COURSE TITLE: INTERNATIONAL BUSINESS

MANAGEMENT

SEMESTER : 04
UNIT : 01

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 Globalization

It is a move towards open economic policies lifting up the

restriction imposed on the international economic flows that in

turn leads to a sharp increase in quantum of such flows.

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 Globalization

Globalization fosters close linkages among countries

through the flow of goods, labour and capital, it is worth

discussing whether it does exist in the real world.

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 Globalization

The evidence of globalization was found a couple of

centuries ago. But it is only since 1950s and especially in

the recent decades that globalization is distinctly visible.

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 Globalization
 The process got stimulus from the international institutions.

The general agreement on tariff and trade (GATT), established in 1947,

created a consensus on axing the tariff and non-tariff barriers over the
past five decades which in turn boosted up the world trade.

The world trade organization (WTO) substituting GATT implemented the

Uruguay round resolutions and covered many trade-related measures that
had remained neglected earlier.

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 INTERNATIONAL BUSINESS

 IT MEANS CARRYING BUSINESS ACTIVITIES BEYOND NATIONAL BOUNDARIES.

IT NORMALLY INCLUDES TRANSACTIONS OF ECONOMIC RESOURCES SUCH AS GOODS,

CAPITAL, SERVIES (COMPRISING TECHNOLOGY, SKILLED LABOUR, TRANSPORTATION ETC.)

AND INTERNATIONAL PRODUCTION.

PRODUCTION MAY EITHER INVOLVE PRODUCTION OF PHYSICAL GOODS OR PROVISION OF

SERVICES LIKE BANKING, INSURANCE, CONSTRUCTION, TRADING AND SO ON.

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 INTERNATIONAL BUSINESS

CORPORATE WEALTH IS THE VALUE OF PRODUCTIVE ASSETS PLUS THE PRESENT VALUE

OF WEALTH CREATED BY THOSE ASSETS.

ALTERNATIVELY, IT IS THE SUM OF THE VALUE OF DEBT AND EQUITY IN A FIRM.

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 Importance of International Business

1. To get higher rate of profits.

2. Expansion of production capacity beyond the demand of the domestic

country.

3. Intensive competition in the home country and wider opportunity in the

global market.

4. Limited home market

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 Importance of International Business

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

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 NATURE OF INTERNATIONAL BUSINESS

1. Accurate Information

2. Information not only accurate but should be timely

3. The size of the international business should be large

4. Market segmentation based on geographic segmentation

5. International markets have more potential than domestic markets

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 BENEFITS OF INTERNATIONAL BUSINESS
1. It acquires more sales:
Chance to expand their companies and to be known to other countries.
Will increase their profits rather than restricting their business within their own borders.
Local country will also benefit from this since new products, technologies, and services are being
offered for us to use.
 Allow them to export their goods and services to us, Local businessmen and government will also
earn.
2. It opens new opportunities:
If there are increasing numbers of foreign companies in our country, they will need more
manpower to help them in running the business. We will be given the chance to use and to share
our skills and knowledge, once we are hired.
In return, we will gain income to provide the needs of our family. The agreement also implies that
we can go to their country to work, to study, or to live.
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 BENEFITS OF INTERNATIONAL BUSINESS
3. It gives new technologies

Other countries have invented different technologies which can help us in our daily living like modern
appliances and computers.

For those countries that lack the means to create new high quality technologies can also have an access
to enjoy the benefits once these technologies are exported to them.

Another example is the invention of rear projection screens. These will help us in disseminating and
advertising in our country.

4. It utilizes the resources

Countries that are rich in fuel, minerals, and many more can utilize their resources by sharing these to
others. Instead of keeping these resources, they can share these to other countries so that others will also
have the benefits. In return of their resources, they can have more income for their government.

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 BENEFITS OF INTERNATIONAL BUSINESS
5. It provides quality products

 Different countries have their own unique and useful products and services that they can offer to us. In this
way, we can choose the best ones that are helpful to us. There are wide varieties of choices when it comes to
brands, prices, designs, and features.

6. It helps in earning foreign exchange

 Investors are welcomed to invest from both local and international. More investors mean that the economic
status of our country will become stable. This helps a lot, especially those fellow citizens that need assistance
from the local government.

7. It acquires investment in infrastructure

 Countries that deal with international business need to invest in infrastructure. This will help them in
transporting and communicating with other business partners and customers. This will also help the people since
these infrastructural developments are open to be used by the public.
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 Domestic Vs. International Business

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 Transfer Pricing

TRANSFER PRICING IS ARBITRARY PRICING OF INTRA-FIRM-

TRANSACTIONS AT MORE/LESS THAN THE ARM’S LENGTH

PRICES.

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 MULTINATIONAL CORPORATION

An MNC is an enterprise with a substantial part

of its operations in a number of foreign

countries.

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 MULTINATIONAL CORPORATION

According to Vernon and Wells Jr. (1986); MNC’s represent a cluster of

affiliated firms located in different countries that;

1. Are linked through common ownership

2. Draw upon a common pool of resources

3. Respond to a common strategy.

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 Evolution and Development of International Business

Process of Evolution:

1. Ancient Indian Trade and Development

2. East India Company Incorporation – British Raj

3. French and Portuguese Invaders and Trading

4. First and Second World War Developments

5. Post War Developments and

6. Recent Trends

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 MNC’s – ETHNOCENTRISM, POLYCENTRISM & GEOCENTRIC

 Ethnocentric firms are those that adopt home market oriented policy and

seldom distinguish between domestic operation and global operation policies.

Polycentric firms follow a host market oriented policy.

Geocentric firms maintain a balance between the home market and host

market oriented policies.

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 MULTI-DOMESTIC COMPANY AND GLOBAL COMPANY

 A MULTI-DOMESTIC COMPANY IS MORE CONCERNED WITH THE MARKET OF

THE HOST COUNTRY WHERE IT OPERATES.

A GLOBAL COMPANY IS CONCERNED WITH THE GLOBAL MARKET. IT

CONSIDERS THE WORLD AS A SINGLE MARKET.

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 FACTORS LEADING TO GROWTH IN INTERNATIONAL
(IN RECENT DECADES )
1. RAPID TECHNOLOGICAL ADVANCEMENT

2. EMERGENCE OF SUPPORTIVE INSTITUTIONS

3. OPENNESS OF ECONOMIC POLICIES AMONG LARGE NUMBERS OF COUTNRIES

4. USA WINOVER USSR (1960 T0 199O’S)

5. INCREASE IN COMPETITION

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 DIFFERENT MODES OF ENTRY IN INTERNATIONAL BUSINESS

1. EXPORTS
2. INTERNATIONAL LICENSING
3. FRANCHISING
4. CONTRACT MANUFACTURING
5. CONTRACT MARKETING
6. MANAGEMENT CONTRACTS
7. JOINT VENTURES/COLLABORATIONS
8. FOREIGN DIRECT INVESTMENT
9. MERGERS AND ACQUISITIONS
10. TAKEOVERS
11. TURNKEY PROJECTS
12. COUNTER TRADE

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 INTERNATIONAL BUSINESS ENVIRONMENT
CULTUARAL AND
SOCIAL FACTORS POLITICAL FACTORS
 Languages  Government System
 Family Political Stability
 Religion  Trade Barriers
 Customs  Business
Traditions and Regulations
Food

INTERNATIONAL BUSINESS
ENVIRONMENT

ECONOMIC FACTORS
GEOGRPAHY  Technology
 Location Education
 Climate Inflation
 Terrain Exchange Rate
 Waterways  Infrastructure
Natural Resources Development

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