2. • Definition
• According to International Business Journal,
‘International business is a commercial
enterprise that performs economical activity
beyond the bounds of its location, has
branches in two or more foreign countries and
makes use of economic, cultural, political, legal
and other differences between countries
3.
4. Advantages of Globalization
• 1.Employment
• Considered as one of the most crucial
advantages, globalization has led to the
generation of numerous employment
opportunities. Companies are moving towards
the developing countries to acquire labor force.
This obviously caters to employment and income
generation to the people in the host country.
Also, the migration of people, which has become
easier has led to better jobs opportunities.
5. • 2. Free Movement of Labour
• Increased labour migration gives advantages to both
workers and recipient countries. If a country
experiences high unemployment, there are increased
opportunities to look for work elsewhere. This process
of labour migration also helps reduce geographical
inequality. This has been quite effective in the EU, with
many Eastern European workers migrating west.
• Also, it helps countries with labour shortages fill
important posts. For example, the UK needed to recruit
nurses from the far east to fill shortages.
• However, this issue is also quite controversial. Some are
concerned that free movement of labour can cause
excess pressure on housing and social services in some
countries. Countries like the US have responded to this
process by actively trying to prevent migrants from
other countries.
6. • 3. Education
• A very critical advantage that has aided the
population is the spread of education. With
numerous educational institutions around the
globe, one can move out from the home
country for better opportunities elsewhere.
Thus, integrating with different cultures,
meeting and learning from various people
through the medium of education is all due to
globalization. Developing countries or labour-
intensive countries have benefited the most.
7. 4. Product Quality
• The onset of international trade has given rise to
intense competition in the markets. No longer
does one find limited number of commodities
available. A particular commodity may fetch
hundreds of options with different prices. The
product quality has been enhanced so as to
retain the customers. Today the customers may
compromise with the price range but not with
the quality of the product. Low or poor quality
can adversely affect consumer satisfaction.
8. 5. Cheaper Prices
• Globalization has brought in fierce competition in
the markets. Since there are varied products to
select from, the producer can sustain only when
the product is competitively priced. There is
every possibility that a customer may switch over
to another producer if the product is priced
exorbitantly. ‘Customer is the King’, and hence
can dictate the terms to a very large extent.
Therefore, affordable pricing has benefited the
consumer in a great way.
9. • 6. Free Movement of Capital
• Capital, the backbone of every economy, is of prime
importance for the proper functioning of the
economy. Today, transferring money through banks
is possible just by the click of a button, all due to
the electronic transfer that has made life very
comfortable. Many huge firms are investing in the
developing countries by setting up industrial units
outside their home country. This leads to Foreign
Direct Investment, which helps in promoting
economic growth in the host country.
10. 7. Communication
• Information technology has played a vital role
in bringing the countries closer in terms of
communication. Every single information is
easily accessible from almost every corner of
the world. Circulation of information is no
longer a tedious task, and can happen in
seconds. The Internet has significantly
affected the global economy, thereby
providing direct access to information and
products.
11. 8. Transportation
• Considered as the wheel of every business
organization, connectivity to various parts of
the world is no more a serious problem. Today
with various modes of transportation
available, one can conveniently deliver the
products to a customer located at any part of
the world. Besides, other infrastructural
facilities like, distribution, supply chain, and
logistics have become extremely efficient and
fast
12. • 9. International Trade
• Purchase and sale of commodities are not the
only two transactions involved in international
trade. Today, international trade has broadened
its horizon with the help of business process
outsourcing. Sometimes in order to concentrate
on a particular segment of business it is a
practice to outsource certain services. Some
countries practice free trade with minimal
restrictions on EXIM (export-import) policies.
This has proved beneficial to businesses.
13. • 10. GDP Increase
• Gross Domestic Product, commonly known as GDP, is
the money value of the final goods and services
produced within the domestic territory of the country
during an accounting year. As the market has widened,
the scope and demand for a product has increased.
Producers familiarize their products and services
according to the requirements of various economies
thereby tapping the untapped markets. Thus, the final
outcome in terms of financial gain enhances the GDP
of the country. If statistics are of any indication, the
GDP of the developing countries has increased twice as
much as before.
14. • 11. Increased Economies of Scale
• Production is increasingly specialized.
Globalization enables goods to be produced in
different parts of the world. This greater
specialization enables lower average costs and
lower prices for consumers.
15. • Disadvantages of Globalization
1. Health Issues
• Globalization has given rise to more health risks and
presents new threats and challenges for epidemics. A
very customary example is the dawn of HIV/AIDS.
Having its origin in the wilderness of Africa, the virus
has spread like wildfire throughout the globe in no
time. Food items are also transported to various
countries, and this is a matter of concern, especially in
case of perishable items. The safety regulations and the
standards of food preparation are different in different
countries, which may pose a great risk to potential
health hazards.
16. 2. Loss of Culture
• Conventionally, people of a particular country
follow its culture and traditions from time
immemorial. With large number of people
moving into and out of a country, the culture
takes a backseat. People may adapt to the
culture of the resident country. They tend to
follow the foreign culture more, forgetting
their own roots. This can give rise to cultural
conflicts.
17. • 3. Uneven Wealth Distribution
• It is said that the rich are getting richer while the
poor are getting poorer. In the real sense,
globalization has not been able to reduce
poverty. Instead it has led to the accumulation of
wealth and power in the hands of a few
developed economies. Therefore the gap
between the elite and the underprivileged seems
to be a never ending road, eventually leading to
inequality.
18. • 4. Environment Degradation
• The industrial revolution has changed the outlook of
the economy. Industries are using natural resources by
means of mining, drilling, etc.which puts a burden on
the environment. Natural resources are depleting and
are on the verge of becoming extinct. Deforestation is
practiced owing to the non-availability of land, thereby
drastically reducing the forest cover. This in turn
creates an imbalance in the environment leading to
climate change and occurrence of natural calamities
19. • 5. Disparity
• Though globalization has opened new avenues like
wider markets and employment, there still exists a
disparity in the development of the economies.
Structural unemployment owes to the disparity
created. Developed countries are moving their
factories to foreign countries where labor is cheaply
available. The host country generates less revenues,
and a major share of the profits fall into the hands
of the foreign company. They make humongous
profits thereby creating a huge income gap
between the developed and the developing
countries.
20. • 6. Cut-throat Competition
• Opening the doors of international trade has given birth to
intense competition. This has affected the local markets
dramatically. In recent times the standard of living has
improved. People are therefore ready to shell out extra
money for a product that may be available at a lower
price. This is because of the modern marketing techniques
like advertising and branding. The local players thereby
suffer huge losses as they lack the potential to advertise or
export their products on a large scale. Therefore the
domestic markets shrink.
21. • 7. Conflicts
• Every economy wants to be at the top spot
and be the leader. The fast-paced economies,
that is the developed countries are vying to be
the supreme power. It has given rise to
terrorism and other forms of violence. Such
acts not only cause loss of human life but also
huge economic losses.
22. • 8. Monopoly
• Monopoly is a situation wherein only one seller
has a say in a particular product or products. It
is possible that when a product is the leader in
its field, the company may begin to exploit the
consumers. As there exists no close
competitors, the leader takes full advantage of
the sale of its product, which may later lead to
illegal and unethical practices being followed.
Monopoly is disastrous as it widens the gap
between the developed and developing
countries.
23. • 9. Inflation
• Strong demand for food and energy has
caused a steep rise in commodity prices. Food
price inflation has placed millions of the
world’s poorest people at great risk.
24. International Business
Management - Overview
• Why companies opt for IB?
– To increase sales and profit
Economy of scale
Full capacity utilization may be difficult without
foreign markets.
Possibility of identifying niche foreign market (
hence a scope of premium pricing)
Possibility of extending product life.
– To acquire resources such as technologies, capital,
manpower (skill/ talent) and information
25. International Business
Management - Overview
.To increase prestige of the product and the
organisation.
• To expand the base of sales and supplies to minimize
the effect of trade-cycle or that of recession or
inflation in the domestic market
• Product development costs can be shared in a larger
market.
• To increase the competitive edge in the domestic
market. (global players are likely to edge out others
in the domestic market due to better quality and
cost effectiveness).
26. Globalization
• Globalization refers to the process of integration of
the world into one huge market.
• Globalization is the process of international
integration arising from the interchange of world views,
products, ideas, and other aspects of culture.
• Globalization is the tendency of investment funds and
businesses to move beyond domestic and national
markets to other markets around the globe, thereby
increasing the interconnection of the world
27. International Business
Management - Overview
• What is ‘Economic Globalization’ ?
– There is a growing economic interdependence
among the countries.
– This is reflected in increasing cross border flows of
1. Goods and services. 2. Capital 3. Know how
There is Globalisation in the field of marketing as in
the field of production/ operation.
Globalisation is growing International trade in GDP is
now 30% of world GDP. It was only 10% 30 years ago.
FDI has grown from 5% of GDP to 12% in 20 years.
Cross border acquisition and merger is increasing.
28. • What are the major drivers of globalization?
– Expansion of technology . Technology is truly
‘stateless’. It crosses national or cultural boundaries.
– Transportation and communication improvements –
in speed , reliability, cost factors etc.
– World economic trend:- Liberalization of cross border
movement, Deregulation, reduction in tariffs. Trend
towards privatization and market allocation economy.
- WTO initiatives.
– Common market needs promotes globalization.
– Leverages / advantages possessed by global
companies such as economy of scale, experience
transfer, improved resource utilization etc.
30. • 1. Political-Legal Environment
• Political environment refers to the influence of the system of
government and judiciary in a nation on international
business. The system of government in a nation wields
considerable impact on its business.
• The type and structure of government prevailing in a country
decides,promotes,fosters,encourages, shelters, directs and
controls the business of that country.
• A political environment that is stable, honest, efficient and
dynamic and which ensures political participation to the
people, and assures personal security to the citizen, is
primary factor for economic development .The developed
economies of the today owe their success to a large extent to
the political system they richly enjoyed.
31. Legal Environment
• Legal Environment refers to the legal system obtaining
in a country.The legal system then refers to the rules
and laws that regulate behaviour of individuals and
organizations. Failure to comply with the laws means
that penalties will be inflicted by the courts depending
on the seriousness of the offence.
• The legal system of a country is of immense importance
to international trade. A country’s laws regulate
business practice, define the manner in which business
transactions are to be carried out and set down the
rights and obligations of those involved in business
deals.
32. 2. Economic Environment
• Economic Environment refers to those economic
factors, which have impact on the international trade.It
includes economic conditions, economic policies,
economic system, phases of business cycle, foreign
investment, international organizations(IMF,World
Bank,WTO etc.), international trade agreements etc.
• There are various international organizations, which
issue various guidelines, make different rules and
regulations for regulating international trade.Among
these important organizations are international
Monetary Fund,World Bank,World Trade Organization
etc.
33. 3. Cultural Environment
• In global business activities such as leading, motivating,
decision-making,problem solving and exchanging
information and ideas depend on the ability of
managers and employees from one culture to
communicate successfully with colleagues, clients and
suppliers from other cultures.
• Mistakes in cross cultural communication often go
unnoticed by the communicators, but these mistakes
have potential to cause damage to international
relationships and negotiations.
34. Technological Environment
• Technological Environment like its counterparts political
and legal has a considerable influence on international
business.Technology has facilitated international
business in at least six ways:
• i. E-Commerce
• The internet allows both small and big companies to
expand their global presence at a lower cost than ever
before.The internet makes it much easier for buyers
and seller to find each other,wherever they may be
located,and whatever their size.
• ii. Telecommunications
• Technology such as 3G,4G,MMS etc. have fostered
closely knit global business.
35. • iii. Transportation
• In addition to developments in computers and
telecommunications,several major innovations in
transportation.In economic terms,the most important are
probably the development of commercial jet aircraft and
super freighters and the introduction of
containerization,which simplifies trans-shipment from one
mode of transport to another.
• iv. Globalization of production
• Technological breakthroughs have facilitated globalization of
production.A worldwide communications network has
become essential for any MNC. Factors influencing the
location of manufacturing facilities vary from country to
country.They may be more favourable in foreign countries
rather than in home country.
•
36. • v. Globalization of Markets
• Globalization of markets refers to the process of
integrating and merging of the distinct world
markets into a single market.This process
involves the identification of some common
norm,value,taste,preference and convenience
and slowly enables the cultural shift towards the
use of common product or service.
37. • vi. Technology Transfer
• Technology transfer and globalization are interconnected
with each other. They are highly interdependent as well.
The onset of globalization has brought up free passage of
goods and services across the globe. The role of technology
has also changed from time to time. It is currently
considered as one of the important factors in the
propagation of globalization.
• Technology transfer consists not only of various scientific
researches and discoveries, but also the transformation of
such researches and discoveries into practical and feasible
applications or products. Technology transfer is one of the
major aspects of globalization.
38. Country Attractiveness
• Country attractiveness is a multidisciplinary concept
at the crossroads of development economics, financial
economics, comparative law and political science.
• it aims at tracking and contrasting the relative
appeal of different territories and jurisdictions
competing for “scarce” investment inflows, by scoring
them quantitatively and qualitatively across ad hoc
series of variables such as GDP growth, tax rates,
capital repatriation … etc.
• The overall attractiveness of a country as a potential
market and/or investment site for an international
business depends on balancing the benefits, costs, and
risks associated with doing business in that country.
39. Criteria for Assessing Country
Attractiveness
• Market potential
• Political, legal and financial environment of the
country
• Marketing support infrastructure in the country
• Brand / company Franchise relative to competing
products / companies
• Degree of market fit with company policies, goals,
and resources
40. What is free trade?
• • Free trade is said to take place between
countries when there are no barriers to trade
put in place by governments or international
organizations.
• • Goods are able to move freely between
countries.
41. What is Protectionism?
• Any measured designed to give local
producers of good or service an advantage
over a foreign competitor.
42. Types of Protectionism
• Tariffs – This is a tax on imports.
• Quotas – This is a physical limit on the quantity of imports
• Embargoes – This is a total ban on a good, this may be
done to stop dangerous substances
• Subsidies – If a government subsidises domestic
production this gives them an unfair advantage over
competitors.
• Administrative barriers – Making it more difficult to trade,
e.g. imposing minimum environmental standards.
• Competitive devaluation – manipulating currency to make
exports cheaper.
43. • Tariffs which are a tax on imports from other
countries and foreign markets. Here, the
government imposing the tariff is looking to restrict
imports of foreign goods and services, protect its
own industries and companies manufacturing such
items and raise tax revenues. Tariffs could be
specific in which there is a fixed tax rate or fee for
each unit of a product or commodity brought into a
nation. There are also ad valorem tariffs which are
set as a proportion of the value of the imported
product.
44. • Quotas are a direct restriction on the number of
certain goods, products, and commodities that
may be permitted to be imported into a nation.
This import quota is generally enforced by the
issuance of import licenses to a certain group of
persons or companies. There is also voluntary
export restraint (VER) that acts as a trade quota
imposed by an exporting nation. VERs can also
come in the form of political pressure on a nation
by another country in order to stop the export of
goods or commodities.
45. • Subsidies are government payments to domestic
producers. This can come in the form of cash
payments, low-to-no interest loans, tax breaks, and
government ownership of common stock in
domestic companies. Subsidies help domestic
producers by having extra cash available for
production of goods thereby lowering
manufacturing costs and allowing these same
companies to gain foreign markets.
46. • Local content requirements may be imposed
by a nation seeking to decrease imports by
setting a manufacturing requirement in which
a stated part or parts of a product must be
made domestically. This occurs by having a
percent of a product manufactured
domestically or that in value terms, such as 85
percent of its value, must be made locally.
47. • Administrative trade policies consist of bureaucratic
rules, laws, and regulations designed to create serious
difficulties for an importer of goods or commodities
into a particular nation.
• Formal trade barriers can come in the form of onerous
rules, regulations, administrative requirements, and
paperwork to be completed.
• Informal trade barriers include the inspection of every
product, good, and commodity entering a nation in
order to check for disease or suspicious content. This
can take time, effort, and may often severely damage
the item being inspected. Administrative policies can
also involve setting high-level health and safety
standards and difficult-to-obtain import licenses for
foreign producers.
48. • Antidumping policies are enacted by a nation in
order to prevent the selling of goods in a foreign
market at a price far below their production costs in
order to gain a substantial share of that nation’s
market. Anti-dumping rules can also include
regulations prohibiting the sale of goods, products,
or commodities below its fair market value.
49. • Exchange rate controls can be used to make a
nation’s product cheaper abroad by lowering the
value of its currency in the foreign exchange
markets. The premise is that a nation can sell its
currency in foreign exchange markets to the point
where its loses value against other currencies.
This will cause the price of imports to rise while
lowering the cost of its exports. This will help a
nation, whether developed or developing,
increase the opportunity to sell its products and
goods in foreign markets.
