International Business Management (unit 1 introduction) covers Anna University syllabus

1. References:
1. International Business : K Aswathappa
2. International Business-competing in the
global market : Charles W L Hill and Arun
K Jain
International Business
management
Unit 1: Introduction
Year : II Semester : IV
1
Prepared and presented by,
N. Ganesha Pandian,
Assistant professor,
Madurai School of management,
Madurai.

2. Contents
International business – Definition
Internationalizing business – Advantages
Factors causing globalization of business
International business environment
Country attractiveness
Political, economic and cultural environment
Protection Vs Liberalization of global business environment
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3. World as market place
3

4. International Business
International business consists of
transactions that are devised and
carried out across national borders to
satisfy the objectives of individuals,
companies, and organizations.
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5. Internationalizing Business
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Internationalization
of capital
Internationalization
of corporate mind set
Internationalization
of supply chain
Internationalization
of market presence

6. Need for International Business
International business: causes the flow of ideas, services,
and capital across the world
offers consumers new choices
permits the acquisition of a wider variety of products
facilitates the mobility of labor, capital, and technology
provides challenging employment opportunities
reallocates resources, makes preferential choices, and shifts
activities to a global level
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7. Drivers of International Business
1. Developing markets have huge opportunities to
increase their profits and sales
2. Many MNC’s are locating their subsidiaries in low wage
countries to take advantage of low cost production
3. Trading blocks seek to promote International business
by removing trade and Investment barriers
4. Changing demographics also adds to increasing
globalization
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8. Contd…
5. Declining investment and trade barriers have vastly
contributed to cross-border business
6. The most powerful instrument that triggered
internationalization is technology
7. Resource seeking is another motive for firms going
international
8. Internationalization is triggered by world bodies and
institutions e.g.. WTO World trade organizations
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9. Advantages of International Business
Product flexibility – offer a much wide range of
product globally
Less competition
Increased investment opportunity
Diversification of risk
Protection from national trends and events
Learning new methods
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10. Trade related entry modes
Exporting – exporting goods directly to foreign
customers
International sub-contracting – When a firm in host
country has surplus manufacturing capacity
Countertrade – countries exchange goods for goods
and like
Management contract – enforceable agreements on
trade related activities
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11. Transfer related entry modes
International leasing
International licensing
International franchising
Build – operate – transfer (BOT) –
Trunkey operations
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12. FDI related entry modes
Branch office
Co-operative joint venture
Equity joint-venture
Wholly owned subsidiary
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13. Terminologies
1. Transnational Corporation (TNC): Companies “Transcend”
or operate across national borders.
2. Multinational Corporation (MNC): Companies operate in
multiple companies.
3. Multinational Enterprise (MNE): International giants are
state-owned enterprises, rather than corporations
4. Global corporation: small number of companies whose
business presence more than 100 nations
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14. 5. International trade: Export of goods and services by a firm to a foreign buyer
(importer)
6. International marketing: Firm level marketing across the border, including
market identification and targeting, entry mode selection and etc.,
7. International investment: Cross-border transfer of resources to carry out
business activities
8. International management: Application of management concepts and
techniques in a cross-country environment
9. International business: Cross-border transaction of goods, services and
resources between two or more nations
10. Global business: Conduct of business activities in several countries using
highly co-ordinate and single strategy
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15. Globalization
Globalization refers to the opening of
local and nationalistic perspectives to a
broader outlook of interconnected and
interdependent world with free transfer
of capital, goods and services across
the national frontiers.
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16. Globalization has several facets, including globalization
of markets and globalization of production:
1. Globalization of market: refers to the merging of
historically distinct and separate national markets
into one huge global marketplace.
2. Globalization of production: refers to the sourcing of
goods and services from locations around the globe
to take advantage of national difference in the cost
and quality of factors of production.
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17. Emergence of global institutions
GATT (General Agreement in trade and tariff) and its successor
WTO (World trade organization)
International monetary fund(IMF), World bank, United nations
(UN)
1. WTO(World trade organization) is primarily responsible for
policing the world trading system and make sure nation-states
adhere to the rules laid down in trade treaties
As of May 2005,148 nations that collectively amount to 97 percent
of trade were WTO members
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18. International monetary fund (IMF) and world bank created in 1944
by 44 nations that met at Bretton woods, new Hampshire.
The task of IMF was to maintain order in the international
monetary system, and that of the world bank to promote
economic development.
World bank – focus on making low interest loans to cash-
strapped governments in poor nations, to develop their
infrastructure
IMF – lender of last resort to nation-states whose economies in
turmoil and currencies are losing value against those of other
nations 18

19. The United nations – Established in Oct 24, 1945, by 51
countries committed to preserving peace through
international co-operation and collective security.
Today every nation in the world nearly 191 countries of
total in members with UN.
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20. Drivers of globalization
• Declining trade and investment barriers
• The role of technological change
- Microprocessors and telecommunications
- The internet and World wide web
- Transportation technology
• The changing demographics of global economy
• The changing world output and world trade picture
• The changing FDI picture
• The changing nature of MNE picture
• The changing world order
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21. Effects of globalization
Globalization and management
Globalization and jobs
Globalization and wages
Globalization and child labor
Globalization and women
Globalization and developing countries
Inequalities
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22. The globalization debate
Is the shift toward a more integrated and
interdependent global economy a goods
thing?
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Demonstrators at the WTO meeting in Seattle in
December 1999

23. International business
Vs Domestic business
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24. Country Attractiveness
Multiple factors determining host country
attractiveness in the eyes of large FDI investors.
A country attractiveness assessment is based on
two dimensions:
1. Market and industry opportunities
2. Country risks (Economic/social/political factors)
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25. Country attractiveness analysis
Market opportunities:
Potential demand in country
Market size
Growth
Quality of demand
Industry opportunities:
Profitability potential
Competitiveness of firm
Resource availability
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26. Political risks: disruptions owing to internal or
external events or regulations as a result of
government
Economic risks: Exposes the business performance
Competitive risks: assessment on competition
prevailing in a country
Operations risks: risk of infrastructure, taxation
policies, availability of raw material
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27. International Business
Environment
The environment of international business is
regarded as the sum total of all external forces
working upon the firm as it goes about its
affairs in foreign and domestic markets
The environment can be classified in terms of
domestic, foreign and international spheres of
impact
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28. The international environment is conceived as the
interaction between domestic and foreign factors,
they cover a wide spectrum of forces:
1. Political environment
2. Legal environment
3. Cultural environment
4. Technological environment
5. Economic environment
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29. Political and legal environment
Political environment refers to the influence of
the system of government and judiciary in a
nation on international business
Democracy – Supreme power is vested with
citizens
Totalitarianism – Individual freedom is
completely subordinated to the power of the
authority of state.
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30. Types of Totalitarianism
Theocratic – country’s religious leader are also its political leader
(e.g) Afghanistan and Iran
Secular – Political leaders are guided by military and
bureaucratic powers (e.g) Pakistan; until 1980s several Asian
countries like south Korea, Taiwan and Singapore
Tribal – (e.g) Zimbabwe, Tanzania, Uganda and Kenya
Right-wing Totalitarianism – China is a classic example of polity
through communist by definition, following right wing policies
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31. Types of political risks
Macro risks
1. Expropriation of corporate assets
2. loss of technology or other intellectual properties
3. Mandatory labor laws
4. Protectionist measures
5. Civil wars and wars between countries
6. Inflation, recession, currency devaluation
7. Natural calamities
8. poverty
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32. Micro risks
Kidnappings, ransom, terrorism
Official dishonesty
Increased taxation
Caps on FDI
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33. Classification of risks
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Firm- Specific
risks
Cultural and
Institutional risks
Transfer risks
Country- Specific
risks
Global- Specific
risks
•Business risk
•Foreign
exchange risk
•Governance
risk Blocked •Ownership
structure
•Religious heritage
•IPR
•Protectionism
•Terrorism and
war
•Environmental
concerns
•Anti-
globalization
•Cyber attacks

34. Managing political risks
Avoiding investment
Adaptation
Threat
Lobbying
Terrorism consultants
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35. Legal environment
Refers to the legal system obtaining in a country
Four basic legal systems prevailing around the world
1. Islamic law
2. Common law (derived from English law)
3. Civil or code law (derived from Roman law)
4. Marxist legal system)
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36. Industrial disputes resolution
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Conciliation
Litigation
Arbitration

37. MNC and legal environment
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M
N
C
Protection
of IPRS
Product
Liability
and safety
Competition
laws
Labor
laws
Shipping
of goods
Contracts
Advertising
and
sales promotion
Bribery
and
corruption Environmental
laws

38. Cultural environment
Elbert W steward and James A Glynn writes
“Culture consists of the thought and
behavioral pattern that members of society
learn through language and other forms of
symbolic interaction – their customs, habits,
beliefs and values, the common view points
that bind them together as a social entity.
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39. Cultural dimensions
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National culture
Business Culture
Occupational culture
Organizational culture

40. Occupational and organizational
culture
Mechanistic ad organic cultures
Authoritarian and participative cultures
Dominant and sub-cultures
Strong, weak and unhealthy cultures
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41. Elements of culture
Language and culture
Supernatural benefits
Education and culture
Religion
Aesthetics
Attitudes
Customs and manners
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42. * Multi-cultural diversity
* Diversity – advantages and
disadvantages
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Points to discuss

43. Managing across the cultures
Cultural predispositions
1. Ethnocentrism – is the tendency of people to
evaluate a foreigner’s behavior by the standards of
their own culture and to believe their own culture is
superior to others
2. Polycentrism – if ethnocentrism exhibits intolerance
to other cultures, polycentrism advocates tolerance
to beliefs and values of other societies
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44. Contd…
3. Regio centrism – The formation of
regional trade blocks has increased the
popularity of regional headquarters
4. Geo centrism – in geocentric orientation,
subsidiary operations are managed by the
best qualified individuals, regardless of
their nationalities
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45. Technological Environment
J.K. Galbraith defines technology as a
‘systematic application of scientific or
other organized knowledge to practical
tasks’
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46. Classification of Technology
State of the art technologies
Proprietary technologies
Known technologies
Core technologies
Leveraging technologies
Supporting technologies
Pacing technologies
Emerging technologies
Scouting technologies
Idealized unknown technologies
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47. The Technology cycle
Awareness phase
Acquisition phase
Adaption phase
Advancement phase
Abandonment phase
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48. Impact of technology
Social implications
Economic implications
Plant level change
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49. Social implications
High expectations of consumers
System complexity
Social changes
Social systems
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50. Economic implications
Increased productivity
Need to spend on R&D
Jobs become intellectual
Problems of techno – structure
Increased regulation and stiff opposition
Rise and decline of products and organizations
Boundaries redefined
Training of scientists and engineers
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51. Plant level changes
Organizational structure
Resistance to change
Fear of risk
E-commerce
Patenting
Transportation
Markets
Technology transfers
Production
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52. Economic Environment
Classification of countries on the basis of income
Region-wise classification countries
Economies in transition
Economic scenario
Economic systems
Financial system
Economic policies
Structural adjustments
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53. Merits and demerits of market,
command and mixed economy
Command economy:
Denial of individual freedom
Commitment to work
Rate of economic growth
Equality
Luxurious lifestyles
Lack of flexibility
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54. Protectionism
Protectionism means by which trade
between country is restricted in some way –
normally through measures to reduce the
number of imports coming into a country
1. Tariff barriers
2. Quotas
3. Non tariff barriers
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55. Trade liberalization
The removal of or reduction in the trade
practices that thwart free flow of goods and
services from one nation to another. It includes
dismantling of tariff (such as duties, surcharges
and export subsides) as well as non-tariff
barriers ( such as licensing regulations, quotas
and arbitrary standards).
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56. Exam point of view (Part-A)
Define the concept of trade.
Differentiate export with import
What is polycentrism?
Define the term international business
Name some forms of international business
What is international trade?
What is international business?
Compare globalization of market with
globalization of production.
Explain the nature of international business.
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57. What is international business environment?
Define globalization
What is geo centrism?
Define LPG and benefits of globalization
What is MNE?
What is political environment?
What are the challenges of globalization?
What are the different stages of globalization?
List out the disadvantages in globalization
Define MNEs and state any five Indian MNEs
What is international trade?
Define ‘Cross National agreements’?
Transnational company
Differentiate between Ethnocentrism and Polycentrism
in the context of international business
What are the factors causing globalization of business?
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58. Part-B
Discuss the forms of international business.
Discuss the history and process of globalization and
state its merits and demerits in the Indian context.
How does political environment influence international
business? Explain in detail
Elucidate the political, economic and cultural
environment of international business with real world
example
Discuss the factors favouring globalization of Indian
business
How does cultural environment influence international
business?
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59. Analyse the steps taken by Indian government to
globalise the economy.
Discuss the differences in culture in different countries
and state the need to understand cultural differences
from international trade point of view.
Explain the advantages of MNEs
Explain the role of MNCs in Indian economy. Why do
MNCs like to Indianise their operation? Give reasons.
What are the available modes of entry into foreign
markets? Explain each one of them shortly
Elucidate the success and failure of international
business with any two examples.
Examine the dimensions of international business
environment.
Explain the steps needed to upgrade domestic
business into international business
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60. ***The End***
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