INTERNATIONAL

BUSINESS
WHAT IS INTERNATIONAL BUSINESS?
International business consists of
transactions that are devised and
carried out across national borders
to satisfy the objectives of
individuals, companies, and
organizations.
Need for International Business
International business:
causes the flow of ideas, services, and capital across the
world
offers consumers new choices
permits the acquisition of a wider variety of products
facilitates the mobility of labor, capital, and
technology
provides challenging employment opportunities
reallocates resources, makes preferential choices, and
shifts activities to a global level
EXAMPLES:
TEA-SRILANKA
HARDISK OF COMPUTER-U.S.A.
PERFUME-FRANCE
TELEVISION-JAPAN
SHOE-TAIWAN
TYPES OF INTERNATIONAL BUSINESS

Export-import trade
Foreign direct
investment

Licensing

Franchising

Management contracts
EXPORT-IMPORT TRADE:
EXPORT:
To send or transport goods, materials at abroad,
especially for trade or sale.

IMPORT:
To bring or carry in from an outside source, especially
to bring in (goods or materials) from a foreign country
for trade or sale.
FOREIGN DIRECT INVESTMENT
Foreign direct investment (FDI) or foreign
investment refers to long term participation by
country A into country B. It usually involves
participation in management, joint-venture,
transfer of technology and expertise. There are two
types of FDI: inward foreign direct investment and
outward foreign direct investment.
LICENSING:
On the basis of license whatever deal happen between
two countries, it is called licensing. This license
generally permitted by government of country and also
based on convenience of opposite country.
In short, The formal documents which the company
needs in order to trade with other countries is called
licensing.
FRANCHISING
A form of business organization in which a firm which
already has a successful product or service (the
franchisor) enters into a continuing
contractual relationship with other businesses (
franchisees) operating under the franchisor's
trade name and usually with the franchisor's guidance,
in exchange for a fee.
MANAGEMENT CONTRACT
Agreement between investors or owners of a project,
and a management company hired for coordinating
and overseeing a contract. It spells out the conditions
and duration of the agreement, and the method of
computing management fees.
EXTERNAL ENVIRONMENT ECONOMIC
A business does not function in a vacuum. It has to act
and react to what happens outside the factory and
office walls. These factors that happen outside the
business are known as external factors or
influences. These will affect the main internal
functions of the business and possibly the objectives of
the business and its strategies.
Factors:
Social – how consumers, households and communities behave and their beliefs.
For instance, changes in attitude towards health, or a greater number of
pensioners in a population.
Legal – the way in which legislation in society affects the business. E.g. changes in
employment laws on working hours.
Economic – how the economy affects a business in terms of taxation, government
spending, general demand, interest rates, exchange rates and European and global
economic factors.
Political – how changes in government policy might affect the business e.g. a
decision to subsidies building new houses in an area could be good for a local
brick works.
Technological – how the rapid pace of change in production processes and
product innovation affect a business.
Ethical – what is regarded as morally right or wrong for a business to do. For
instance should it trade with countries which have a poor record on human rights.
INTERNAL ENVIRONMENT ECONOMIC
Conditions, entities, events, and factors within an
organization which influence its activities and choices,
particularly the behavior of the employees. Factors
that are frequently considered part of the internal
environment include the organization's
mission statement, leadership styles, and its
organizational culture.
Factors:
Internal factor , these involve (5M's)
Management
Manpower
machine
material and
money.
The human culture environment
In its narrow sense culture is understood to
refer to such activities as music, drama,
dance and festivals but in true sense culture
is understood as that complex whole
includes knowledge, belief, art, morals, law,
customs and other capabilities and habits
acquired by and individual as a member of
society.
Cont…
Most scholar of culture would agree on its following
characteristics:

-learned(culture is not inherited but it is acquired by

learning and experience.)
-shared(it is not specific to specific individual but as a
member of groups, org., or society)
-trans-generational(culture is correlative which is passed
from one generation to another .)
Cont…
-symbolic(culture is based on human capacities to
symbolize or use one thing to represent another.)
-patterned(culture has structure and is integrated a
change in one part will bring in another)
-adaptive(culture is based on human capacity to change
or adapt.)
Recent world trade and foreign investment
Trend
 World trade in 2009 was dominated by the worst
financial and economic crisis in decades. Global output
shrank. So did the volume of international trade.
Poorer developing countries have faced the worst.
 China, Brazil and India saw exports drop in the second
half of 2008, but countries not belonging to the top 20
developing country exporters were hit even harder.
Trade and GDP growth have started to pick up again,
but some economists fear a “double-dip” recession.
Conti…
 If unemployment continues to grow, it may become harder for
governments to resist protectionist pressures

 There are parallels between rapid growth in foreign investment

now, and the rapid growth of international trade over the last
several decades

 During the 1980s, the increase in international direct investment

was led by investment among developed countries.

 Many developing countries began actively seeking private sources

of capital, particularly foreign investment,
Conti…
 The issue now facing developing countries is
whether they can increase their share of growing
world FDI flows, and thus participate more fully in
the internationalization of production that is now
occurring.