The document provides an overview of international business management. It defines international business as commercial transactions that cross national borders and involve two or more countries. It discusses the nature of international business, including involvement of multiple countries and currencies. The objectives of international business are outlined as integrating economies, offering new markets, and facilitating the exchange of ideas, services, and capital globally. The document also examines factors like political systems, economic environments, socio-cultural differences, and the natural/technological landscape that comprise the international business environment.
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
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.
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
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