INTERNATIONAL BUSINESS

UNIT-1
International Business and Emerging Global Scenario
Concept of International Business
 International Business implies the conduct of
business activities beyond the national
boundaries
 All commercial transactions may take place by
government or private companies with or
without an objective to make profit.
 Exports & Imports
 Sales & Purchases
 Transportation
 INTERNATIONAL TRADE
1. Merchandize Trade
2. Service Trade
INTERNATIONAL MARKETING
3. Cross Border Transactions
4. Market identification
5. Targeting
6. Entry mode selection
7. Marketing mix
8. Out Sourcing
INTERNATIONAL INVESTMENTS
 Foreign Direct Investments
 Portfolio Investments
INTERNATIONAL MANAGEMENT
 Application of MGT concepts &Techniques in
the cross country environment
 Adoption of different Socio - Cultural,
Economic, Legal, Political &Technical
Environment
 Transaction of Resources
 Transfer of Technology
 Services like- Finance, Banking,
Insurance and Construction
GLOBAL BUSINESS
 IB &GB are interchangeable concepts
 Conducting business across many
countries, using in a highly coordinated
way
 Reasons and the Need for the Expansion of
International Business
 MARKET-SEEKING MOTIVES
 Marketing opportunities due to life cycles
 Uniqueness of Product/Service
ECONOMIC MOTIVES
 Profitability, Price Differentials, Fiscal
Incentives, Monetary Incentives, Cost
Advantage
 Achieving Economies of scale
 Spreading R&D costs
 STRATEGIC MOTIVES
 Growth-when the domestic market is saturated with
little scope for expansion
 Even for survival small countries expand to the rest of
the world-like Singapore, Hongkong & Scandinavia
 Highly populous Countries(CIUI) with huge market
size can excel in the domestic market also
 Risk spread
 Operating in several countries reduces dependence
on any particular market and spread the business risk-
Market Diversification
 GOALS OF IB
 To achieve higher rate of profits
 Expanding the production capacities beyond
the demand of a domestic country
 Severe competition in the home country to
the weak/infant/sick industries
 Limited home market
 Political stability Vs political instability
 Availability of technology and competent
human resources
 High cost of transportation
 Nearness to raw materials
 Availability of human resources at lower
cost
 Liberalization/ Globalization
 To increase the market share
 To achieve higher rate of economic
development
 Tariffs &Import quotas
 Advantages of IB
 High living standards
 Variety of Goods/Services/Wide Choice
 Consumer is the King
 Increased socio-economic welfare
 Wider market
 Reduced effects of business cycles
 Reduced risks
 Large scale economies
 Potential untapped markets
 Provides the opportunity for and challenge to domestic
business
 Division of labor & specialization
 Economic growth of the world
 More export earnings and foreign
remittances
 Optimum & proper utilization of
resounces
 Cultural transformation
 Knitting the world into a closely
interactive traditional village
 Problems of IB
Life is a not a bed of roses-IB is not that lovely, it has its
problems. They are-
 Political factors
 Huge foreign indebtedness
 Exchange instability
 Entry requirements
 Tariffs, quotas and trade barriers
 Corruption
 Bureaucratic practices of government
 Technological pirating
 Quality maintenance
 High cost
 Import intensive industrialization
International Business Approaches
 Ethnocentric Approach
 The domestic companies normally formulate their strategies
,their product design and their cooperation towards the national
markets
 The domestic companies view foreign markets as a extension to
domestic market
 Polycentric Approach
 Under this approach, companies establish foreign subsidary and
empowers its executives
 Regiocentric Approach
 Subsidiaries consider regional environment for policy/strategy
formulation
 Geocentric Approach
 Companies view the entire world as a single country
DOMESTIC VERSUS INTERNATIONAL BUSINESS
The basic difference in domestic and international
business arrives from the differences in the following
operations:

 ECONOMIC DEVELOPMENT
 SOCIO-CULTURAL ENVIRONMENT
 POLITICAL ENVIRONMENT
 COMPETETION
 INFRASTRUCTURE
 TECHNOLOGY
DOMESTIC VERSUS INTERNATIONAL
BUSINESS
 Domestic business-Among us
 Within the boundaries of the country
 Closed Economy
 INTERNATIONAL BUSINESS-between us
&The rest of the world
 Cross Boarder Transactions
 Open Economy
 Differences in the environment of their
operations
 International managers have to deal
with environmental challenges which
are beyond the firm’s control and do
vary significantly among the countries
 If any firm operates in several
countries ,the severity of business
complexity increases multi-fold
Closed Economy &Open Economy
Closed Economy
Transactions will be Confined to
the boundaries of the country
Only internal/Domestic trade
No borrowings and lending with
other countries
No international movement of
factors of production
No international grants and loans
with other countries
Localization
Open Economy
Transactions with the rest of the
world
Trade with the rest of the world
borrowings and lending with other
countries
international movement of factors
of production
international grants and loans with
other countries
Localization +Globalization-
Glocalization
 Differences
DOMESTIC BUSINESS
Between DB&IB
INTERNATIONAL BUSINESS

• ETHNOCENTRIC APPROACH-It POLY CENTRIC,REGION

means that domestic companies CENTRIC,GEOCENTRIC APPROACH-
formulate strategies, product Stablishing foreign branches
design etc towards the national
markets, customers
&competitors

• Geographic scope with in the Geographic scope across the

boundaries of the country boundaries of different countries

• Operating style in production, Operating style may spread to entire

distribution , exchange , R&D is globe
limited to with in the country

• Domestic environment International environment

 Differences Between DB&IB
DOMESTIC B USINESS INTERNATIONAL BUSINESS
• Quotas Has to operate with in the quotas imposed
by various countries on their exports
&imports

• Tariffs-The tariff rates of various Tariff rates of various countries will

countries do not directly
&significantly influence the domestic
business
• Foreign exchange rates- No significant
effect on trade
• Culture-influence the product design
directly influence
Different forex rates have significant effect
on international business
Different cultures influence the IB

• Import export procedures-DB will not Import export procedures- influence the IB
be influenced
• Human resources-Recruits local people Recruits foreign people thus HRM is a
only, thus HRM is not a problem complicated problem
• Markets &Customers- Mood & Needs Markets &c Customers - Mood &Needs of
can be understood easily different countries cannot be understood
easily