BA7401 - International Business management - Unit 1 - Anna university syllabus

1. International Business
Management
Unit - 1

2. Introduction
 International Business is the process of
focusing on the resources of the globe
and objectives of the organisations on
global business opportunities and
threats.
 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.

3. Definitions
 International business is defined as a field of
management training that deals with the special
features of business activities that cross national
borders.
- Robock & Simmonds
 International business is defined as all business
transactions that involve two or more countries.
– Daniels & Radebaugh
 International business is defined as transactions
devised and carries out across international borders to
satisfy corporations and individuals
– Grosse & Kojawa

4. Nature of International Business
 Involvement of commercial activity
 Involvement of two countries
 Many bases
 Language difference
 Comparative more physical risk
 Surrounded with political risk
 Proactive / Reactive
 Government Intervention
 Payment in foreign currency
 Differs from Domestic Business

5. Objectives of International
Business
 To integrate economies
 To offer new markets
 To facilitate interchange of ideas,
service and capital across the world
 To facilitate mobility of factors of
production

6. Reasons of Internationalization
 Pull Factors – Proactive Reasons
 Push Factors – Reactive Reasons

7. Other Reasons
 Growth
 Profitability
 Achieving Economies of Scale
 Risk Spread
 Access to Imported inputs
 Uniqueness of product / service
 Marketing opportunities
 Spreading R&D Costs
 Resource Utilization
 Competition and costs
 Quality improvements
 Economic integration & Free Markets
 Living Standards
 Emergence of WTO
 Unifying effect and peace

8. Internationalizing Business
FDI
Local Packaging and/or
Assembly
Direct Export
Indirect Export
license

9. Approaches of International
Business
ETHNOCENTRIC
(Home Country is
superior, sees
similarities in
foreign countries)
POLYCENTRIC
(Each host
country is unique,
sees differences
in foreign
countries)
REGIOCENTRIC
(sees similarities
and differences in
world region )
GEOCENTRIC
(world view, sees
similarities and
differences in
home and host
countries)

10. Advantages of International
Business
 Maximum utilization of resources
 Stability in prices
 Economic growth
 Economies of scale
 Encouragement to industrialization
 Earning of foreign exchange
 Establishment of international cooperation
 Less cost due to the use of modern techniques
 Development of Transport and communication
 Higher standard of living
 Employment
 International brotherhood
 Greater competition
 Up gradation of technology
 Security from famine
 Escape from domestic competition

11. Disadvantages of IB
 Increased Costs
 Foreign regulation and standards
 Delay in Payments
 Complex Org. Structure
 Exhaustion of Natural Resources
 Cultural Differences
 Market Competition in Host Country
 National Controls
 Lack of home country support
 Dependence
 Loss to agricultural countries

12. Difference b/w International
Business and Domestic Business
Basis International Domestic
Scope FDI, Licensing, Franchising
, and trade in services etc.
Business With in the
country
Benefits Both Nations and Firms Lesser benefit compared to
IB
Market Fluctuations Have wide market, can
diversify the risk
Have face some losses
Political relations IB Improves the political
relations of the nations
Does not Improve
Purvey (Deals in) Follow IB Procedures like
Customs and Tariff etc
No restrictions for Domestic
business
Sharing of
technology
Sharing of latest
technology
Does not share, only adopt
Trade Restrictions Trade Practices, Govt.
Rules and Licenses Etc.
Very few restrictions
Modes of Entry Export, Licensing,
Franchising, joint
Easily Start the Business

13. 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.

14. Components of Globalization
Globalization
of Markets
Globalization
of
Production
Globalization
of
Investment
Globalization
of
Technology

15. Factors causing Globalization
Increase and expansion of Technology
Liberalization of cross border trade and resource movements
Development of services that support IB
Growing consumer pressures
Increased global competition
Changing political situation
Expanded cross national cooperation

16. 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.

17. Contd..
 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.

18. 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

19. International Business
Environment

20. Political & Govt. Environment
 The political environment in which the
firm operates will have a significant
impact on a company’s international
marketing activities.
 A Govt. control’s and restricts a
company’s activities by encouraging
and offering support or by
discouraging and banning or
restricting its activities depending on
the Govt.

21. Classification of Political System
 Political System as the basis : one way
◦ Parliamentary Govt.
◦ Absolutist System
 Another Way
 Two Party System
 Multiparty System
 Single Party System
 Dominated one-party
 Economic system as the basis
◦ Communist Theory
◦ Socialism Theory
◦ Capitalism Theory

22. Key Aspects in Political System
Key Aspects
Individualism
and
collectivism
Democracy and
totalitarianism

23. Economic Environment
 The economic environment consists of
external factors in a business market
and the broader economy that can
influence a business.
 The economic environment can divide
into the microeconomic environment,
which affects business decision
making - and the macroeconomic
environment, which affects an entire
economy and all of its participants.

24. Contd.. Macroeconomic factors
 Macroeconomic influences are broad
economic factors that either directly or
indirectly affect the entire economy and
all of its participants, including your
business.
 These factors include such things as:
 Interest rates
 Taxes
 Inflation
 Currency exchange rates
 Savings rates
 Unemployment rate
 Recession

25. Microeconomic factors
 Microeconomic factors influence how your
business will make decisions. Unlike
macroeconomic factors, these factors are far
less broad in scope and do not necessarily
affect the entire economy as a whole.
◦ Microeconomic factors influencing a business
include:
 Market size
 Demand
 Supply
 Competitors
 Suppliers
 Distribution chain, such as retail stores

26. Preliminary economic indicators
 Size of demand
◦ Level of income
◦ Inflation
◦ Consumption behavior
 Cost of production
◦ Availability of Human resources and physical
resources
◦ Network of infrastructure
◦ Fiscal, monetary, and industrial policies
 Smoothly repatriation
◦ Income and profit depends upon the strength of the
external sector

27. Economic Systems
 Planned Economy
 Social ownership of means of production
 Centralized planning – planning authority prepares plan for resources
allocations
 Social welfare rather than profit motive
 Market Based Economy
 Private enterprises, materials means of production are owned by
private sector, accumulation of wealth, consumers sovereignty, etc
 Market mechanism to allocate resources
 Profit motive
 Mixed Economic System
 Co-existence of public and private sector. Joint sector also
 Planning and price mechanism lead to resource allocation
 Profit motive and Social welfare objective

28. Socio – Cultural Environment
 Culture is that complex whole which
includes knowledge, belief, art,
morals, law, custom and other
capabilities acquired by man as a
member of society.

29. Determinants of culture
Culture
norms &
value
Systems
Religion
Work
Motivation
Public
Policy &
laws
Individual
& groups
Education
&
language
Social
Structure

30. Natural & Technological
Environment
 Natural
◦ The natural environment is another important factor of the
macro-environment. This includes the natural resources
that a company uses as inputs that affects their marketing
activities.
◦ The concern in this area is the increased pollution,
shortages of raw materials and increased governmental
intervention.
 Technological
◦ Businesses are affected by changes in the technological
environment.
◦ Technology is simply the application of knowledge to
control or change our environment.
◦ Technology can be divided between products and
processes.

31. Protection Vs Liberalization of
Global Business Environment
Basis Protection Liberalization
Meaning Protectionism is the economic
policy of restraining trade
between states through
methods such as tariff, quotas
and other measures
The removal of
restrictions on the free
trade of goods between
countries
Techniques Tariffs, quotas, subsidies, local
content requirement, etc
Removal of trade
barriers
Reasons /
motive
Is to encourage domestic
industry
Encourages the
International business
Compliance
to
international
rules and
regulations
Domestic Rules and
Regulations have to be
compiled with
Consider the rules and
regulations of foreign
country with which it is
trading

32. Contd.
Basis Protection Liberalization
Pre –
requirement
Considering the culture of
domestic industry and
economy
Carefully observe and
understand a country’s
culture before trading
with it
Advantages Protects Domestic industry,
encourages employment
and growth opportunities in
home country
It can help to lower
prices and wide range
of quality goods and
services
Disadvantages It reduces overall volume of
world trade, low global
income, employment
opportunity, and less variety
of goods
Unsustainable
utilization of
resources, affects the
domestic industries