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Introduction to international_business



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  • This slide offers a definition for globalization; it highlights that globalization affects two primary areas.
  • This slide offers a definition of the globalization of markets trend. It also details why this has happened.
  • Some problems occur when companies begin operating globally. These include: very significant differences still exist among national markets along many relevant dimensions, including consumer tastes and preferences, distribution channels, culturally embedded value systems, business systems, and legal regulations. These differences frequently require that marketing strategies, product features, and operating practices be customized to best match conditions in a country. For example, automobile companies will promote different car models depending on a range of factors such as local fuel costs, income levels, traffic congestion, and cultural values. Similarly, many companies need to vary aspects of their product mix and operations from country to country depending on local tastes and preferences.
  • The past quarter century has seen rapid changes in the global economy. Barriers to the free flow of goods, services, and capital have been coming down. The volume of cross-border trade and investment has been growing more rapidly than global output, indicating that national economies are becoming more closely integrated into a single, interdependent, global economic system. As their economies advance, more nations are joining the ranks of the developed world. But it is always hazardous to use established trends to predict the future. The world may be moving toward a more global economic system, but globalization is not inevitable. Countries may pull back from the recent commitment to liberal economic ideology if their experiences do not match their expectations. Also, greater globalization brings with it risks of its own. This was starkly demonstrated in 1997 and 1998 when a financial crisis in Thailand spread first to other East Asian nations and then in 1998 to Russia and Brazil. Ultimately the crisis threatened to plunge the economies of the developed world, including the United States, into a recession. This slide outlines some of the arguments from the great globalization debate.
  • As markets globalize and an increasing proportion of business activity transcends national borders, there is a need for institutions to help manage, regulate, and police the global marketplace, and to promote the establishment of multinational treaties to govern the global business system. Over the past half century, a number of important global institutions have been created to help perform these functions.
  • Without an institution such as the WTO, the globalization of markets and production is unlikely to have proceeded as far as it has. However, as we shall see in this chapter and in Chapter 6 when we take a close look at the WTO, critics charge that the WTO is usurping the national sovereignty of individual nation-states.
  • The World Bank is the less controversial of the two sister institutions. It has focused on making low-interest-rate loans to cash-strapped governments in poor nations that wish to undertake significant infrastructure investments (such as building dams or roads). The IMF is often seen as the lender of last resort to nation-states whose economies are in turmoil and currencies are losing value against those of other nations. Repeatedly during the past decade, for example, the IMF has stepped in to lend money to the governments of troubled states, including Argentina, Indonesia, Mexico, Russia, South Korea, Thailand, and Turkey. The IMF loans come with strings attached; in return for loans, the IMF requires nation-states to adopt specific economic policies aimed at returning their troubled economies to stability and growth. These “strings” have generated the most debate, for some critics charge that the IMF’s policy recommendations are often inappropriate, while others maintain that by telling national governments what economic policies they must adopt, the IMF, like the WTO, is usurping the sovereignty of nation-states.
  • Although the UN is perhaps best known for its peacekeeping role, one of the UN’s central mandates is the promotion of higher standards of living, full employment, and conditions of economic and social progress and development—all issues that are central to the creation of a vibrant global economy. As much as 70 percent of the work of the UN system is devoted to accomplishing this mandate. To do so, the UN works closely with other international institutions such as the World Bank. Guiding the work is the belief that eradicating poverty and improving the well-being of people everywhere are necessary steps in creating conditions for lasting world peace.


  • 1. Introduction to International Business Ms Kavita Shetty Faculty DYPDBM
  • 2. JUST PONDER OVER THIS !!!  There is a shortage of radiologists in the United States and demand for their services is growing twice as fast as the rate of graduation. What should be done?  Solution to the Problem: Send images over the Internet to be interpreted by radiologists in India
  • 3.  Outsourcing health care is not only limited to radiology; we are beginning to see patients travel internationally for treatments as well as surgery  In 2004 some 170,000 foreigners visited India for medical treatments; the number is expected to grow at 15% for the next several years  Question: Will demand for American health services soon collapse as work moves offshore to places like India? THE FACT OF THE MATTER IS ….
  • 4. THE ANSWER IS OBVIOUSLY NO BUT IT JUST MAKES ONE START THINKING ABOUT THE I IMPLICATIONS OF SUCH EVENTS? It only means that Economies across the world are getting more and more dependent on each other. And this dependence is for the better for each one will do things that they can do better. This of course will have commercial implications and give rise to INTERNATIONAL BUSINESS in a Globalized Market
  • 5. What is Globalization?  The shift towards a more integrated and interdependent world economy  Two components: * The globalization of markets * The globalization of production This is when International Business starts
  • 6. Globalization of Markets The merging of distinctly separate national markets into a global marketplace implies:  Falling barriers to cross-border trade  Tastes and preferences converge onto a global norm  For Example; Every country today knows and relished Chicken Tandoori or Chinese Food for that matter.  Firms offer standardized products worldwide creating a world market
  • 7. Globalization of Markets  Difficulties that arise from the globalization of markets  Significant differences still exist among national markets For Example: Differences in the purchases of Urban and Rural population  Country - specific marketing strategies For Example: Freebies may work in one market not necessarily in other markets  Varied product mix For Example: McDonald’s menu for American Market is very different from the one in India
  • 8. What is International Business? • International Business is all business transactions that involve two or more countries. • International Business comprises a large and growing portion of the world’s total business. • International Business usually takes place within a more diverse external environment.
  • 9. • To Expand Sales • Acquire Resources • Diversify Sources of Sales and Supplies • Minimize Competitive Risk • Profit Advantage • Growth opportunities • Government policies and regulations Why Companies Engage in International Business?
  • 10. • Expansion of Technology, transportation, telecommunications • Liberalization of Cross-Border Movements of Goods, Services, Labour, Capital • Development of Supporting Institutional Arrangements For Example: World Bank, IMF • Increase in Global Competition through Globalization of production Reasons for Recent International Business Growth
  • 11. Modes of International Business A - Merchandise Exports and Imports: visibles and invisibles B - Performance of Services: fees; turnkey operations; management Contracts C - Use of Assets: licensing agreements; royalties; franchising
  • 12. Contd…. D - Investments: Foreign Direct Investment: gives the investor a controlling Interest in a foreign company. It gives access to: - foreign markets - foreign resources - higher profits than exporting - partial ownership Portfolio Investment: stock in a company or loans to a company or country in the form of bonds, bills, or notes that the investor purchases.
  • 13. E - Other Operational Definitions - Strategic Alliances F – MNCs, MNEs, TNCs, Global Company, Multidomestic Company External Influences on International Business Understanding a Company’s Physical and Societal needs, Environment Managers need, knowledge of business operations, Knowledge of political sciences, law, anthropoly, sociology, economics, and geography.
  • 14. The Globalization Debate  Pro Factors  Lower prices for goods and services  Economic growth stimulation  Increase in consumer income  Creates jobs  Countries specialize in production of goods and services that are produced most efficiently  Con Factors  Destroys manufacturing jobs in wealthy, advanced countries  Wage rates of unskilled workers in advanced countries declines  Companies move to countries with fewer labor and environment regulations  Loss of sovereignty
  • 15. Managing International Business Managing an international business is different from managing a purely domestic business in four areas:  Countries are different  Range of problems confronted by a manager in an international business are wider and more complex  An international business has to work within the limits imposed by government  International transactions involve converting money into different currencies
  • 16. The Emergence of Global Institutions Globalization has created the need for institutions to help manage, regulate and police the global Marketplace:  GATT  WTO  IMF  World bank  United Nations
  • 17. YOUR ???????????? PLEASE
  • 18. THANK YOU