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  • 1. International Management
    • Session 1
    • Introduction
    • Evolution of IB
    • Why, How, When & Where of IB
    • Indian IB Story
  • 2. Amar KJR Nayak/IB/XIMB International Business (IB) Commercial Activities that cross National Frontiers International Movement of Goods, Capital, Technology, & Services …
  • 3. Amar KJR Nayak/IB/XIMB Growth Phase: 1880s - 1920 Ownership / Control of many of the world’s natural resources - IB Trading companies, banks and utilities had created a global infrastructure Movement of the latest and the newest technological products IB: Prominent in chemicals, machinery and branded consumer products.
  • 4. Amar KJR Nayak/IB/XIMB The Great Depression, 1920 - 1930 Collapse of primary commodity prices World Political Uncertainties – Break of the Second World War Halted the growth of international trade for nearly a decade. IB could not retain its momentum as prior to the 1920s
  • 5. Amar KJR Nayak/IB/XIMB Limited Growth Phase, 1930 – 1950 In 1930s, IB in the world economy halted From 1930s IB expanded in the automobiles FDI: dominated by USA, Britain and the Netherlands International cartels: to restrict output, maintain prices, and to transfer technologies across borders Limited flow of FDI to the less industrialized nations Many host countries of FDI freed themselves from colonial rule US MNEs: latest innovation in petrochemicals, computers and semi-conductors to other industrialized countries The new independent nations sought to control of the nation’s strategic natural resources and utilities from the foreign companies IB from the 1950s: numerous borders
  • 6. Amar KJR Nayak/IB/XIMB Growth Restricted, 1950 – 1970 Service MNEs were the worst affected by such policies Foreign ownership of energy, communication and utilities – challenged and prohibited Vertical integration strategies of MNEs started to get fragmented Vertical integration strategies of MNEs started to get fragmented Multinational investment in airlines was impossible Trading firms found a firm role in these industrialized nations The Sogo Shosha functioned as Japan’s leading MNEs Significant growth in areas like advertising agencies, accounting, hotels, fast food restaurants in the industrialized nations
  • 7. Amar KJR Nayak/IB/XIMB New Growth Phase, 1970 - Germany, France and Japan re-emerged as major outward investors Newly industrialized countries in Asia emerged as new sources multinational investment. IB entered a new environment and a new growth phase Regained the level of importance that of period before the 1920s China and Eastern Europe also were open for FDI India
  • 8. Amar KJR Nayak/IB/XIMB Key Features Multinational investment overtook trade as the driving force Air transportation, Utilities, Natural Resources – opened up for FDI New forms of international borders: Regulations and control Contracts and Joint Ventures: Means to control
  • 9. Amar KJR Nayak/IB/XIMB Sectoral distribution (%) of IB 50 26 30 Service 39 52 15 Manufacturing 11 22 55 Natural Resources 1992 1978 1914 Sector
  • 10. Amar KJR Nayak/IB/XIMB International Business A striking mixture of continuities and discontinuities Change has been the most key feature of IB
  • 11. The Why, How and Impact of International Business Why - The Driving Force: Is there a single driving force? Nineteenth century – need for raw materials and foodstuffs in the industrialized world. Maturing markets in the industrialized countries High transaction costs in many markets and the capital intensity Firms want to Become Multinational corporation? Amar KJR Nayak/IB/XIMB
  • 12. Amar KJR Nayak/IB/XIMB How it happened Improvement in transport and communications
    • Reduced the problem of co-ordination of business in different countries
    • It reduced the time and cost of traversing space
    Strong and dynamic organizational structure were critical Protection of proprietary technology, and brands Complexity of written contracts for intricate technologies Modes of investment (joint venture, equity and non-equity) International cartels (as in the 1930s)
  • 13. Amar KJR Nayak/IB/XIMB The Impact Major facilitators of trade flows Transferred technologies and organizational skills across borders Raised problems for local industries Draining of profits out of a country Risk of resource transfer from home economies to other economies
  • 14. Significance to Managers: Business in most industries have crossed the national boundaries Have to fight for the global market share to remain competitive Understanding International Business Developing capabilities to operate in the international market Amar KJR Nayak/IB/XIMB
  • 15. Corporate Managers and Business Managers need to know the dynamics of IB Amar KJR Nayak/IB/XIMB
  • 16. International Business & India Nature & Scope Investment of foreign companies in India (1901-2000) 1900-1920: British Dominated Growth 1920-1940: Indian companies assert, British co. enter mfg. 1940-1960: American & other European companies rush in 1960-1980: Controlled Growth, Committed survived 1980-2000: Gates opened, Flooding of FDI Amar KJR Nayak/IB/XIMB