International business involves conducting business activities across national boundaries to meet international customer needs. Key reasons for engaging in international business include surplus production, resource scarcity, competitive pressure, and the pursuit of profit. Common approaches to enter foreign markets include exporting, licensing, joint ventures, and multinational corporations.

1. International Business
10/2/2019

2. International Business
10/2/2019
International
Business
Very simply international business is the performance of
business activities across the national boundaries.
More broadly IB is defined as the process of extending the
business activities from domestic to any foreign country
with an intention of targeting international customers.
Expansion of business functions to various countries with an
objective of fulfilling the needs and wants of international
customers.

3. Why firms conducting International Business?? Or
Reasons for International Business
• Surplus or excess production capacity
• Capacity utilization
• Scarcity of resources (Raw materials)
• Absolute and Comparative advantage
• To increase profit
• To achieve economics of scale
• Competitive pressure
• Declining domestic sales
• Availability of technology and managerial competency
• To minimize risk
10/2/2019

4. Absolute advantage and Comparative
advantage
• Absolute Advantage: When a country can
produce a product more efficiently than any
other nation
• Comparative Advantage: When a country can
produce one product more efficiently and at
a lower cost than other products in
comparison to other nation
10/2/2019

5. 10/2/2019
Country Labor units to produce Exchange ratio between
wine and clothPer unit wine Per unit cloth
Portugal 80hours,
a1
90 hours,
b1
80/90=1w=0.89c again
90/80=1c=1.13w
England 120 hours
A2
100 hours
B2
120/100=1w=1.2c again
100/120=1c=0.83w
Comparative cost of
Portugal on the basis of
England.
80/120=0.67 90/100=0.90
Comparative cost of
England on the basis of
Portugal.
120/80=1.50 100/90=1.11

6. Basic Concept of International Business
10/2/2019
1. Exporting and Importing:
Exporting refers Selling domestic made goods in another country
Importing means Purchasing goods made in another country.
2. Balance of Trade: The difference between the amount a country
exports and the amount it imports
3. Balance of Payment: The total flow of money into and out of a
country.
4. Exchange Rate: The rate at which one country ‘s currency can be
exchanged for that of another country.
• Fixed exchange rate
• Floating exchange rate

7. Barriers to International Business
1. Cultural and Social Barriers
2. Political Barriers
3. Tariffs and Trade Restrictions:
 Import tariff
 Quota
 Embargo
 Exchange control
10/2/2019

8. Approaches to international Business/ Modes
of entering into Foreign Market
• Exporting
• Licensing
• Joint Ventures
• Trading Companies
• Countertrading
• Direct Ownership
• Multinational Corporations
10/2/2019

9. 10/2/2019