2. Learning Objectives
To understand the meaning of Globalization
To understand the drivers of Globalization
To learn the concept of international
business.
To understand the reasons for international
business expansion
To appreciate the opportunities and
challenges offered by international business.
2
3. The Globalization phenomenon
‘Globalization ‘ refers to the free cross
border movement of goods, services,
capital, information and people.
It is the intensification of cross-national
economic, political, cultural, social and
technological interactions that leads to
establishment of transnational
structures.
3
4. Globalization : Defined
May be defined as the process of
integration and convergence of
economic, financial, cultural and
political systems across the world.
4
5. Globalization dimensions:
Economic Globalization
Internationalization of markets, financial
system, corporations, technology and
competition.
Financial Globalization
Liberalization of capital movements and
deregulations of financial services.
Integration of financial markets.
Cultural Globalization
Convergence of cultures across the world.
5
6. Drivers of Globalization
Increase in and expansion of
technology:
• Most ‘modern marvels’ have been
invented in recent times.
• More percent of population involved in
developing new products.
• Pace of new development very fast.
• Technology sharing also very fast.
6
7. Drivers of Globalization
Advances in Communications and
Transportation :
Strides in communications and
transportations makes people aware
about the new products fast.
Cost of improved transportation and
communication have come down.
7
8. Liberalization of Cross-Border Trade
and Resource Movements :
Most governments have reduced
restrictions on inernational movements of
products and services because:
Citizens want a greater variety of goods
and services at lower prices.
Competition spurs domestic producers to
become more efficient.
They hope to induce other countries to
lower their barriers in turn.
8
9. Development of services that
support International Business:
Companies and govts. have developed
a variety of services that facilitate
conduct of international business.
Eg. Bank credit agreements, clearing
arrangements, insurance that covers
risk of damage en route and non
payment, special schemes of govt etc.
9
10. Growing Consumer Pressures :
Consumers are aware of the latest products and
services available in other countries.
So they want more, newer, better and differentiated
products.
Increased Global Competition :
Competition spurs movement to newer markets.
Mergers and acquisitions across the border may
improve operating efficiencies.
10
11. Changing Political Situation:
Less schism between non-communist and
communist world.
Willingness among governments to promote
international trade. (development of sophisticated
airports and seaports, info. on foreign markets
etc.).
Expanded Cross National
Cooperation
Bilateral, Multilateral treaties for cooperation
in trade, usage of infrastructural facilities for
trade, reduction of trade barriers etc.
11
12. What is International Business?
International business consists of all
commercial transactions taking place
between two countries. These
transactions include sales, investment
and transportation by government or
private companies with or without the
objective of making profit.
12
13. Reasons for International Business
Expansion
Market Seeking Motives:
Marketing Opportunities due to life
cycles of products
Uniqueness of product or service
eg. Himalayan herbs and Indian
medicinal plants, software deveopment at competitive prices, value
added BPO/KPO services etc.
13
14. Reasons for International
Business Expansion…
Economic Motives:
Profitability
Higher profits from overseas business is a significant motive for
intl. expansion.
Differences in profitability due to :
Price differentials in various country markets
Export Incentives by home country govt.
Fiscal incentives by host country govt.
Low cost and abundant availability of factors of production.
Low intensity of competition in foreign markets .
14
15. Reasons for International
Business Expansion…
Economic Motives :
Achieving economies of scale:
Large scale production capacities necessitate
domestic firms to dispose off their goods in intl.
markets.
Moreover global business also contribute to
synergies and increased economies even in
marketing, logistics, supply chain and other
functional areas.
15
16. Reasons for International
Business Expansion…
Economic Motives:
Spreading R&D costs:
R& D intensive companies like those in software,
Pharmaceuticals, micro processors etc. need to
recover costs speedily by spreading business in
newer and profitable markets. So international
business expansion is critical for their success.
16
17. Reasons for International
Business Expansion…
Strategic Motives
Growth:
For companies with small home markets growth is
possible by moving to larger markets in other countries.
For e.g. Singapore, Malaysia, Thailand, Norway,
Sweden, Finland etc.
Risk Spread:
International expansion is also used to mitigate risk of
economic upheavals in the home market. Operating in
several countries reduces dependence on any
17
particular market .
18. Globalization : Challenges
Opening up of domestic market to foreign
companies increases competition even
for firms solely operating in domestic
markets.
Liberal investment regime facilitates intl.
Cos. In establishing business operations,
giving rise to increased competition to
firms that have been used to operate in
protected economies.
18
19. Globalization : Opportunities
Increased market access and reduced tariffs
make foreign markets not only accessible , but
increases competitiveness as well.
Liberalization of regulatory framework helps
investment and expansion in foreign markets.
It give opportunity for integration of business
operations on a global scale.
It gives opportunities for foreign collaborations
and ownership.
19
20. Types of International Business
Export-import trade
Foreign direct
investment
Licensing
Franchising
Management contracts
20
21. International Business Questions
How will an idea, good, or service
fit into the international market?
Should trade or investment be used
to enter a foreign market?
Should supplies be obtained
domestically or abroad?
What product adjustments are
necessary to be responsive to local
conditions?
What are the threats from global
competitors, and how can these
threats be counteracted?
21
