International Business 1

INTERNATIONAL
BUSINESS
INTERNATIONAL BUSINESS
International Business is
an attitude of mind,
approach of the Company
with a global outlook,
seeking profits around
the world on a planned
and systemic basis
International Business is all commercial transactions

– private and governmental - between two or more
countries
• Private companies transact for Profits
• Government may or may not
• Transactions may include Sales, Investments,
Services - Transportation
International Business - Large and
Growing Portion of World Business
Growing Importance of International

Business
• Expand Sales
• Acquire Resources
• Minimize Risk
Expand Sales
Diversify Source of Sales and Supplies
Domestic Market Constraints
Market on Decline
Domestic Recession
Scarcity of Resources
International Market Opportunities
Number of People
Amount of Purchasing Power
Better Availability of Resources
Acquire Resources
Better Quality & Profits
Foreign Capital
Finance, Technology, HR
Monopoly Power
IPR, Licenses
Govt. Policies & Regulations
Tax Benefits, Incentives
Minimize Risk
Situational Advantage
Business Cycles
Recession & Expansion
Minimize Impact of Price Swings
Minimize Impact of Shortages
PLC
Competition
Counter Competition Effectively
Growth Factors
Technology
Production, Promotion
Telecommunication Revolution
Better Transportation
Cost Reductions Telecom & Transport
Liberalizations
Lower Government Barriers
Consumer Desire
Affluence
Competition in Domestic Manufacturers
Growth Factors
Increase in Global Competition
Global Opportunities for Domestic
Manufacturers and Suppliers
Faster Availability of New Product
Technology
Multiple Manufacturing Locations
Uniformity in quality and price
Responsible Growth Factors
Development of Supporting Institutions
Insurance
WTO
Banking
Shipping
Trade Associations
Consular Services
Government Agencies
Domestic vs. International Business
Controllable Domestic Foreign Environment
Environment (Uncontrollable)
Product (Uncontrollable)
Political / Legal Forces
Price Political / Legal
Forces Economic Forces
Promotion
Competitive Forces Cultural Forces
Distribution
Channel Economic Climate Competitive Forces
Geography &
Infrastructure
Level of Technology
Structure of Distribution
International Business Decisions
Co. Objectives
Vision
Co.’s Decision
Present & Future
Opportunities in Domestic
and International Market
Resources of the Company
Skills / Technology
Finance
Experience
Production Capabilities
Marketing Capabilities
Corporate Mission  Objectives 
Strategy
Major Operating Objectives
Profit Motives
Growth Opportunities
For the Company
For the Country
Expand Sales
Capacity Utilisation
Spin-off Benefits
Duty-free Imports
Capital Goods Imports
Improved Domestic Production
Non-profit Motives
Philanthropic
NGOs – Education, Health, Wild Life
Political
Spread of Ideologies, New base
Operating Mode
Export and Import
Merchandise Exports and Imports
Visible Exports and Imports
Tangible Goods
Less Complicated
Need Not Be Manufacturer or Actual User
Good Growth Opportunities
Operating Mode
Export and Import
Service Exports and Imports
Invisible Exports and Imports
Intangible Goods
More Complicated
Mostly Manufacturer or Actual User
Good Growth Opportunities
Operating Mode
Export and Import
Entertainment, Travel, Tourism
Performance of Services
Banking, Insurance, Rental,
Management, Engineering,
Software, Turnkey Projects,
Construction, Manpower
Operating Mode
Export and Import
Use of Assets
Licensing Agreements
Trademarks, Patents, Copyrights
Franchising Agreements
Royalties and Fees
Use of Capital Assets
Operating Mode
Investments
FDI
JV, Strategic Alliances
Portfolio Investment
Stocks
Short-term Loans
International Orientations
Ethnocentrism Home Country Orientation

Polycentrism Host Country Orientation
Regiocentrism Regional Orientation
Geocentrism World Orientation
International Business has been
present throughout much of
history
Silk Route, Amber Route
Sun never sets on British Empire
Migrations, Immigrations, Manpower
Exports
No Passport, No Visa, No Forex
Different complexities in each era
External Influences
Political Science Political Policies
Law Legal Practices
Anthropology Values
Sociology Attitudes
Psychology Beliefs
Economics Economic Forces
Geography Geographical Influences
Competition Competitive Strategies
External Influences
Political Environment
Political Systems
Types of Government
Parliamentary (Open)
Absolutist (Closed)
Two Party USA, UK
Monarchy Saudi, UAE
Multiparty India, France, Israel
Dictatorship Saddam in Iraq
Single Party Egypt, Syria, Mexico
Dominated one party USSR, Cuba, Libya
Parliamentary with Monarchy UK, Japan
External Influences
Economic Systems
Communism
All resources owned and shared by people for the
benefit of the society
Government Controls
Productive Resources
Determines Jobs
Production
Prices
Education And Everything
Centrally Planned Economy
USSR, North Korea, Vietnam, Easten Europe, China –
Non -market Economy, Weak Economy, Large Foreign Debt
External Influences
Economic Systems
Socialism
Poland and France, two ends of socialism spectrum
Sweden in the middle

Sweden gave generous benefits to employees which
were misused
Govt. control less than communism
Govt. owns & operates large enterprises
Small business to private ownership
External Influences
Economic Systems
Capitalism
Free Market System Allows Competition
Freedom To Customers As Well As
Manufacturers
USA Managerial Capitalism
UK Personal Capitalism
Germany Cooperative Capitalism
Ideal Free Trade Market Is Hongkong. World’s
Freest Economy
External Influences
Political Risks
Confiscation
Expropriation
Nationalisation
Domestication
General Instability Risk
Ownership / Control Risk
Operation risk
Transfer Risk
Privatisation
External Influences
Political Risks
Indicators Of Political Instability
• Social Unrest
• Attitudes of Nationals
• Policies of Host Government
• War
Management of Political Risk
• Avoidance
• Insurance
External Influences
Political Risks
Measures To Minimize Political Risk
Stimulation of Local Economy
Local Sourcing
Exports
FDI
Employment Of Nationals Jobs, Contracts
Sharing Ownership Cathay Pacific
in China
External Influences
Political Risks
Measures To Minimize Political Risk
Being Civic Minded Microsoft
Singapore Airlines
Political Neutrality
Behind the Scenes Lobby
Observation of Political Mood and Reduction in
Exposure
Other Measures Adapting Culture
McDonalds No Beef
External Influences
Economic Systems
Market Economy Resources Allocated &

Controlled by Consumers
Mechanism Involves Interrelationship of Price,
Quality, Supply & Demand
Economic Freedom – From Govt Restrains. Legal
& Inst. Framework
External Influences
Economic Systems
CPE Govt. Control

Govt. Sets Goals and Decides Price and Quantity
to be Produced
Mixed Economy Mix of Mkt. & C P E
Different Mixtures of Market and Central Planning
Control. Public and Private Ownership of
Recourses. Classified as Free and Not Free with
Categories as Partly Free and Mostly Not Free
External Influences
Country Classifications
Factor Conditions / Production Factors
Physical Resources
Human Recourses
Knowledge Resources
Capital Resources
Infrastructure
Demand Conditions
Composition of Home Demand
Size and Growth Pattern of Home Demand
Internationalisation of Demand
Country Classifications
Economic Indicators
GNP
The Market Value of Final Goods and Services Newly Produced by
Domestic Factor of Production at Home or Abroad
GDP
The Value of Production That Occurs Within Country's Borders,
Whether Done by Domestic or Foreign Factors of Production
GNP & GDP are Similar

GDP is More Accurate to Reflect Economic
Activity
World Bank Considers GNP
Low Income, Lower Middle Income, Higher Middle Income, High
Income
Distribution of Wealth
Low Income USD 875 and less (54)
Lower Middle USD 876 – 3465 (58)
Higher Middle USD 3466 – 10725 (40)
Higher Income USD 10726 and more (56)
As classified in 2005 of 208 countries with population of more

than 30,000. Includes 184 member countries of World Bank
Low and Middle Income are Grouped as Developing Countries

Except East European Non-Market Economies
CEIT (Countries with Economies in Transition)

Moving from CPE to Market Economy
Israel, Hong Kong, Kuwait, Singapore and UAE Termed as

Developing Countries by UN, Though in High Income
Distribution of Wealth
High Income 21% of Economies

15.2% of Population
79.5% of GNP
Middle Income 48.3% of Economies

28.1% of Population
15.6% of GNP
Low Income 30.6% of Economies

56.7% of Population
4.9% of GNP
Macroeconomic Issues
Economic Growth
9 / 11
1997 Asian Financial Crisis
Dot Com Burst
Global Terrorism
Emerging Economies May Have a Higher Growth
With Dangers of Political Instability
Inflation
CPI (Consumer Price Index)
PPP (Purchasing Power Parity)

Culture
What is culture?
What its characteristics are?
How culture affects consumer behaviour?
• Culture plays significant role in
influencing consume perception,
influences preference and purchase.
Marketing Mix can be effective as long
as it is relevant to given culture
• Culture – Set of traditional beliefs and values,
transmitted and shared in a given Society.
Culture is a total way of life and thinking
pattern that is passed on from generation to
generation
Culture
Culture Its Characteristics
Prescriptive - Purchase Decisions That

Are Socially Acceptable
Socially Shared - Based On Social
Interaction & Creation
Facilitates - Advertising &
Communication Communication
Learned - Not Genetically Passed
on, Learned & Acquired
Culture
Culture Its Characteristics
Subjective - Different Ideas About Same Object.

Unique & Arbitrary
Enduring - Shared & Passed From Generations
To Generations
Cumulative - Broader Based, Adapts New Ideas,
Discards Old
Dynamic - Adapts To New Situations And
Knowledge
Culture
Influence On Consumption
Consumption Of Beef In US And In India, Cold Cuts In
Russia
Chinese Eat Reptiles, Raw Beef In Ethiopia
French Eat Snails, Americans Prefer Fried Chicken,
Indian Food - Tandoori
Halal For Muslims Pork For Non Muslims, Fish Head In
Bengal
Culture
Influence On Consumption
Non Alcoholic Beer In Saudi Arabia
Parsi’s & Sikhs Do Not Smoke
Concept Of Vegetarian Food
Dressing Styles In Different Countries
Bindi, Mangalsutra In India, Wedding Rings In West
Culture
Influence On Thinking Process
SRC - Self Reference Criterion
Influence On Communication Process
Low-context Culture - North America,

North Europe
High-context Culture - Japan, France,
Spain, Italy, Asia,
ME Asia, Africa
Culture
Verbal Communication
Same language in different markets - 6000

dialects
American Vs. UK English
Chinese, Japanese Vs. English
02.06.02 Vs. 06.02.02, Addresses
Culture
Non-verbal Communication
Body language - Movements, appearance,

dress, facial expression,
gestures, postures, touch,
silence, timing, distance etc.
Waving hand - Normal in US, rude in Japan
Eye contact - Rude in Japan, Avoidance
considered rude in US
Gesture - OK in USA, Money in Japan,
Rudeness in Brazil,
Vulgar in Latin America
Culture
• Language of Space
• Language of Time
• Language Of Agreement
• Language of Friendship
• Language of Negotiations
• Language of Religion
• Language of Superstition
• Language of Colour
• Language of Gift
External Influences
Technology
Technological Advance
Impact on Manufacturing – Process, Inventories
Marketing – Promotion
- Distribution, Logistics
- Pricing
Suitability of environment for use of the product
Impact of Technology on Infrastructure
External Influences
Legal Environment
Legal Systems
Legal Systems in Different Countries
Multiplicity of Legal Environments
Civil Law
Civil law is the most widespread system of law in the
world, also known as European Continental law,
codified law
Codifications in a constitution or statute passed by
legislature
Civil law systems mainly derive from the Roman
Empire
Civil law partly influenced by religious laws such as
Canon law and Islamic law
External Influences
Legal Environment
Legal Systems
Civil Law
Only legislative enactments, rather than judicial
precedents are considered legally binding. However,
in reality courts do pay attention to previous
decisions, especially from higher courts
• French Civil Law
• German Civil Law
• Scandinavian Civil Law
• Chinese Law is a mixture of civil law & socialist
law
Legal Systems
Common Law
Common law based on tradition , precedent,
customs and usage
Common law developed in England
Common law inherited by the Commonwealth of
Nations and almost every former colony of the
British Empire
The doctrine of stare decisis or precedent by courts
is the major difference to codified civil law systems
Legal Systems
Common law is currently in practice in Ireland, most
of the United Kingdom, Australia, India, South Africa,
Canada*, Hong Kong and the United States** etc
In addition several others have adapted the common
law system into a mixed system
Pakistan and Nigeria operate largely on a common law
system, but incorporate religious law
In the European Union the Court of Justice takes an
approach mixing civil law
*excluding Quebec, **excluding Louisiana
Legal Systems
Theocratic Law
The main kinds of religious law are Sharia in Islam,
Halakha in Judaism and Canon law in some Christian
groups
Sharia Law governs a number of Islamic countries,
including Saudi Arabia, Malaysia and Iran, though
most countries use Sharia Law only as a supplement
to national law
It can relate to all aspects of civil law, including
property rights, contracts or public law Islamic Law
Legal Systems
Legal Systems divided into

• Civil
• Criminal
Pluralistic systems
• Civil law and common law
• Civil law and religious law
• Common law and religious law
Legal Systems
International Law
• Public Law or Law of Nations
• International Commercial Law
International Court of Justice

• International Conventions, Rules of States
• International Customs for Acceptance of Law
• General Principles of Law Recognised by
Civilised Nations
• Judicial Decisions of Most Highly Qualified
India
India has a written Constitution and codified Central
and State law. Its Judiciary is of the highest
integrity
The official language is English in the High Courts
and the Supreme Court
The Indian Legislature and Judiciary make constant
efforts to bring about improvements in Courts and
dispense justice speedily
On the recommendation of the General Assembly of
the United Nations to consolidate and amend the
law relating to domestic arbitration, international
arbitration and enforcement of the foreign arbitral
awards a new Arbitration and Conciliation Act has
been enacted
India
To expedite the disposals of cases concerning the
transactions related to Banks a special tribunal is
being established
To facilitate foreign investment, foreign joint
venture and globalization of Indian Trade &
Industry, various amendments have been thought of
in the existing Companies Act, 1956 and a proposal
of enacting a new Take-over Code is under
consideration
The Income-Tax Act, 1961, which at present is
lengthy and complicated, is thought of being revised
and in its place a simple Tax Law is proposed to be
enacted
External Influences
Form of the Company
Pvt., Ltd, Inc, France S.A.(societe
anonyme), Germany GmbH, AG,
KK in Japan
EC is Encouraging PLC
Branch, Subsidiary, JV
Impact of Laws on Business
National Laws Affect All Local Business Activities

Including Elements of Management
Law is not appropriate for everything. What is
unethical may not be illegal
Law is slow to emerge in developing areas
Law is often based on morality and values can
change
Law needs testing by courts
Law embodies many of a country’s moral beliefs

and is a guide for governance
Law provides clearly defined set of rules, helps
develop precedent. Makes people follow the law
for the fear of penalty
Law contains enforceable rules. All are on level
playfield. FCPA, USA
Law is outcome of experiences, deliberations
and precedents

National Laws Affect All Cross Border Activities
National Laws Govern Contractual Relationships
Health, Environment, Defence, Labour Laws
Needs Special Attention
International Treaties and Conventions
Govern Cross Border Transactions
External Influences
Key Legal Issues
HR, Contracts, Fees

IPR
Trademark, Copyright, Patents
Infringement, Unfair competition
Counterfeiting
Gray Market
Key Legal Issues
Trade and Investment Regulations

Financial Flow Regulations
Taxation
Reporting Requirements
Ownership Regulations
Dispute Resolutions
External Influences
Visa
Bribery
Banned by US Govt., FCPA
Bribing
To Speed Up The Work
To Get Contract
To Prevent Competition
Cooperation Money In Indonesia
Reconciliation of International Differences
Cultural Awareness
No Foolproof Method
Awareness and Sensitivity
Samsung Junior Executives
Grouping Countries
Language, Ethnicity, Geographical Location
Group Countries by Attitudes and Values
Seemingly Similar Countries May Not Be
Similar As In ME Asia
Formulating & Implementing Political Strategies
More Complicated Than Formulating
Competitive Marketing Strategy
Marketing Issues Resolved by Voluntary
Agreements
Political Issues Resolved by Power Center and
by Those Who Structure the Conditions
Under Which Market Participants Operate
Many of the Components Implemented in
Public View
Formulating & Implementing Political Strategies
Watch For
Identify Issue - Protectionism, Environment,
Worker’s Rights
Define – Nature of Politics of the Issue
Assess Possible Action of Other Companies and
Interest Groups
Identify Important Individuals and Key Institutions
Formulate Strategies – Objectives, Major
Alternatives
Determine Impact of Implementation – Public
Reaction
Select Appropriate Strategy and Implement
LG Case Study
40% weightage
Divide class in two groups, odd roll nos. and even roll
nos.
Form serially group of six students from above
20 minutes presentation with participation of each
group member
10 minutes for Q&A
All students to be present for all the presentations
Presentation to cover
• Vision of LG
• SLEPT Analysis
• Lessons for emerging Indian MNCs

International Business 1

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International Business 1

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INTERNATIONAL

International Business is all commercial transactions

Growing Importance of International

Ethnocentrism Home Country Orientation

Sweden in the middle

Market Economy Resources Allocated &

CPE Govt. Control

GNP & GDP are Similar

As classified in 2005 of 208 countries with population of more

Low and Middle Income are Grouped as Developing Countries

CEIT (Countries with Economies in Transition)

Israel, Hong Kong, Kuwait, Singapore and UAE Termed as

High Income 21% of Economies

Middle Income 48.3% of Economies

Low Income 30.6% of Economies

CPI (Consumer Price Index)

PPP (Purchasing Power Parity)

Prescriptive - Purchase Decisions That

Subjective - Different Ideas About Same Object.

SRC - Self Reference Criterion

Influence On Communication Process

Low-context Culture - North America,

Same language in different markets - 6000

Body language - Movements, appearance,

Legal Systems divided into

International Court of Justice

National Laws Affect All Local Business Activities

Impact of Laws on Business

Law embodies many of a country’s moral beliefs

Impact of Laws on Business

Key Legal Issues

HR, Contracts, Fees

Trade and Investment Regulations

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