrium state in which investors are
indifferent to interest rates attached to bank deposits in two separate
countries.
Example of International Institutions of International Finance

The Bretton Woods System
The Bretton Woods system was created at the Bretton Woods conference in 1944,
where the 40 participating countries agreed to establish a fixed exchange rate
system. The collective goal of this initiative was to standardize international
monetary exchanges and policies in a broader effort to create post World War II
stability. The Bretton Woods conference catalyzed the development of international
institutions that play a foundational role in the global economy. These include the
International Monetary Fund (IMF), a consortium of 189 countries dedicated to
creating global monetary cooperation, and the International Bank for Reconstruction
and Development, which later became known as the World Bank.

International Monetary Fund (IMF)
The International Monetary Fund, also known as the IMF or simply the ‘Fund’, was
conceived at a United Nations Conference convened in Bretton Woods, New
Hampshire, US in July 1944. The 45 governments represented at the conference
sought to build a framework for economic cooperation that would avoid a repetition
of the disastrous economic policies that had contributed to the Great Depression of
the 1930s.
The IMF offers regular dialogue and policy advice to each of its members. Generally,
once a year, the Fund conducts in-depth appraisals of each member country’s
economic situation. It discusses with the country’s authorities the policies that are
most conducive to stable exchange rates and a growing and prosperous economy.
In its overview of its members’ economic policies, the IMF looks mainly at a
country’s macro-economic performance. This comprises total spending and its major
components such as consumer spending and business investment, output,
employment, and inflation, as well as the country’s balance of payments.
Responsibilities of the International Monetary Fund (IMF)
(i) Promoting international monetary cooperation
(ii) Facilitating the expansion and balanced growth of international trade
(iii) Promoting exchange stability
(iv) Assisting in the establishment of a multilateral system of payments.
(v) Making its resources available, under adequate safeguards to members

experiencing balance of payments difficulties
Objectives of International Monetary Fund (IMF)
1. International Monetary Co-Operation:The most important objective of

the Fund is to establish international monetary co-operation amongst the
various member countries through a permanent institution that provides the
machinery for consultation and collaborations in various international
monetary problems and issues.
2. Ensure Exchange Stability:Another important objective of the Fund is to

ensure stability in the foreign exchange rates by maintaining orderly exchange
arrangement among members and also to rule out unnecessary competitive
exchange depreciations.
3. Balanced Growth of Trade: IMF has also another important objective to

promote international trade so as to achieve its required expansion and
balanced growth. This would ensure development of production resources and
thereby promote and maintain high levels of income and employment among
all its member countries.

4. Eliminate Exchange Control:Another important objective of the Fund is
to eliminate or relax exchange controls imposed by almost each and every
country before Second World War as a device to deliberately fix the exchange
rate at a particular level. Such elimination of exchange controls was made so
as to give encouragement to the flow of international trade.
5. Multilateral Trade and Payments:To establish a multilateral trade and

payment system in respect to current transactions between members in place
of the old system of bilateral trade agreements was another important
objective of IMF.
6. Balanced Growth:Another objective of IMF is to help the member

countries, especially the backward countries, to attain balanced economic
growth by exchange the level of employment.
7. Correction of BOP Maladjustments:IMF also helps the member

countries in eliminating or reducing the disequilibrium or maladjustments in
balance of payments. Accordingly, it gives confidence to members by selling or
lending Fund’s foreign currency resources to the member nations.
8. Promote Investment of Capital:Finally, the IMF also promotes the flow

of capital from richer to poorer or backward countries so as to help the
backward countries to develop their own economic resources for attaining
higher standard of living for its people, in general.
Organization of International Monetary Fund (IMF)

The IMF, which started functioning in March 1947, is an autonomous organization
and is affiliated to U.N.O. As per Fund Agreement, the headquarters of the IMF
should be located in that country which usually possess the highest quota of capital
of the IMF. Accordingly, the head office of IMF is located at Washington. At the
initial stage, the IMF had 30 countries as its members. Later, as on April 30, 1986,
the total membership of the IMF rose to 149.
Since inception, the management of the IMF is rested on two bodies:
(a) Board of Governors
(b) Board of Executive Directors
Every member country appoints one Governor for participating in the meetings of
Board of Governors and also appoints one Alternate Governor to represent the
Governor is respect of its absence. The Board of Governors in authorized to
formulate the general policies of the Fund. To carry on day to day activities of the
IMF, the Board of Executive Directors in formed. At present, there are 22 members
in the Board of Executive Directors, six of which are appointed by members
maintaining largest quotas, i.e. USA, UK, Germany, France, Japan and Saudi Arabia
and the remaining sixteen directors are elected by other nations. The Managing
Director of Board of Directors, the top most official of IMF, in elected by the Board of
Directors. He is responsible for organization and management of the Fund.
Resources of International Monetary Fund (IMF)

The resources of IMF are built up by the subscription of members. Again the
subscription quota of each member is determined by its national income and its
condition of international trade. After determination of quota, every member nation
contributes 25 per cent of its quota in international reserve assets and the remaining
75 per cent is contributed in member’s own currency.
The contribution of first 25 per cent was made originally in terms of gold but now it
is being made in Special Drawing Rights (SDRs), an international reserve asset
created by the IMF in 1969. There is also provision to enlarge the resources of the
Fund by resorting to borrowing, by selling gold to the people and also by receiving
fee from its borrowing members.
There is provision of revising the quotas of member countries in every five years. The
latest general increase in quotas as result of 9th review has enlarged the capital base
of the Fund and accordingly the Fund could increase the loan assistance extended to
its member countries.
Quota has a great significance to the member nations because of its following
implications:
(i) Quota determines the subscription of members to the IMF and that determines
the quantum of IMF resources;
(ii) It also determines the member country’s access to IMF resources either through
drawings or borrowings from the IMF.
(iii) The quota can also determine the voting power of member in IMF management.
(iv) The quota can also determine the share of member country in respect of
allocation of SDRs.
Critical Appraisal of International Monetary Fund (IMF)
It would be better to make an appraisal of the activities of IMF in the form of its
achievements and failures.
Achievements
The functioning of IMF has become successful in certain areas like—expansion of
fund, making adequate provision of credit for the developing countries, attaining
exchange stability, expansion of world trade, raising international liquidity, removing
international monetary system, setting up multilateral trade and payment system,
eliminating short-term disequilibrium of balance of payments, checking competitive
currency devaluation and setting up machinery for consultation so as to provide
export guidance to member countries in formulating its fiscal and financial policies.
Failures
In spite of achieving some degree of success by the IMF in certain areas, the Fund
suffers as a result of failures in many fronts.
Following are some of these failures:
(i) The IMF has failed in respect of achieving the basic objectives of international
exchange stability. Neither the Fund put any loan exchange fluctuations nor it
prevents competitive devaluation of currencies by its members.

(ii) The Fund has followed discriminatory treatment in favour of certain members in
its day to day functioning. It favours some Western countries and neglects the
genuine interests of underdeveloped and backward countries.
(iii) The IMF has also failed to establish a stable and sound international monetary
system and thereby experiences serious monetary crisis arising out of rapidly
fluctuating exchange rates. Thus the Fund has failed to bring complete stability in
foreign exchange rates.
(iv) The Fund has also failed to persuade the member countries to eliminate
exchange controls and other restrictions on foreign trade.
(v) In respect of promoting international liquidity the Fund has found it difficult to
meet the foreign exchange requirements of the members.
(vi) The IMF has also failed to eliminate the multiple exchange rates with regard to
different transactions.
(vii) The IMF has also failed to bring the free convertibility of currency of different
countries.
(viii) In respect of problems of long term disequilibrium in the balance of payments
faced by different countries, the IMF can provide only short term credit facilities.
(ix) The IMF has also failed to tackle the problem of petro dollars. The Fund should
have played an effective role in recycling the surpluses of OPEC countries towards
the developmental purposes of developing countries.
(x) The IMF has also failed to remove the various restrictions of trade imposed by
different countries. Accordingly, the most of the countries are making extensive use
of the trade and exchange controls.
(xi)In IMF affairs, the developing countries are having inadequate representation.
Although developing countries of Asia, Africa and Latin America constitute about 90
per cent of the members of IMF but in reality these countries are having 38 per cent
of the total voting power in various affairs of Fund.
(xii) As a result of non-revision of quota of IMF, the share of quotas as a percentage
of world trade has been declining fast from 16 per cent in 1965 to a mere 4 per cent in
1981.
(xiii) As a result of following faulty and biased method of extending credit on the
basis of quotas but not on the basis of need, the underdeveloped and developing
countries are not getting adequate financial support from the IMF because of their
small quotas.
(xiv) The rich member countries are maintaining larger quotas and thereby can
influence the policies and decisions of the IMF easily. Therefore, the IMF has been
branded as Rich Men’s Club because of their growing dominance.
(xv) Finally, it has also been argued that IMF has been interfering or influencing the
economic policies of poor and developing countries by putting various restrictions on
them.

Functions of International Monetary Fund (IMF)
1. Exchange Stability
The first important function of IMF is to maintain exchange stability and thereby to
discourage any fluctuations in the rate of exchange. The Found ensures such stability
by making necessary arrangements like—enforcing declaration of par value of
currency of all members in terms of gold or US dollar, enforcing devaluation criteria,
up to 10 per cent or more by more information or by taking permission from IMF
respectively, forbidding members to go in for multiple exchange rates and also to buy
or sell gold at prices other than declared par value.
2. Eliminating BOP Disequilibrium
The Fund is helping the member countries in eliminating or minimizing the short-
period equilibrium of balance of payments either by selling or lending foreign
currencies to the members. The Fund also helps its members towards removing the
long period disequilibrium in their balance of payments. In case of fundamental
changes in the economies of its members, the Fund can advise its members to change
the par values of its currencies.
3. Determination of Par Value
IMF enforces the system of determination of par values of the currencies of the
members countries. As per the Original Articles of Agreement of the IMF every
member country must declare the par value of its currency in terms of gold or US
dollars. Under the revised Articles, the members are given autonomy to float or
change exchange rates as per demand supply conditions in the exchange market and
also at par with internal price levels.
As per this article, IMF is exercising surveillance to ensure proper working and
balance in the international monetary system, i.e., by avoiding manipulation in the
exchange rates and by adopting intervention policy to counter short-term
movements in the exchange value of the currency.
4. Stabilize Economies
The IMF has an important function to advise the member countries on various
economic and monetary matters and thereby to help stabilize their economies.
5. Credit Facilities
IMF is maintaining various borrowing and credit facilities so as to help the member
countries in correcting disequilibrium in their balance of payments. These credit
facilities include-basic credit facility, extended fund facility for a period of 3 years,
compensatory financing facility, lociffer stock facility for helping the primary
producing countries, supplementary financing facility, special oil facility, trust fund,
structural adjustment facility etc. The Fund also charges interest from the borrowing
countries on their credit.

6. Maintaining Balance Between Demand and Supply of Currencies
IMF is also entrusted with important function to maintain balance between demand
and supply of various currencies. Accordingly the fund can declare a currency as
scarce currency which is in great demand and can increase its supply by borrowing it
from the country concerned or by purchasing the same currency in exchange of gold.
7. Maintenance of Liquidity
To maintain liquidity of its resources is another important function of IMF.

Accordingly, there is provision for the member countries to borrow from IMF by
surrendering their own currencies in exchange. Again for according accumulation of
less demand currencies with the Fund, the borrowing countries are directed to
repurchase their own currencies by repaying its loans in convertible currencies.
8. Technical Assistance
The IMF is also performing an useful function to provide technical assistance to the
member countries. Such technical assistance in given in two ways, i.e., firstly by
granting the members countries the services of its specialists and experts and
secondly by sending the outside experts.
9. Reducing Tariffs
The Fund also aims at reducing tariffs and other restrictions imposed on
international trade by the member countries so as to cease restrictions of remittance
of funds or to avoid discriminating practices.
10. General Watch
The IMF is also keeping a general watch on the monetary and fiscal policies followed
by the member countries to ensure no flouting of the provisions of the charter.

World Bank
The World Bank is an international organization dedicated to providing financing,
advice, and research to developing nations to aid their economic advancement. The
bank predominantly acts as an organization that attempts to fight poverty by offering
developmental assistance to middle- and low-income countries.
Currently, the World Bank has two stated goals that it aims to achieve by 2030. The
first is to end extreme poverty by decreasing the number of people living on less than
$1.90 a day to below 3% of the world population. The second is to increase overall
prosperity by increasing income growth in the bottom 40% of every country in the
world.
The World Bank is a provider of financial and technical assistance to individual
countries around the globe. The bank considers itself a unique financial institution
that sets up partnerships to reduce poverty and support economic development.
The World Bank supplies qualifying governments with low-interest loans, zero-
interest credits, and grants, all for the purpose of supporting the development of
individual economies. Debt borrowings and cash infusions help with global
education, healthcare, public administration, infrastructure, and private-sector
development. The World Bank also shares information with various entities through
policy advice, research and analysis, and technical assistance. It offers advice and
training for both the public and private sectors.
Objectives of World Bank

The following objectives are assigned by the World Bank:
1. To provide long-run capital to member countries for economic reconstruction

and development.
2. To induce long-run capital investment for assuring Balance of Payments (BoP)
equilibrium and balanced development of international trade.
3. To provide guarantee for loans granted to small and large units and other
projects of member countries.
4. To ensure the implementation of development projects so as to bring about a
smooth transference from a war-time to peace economy.
5. To promote capital investment in member countries by the following ways;
• To provide guarantee on private loans or capital investment

• If private capital is not available even after providing guarantee, then IBRD
provides loans for productive activities on considerate conditions.
Functions of World Bank

World Bank is playing main role of providing loans for development works to
member countries, especially to underdeveloped countries. The World Bank provides
long-term loans for various development projects of 5 to 20 years duration.
The main functions can be explained with the help of the following points:

1. World Bank provides various technical services to the member countries. For
this purpose, the Bank has established “The Economic Development Institute”
and a Staff College in Washington.
2. Bank can grant loans to a member country up to 20% of its share in the paid-
up capital.
3. The quantities of loans, interest rate and terms and conditions are determined
by the Bank itself.
4. Generally, Bank grants loans for a particular project duly submitted to the
Bank by the member country.
5. The debtor nation has to repay either in reserve currencies or in the currency
in which the loan was sanctioned.
6. Bank also provides loan to private investors belonging to member countries
on its own guarantee, but for this loan private investors have to seek prior
permission from those counties where this amount will be collected.
History of the World Bank

The World Bank was created in 1944 out of the Bretton Woods Agreement, which
was secured under the auspices of the United Nations in the latter days of World War
II. The Bretton Woods Agreement included several components: a collective
international monetary system, the formation of the World Bank, and the creation of
the International Monetary Fund (IMF). Since their foundings both the World Bank
and the International Monetary Fund have worked together toward many of the
same goals. The original goals of both the World Bank and IMF were to support
European and Asian countries needing financing to fund post-war reconstruction
efforts.
Both the World Bank and IMF outlasted the collective international monetary system
which was central to the Bretton Woods Agreement. President Nixon halted the
Bretton Woods international monetary system in the 1970s. However, the World
Bank and IMF remained open and continued to thrive on providing worldwide aid.
The World Bank and IMF are headquartered in Washington, D.C. The World Bank
currently has more than 10,000 employees in more than 120 offices worldwide.
Though titled as a bank, the World Bank, is not necessarily a bank in the traditional,
chartered meanings of the word. The World Bank and its subsidiary groups operate
within their own provisions and develop their own proprietary financial assistance
products, all with the same goal of serving countries’ capital needs internationally.
The World Bank’s counterpart, the IMF, is structured more like a credit fund. The
differing in the structuring of the two entities and their product offerings allows them
to provide different types of financial lending and financing support. Each entity also
has several of its own distinct responsibilities for serving the global economy.
Through the years, the World Bank has expanded from a single institution to a group
of five unique and cooperative institutional organizations, known as the World Banks
or collectively as the World Bank Group. The first organization is the International
Bank for Reconstruction and Development (IBRD), an institution that provides debt
financing to governments that are considered middle income. The second
organization within the World Bank Group is the International Development
Association (IDA), a group that gives interest-free loans to the governments of poor
countries. The International Finance Corporation (IFC), the third organization,

focuses on the private sector and provides developing countries with investment
financing and financial advisory services. The fourth part of the World Bank Group is
the Multilateral Investment Guarantee Agency (MIGA), an organization that
promotes foreign direct investments in developing countries. The fifth organization
is the International Centre for Settlement of Investment Disputes (ICSID), an entity
that provides arbitration on international investment disputes.
• The World Bank is an international organization dedicated to providing

financing, advice, and research to developing nations to aid their economic
advancement.
• The World Bank and International Monetary Fund were founded
simultaneously under the Bretton Woods Agreement with generally the same
focus to help serve international governments globally.
• The World Bank has expanded to become known as the World Bank Group
with five cooperative organizations, sometimes known as the World Banks.
• The World Bank Group offers a multitude of proprietary financial assistance
products and solutions for international governments as well as a range of
research-based thought leadership for the global economy at large.

UNIT-V
Global Operations
Traditionally ‘production’ or ‘manufacturing’ management has been used to
imply production of physical goods, which are tangible in nature, such as
automobiles, computers, televisions, camera, furniture, equipment, etc. During
recent decades, ‘services’ that are ‘intangible’ in nature but also satisfy needs of a
customer have grown rapidly.
Service providers like educational institutes, banks, insurance companies,
amusement parks, etc., form a part of services.
A combination of goods and services may also form a product. For instance, meals
served in a restaurant comprise both the tangible physical core product and
intangible services aspects, such as cleanliness, ambience, delivery, etc.
Operations management refers to planning, organizing, and controlling all resources
and activities to provide goods and services, which applies equally to manufacturing
and services in the private and public sectors and even governments.
Operations management refers to the process which transforms inputs such as
materials, machines, labour, capital and management, into outputs (i.e., goods and
services).
The transformation process in ‘operations’ can have different forms,

such as:
Globalization of Operations Management
The forces of globalization, such as reduction in trade barriers, cheaper and easier
means of international transportation and communication, wage differential, and
market saturation in the home markets on one hand and rapidly growing marketing
opportunities overseas, especially in emerging economies on the other, have led to
expansion of operations on a global scale.

Globalization of operations includes:
• Global sourcing of inputs

• Global production of goods and services
• Global transportation of products
• Global management of entire supply chain
An MNE headquartered in New York, New Delhi, or London may have production
operations in a few countries and warehousing and marketing across the world.
For instance, Exxon Mobil, the world’s largest integrated oil company has its
upstream drilling activities in about 50 countries; Siemens, the leading manufacturer
of high technology industrial and consumer equipment, operates in over 190
countries with about 500,000 employees, and Boeing, the world’s largest
manufacturer of commercial aircraft has operations in 26 countries with customers
in over 100 countries.
Off-shoring
Relocation of business processes to a low-cost location by shifting the task overseas is
termed as ‘off-shoring’. Capital assets may be shifted to a new production location by
relocating the business processes to a new country within the company or by being
sold to others.
Such assets include business processes, such as production, manufacturing, or
services from high-cost locations (for example, the US or Europe) to low-cost
locations, such as India, China, or Latin America. With digitization, the Internet, and
high-speed data networks as the driving forces, all kinds of knowledge related work
can now be performed almost anywhere in the world.
Activities which are particularly suitable for off-shore sourcing are discussed as
follows:
(i) Products at the maturity stage of their product life cycle where technology has
become standardized and widespread, requiring long-production runs making labour
costs crucial to achieve competitiveness, are suited for off-shoring.
(ii) In case of technology: and capital-intensive industries, such as electronics,
telecommunication, and software, certain parts of the production process are labour-
intensive and need to be off-shored to low-cost locations.
Relocating the business processes for quality reasons at higher costs to another
country are not considered off-shoring, for instance, shifting a costume-design centre
from an East European or a South Asian country to Italy or France.
China and India, besides other developing countries, have become the most sought
after off-shoring locations. Exhibit 16.1 illustrates the emergence of China as a global
manufacturing hub, primarily due to low-cost large-scale production facilities
whereas India, as a result of abundance of highly-skilled and knowledge-intensive
manpower, has become the virtual, service centre for the world.

Types of off-shoring
(i) Captive off-shoring
Relocating business processes to a low-cost location and delivering from a shared
service centre owned by the company itself is known as captive off-shoring.
(ii) Third party off-shoring
Also known as outsourcing, third party off-shoring involves relocation of business
process from within the client country to an outside vendor operating at low-cost
location. For the client company, the ‘outsourced’ services are performed by the
outside vendor.
(iii) Near-Shoring
Relocation of a business process to a country within the same geographical region is
referred to as near-shoring. For instance, shifting business processes from the US to
Mexico or from Western to Eastern Europe.

Supply Chain Management (SCM)
Supply chain management is the management of the flow of goods and services
and includes all processes that transform raw materials into final products. It
involves the active streamlining of a business’s supply-side activities to maximize
customer value and gain a competitive advantage in the marketplace.
SCM represents an effort by suppliers to develop and implement supply chains that
are as efficient and economical as possible. Supply chains cover everything from
production to product development to the information systems needed to direct
these undertakings.
Typically, SCM attempts to centrally control or link the production, shipment, and
distribution of a product. By managing the supply chain, companies are able to cut
excess costs and deliver products to the consumer faster. This is done by keeping
tighter control of internal inventories, internal production, distribution, sales, and
the inventories of company vendors.
SCM is based on the idea that nearly every product that comes to market results from
the efforts of various organizations that make up a supply chain. Although supply
chains have existed for ages, most companies have only recently paid attention to
them as a value-add to their operations.
In SCM, the supply chain manager coordinates the logistics of all aspects of the
supply chain which consists of five parts:
• The plan or strategy

• The source (of raw materials or services)
• Manufacturing (focused on productivity and efficiency)
• Delivery and logistics
• The return system (for defective or unwanted products)
The supply chain manager tries to minimize shortages and keep costs down. The job
is not only about logistics and purchasing inventory. According to Salary.com, supply
chain managers, “make recommendations to improve productivity, quality, and
efficiency of operations.”
Improvements in productivity and efficiency go straight to the bottom line of a
company and have a real and lasting impact. Good supply chain management keeps
companies out of the headlines and away from expensive recalls and lawsuits.
Supply Chain Strategies are the critical backbone to Business Organizations
today. Effective Market coverage, Availability of Products at locations that hold the
key to revenue recognition depends upon the effectiveness of Supply Chain Strategy
rolled out. Very simply stated, when a product is introduced in the market and
advertised, the entire market in the country and all the sales counters need to have
the product where the customer can buy and take delivery. Any glitch in the product
not being available at the right time can result in the drop in customer interest and
demand which can be disastrous. Transportation network design and management
assume importance to support sales and marketing strategy.

Inventory control and inventory visibility are two very critical elements in any
operations for these are the cost drivers and directly impact the bottom lines on the
balance sheet. Inventory means value and is an asset to the company. Every business
has a standard for inventory turnaround that is optimum for the business. Inventory
turnaround refers to the number of times the inventory is sold and replaced over a
period of twelve months. The health of the inventory turn relates to the health of
business.
In a global scenario, the finished goods inventory is held at many locations and
distribution centers, managed by third parties. A lot of inventory would also be in the
pipeline in transportation, besides the inventory with distributors and retail stocking
points. Since any loss of inventory anywhere in the supply chain would result in loss
of value, effective control of inventory and visibility of inventory gains importance as
a key factor of Supply Chain Management function.
Example of SCM
Understanding the importance of SCM to its business, Walgreens Boots Alliance Inc.
placed focused effort on transforming its supply chain in 2016. The company
operates one of the largest pharmacy chains in the United States and needs to
efficiently manage and revise its supply chain so it stays ahead of the changing trends
and continues to add value to its bottom line. As of July 5, 2016, Walgreens has
invested in the technology portion of its supply chain. It implemented a forward-
looking SCM that synthesizes relevant data and uses analytics to forecast customer
purchase behavior, and then it works its way back up the supply chain to meet that
expected demand. For example, the company can anticipate flu patterns, which allow
it to accurately forecast needed inventory for over-the-counter flu remedies, creating
an efficient supply chain with little waste. Using this SCM, the company can reduce
excess inventory and all of the inventories’ associated costs, such as the cost of
warehousing and transportation.
• Supply chain management (SCM) is the centralized management of the flow of

goods and services and includes all processes that transform raw materials
into final products.
• By managing the supply chain, companies are able to cut excess costs and
deliver products to the consumer faster.
• Good supply chain management keeps companies out of the headlines and
away from expensive recalls and lawsuits.

International Human Resource Management
International human resource management (IHRM) is the process of
procuring, allocating, and effectively utilizing human resources in a multinational
corporation. If the MNC is simply exporting its products, with only a few small
offices in foreign locations, then the task of the international HR manager is
relatively simple.
However, in global firms human resource managers must achieve two somewhat
conflicting strategic objectives. First, they must integrate human resource policies
and practices across a number of subsidiaries in different countries so that overall
corporate objectives can be achieved.
Pulapa Subba Rao defines international human resource management as, performing
HRM and its related activities and arranging for related and necessary immigration
facilities for prospective and current expatriate employees, by organizations
operating in domestic and/or foreign countries.
Need of International Human Resource Management

HRM activities are performed in a particular context. It implies that either different
HRM activities may be required in a global firm as compared to the domestic firm or
even if the HRM activities remain the same, there may be difference in the way of
performing these activities.
There are four major contextual variables because of which HRM activities in a
global firm differ from a domestic firm, hence the need for international HRM. These
are cultural diversity, workforce diversity, language diversity, and economic
diversity. Let us go through these variables and see how they affect HRM practices.
1. Cultural Diversity
Culture of a country is one of the key factors which affect people-oriented processes,
and HRM is a people-oriented process. Therefore, culture of a country has very
significant impact on HRM practices. When we consider global perspective of HRM,
we find cultural diversity along the globe, that is, cultures of two countries are not
alike.
Cultural diversity exists on five dimensions- individualism versus collectivism, power
orientation, uncertainty avoidance, masculinity versus femininity, and time
orientation. Let us see how these dimensions affect human behaviour and,
consequently, work practices.
(a) Individualism versus Collectivism
People differ in terms of individualism and collectivism. Individualism is the extent
to which people place value on themselves; they define themselves by referring
themselves as singular persons rather than as part of a group or organization. For
them, individual tasks are more important than relationships. Collectivism is the
extent to which people emphasize the good of the group or society. They tend to base
their identity on the group or organization to which they belong. Countries that value
individualism are USA, Great Britain, Australia, Canada, Netherlands, and New
Zealand. Countries that value collectivism are Japan, Columbia, Pakistan, Singapore,
Venezuela, and Philippines.’ India may be placed near to collectivism.

(b) Power Orientation
Power orientation, also known as orientation to authority, is the extent to which less
powerful people accept the unequal distribution of power; people prefer to be in a
situation where the authority is clearly understood and lines of authority are never
bypassed. On the other hand, in a culture with less orientation to power, authority is
not as highly respected and employees are quite comfortable circumventing lines of
authority to accomplish jobs.
(c) Uncertainty Avoidance
Uncertainty avoidance, also known as preference for stability, is the extent to which
people feel threatened by unknown situations and prefer to be in clear and
unambiguous situations. In many countries, people prefer unambiguity while in
many other countries, people can tolerate ambiguity.
(d) Masculinity versus Femininity
Masculinity or femininity, also known as degree of assertiveness or materialism, is
the extent to which the dominant values in a society emphasize aggressiveness and
the acquisition of money and material goods, rather than concern for people and
overall quality of life. In societies having masculinity characteristics, more emphasis
is placed on ego goals such as career, money, etc., while in societies having femininity
characteristics, more emphasis is placed on social goals such as relationships,
helping others, etc.
(e) Time Orientation
Time orientation dimension divides people into two categories- long- term
orientation and short-term orientation. People having long-term orientation focus on
future, prefer to work on projects having a distant payoff, and have persistence and
thrift. People having short-term orientation are more oriented towards past and
present and have respect for traditions and social obligations.
The basic implication of cultural diversity is that same set of HRM practices is not
suitable for all cultures; consideration has to be given about matching HRM practices
with cultural characteristics of the countries concerned.
2. Workforce Diversity
Workforce diversity is increasingly becoming common for large organizations even
for domestic ones. However, in a global firm, additional workforce diversity emerges
because of hiring personnel from different countries. A typical global firm may draw
its employees from three types of countries — home country (PCNs), host country
(HCNs), and third country (TCNs). In a global firm, workforce diversity can also be
seen in the context of employee mobility from one country to another country for
performing jobs. On this basis, an employee can be put in one of the following :
• Expatriate: A parent country national sent on a long-term assignment to the

host country operations.
• Inpatriate: A host country national or third country national assigned to the
home country of the company where it is headquartered.
• Repatriate: An expatriate coming back to the home country at the end of a
foreign assignment.

Workforce diversity implies that various categories of employees not only bring their
skills and expertise but also their attitudes, motivation to work or not to work,
feelings, and other personal characteristics. Managing such employees with pre-
determined HRM practices may not be effective but contingency approach has to be
adopted so that HRM practices become tailor-made.
3. Language Diversity
Language is a medium of expression but employees coming from different countries
have different languages. Though English is a very common language, it does not
serve the purpose adequately as it does not cover the entire world. While employees
coming from different countries may be encouraged to learn the language of the host
country for better dissemination of the information, it does not become feasible in
many cases.
An alternative to this is to send multilingual communications. It implies that
anything transmitted to employees should appear in more than one language to help
the message get through. While there are no hard- and-fast rules in sending such
messages, it appears safe to say that such a message should be transmitted in the
languages the employees understand to ensure adequate coverage.
4. Economic Diversity
Economic diversity is expressed in terms of per capita income of different countries
where a global company operates. Economic diversity is directly related to
compensation management, that is, paying wages/salaries and other financial
compensation to employees located in different countries.
One of the basic principles of paying to employees is that “there should be equity in
paying to employees.” However, putting this principle in practice is difficult for a
global company because its operations are located in different countries having
different economic status. In such a situation, some kind of parity should be
established based on the cost of living of host countries.
Diversity of various types in a global firm suggests that HRM practices have to be
tailor- made to suit the local conditions.
Recruitment Policy of International Human Resource Management

Companies operating outside their home countries, essentially, follow three ways of
hiring executives:
1. Ethnocentrism
It is a cultural attitude marked by the tendency to regard one’s own culture as
superior to others. Sending home country executives abroad – thinking that they will
be able to deliver the goods – may be an appropriate strategy in the initial stages of
expanding company operations worldwide as these officials know what to do
immediately. At Royal Dutch Shell, for instance virtually all financial controllers
around the world are Dutch nationals.
Often the other reasons advanced for ethnocentric staffing policies include- lack of
qualified host country managerial talent, a desire to have a unified corporate culture,
tight control and the keenness to transfer the parent company’s core competencies
(say, a specialised design skill) to a foreign subsidiary more expeditiously.

However, a policy of ethnocentrism is too narrow in its focus and may evoke strong
negative reactions from local executives whose upward mobility is blocked.
There is also no guarantee that the expats will win over the hearts of local employees
and offer positive contributions. In fact, failures of US expats range from 10% to 15%.
European and Japanese expat failures are equally alarming, the costs of each such
failure running to several thousands of dollars.
Too often expats are selected on the strength of their domestic track record. They are
posted abroad without requisite cross-cultural training. The family factors stand
completely discounted in the selection process. The rate of failures could be
drastically reduced if these issues are properly addressed.
2. Polycentrism
In the polycentric corporation, there is a conscious belief that only host country
managers can ever really understand the culture and behaviour of the host country
market; therefore, the foreign subsidiary should be managed by local people. The
home-office headquarters, of course, is staffed by parent-country nationals.
Hiring nationals has many advantages. It eliminates language barriers, expensive
training periods, cross-cultural adjustment problems of managers and their
families.It also permits the firms to attract talented locals by offering an attractive
compensation package. Many western MNCs have found that the key to success on
foreign soil is to employ local people.
Analog Devices Inc. has achieved global success in a highly technical field by picking
up local managers, training them extensively and then empowering them to hire and
manage more local talent. Likewise, global sales of Bausch & Lomb improved
dramatically after putting the local managerial talent to good use.
3. Geocentrism
Geocentrism assumes that management candidates must be searched on a global
basis, without favouring anyone. The best manager for any specific position
anywhere on the globe may be found in any of the countries in which the firm
operates. Such a staffing policy seeks the best people for important jobs throughout
the organisation, regardless of nationality. It helps to build a stronger and more
consistent culture and set of values among the entire global management team.
‘Team members here are always interacting, networking and building bonds with
each other, as they move from assignment to assignment, around the globe and
participate in global development activities’. Colgate-Palmolive is an example of a
company that hires the best person for the job regardless of nationality. It has been
operating globally for more than 55 years, and its products are household names in
more than 175 countries.
Fully 60 per cent of the company’s expatriates are from countries other than the
Unites States and two of its last four CEOs were not US nationals. Moreover, all the
top executives speak at least two languages and important meetings routinely take
place all over the globe.

Challenges of International Human Resource Management
According to P. V. Morgan, International HRM is the result of an interplay among
the three dimensions human resource activities, types of employees and countries of
operation. The complexities of operating in various countries and employing
different national categories of workers is an important variable that differentiates
domestic and international HRM, rather than any major differences between HRM
activities performed.
Broadly stated, IHRM is “the process of procuring, allocating and effectively utilising
human resources in a multinational corporation “. When compared to domestic
human resources management, the scope of IHRM is very wide.
For example, while compensating people in India, the American MNC must keep in
mind the expectations of locals, the competitor’s compensation structure, taxation
problems of repatriates, TCN’s aspirations and a host of other issues that have a
bearing on the psyche of employees possessing different skills and having different
cultural backgrounds (both within and outside the country).
IHRM, thus, requires a much broader perspective, encompasses a greater scope of
activities and is subject to much greater challenges than is domestic HRM.
International Trade Procedures and Documentation
Export
Export of goods take place when there is a change of proprietorship from a resident
to a non-resident; this does not essentially infer that the goods in question physically
crosses the border.
However, in specific cases national accounts credit changes of ownership even
though in legal terms no change of ownership takes place such as cross border
financial leasing, cross border deliveries between affiliates of the same enterprise,
goods crossing the border for significant processing to order or repair. Also smuggled
goods must be included in the export measurement.
Exporter has to submit ‘shipping bill’ for export by sea or air and ‘bill of export’ for
export by road. Relevant documents i.e. copies of packing list, invoices, export
contract, letter of credit are also to be succumbed.
For many companies, export begins in the sale or marketing department. That
department may develop leads or identity clients located in other countries.
Inquiries or orders may come from potential customers through company website
where the destination is not identified. When such orders come in, sales person need
to determine what steps are different from its domestic sale in order to fill those
export orders?

Basic Export Procedures
1. Market Research and Setting Objectives of Distribution
Selecting target markets, methods of exportation and channels, setting foreign

market objectives on pricing and terms
2. Trade Regulations
• Export regulations and requirements

• Overseas import regulations and requirements
• Patent, trademark and copyright
3. Making Contacts
• Investigations from interested overseas buyers

• Checking buyer’s background from ECIC and / or banks
4. Quotation and Terms
• Making offers and quotation for potential buyers

• Costs, quotations and pro forma invoices, and terms of sale
5. Sales Contract
• Confirming the sales contract and terms of transaction such as payment

terms.
6. Contract Execution
• Producing or sourcing goods

• Packing and labelling
• Arranging shipment
• Preparing exports documentation
• Arranging insurance, if necessary
7. Customs Clearance
Arranging export declaration and applying for export licence when necessary.
8. Getting paid
Subject to the payment terms specified in the sales contract, the exporter should
present the required documents to the relevant parties for payment.

Import
Import is explained as bringing products into own country from a place outside
national border. It can be said that Import trade refers to the purchase of goods from
a foreign country. The procedure for import trade varies 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 aims of these controls are appropriate use of foreign exchange
restrictions, protection of indigenous industries etc. The imports of goods have to
follow a procedure.
A manufacturer’s import department often grows out of the purchase department,
whose personnel have been assigned the responsibility of procuring raw material or
components for the manufacturing process. For importers or trading companies that
deal in finished goods, the import department may begin as a result of being
appointed as the distributor for a foreign manufacture.
In Indian context, the import and export of goods is ruled 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 major governing body
and responsible for all issues associated with EXIM Policy. Importers are essential 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.
Basic Import Procedures
1. Setting Market Objectives
Setting market objectives on pricing and terms
2. Sourcing Products
• Identifying potential suppliers

• Sourcing channels of distribution
3. Trade Regulations
• Import regulations and requirements, and checking whether import licence is

required
• Patent, trademark and copyright
4. Making Contacts
Sending enquiries to suitable suppliers
5. Settling Quotation and Terms
• Analysing the supplier’s quotation and offers

• Costs and terms of sale
6. Financing the Purchase
• Preparing for working capital

• Types of bank financing and application, such as exporter credit or other bank
facilities
7. Sales Contract
Confirming the sales contract and terms of transaction such as payment terms.
8. Preparing Payment and Insurance
• Preparing payments and insurance specified in sales contract (eg. when

payment term is D/C, submit D/C application to the issuing bank; when trade
term is FOB, arrange cover note with an insurance company).
• Preparing insurance, cover note, when necessary
9. Acquiring Goods
• Receiving shipping advice and arrival notice

• Receiving export documents from the exporter
• Collecting goods from the specified shipping company or forwarder
10. Customs Clearance
Arranging customs clearance and import declaration.

Import Procedure
All importers must have to follow detailed customs clearance formalities when
importing goods into India. A complete overview of EXIM procedures can be found
on the Indian Directorate of General Valuation’s website.
It is established in finance literature that smooth, efficient and compliance oriented
exporting, importing needs specialized knowledge of personnel. In many companies
some or all functions of export and import department are combined in some way. In
smaller companies, where the volume of export and import does not justify more
personnel one or two person may have responsibility for both export and import
documentation and procedures. In giant companies, these functions tend to be
separated into export department and import department.
It is beneficial for companies to have export and import manual of procedures and
documentation. These manuals serve as an effective tool for smooth operations and
as a training tool for new employees. Exporters and importers must maintain record
relating to their international trade transaction. Many companies offer software
program for managing the export process such as order taking, generating of export
documentations compliance with export control regulation, calculation of
transportation charges and duties. On import side, many companies offer supply
chain management software.

Global e–business
Communication technologies have become advanced since last decade of the
twentieth century that accelerated the process of globalization. Presently most of the
nations are ready for the electronic economy and to build e-business infrastructure.
It is necessary for different countries to develop specialized e-business strategies that
exploit their unique capabilities and resources, and even geographic positions. There
is also a need for a variety of models for building e-business infrastructure and
participating in global e-commerce. Global e-business is growing speedily and
several trillion dollars are being exchanged annually over the web. Companies must
assess global markets and broaden online in developed countries as well as in the
emerging economies of other nations like China, Brazil, and India to exploit the
technology of global e-business. Companies may proactively utilize global e-business
opportunities and take benefits of e-commerce, or may implement a protective
approach to new global competition that intimidates their business. Domestic
businesses will progressively feel more pressure of international competition as e-
business will offer companies a platform to fight at universal level.
The combination of telecommunications and computer technology has initiated
business organizational system known as the internet that offered example of
ecological business development. The internet symbolizes a new and important
technology that has received more attention from academicians, entrepreneurs,
business and investors (Sawhney and Zabin, 2002). The expansion of e-commerce,
facilitated through the internet as a channel, suggests both the emergence of a new
business environment, and the likelihood of catastrophic change within the previous
environment. The emergence of the information age and the initiation of the internet
have resulted in transformations and these outcomes forced companies to review
their organizational models used to explain business management. Hannan and
Freeman (1977) developed the basis of organizational ecology in an attempt to
describe the existence of organizations. Since then, organizational ecologists have
theorized that environmental pressures considerably impact the triumph of an
organization with regard to its form, function, and overall strategy.
A critical assessment of the growth of e-commerce on the internet gives a distinctive
opportunity to scrutinize the natural development of a business sector that was
created and colonized over a relatively short time period. Clearly, the internet
technology and its different manifestations such as e-commerce provide better
opportunities for companies around the world to establish unique strategic
advantages (Varadarajan and Yadav, 2002). Global e-commerce is basically about
leveraging electronic networks to capture global markets, and it includes all
transactions taking place in the worldwide electronic market space. Transactions
between global purchaser and sellers can take the form of business-to business
(B2B), business-to-consumer (B2C), consumer-to-consumer (C2C), business to-
government (B2G), and other hybrid forms of transactions.

Global E-Enabled Business Process Transformations and Challenges
Integration of digital technology into the business processes has considerably
transformed the traditional ways of doing business. Some of the changes brought
about by e-business are summarized below:
(i) Physical marketplace to virtual market-space
The Internet has transformed the traditional ways of buying and selling of goods at
physical marketplaces into virtual market-space enabling almost unlimited
movements beyond physical borders.
(ii) Physical products to digital products
Breakthroughs in ICT have made possible to sell and buy some products online. For
instance, computer software, music, movies, video games, drawings, designs,
research papers, reports, and even books can be accessed, evaluated, bought, and
downloaded over the net.
(iii) Mass production of standardized products to mass customization
Consequent to industrial revolution in the eighteenth century, the large-scale
production of standardized products was used as the most significant tool to achieve
scale economies and competitiveness.
Advent of electronic technology and Internet facilitated real-time interaction and
information-sharing between the businesses and their various stakeholders,
especially the customers and suppliers that made it possible to integrate
manufacturing systems to produce customized products for different customers.
(iv) Fixed pricing to dynamic pricing
E-business models offer flexibility in price determination in several ways, such as
buyer-determined customized pricing, dynamic pricing by way of online auctions,
unlike the traditional fixed-pricing approach.
(v) Mass marketing techniques to customized marketing
Traditional marketing heavily relied upon mass marketing techniques with some
adaptations for different market segments. Advent of ICT has facilitated businesses
to gather information about individual customers’ tastes and preferences, their
buying behaviour and customized marketing strategy to cater to each of the
customers.
(vi) Hierarchical organizations to network organizations
The traditional ‘hierarchical organizational structures’ are transforming into
‘network organizational structures’ so as to take benefit of emerging e-business
opportunities and meet the potential challenges.

However, businesses going online face several challenges, including:
• As most businesses are making their online presence, the market competition
has grown multi-fold from local to global level.
• Online buying and selling of goods often results in elimination of market
intermediaries; the process is frequently referred to as ‘disintermediation’,
and leads to channel conflict.
• Increase in availability of information online on the public domain augments
the chances of its copying by the competitors who make its use for their own
benefits.
• Since the Internet can be accessed from across the world, there is no single
binding legal framework.
• Most businesses and customers often fear breach of security in terms of both
the theft and misuse of classified and personal information over the Internet.
• A large segment of customers is resistant to carrying out business transactions
over the Internet.
• Viability of carrying out business transactions differs across firms, depending
upon their nature of business and resource availability.
Global E-Business Applications

Integration of ICT finds wide applications in a range of business activities, including
the following:
1. E-auctions: In traditional auctions, buyers and sellers gather at an agreed
place, often the auction house, at a pre-determined time. Bids are usually
placed over and above the reserved price set by the seller until the biding stops
at a higher offer rate and the final bidder makes claims to the goods. Using a
similar approach, electronic auction sites allow Internet users either to sell or
bid for the products offered. Auction sites generally serve as a forum of buying
and selling and charge a commission on sales made. Sellers may post an item
they wish to sell along with a minimum price and the deadline to close the
auction. Moreover, some site also allows addition of conditions of sales and
product photographs. On the other hand, bidders may explore the site to
check its availability and place a bid, usually in designated increments. EBay
allows people to buy and sell almost anything. In some sites, such as liquid
price(dot)com, the ‘reverse-auction’ model is used which allows buyers to set
the price that sellers compete to match or even beat. A reverse price is the
lowest price a seller is willing to accept.
2. E-banking: The banking industry is a pioneer in using EDI for intra-bank
transfer of funds using the SWIFT network. E-banking allows its customers to
access their accounts using the Internet and make online transactions with no
extra charge. Besides, banks compete with each other to offer a variety of
value-added services to their customers, such as checking their balances,
account statements, fund transfers, bill payment, transactions in the stock and
commodity markets, customer service, etc. As a result, customers have access
to banking services 24 hours a day and seven days in a week. E-banking has
transformed the business processes and its relationship with customers in the
banking industry.

4. E-directories: Telephone directories, the so-called ‘white pages’ containing
private telephone numbers and the ‘yellow pages’ for businesses have widely
been used to locate a person or a company. Conversion of traditional
directories from paper to electronic form and integrating them with the
Internet has facilitated their online access round the clock from any part of the
world. Besides, a large number of online directories allow users to update
their entries any time they wish, irrespective of their geographical locations.
Thus the information which could earlier be updated only at the time of
printing a new or revised directory has become dynamic in nature. Moreover,
electronic directories are often user-friendly. Users may online access detailed
information upon entering the desired fields.
5. E-manufacturing: Integration of technology has facilitated sharing real-time
information with a firm’s customers and trading partners, leading to the use of
such information for making collaborative production decisions. As a result,
businesses are increasingly adopting e-manufacturing using real-time
information on customer needs and preferences and productive capacity
across the entire supply-chain so as to speedily deliver customized products
directly to the customers rather than huge volumes of mass production to
fulfil anticipated demands. An automated manufacturing system integrated
through computer technology is known as computer integrated manufacturing
(CIM). With globalization of markets and production and with the advent of
the Internet, CIM has evolved into a web- centric collaborative venture,
termed as e-manufacturing. E-manufacturing involves Computer-Added
Designs (CAD), robots, automated guided vehicles. Computer Numerical
Control (CNC) machines, Automated Storage and Retrieval Systems (ASRS),
and Flexible Manufacturing Systems (FMS).
5. E-business Research : The uses of electronic surveys for business research
have increased tremendously in the last decade. Due to variation in the extent
of availability of personal computers and Internet penetration, mass electronic
surveys are possible only in a few developed countries while stratified
sampling for select market segments can even be carried out in developing
countries. The Internet has the reach of far greater population than that
captured in most multilateral surveys and publications. Hence, business and
institutional surveys are gaining popularity even in the developing countries.
Although electronic surveys are cost-effective and quick, the sample surveyed
may not be representative of the population and may lead to faulty inferences.
So, due care is to be taken while selecting samples for electronic surveys.
6. E-governance :Governments across the world are using the Internet to
augment their communication systems with their citizens. Government
websites often provide a wealth of information which is extensively used by
foreign and multilateral agencies, officials, researchers, and most importantly
by their own citizens. In addition to information provided, governments
across the world are evolving new systems to integrate technology for
providing value-added services. Integration of technology with a system of
governance has made it possible to make online queries, file complaints, make
applications for various statutory approvals, receive approvals online, and
track online interactions. E-governance has significantly contributed to
transparency and efficiency in public administration.

Ethics and Social Responsibility: International Business Ethics
International business ethics emerged quite late globally compared to the business
ethics that came up in 1970’s. It was only in late 1990’s that the international
business ethics came to the fore especially so after the economic developments that
occurred on a global scale.
In 1990’s many businesses from the developing countries expanded their operations
and became multinational. The transactions between businesses and the
governments increased as a result, which gave rise to many practical issues. Culture
and its relativity was one factor more prominent than the others. Other ethical issues
in the context of international business are generally dealt with the laws of the land;
although all of them fall within the ambit of international business ethics.
Globalization diminished the barriers between countries on the globe and also called
for universalization of values for trade to occur smoothly. Universal values were
perceived to control the behaviour in the commercial space. This lead to ethical
issues in the international business perspective, those that were unknown till date.
Other theoretical issues arise from the diversity of business ethical traditions in
various countries across the globe. In addition, comparisons made on the basis of
corruption rankings of a certain state or on the basis of gross domestic product of a
certain economy also lead to ethical issues in the international arena. Since religion
brings in a wholly different perspective to the way we look upon things; the
comparison of ethical traditions from the perspective of the latter also gives birth to
ethical problems. For example, trade in Christian dominated countries is different
from the trade in Islamic countries. Again depending upon how strong or profound
the impact of the religion is, business practices are influenced proportionally.
In the international business arena, ethical problems also arise out mere
international business transactions. Fair trade movement, transfer pricing,
bioprospecting and biopiracy are examples of transactions that fall within the ambit
of international business ethics. Similarly issues like child labor and cultural
imperialism are controversial enough to call upon the attention of international
business ethics. Yet another arena for strong requirement of ethics would be when
multinationals bargain to take advantage of international differences; For example
when rich nations outsource their services to poor and developing nations at cheaper
cost. Western nations were up till recently outsourcing many of services to third
world nations where they could hire manpower for the cheapest prices. This led to a
severe competition between developing nations with each one offering cheaper
labour than the other.
Dumping is yet another way by which large companies are trying to kill the domestic
players. Foreign players often sell goods and services at a cheaper price making it
hard for the small players to survive the competition. Consumer durables and FMCG
are biggest examples of such practices. The bigger threat here is the resulting
monopoly which places the customer in a losing position. The international trade
commission began for its search of its anti dumping laws from the year 2009. All
these are ways in which business at the international level can lead to ethical
dilemmas. In absence of international business ethics it may become almost
impossible to regulate business and create winning situations for people in the
market place.

Ethical issues in Business
Business ethics is both part of the prescriptive (normative) ethics establishing
standards of conduct, recommending certain behaviours, as well as descriptive
ethics, describing the moral attitudes and behaviours of entrepreneurs. In principle,
the practical goal of business ethics is to solve ethics problems in business.
Ethical factor in area of business communication
• Proper marketing techniques, telling truth about products and services,

• Informing customers, employees and partners about company’s mission
statement and goals,
• Respecting religious and social values of employees, customers and partners,
• Negligence in informing shareholders about company’s situation, managerial
ethics
• Insider trading, hiding information about mergers, acquisitions, investments,
etc.
Ethical factors concerning production processes
• Eliminating unsafe working conditions,

• Avoiding processes and technologies that jeopardize the safety of the
employees and public,
• Producing product safe for customers,
• Waste product utilization and recycling,
• Profiting from products bad for health (drugs, cigarettes, alcohol) and people
(gambling),
Social Responsibility
Social responsibility is a form of management that considers ethical issues in all
aspects of the business. Strategic decisions of a company have both social and
economic consequences. Social responsibility of a company is a main element of the
strategy formulation process. There is a misconception that corporate social
responsibility is less relevant to small businesses; however, there is growing
recognition of the importance of social responsibility for smaller firms.
Integrating social responsibility in strategic management requires sound knowledge
of the types of social responsibilities a company deals with. Economic responsibilities
are the most basic type of social responsibilities. The company is expected to provide
goods to the society at reasonable prices, create jobs and pay due taxes.
Legal responsibilities reflect the obligation to comply with the laws that regulate
business activities; ethical responsibilities mirror the company’s notion of the right
business behavior. Some actions might not be illegal but can be unethical. Making
and selling cigarettes is a case in point.
Finally, discretionary responsibilities are those that are voluntarily adopted by the
business. For example, companies that adopt the good citizenship approach, actively
support charities, public service advertising campaigns and other public interest
issues

Corporate social responsibility is self-regulation by a company with the objective of
embracing responsibility for the company’s actions and creating a positive impact
through its activities on its customers, employees, communities and the
environment. A company may build into its mission, strategy and everyday
operations elements that serve to promote specific goals, for example, using recycled
paper or organic hand soap in the offices to help save the environment.
Benefits for the Company
Although direct effects haven’t been proved and much criticism has risen around
CSR, companies identify some obvious benefits. Implementing the values and goals
of CSR improve the judgment and reputation of the business among customers. In a
strong, competitive market it also makes the business stand out from its rivals. CSR
may also prompt current and potential employees to commit themselves to the
company and promote its values in their private lives.
Good Example
The Body Shop is the most cited example of establishing CSR early in an exceptional
way. The natural-cosmetics company promotes social and environmental issues. It
implemented a shared campaign with Greenpeace to save the whales; a campaign
against overly skinny models to avoid perpetuating bulimia and anorexia; and an
initiative called Community Fair Trade to help people sell their products in
developing countries. It also regularly sponsors local charity and community events.
Cautionary Example
H&M, the clothing store implemented the CSR strategy of producing clothing items
from organic cotton. The organic-clothing line gave consumers a positive image
towards H&M for years. But this image was easily destroyed when three different
reports in one year accused the company of using genetically modified cotton from
India in its products. Today, H&M’s new line represents only low prices but not
organic clothing.

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International Business

SUPER HOUSE MANAGEMENT SERVICES

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Types of International Businesses

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1. Domestic Business is defined as the business whose economic transaction is

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Area of operation Within the country Whole world

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Importance of International Business

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1. It is important to meet imports of industrial needs.

SUPERHOUSE MANAGEMENT SERVICES PVT. LTD. PH: 9829150137 [8]

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Scope of International Business :International business is the process of

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International Business Environment

Importance of the International Business Environment

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International Business Environment: Political Environment, Economic

• The Political system of the business

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• An Economic system to enter the business sector.

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• Level of technological development in the country as a whole & specific

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SUPERHOUSE MANAGEMENT SERVICES PVT. LTD. PH: 9829150137 [15]

International Business Organizations

• Exporting goods and services.

International Business Organizations

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Forms of International Organizations

Exports activities are controlled by a company’s home-based office through a

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• Extent or type of control exerted by the parent company headquarters over

It leads to re-organization and amalgamation of hitherto fragmented organizational

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• Greater emphasis on functional expertise

The disadvantages of such divisional structure include:

• Difficulty in cross-functional coordination

(b) Global product structure

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SUPERHOUSE MANAGEMENT SERVICES PVT. LTD. PH: 9829150137 [22]

Such an integrated organizational structure facilitates greater interaction and flow of

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WTO Structure, Functions & Roles in the International Business Scenario

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1. To lay-down a substantive code of conduct aiming at reducing trade barriers

Features of the WTO: The distinctive features of the WTO are:

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1. To ensure the reduction of tariffs and other barriers to trade.

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International Financial Management

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Example of International Institutions of International Finance