INTERNATIONAL BUSINESS ENVIRONMENT PGDIB - I
INTRODUCTION <ul><li>Topics for the day :- </li></ul><ul><li>What is International business? </li></ul><ul><li>What Intern...
What is International business? <ul><li>The business or commercial transactions between two or more countries may be betwe...
What International business Includes? <ul><li>The parties involved in such transactions may include individuals, companies...
What International business Includes? <ul><li>International Business includes not only international trade of goods and se...
Why study International Business? <ul><li>IB comprises a large & growing portion of the world’s total business; </li></ul>...
Why study International Business? <ul><li>E-commerce has opened up new opportunities; </li></ul><ul><li>Examining the prac...
Why study International Business? <ul><li>Training managers to acquire skills & knowledge that are global in character; </...
Why companies engage in International Business? <ul><li>Expand Sales: </li></ul><ul><li>Higher Sales – Higher Profit </li>...
Why companies engage in International Business? <ul><li>Acquire Resources:  </li></ul><ul><li>A company may acquire someth...
Why companies engage in International Business? <ul><li>Seek New Markets:   </li></ul><ul><li>Somehow related for expandin...
Why companies engage in International Business? <ul><li>Competition: </li></ul><ul><li>Enter foreign markets to better com...
Why companies engage in International Business? <ul><li>Rapid Technology </li></ul><ul><li>Emergence of supportive Institu...
Modes of Entry into International Business <ul><li>1.   Exports and Imports: </li></ul><ul><li>-- Merchandise Exports   an...
Modes of Entry into International Business <ul><li>2.   International Investments: </li></ul><ul><li>--  Foreign Direct In...
Modes of Entry into International Business <ul><li>--  Portfolio Investment:  Purchase of foreign financial assets (stocks...
FDI v/s Portfolio Investment <ul><li>Long term Perspective </li></ul><ul><li>Productive activity </li></ul><ul><li>Intensi...
Modes of Entry into International Business <ul><li>3.  Licensing:  (permission) </li></ul><ul><li>A legal arrangement (bin...
Modes of Entry into International Business <ul><li>Intellectual Property could be patents, trademark, brand names, copyrig...
Modes of Entry into International Business <ul><li>4.  Franchising:  (Extension of Licensing) </li></ul><ul><li>A firm in ...
Modes of Entry into International Business <ul><li>5.  Management Contract: </li></ul><ul><li> An arrangement where A firm...
Modes of Entry into International Business <ul><li>Operational control of the enterprise is vested by contract in a separa...
Modes of Entry into International Business <ul><li>Example:   </li></ul><ul><li>Disney receives management fees from manag...
Modes of Entry into International Business <ul><li>6.   Turnkey Projects: </li></ul><ul><li>A firm agrees to construct an ...
References  <ul><li>International Business  </li></ul><ul><ul><li>By V. Sharan </li></ul></ul>
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Ib overview(1)

  1. 1. INTERNATIONAL BUSINESS ENVIRONMENT PGDIB - I
  2. 2. INTRODUCTION <ul><li>Topics for the day :- </li></ul><ul><li>What is International business? </li></ul><ul><li>What International business Includes? </li></ul><ul><li>Why study International Business? </li></ul><ul><li>Why companies engage in International Business? </li></ul><ul><li>Modes of entry into International business. </li></ul>
  3. 3. What is International business? <ul><li>The business or commercial transactions between two or more countries may be between Individual, Government, or other entities. </li></ul><ul><li>International Business means carrying on business activities beyond national boundaries. </li></ul>
  4. 4. What International business Includes? <ul><li>The parties involved in such transactions may include individuals, companies, group of companies or Government agencies. </li></ul><ul><li>IB includes the transaction of economic resources such as goods, capital, services (comprising Technology, skilled Labor, transportation etc.) and International Production. </li></ul>
  5. 5. What International business Includes? <ul><li>International Business includes not only international trade of goods and services but also Foreign Investment, especially foreign direct Investment. </li></ul>
  6. 6. Why study International Business? <ul><li>IB comprises a large & growing portion of the world’s total business; </li></ul><ul><li>Companies sells its output to & secure supplies from foreign countries; </li></ul><ul><li>Companies are competing against product and services that come from abroad; </li></ul><ul><li>Small businesses are also becoming more involves in IB. </li></ul>
  7. 7. Why study International Business? <ul><li>E-commerce has opened up new opportunities; </li></ul><ul><li>Examining the practices, problems, solutions relating to managerial function in foreign countries; </li></ul><ul><li>Need to know the culture, values & social norms along with business processes/ practices in foreign countries. </li></ul>
  8. 8. Why study International Business? <ul><li>Training managers to acquire skills & knowledge that are global in character; </li></ul><ul><li>Keep pace with your future competitors; </li></ul><ul><li>Helps in acquiring latest business techniques and tools. </li></ul>
  9. 9. Why companies engage in International Business? <ul><li>Expand Sales: </li></ul><ul><li>Higher Sales – Higher Profit </li></ul><ul><li>Many of World’s largest companies derive over half of their sales from outside their home countries. </li></ul><ul><li>Example: Nestle (Switzerland), Nokia (Finland), Ericsson (Sweden), Sony (Japan). </li></ul>
  10. 10. Why companies engage in International Business? <ul><li>Acquire Resources: </li></ul><ul><li>A company may acquire something not readily available in its home country. </li></ul><ul><li>Reduce the cost: </li></ul><ul><li>Many firms have located facilities in LCDs (Less developed countries) or developing countries to lower firm’s production cost. </li></ul>
  11. 11. Why companies engage in International Business? <ul><li>Seek New Markets: </li></ul><ul><li>Somehow related for expanding sales </li></ul><ul><li>Domestic markets matures (Eg: Procter & Gamble, Unilever & Colgate Pamolive) </li></ul><ul><li>Expansion into new markets carries with it two other benefits: </li></ul><ul><li>Economies of scale </li></ul><ul><li>Diversifies a firm’s revenue system </li></ul>
  12. 12. Why companies engage in International Business? <ul><li>Competition: </li></ul><ul><li>Enter foreign markets to better compete with industry rivals (Eg: Coca-Cola and Pepsi) </li></ul><ul><li>A protected market in India till 1991. </li></ul><ul><li>Since liberalization, many Indian companies are now planning to go international in a big way. </li></ul><ul><li>Eg: Tata-Corus Takeover </li></ul><ul><li>Birla’s Takeover of Novelis </li></ul>
  13. 13. Why companies engage in International Business? <ul><li>Rapid Technology </li></ul><ul><li>Emergence of supportive Institution </li></ul><ul><li>Openness of economic policies among large number of countries </li></ul>
  14. 14. Modes of Entry into International Business <ul><li>1. Exports and Imports: </li></ul><ul><li>-- Merchandise Exports and Imports or Visible Trade i.e. Exports and Imports of Tangible goods. </li></ul><ul><li>-- Service Exports and Imports or Invisible Trade i.e. Trade of Services </li></ul><ul><li>Eg: Tourism and transportation </li></ul><ul><li> Banking, Insurance, Engineering, </li></ul><ul><li>Management services </li></ul>
  15. 15. Modes of Entry into International Business <ul><li>2. International Investments: </li></ul><ul><li>-- Foreign Direct Investment (FDI): Investment which is made to acquire a lasting (long term) interest in an enterprise operating in an economy other than that of the investor, the investor’s purpose being to have an effective voice in the managementof enterprise” </li></ul>
  16. 16. Modes of Entry into International Business <ul><li>-- Portfolio Investment: Purchase of foreign financial assets (stocks, bonds, etc.) to raise rate of return on the asset portfolio. </li></ul><ul><li>It is not made with the intension of controlling a company’s decision making. </li></ul>
  17. 17. FDI v/s Portfolio Investment <ul><li>Long term Perspective </li></ul><ul><li>Productive activity </li></ul><ul><li>Intension of managerial control (or participation in the management of foreign enterprise) </li></ul><ul><li>Short term perspective </li></ul><ul><li>Motivated by profit </li></ul><ul><li>Does not seek management control </li></ul>
  18. 18. Modes of Entry into International Business <ul><li>3. Licensing: (permission) </li></ul><ul><li>A legal arrangement (binding by a contract) whereby a firm in one country licenses the use of its intellectual property to a firm in a second country in return for a royalty payment. </li></ul>
  19. 19. Modes of Entry into International Business <ul><li>Intellectual Property could be patents, trademark, brand names, copyright, manufacturing designs, etc. </li></ul><ul><li>The firm transferring its intellectual property is known as Licensor and the firm receiving it is known as the Licensee . </li></ul><ul><li>Example: Mickey Mouse </li></ul><ul><ul><ul><ul><ul><li>Harry potter </li></ul></ul></ul></ul></ul>
  20. 20. Modes of Entry into International Business <ul><li>4. Franchising: (Extension of Licensing) </li></ul><ul><li>A firm in one country (the Franchisor) authorizes a firm in another country (the franchisee) to utilize its operating system as well as its brand names, trademark, logos, etc. </li></ul><ul><li>In return Franchisor receives royalty payment. </li></ul><ul><li>Example : Mc.D, Pizza Hut, Dominos, Kodak, KFC, Mark & Spencer, etc. </li></ul>
  21. 21. Modes of Entry into International Business <ul><li>5. Management Contract: </li></ul><ul><li> An arrangement where A firm in one country agrees to operate facilities or provide other management services to a firm in another country for an agreed upon fees. </li></ul>
  22. 22. Modes of Entry into International Business <ul><li>Operational control of the enterprise is vested by contract in a separate enterprise which performs the necessary managerial functions. </li></ul><ul><li>It involves a wide range of functions such as technical operations of a production facility, management of personnel, accounting, marketing services and training. </li></ul>
  23. 23. Modes of Entry into International Business <ul><li>Example: </li></ul><ul><li>Disney receives management fees from managing theme parks in France & Japan. </li></ul><ul><li>Taj group will manage the Peirre in New York. </li></ul>
  24. 24. Modes of Entry into International Business <ul><li>6. Turnkey Projects: </li></ul><ul><li>A firm agrees to construct an entire plant in a foreign country and make it fully operational. </li></ul><ul><li>Agreement for Turnkey projects normally takes place where the initial construction part of the plant is more complex then the operational part. </li></ul><ul><li>Example: Larsen & Tourbo – Giant construction & engineering group. </li></ul>
  25. 25. References <ul><li>International Business </li></ul><ul><ul><li>By V. Sharan </li></ul></ul>
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