Introduction to Business Management

2. Learning Objectives
 To define international business (IB) and describe how it differs from
domestic business
 Globalization
 Multinational Enterprises
 International Management
 To explain why companies engage in IB and why its growth has
accelerated
 To introduce different modes a company can use to accomplish its
global objectives
 To illustrate the role social science disciplines play in understanding
the environment of IB
 To provide an overview of the primary patterns for companies’
international expansion
 To describe the major countervailing forces that affect
BY:MADDY.KALEEM

3. Understanding the Term International Business
 International business comprises all commercial
transactions (private and governmental, sales,
investments, logistics, and transportation) that take place
between two or more regions, countries and nations
beyond their political boundaries.
BY:MADDY.KALEEM

4.  1.The exchange of goods and
services among individuals and businesses in
multiple countries
 2.A specific entity, such as a multinational
corporation or international business company that
engages in business among multiple countries

BY:MADDY.KALEEM

5. Globalization
BY:MADDY.KALEEM

6. Globalization
 The process by which businesses or other
organizations develop international influence or start
operating on an international scale.
BY:MADDY.KALEEM

7. Multinational Enterprises
 A MNE has a worldwide approach to
 foreign markets and production and
 an integrated global philosophy
 encompassing both domestic and
 international markets.
BY:MADDY.KALEEM

8. International Management
Defined as a process of accomplishing the
global objectives of a firm by (1) effectively
coordinating the procurement, allocation, and
utilization of the human, financial, intellectual, and
physical resources of the firm within and across
national boundaries and (2) effectively charting the
path toward the desired organizational goals by
navigating the firm through a global environment that
is not only dynamic but often very hostile to the firm’s
very survival.
BY:MADDY.KALEEM

9. Why Companies Engage in IB
 Expand sales—greater purchasing power in the world
as a whole
 Acquire resources—products, services, components
• also, foreign capital, technologies, information
 Diversify sources of sales and supplies—takes
advantage of business cycle differences among
countries
 Minimize competitive risk—prevent competitor from gaining
advantages
BY:MADDY.KALEEM

10. © 2001 Prentice Hall 1-10
International Business: Operations and Influences
Modes
• Importing and exporting
• Tourism and transportation
• Licensing and franchising
• Turnkey operations
• Management contracts
• Direct and portfolio
investment
Functions
• Marketing
•
Production
•
Accounting
• Finance
• Human
resources
Overlaying
Alternatives
• Choice of
countries
• Organization
and control
mechanisms
MEANS
EXTERNAL INFLUENCES
COMPETITIVE
ENVIRONMENT
• Major advantage in price,
marketing, innovation, or
other factors
• Number and comparative
capabilities of competitors
• Competitive differences
by country
PHYSICAL AND
SOCIETAL FACTORS
• Political policies and
legal practices
• Cultural factors
• Economic forces
• Geographical influences
OPERATIONS
OBJECTIVES
• Sales expansion
• Resource acquisition
• Diversification
• Competitive risk
minimization
STRATEGY
BY:MADDY.KALEEM

11. Modes
• Importing and exporting
• Tourism and transportation
• Licensing and franchising
• Turnkey operations
• Management contracts
• Direct and portfolio
investment
COMPETITIVE ENVIRONMENT
• Major advantage in price,
marketing, innovation, or
other factors
• Number and comparative
capabilities of competitors
• Competitive differences
by country
BY:MADDY.KALEEM

12. EXTERNAL INFLUENCES
PHYSICAL AND SOCIETAL FACTORS
• Political policies and
legal practices
• Cultural factors
• Economic forces
• Geographical influences
BY:MADDY.KALEEM

13. Reasons for Growth of IB
 Expansion of technology—transportation and communication are
quicker and less costly
 Liberalization of cross-border movements
• Government barriers reduced because:
– desire for better access to greater variety of goods and
services
– domestic producers forced to be more competitive
– lowered trade barriers to their own exports
 Development of supporting services by business and governments
to:
• Ease the flow of goods and services sold abroad
• Reduce risks of IB
 Increase in global competition—firms have become more global to
maintain competitiveness
BY:MADDY.KALEEM

14. External Influences on IB
 Physical and societal factors—must understand
• Politics that affect whether and how IB occurs
• Domestic and international law determines what managers can do in
IB
• Economics
• Geography—determine location and availability of world’s resources
 Competitive environment
• Varies by industry, company, and country
– strategies differ across companies
» e.g., importance of controlling labor costs
» e.g., influence of local and international competitors
– size of market differs across countries
BY:MADDY.KALEEM

15. Evolution of Strategy in International Process
 Risk minimization—foreign operations viewed as risky
 international commitments evolve gradually
 Patterns of expansion
• Passive to active pursuit of IB opportunities
 – initially wait for foreign opportunity
• External to internal handling of IB
– rely on intermediaries at first
• Limited to extensive modes of operations
– begin with importing or exporting operation
• Few to many foreign locations
• Similar to dissimilar business environments
 Leapfrogging of expansion—new companies begin with international
focus
• Possible because of founder’s experience and technological
advances that help define foreign markets
BY:MADDY.KALEEM

16. Routine Schedule
 International Business 9: 00am to 10: 00am
 Entrepreneurship 1:00pm to 2:00pm
BY:MADDY.KALEEM