INTERNATIONAL BUSINESS

TOPIC I INTRODUCTION TO INTERNATIONAL BUSINESS

DEFINITION
Definition: International Business is the process of focusing on the resources of the globe and objectives of the organisations on global business opportunities and threats. International business defined as global trade of goods/services or investment. 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

Features of IB
Large scale operations : In international business, all the operations are conducted on a very huge scale. Production and marketing activities are conducted on a large scale Integration of economies : International business integrates (combines) the economies of many countries. This is because it uses finance from one country, labour from another country, and infrastructure from another country. It designs the product in one country, produces its parts in many different countries and assembles the product in another country. It sells the product in many countries, i.e. in the international market.

Features of IB
Dominated by developed countries and MNCs : International business is dominated by developed countries and their multinational corporations (MNCs). At present, MNCs from USA, Europe and Japan dominate (fully control) foreign trade. This is because they have large financial and other resources. They also have the best technology and research and development (R & D). They have highly skilled employees and managers Benefits to participating countries : International business gives benefits to all participating countries. However, the developed (rich) countries get the maximum benefits. The developing (poor) countries also get benefits. They get foreign capital and technology. They get rapid industrial development. They get more employment opportunities

Features of IB
Keen competition : International business has to face keen (too much) competition in the world market. The competition is between unequal partners i.e. developed and developing countries Special role of science and technology: International business gives a lot of importance to science and technology. Science and Technology (S & T) help the business to have large-scale production

Features of IB
International restrictions : International business faces many restrictions on the inflow and outflow of capital, technology and goods. Many governments do not allow international businesses to enter their countries. They have many trade blocks, tariff barriers, foreign exchange restrictions, Sensitive nature : The international business is very sensitive in nature. Any changes in the economic policies, technology, political environment, etc. has a huge impact on it. Therefore, international business must conduct marketing research to find out and study these changes.

Need for International Business

1. To achieve higher rate of profits 2. Expanding the production capacity beyond the demand of the domestic country 3. Severe competition in the home country 4. Limited home market 5. Political conditions 6. Availability of technology and managerial competence 7. Cost of manpower, transportation 8. Nearness to raw material 9. Liberalisation, Privatisation and Globalisation (LPG) 10. To increase market share 11. Increase in cross border business is due to falling trade barriers (WTO), decreasing costs in telecommunications and transportation; and freer capital markets

Importance of IB

Importance of IB
Earn foreign exchange : International business exports its goods and services all over the world. This helps to earn valuable foreign exchange. This foreign exchange is used to pay for imports Optimum utilisation of resources : International business makes optimum utilisation of resources. This is because it produces goods on a very large scale for the international market. International business utilises resources from all over the world

Importance of IB
Achieve its objectives : International business achieves its objectives easily and quickly. The main objective of an international business is to earn high profits. This objective is achieved easily.

To spread business risks : International business spreads its business risk. This is because it does business all over the world. So, a loss in one country can be balanced by a profit in another country.

Importance of IB
Improve organisation's efficiency : International business has very high organisation efficiency. This is because without efficiency, they will not be able to face the competition in the international market. So, they use all the modern management techniques to improve their efficiency. They hire the most qualified and experienced employees and managers.

Get benefits from Government : International business brings a lot of foreign exchange for the country. Therefore, it gets many benefits, facilities and concessions from the government

Importance of IB
Expand and diversify : International business can expand and diversify its activities. This is because it earns very high profits. It also gets financial help from the government. Increase competitive capacity : International business produces high-quality goods at low cost. It spends a lot of money on advertising all over the world. It uses superior technology, management techniques, marketing techniques, etc. All this makes it more competitive.

Reasons for Recent International Business Growth

1. Expansion of technology 2. Business is becoming more global because Transportation is quicker Communications enable control from afar Transportation and communications costs are more conducive for international operations 3. Liberalization of cross-border movements 4. Lower Governmental barriers to the movement of goods, services, and resources enable Companies to take better advantage of international opportunities

Advantages of IB
Product Flexibility Less Competition Protection From National Trends and Events Learning New Methods Faster growth Access to cheaper inputs Increased quality and efficiency New market opportunities Diversification

Scope of IB
1. International Marketing 2. International Finance and Investments 3. Global HR 4. Foreign Exchange

Domestic business v/s International business

International business
1.It is extension of Domestic Business and Marketing Principles remain same 2. Difference is customs, cultural factors 3. Conduct and selling procedure changes

Domestic business
1. The Domestic Business Follow the marketing Principles 2. No such difference. In a large countries like India, we have many languages 3. Selling Procedures remain unaltered

Domestic business V/s International business

International business

Domestic business

4. Working environment and 4. No such changes are necessary management practices change to suit local conditions 5. These have little or no impact 5. Will have to face restrictions in on Domestic trade trade practices, licenses and government rules. 6. Long Distances and hence more transaction time 7. Currency, interest rates, taxation, inflation and economy have impact on trade

6. Short Distances, quick business is possible

7. Currency, interest rates, taxation, inflation and economy have little or no impact on Domestic Trade

Domestic business v/s International business

International business
8. MNCs have perfected principles, procedures and practices at international level 9. MNCs take advantage of location economies wherever cheaper resources available 10. Large companies enjoy benefits of experience curve 11. High Volume cost advantage

Domestic business
8. No such experience or exposure 9. No such advantage once plant is built it cannot be easily shifted. 10. It is possible to get this benefit through collaborators. 11. Cost Advantage by automation, new methods etc.

Domestic business v/s International business

International business
11. Cost Advantage by automation, new methods etc. 12. Global business seeks to create new values and global brand image. 13. Can Shift production bases to different countries whenever there are problems in taxes or markets

Domestic business
11. No such advantage 12. No such advantage 13. No such advantage and get competition from some spurious or SSI Unit who get patronage of Government.