The world may continue to shrink in light of advanced technology, higher demands from markets and faster turnaround times, globalization has become a staple for world commerce and international business.

1. INTERNATIONAL
BUSINESS & MANAGEMENT
LECTURE ONE
Mr: Ilyass AINANASS
ainanass.ilyass@gmail.com

2. SEMINAR OUTLINE
1. Introduction To International Business (IB)
• Definition and meaning of international business
• Internationalization of business
• Stages of internationalization
• Approaches of international business
• Entry Strategy
• Understanding of international business environment
• Scope of international business
• Special difficulties in international business
• Benefits of international business
2. Introduction To Globalization
• Meaning of Globalization
• Globalization of the world
• Components of globalization
• Advantages & Disadvantages
3. Country Attractiveness
4. Business Research And Analysis
• Quantitative methods for business research
Suggested Readings:-
1. International Business Environment – Sundaram and Black
2. International Business Environment – Bhalla and Raju.
3. International Business – Rao and Rangachari
4. International Business Management – Mrs. Jotwani.

3. PART ONEINTERNATIONAL BUSINESS

4. INTERNATIONAL BUSINESS
Definition
1) IB field is concerned with the issues facing international companies and governments in dealing with all
types of cross- border transactions.
2) IB involves all business transactions that involve two or more countries.
3) IB consists of transactions that are devised and carried out across borders to satisfy the objectives of
individuals and organizations.
4) IB consists of those activities private and public enterprises that involve the movement across national
boundaries of goods and services, resources, knowledge or skills.

5. INTERNATIONALIZATION
Definition
International business is a term used to collectively describe all commercial transactions (private and
governmental, sales, investments, logistics, and transportation) that take place between two or more
nations. Usually private companies undertake such transactions for profit; organizations undertake
them for profit for political reasons. A multinational enterprise (MNE) is a company that has a worldwide
approach to markets and production or one with operations in more than a country.
Commerce: The growing tendency of corporations to operate across national boundaries.
In the context of economics, internationalization can refer to a company that takes steps to increase its
footprint or client base outside of its country of domicile and into international markets.

6. DOMESTIC BUSINESS
The business transaction that occurs within the geographical limits of the country is known as domestic
business. It is a business entity whose commercial activities are performed within a nation. Alternately
known as internal business or sometimes as home trade. The producer and customers of the firm both
reside in the country. In a domestic trade, the buyer and seller belong to the same country and so the
trade agreement is based on the practices, laws and customs that are followed in the country.
Definition

7. DOMESTIC .Vs INTERNATIONAL BUSINESS
Basis for Comparison Domestic Business International Business
Meaning
A business is said to be domestic,
when its economic transactions are
conducted within the geographical
boundaries of the country.
International business is one
which is engaged in economic
transaction with several
countries in the world.
Area of operation Within the country Whole world
Quality standards Quite low Very high
Deals in Single currency Multiple currencies
Capital investment Less Huge
Restrictions Few Many
Nature of customers Homogeneous Heterogeneous
Business research It can be conducted easily. It is difficult to conduct
research.
Mobility of factors of production Free Restricted
Comparison Chart

8. 1.Domestic Business is defined as the business whose economic transaction is conducted within the geographical limits of the country. International
Business refers to a business which is not restricted to a single country, i.e. a business which is engaged in the economic transaction with several
countries in the world.
2.The area of operation of the domestic business is limited, which is the home country. On the other hand, the area of operation of an international
business is vast, i.e. it serves many countries at the same time.
3.The quality standards of products and services provided by a domestic business is relatively low. Conversely, the quality standards of international
business are very high which are set according to global standards.
4.Domestic business deals in the currency of the country in which it operates. On the contrary, the international business deals in the multiple
currencies.
5.Domestic Business requires comparatively less capital investment as compared to international business.
6.Domestic Business has few restrictions, as it is subject to rules, law taxation of a single country. As against this, international business is subject to
rules, law taxation, tariff and quotas of many countries and therefore, it has to face many restrictions which are barriers in the international business.
7.The nature of customers of a domestic business is more or less same. Unlike, international business wherein the nature of customers of every
country it serves is different.
8.Business Research can be conducted easily, in domestic business. As against this, in the case of international research, it is difficult to conduct
business research as it is expensive and research reliability varies from country to country.
9.In domestic business, factors of production are mobile whereas, in international business, the mobility of factors of production are restricted.
KEY DIFFERENCES BETWEEN DOMESTIC AND INTERNATIONAL BUSINESS

9. TYPES OF INTERNATIONAL BUSINESS (type of entry)
FORMS
Importing & exporting
Licensing
Franchising
Joint venture
FDI

10. Importing
&
exporting
Licensing
Franchising
Joint
venture
FDI
Imports: a good or service brought into one country from another.
Exports: a good or service produced in one country then get marketed to other country.
Import-export is the most fundamental and the largest international business activity, and it is often the first choice when the
businesses decide to expand abroad as it is the easiest way to enter the market with a small outlay of capital.
Licensing is the arrangement between a firm, called licensor, allows another one to use its intellectual property such as brand name,
copy right, patent, technology, trademark and so on for a specific period of time. The licensor gets benefits in term of the royalty. The
company may choose to sell the products under the licensing when the domestic production costs are too high, strict government
regulations, or the company wants to sell and produce standardized products everywhere.
It is a positive aspect of the cooperation of two or more companies in different countries are joined together for mutual gain. A joint
venture is a special type of strategic alliance, where the partners across globe collectively found a company to product goods and
services. The cooperation between the companies allow them to share the production cost, technologies, development, and sales
networks. The resources will be pooled to mutual advantages and put the companies in win-win situations.
Foreign direct investment is a company’s physical investment such as into the building and facilities in the foreign country, and
acts as a domestic business with a full scale of activity. Companies practice FDI to get benefits from cheaper labor costs, tax
exemptions, and other privileges in that foreign country. The host country will get benefits by the introduction of new products,
services, technologies and managerial skills. Also, FDI helps facilitate progressive internal policy reforms of the host country,
and enhance the economic situation.
Franchising is a parent company (franchiser) gives right to another company (franchisee) to do business using the franchiser’s
name and products in a prescribed manner. Franchising is different from the licensing in terms of the franchisees have to follow
much stricter guidelines. Moreover, licensing is more about the manufacturers while franchising is more popular with restaurants,
hotels, and rental services.

11. STAGES OF INTERNATIONALIZATION
Domestic Company
Limits operation, Vision, Mission to National political boundaries
International Company
Focus on domestic practices but extend wings to foreign countries (Mere export-import)
Multinational Company
Different strategy for different market
Global Company
Either produce in one country and market globally or produce globally and market domestically
Transnational Company
Produces, markets, invests and operates across the world

12. • Domestic company :Most international companies have their origin as domestic companies. The orientation of a
domestic company essentially is ethnocentric. A purely domestic company operates domestically because it never
considers the alternative of going international. A domestic company may extend its products to foreign markets by
exporting, licensing and franchising
• International companies are importers and exporters, they have no investment outside of
their home country.
• Multinational companies have investment in other countries, but do not have coordinated product offerings in
each country. More focused on adapting their products and service to each individual local market.
• Global companies have invested and are present in many countries. They market their products through the use
of the same coordinated image/brand in all markets. Generally one corporate office that is responsible for global
strategy. Emphasis on volume, cost management and efficiency.
• Transnational companies are much more complex organizations. They have invested in foreign operations,
have a central corporate facility but give decision-making, R&D and marketing powers to each individual foreign
market.
• Multinational Corporation In a report of the International Labour Organisation (ILO), it is observed that, "the
essential of the MNC lies in the fact that its managerial headquarters are located in one country (home country),
while the enterprise carries out operations in a number of the other countries (host countries)."
PROCESS OF INTERNATIONALIZATION

13. STAGES OF INTERNATIONALIZATION

14. STAGES OF INTERNATIONALIZATION

15. APPROACHES TO INTL. BUSINESS
Ethnocentric
Domestic companies view foreign markets as
an extension to domestic markets.
Under this approach, target market is own country ,
Excessive production will export due to change in
customer taste, preferences.
Polycentric
Companies establish foreign subsidiaries
and empowers its executives.
Under this approach, the companies customizes
the marketing mix to meet the taste,
performance and needs of the customers of each
international market.
Regiocentric
Subsidiaries consider regional environment for
policy/strategy formulation.
Under this approach, the company operating
successfully in a foreign country thinks of exporting
other neighboring countries of the host country.
• At this stage, the concerned subsidiary considers
the regional environment ( such as laws, culture,
policies etc.) for formulating the policies & strategies.
Geocentric
Companies view the entire world as a single
unit.
Under this approach, the company analyses the
tastes, preference and needs of the customers in
all foreign markets and then adopts a
standardized marketing mix for all the foreign
markets.

16. CLASSIFICATION OF INTERNATIONAL BUSINESS ENVIRONMENT
A BUSINESS ENVIRONMENT INCLUDES VARIOUS EXTERNAL ACTORS AND FORCES THAT
SURROUNDS A FIRM AND IMPACTS THE OUTCOME OF ITS DECISIONS AND OPERATIONS.
1. MICRO ENVIRONMENT: These are the actors in the firm’s immediate environment Which directly
influence the firm’s decisions and operations These includes: - Suppliers - Market intermediaries and
service - organizations - Competitors - Customers - General public.
The general environment within the economy that influences the working, performance, decision making and strategy of all business groups at the same time is known as Macro
Environment. It is dynamic in nature.Therefore it keeps on changing.
It constitutes those outside forces that are not under the control of the firm but have a powerful impact on the firm’s functioning. It consists of individuals, groups, organizations,
agencies and others with which the firm deals during the course of its business.
2. MACRO ENVIRONMENT: It affects the firm as well as other actors in the firm’s micro environment
These includes: - Geographical - Economic - Financial - Socio cultural - Political - Legal -Technological
– etc.
The general environment within the economy that influences the working, performance, decision making and strategy of all business groups at the same time is known as Macro
Environment. It is dynamic in nature.Therefore it keeps on changing.
It constitutes those outside forces that are not under the control of the firm but have a powerful impact on the firm’s functioning. It consists of individuals, groups, organizations,
agencies and others with which the firm deals during the course of its business.

17. INTL. BUSINESS ENVIRONMENT
Competitors
media
EmployeesShareholders
Suppliers
Microenvironment

18. INTL. BUSINESS ENVIRONMENT
Factor Explanation
The suppliers Suppliers are the ones who provide inputs to the business like raw material,
equipment and so on.
The customers Customers / Consumers are the ones who purchase the goods for their own
consumption. They are considered as the king of business.
The competition Competitors are the rivals, which compete with the firm in the market and
resources as well.
Microenvironment

19. INTL. BUSINESS ENVIRONMENT
Socio-cultural
Technological
Political
and
legal
Economical
Macroenvironment

20. INTL. BUSINESS ENVIRONMENT
factor Explanation
Socio-cultural Consist of people (or consumers). They buy products based on many different factors. This includes their demographic
location, ethnic background, social status, immediate needs, lifestyle changes and trends.
The impact the products and services your organisations brings to market have on society must be considered. Any elements of the
production process or any products/services that are harmful to society should be eliminated to show your organisation is taking social
responsibility. A recent example of this is the environment and how many sectors are being forced to review their products and
services in order to become more environmentally friendly.
Technological Are often referred to advancements in technology. Not only technology used to develop and deliver products to
consumers. But also the technology used to run businesses efficiently. The company who is fastest, with the best agile
technology, can easily out beat the competition in any market. Keeping an eye out on which technology is used in the
industry can mean life or death for the firm.
The skills and knowledge applied to the production, and the technology and materials needed for production of products and services
can also impact the smooth running of the business and must be considered.
Economical Are related to inflation, taxes, unemployment, and the recession. While people in business can track trends and
implement planning, many businesses are not recession proof.
The economic environment can impact both the organisation’s production and the consumer’s decision making process.
Political & legal May be related to the government. They consist of legislative bills, tax policies, health and safety laws, and government
stability. The average businessman can’t lower taxes or introduce new legislation that’ll affect the entire economy. They
must instead understand these factors on a grand level and ensure their business aligns to laws, regulations, and
policies.
marketing decisions should always take into account political and/or legal developments relating to the organisation and its markets.
Macroenvironment

21. 1.Microenvironment is the environment which is in immediate contact with the firm. The environment which
is not specific to a particular firm but can influence the working of all the business groups is known as
Macro Environment.
2.The factors of the microenvironment affect the particular business only, but the macro environmental
factors affect all the business entities.
3.The microenvironmental factors are controllable by the business. However, the macroeconomic variables
are uncontrollable.
4.The elements of the microenvironment affect directly and regularly to the firm which is just opposite in the
case of the macro environment.
5.The study of the microenvironment is described as COSMIC analysis. Conversely, PESTLE Analysis is a
study of the macro environment.
Key Differences Between Micro Environment and Macro Environment

22. BENEFITS OF INTL. BUSINESS
• Earning valuable foreign currency: A country is able to earn valuable foreign currency by exporting its goods to other
countries.
• Division of labor: International business leads to specialization in the production of goods. Thus, quality goods for which it has
maximum advantage.
• Optimum utilization of available resources: International business reduces waste of national resources. It helps each country
to make optimum use of its natural resources. Every country produces those goods for which it has maximum advantage.
• Increase in the standard of living of people: Sale of surplus production of one country to another country leads to increase in
the incomes and savings of the people of the former country. This raises the standard of living of the people of the exporting
country.
• Benefits to consumers: Consumers are also benefited from international business. A variety of goods of better quality is
available to them at reasonable prices. Hence, consumers of importing countries are benefited as they have a good scope of
choice of products.
• Encouragement to industrialization: Exchange of technological know-how enables underdeveloped and developing countries
to establish new industries with the assistance of foreign aid. Thus, international business helps in the development of the
industry.
• International peace and harmony: International business removes rivalry between different countries and promotes
international peace and harmony. It creates dependence on each other, improves mutual confidence and good faith.
• Cultural development: International business fosters exchange of culture and ideas between countries having greater
diversities. A better way of life, dress, food, etc. can be adopted from other countries.
• Creating employment opportunities: International business boosts employment opportunities in an export-oriented market. It
raises the standard of living of the countries dealing international business.

23. DISADVANTAGES OF INTL. BUSINESS
• Adverse effects on the economy: One country affects the economy of another country through international business.
Moreover, large-scale exports discourage the industrial development of importing country. Consequently, the economy of the
importing country suffers.
• Competition with developed countries: Developing countries are unable to compete with developed countries. It hampers the
growth and development of developing countries unless the international business is controlled.
• Colonization: Sometimes, the importing country is reduced to a colony due to economic and political dependence and industrial
backwardness.
• Exploitation: International business leads to exploitation of developing countries the developed countries. The prosperous and
dominant countries regulate the economy poor nations.
• Publicity of undesirable fashions: Cultural values and heritages are not identical in all the countries. There are many aspects,
which may not be suitable for our atmosphere, culture, tradition, etc. This indecency is often found to be created in the name of
cultural exchange.
• Shortage of goods in the exporting country: Sometimes, traders prefer to sell their goods to other countries instead of in
their own country in order to earn more profits. This results in the shortage of goods within the home country.

24. PART TWOGLOBALIZATION

25. IMF defines globalization as, “the growing economic interdependence of countries
worldwide through increasing volume and variety of cross border transactions in goods
and services and of international capital flows and also through the more rapid and
widespread diffusion of technology”
GLOBALIZATION
Definition
Globalization of the economy means reduction of import duties, removal of Non-Tariff
Barriers on trade such as Exchange control, import licensing etc., allowing FDI and FPI,
allowing companies to raise capital abroad and grow beyond national boundaries and
encourage exports. Both Foreign Trade and Foreign investment volume have grown
rapidly over the last few years.

26. •Globalization is the shift towards a more integrated and interdependent world economy
• Globalization implies integration of the economy of the country with the rest of the world
economy and opening up of the economy for foreign direct investment by liberalizing the rules and
regulation and by creating favorable socio-economic and political climate for global business
GLOBALIZATION
Definition

27. FEATURES OF GLOBALIZATION
• Operating and planning to expand business throughout the world
• Erasing the difference between domestic and foreign markets
• Buying and selling goods and services from any country to any country in the world
• Establishing manufacturing and distribution facilities in any part of the world based on the feasibility and
viability rather than national consideration
• product planning and development are based on market consideration of the entire world
• Sourcing the factors of production and inputs like raw materials, machinery, finance, human resources ,
technology and managerial skills from entire world
• Global orientation in strategies, organizational structure, organizational culture and managerial expertise
• Setting the mind and attitude to view the entire globe as a single market

28. • Domestic company export to foreign countries through the dealers or distributors of the home country
• The domestic company exports to foreign countries directly on its own
• The domestic company becomes an international company by establishing production and marketing
operations in various key foreign countries
• The company replicates a foreign company in the foreign country by having all the facilities including
R&D, full fledged human resource
• The company becomes a true foreign company by serving the needs of foreign customer just like the
home country company serves
PROCESS OF GLOBALIZATION

29. COMPONENTS OF GLOBALIZATION
Globalization
Production
Investment
Technology
Market

30. GLOBALIZATION OF MARKETS
Globalization of markets refers to the process of integrating and merging of the distinct world markets into a
single market.
- Globalization of markets refers to the process of integrating and merging of the distinct world markets into a single market
-This process involves the identification of some common norms, values, taste, preference and convenience and slowly enables the cultural shift towards the use
of a common products or services
- A number of consumer products have global acceptance. Eg coca- cola, pepsi, sony and kfc
EXAMPLE: Coca-Cola, Pepsi, McDonald’s burgers, Levis Jeans etc.,
REASONS FOR GLOBALIZATION OF MARKETS
• Large scale industrialization enabled mass production
• Risk reduction by diversification
• Increase profits and achieve goals
• Adverse business environment in home country
• Demand for their products in foreign markets
• Failure of domestic companies to cater the needs of customers

31. Globalization of production is locating the manufacturing facilities in a number of locations around the globe.
EXAMPLE: Jet airlines Boeing 777 and Swan opticals
- Factors influencing the location of manufacturing facilities vary from one country to another
- They may be more favorable in foreign countries rather than in the home country
GLOBALIZATION OF PRODUCTION
REASONS GLOBALIZATION OF PRODUCTION
• Impositions of imports by the foreign country
• Availability of high quality raw materials and components
• Availability of inputs at low cost
• Skilled human resource at low cost
• Liberal labour laws
• To reduce cost of transport
• To cater to varying tastes of customers

32. Globalization of investment refers to investment of capital by a global company in any part of the world.
GLOBALIZATION OF INVESTMENT
REASONS FOR GLOBALIZATION OF INVESTMENT :
• Increase in volume of global trade
• Limitations of exporting and importing
• Liberalization
• Avoid restrictions

33. GLOBALIZATION OF TECHNOLOGY
Companies with the latest technology acquire distinctive competencies and gain the advantages of
producing high quality products at low cost.
Companies may have technological collaboration with the foreign companies through technology
which spreads from country to country
The foreign companies allow the companies of various other countries adopt their technology on
royalty payment basis or on outright purchase basis.
How technology fastens the process of globalization
• Microprocessors and telecommunication
• The Internet and world wide web
• On-line globalization
• Transportation technology

34. ADVANTAGES AND DISADVANTAGES OF GLOBALIZATION
- Free flow of capital, technology
- Industrialization
- Production facilities throughout
the world
- Increase in production and
consumption
- Lower prices and high quality
- Jobs and Incomes
- Higher standard of living
- Balanced Human development
- Welfare and prosperity
- Kills domestic business
- Exploits human resource
- Unemployment and
underemployment
- Widening gap between rich and
poor
- Transfer of natural resources
- National sovereignty at stake
- Commercial and political
Colonialism
ADVANTAGES
DISADVANTAGES

35. PART THREECOUNTRY ATTRACTIVNESS

36. COUNTRY ATTRACTIVNESS
ATTRACTIVNESS
=
Profit Vs Risk
Country attractiveness is a measure of a country’s attractiveness to the international investors. In
international business, investment in foreign countries is the most important aspect and hence firms
want to determine how suitable a country is in terms of its external business environments.
International business firms judge the risks and profitability of doing business in a particular country
before investing and starting a business there. This judgment includes studying the environmental
factors to arrive at a decision.
It is pretty clear that businesses prefer a country that is less costly, more profitable, and has fewer risks.
Cost considerations are related with investment. Profitability is dependent on resources. Risks are
associated with the environment and hence it is of prime concern.
Risks may be of various types. However, the general consensus is that a country that is more stable in
terms of political, social, legal, and economic conditions is more attractive for starting a business.

37. THE PROCESS OF ASSESSING COUNTRY ATTRACTIVENESS
A country attractiveness assessment is based on two dimensions
- Market and industry opportunities
- Risks (many organizations publish country assessment results based on various economic/political/social factors)
Market opportunities: opportunities assessment measures the potential demand in the country for a firm’s products or
services based on:
• Size
• Growth
• Quality of demand.
Industry opportunities: opportunities assessment determines profitability potential of a company’s presence in a
country given the following factors:
• Quality of industry competitive structure (Porter’s five-force Industry Analysis Framework)
• Resource availability (Porter’s diamond framework)
COUNTRY ATTRACTIVENESS ANALYSIS

38. FRAMEWORK FOR COUNTRY MARKET AND INDUSTRY ATTRACTIVENESS ASSESSMENT
+ Intensity of rivalry
+ Entry barriers
+ Bargaining power of
suppliers & customers
- Is the business
+ Profitable short-term? +
Profitable long-term
COUNTRY
MARKETS AND
INDURTRIES
OPPORTUNITIES
+ Tax
+ Subsidies
+ Infrastructures
+ Government contracts
+ Does a presence in this country
increase competitiveness?
INCENTIVES
MARKETCOMPETITION
RESOURCES
- Is the country a critical source
of Skilled personnel?
+ Raw materials?
+ Components?
+ Labor?
+ Technology?
+ Innovation?
- Quality of infrastructure supporting
services
- Location
- How important is the demand in
this country?
+ Growth?
+ Size?
+ Customer quality

39. Country attractiveness: Country risk
• Political risks
Political risks are probable disruptions owing to internal or external events or regulations resulting from political
action of governments or societal crisis and unrest.
• Economic risks
Economic risks expose business performance to the extent that the economic business drivers can vary and
therefore put profitability at stake.
• Competitive risks
Competitive risks are related to non-economic distortion of the competitive context owing to cartels and networks
as well as corrupt practices. The competitive battlefield is not even and investors who base their competitive
advantage on product quality and economics are at disadvantage.
• Operational risks
Operational risks are those that directly affect the bottom line, either because government regulations and
bureaucracies add costly taxation or constraints to foreign investors or because the infrastructure is not reliable.
COUNTRY ATTRACTIVENESS ANALYSIS

40. FRAMEWORK FOR COUNTRY RISK ANALYSIS
COUNTRY RISK
ANALYSIS
POLITICAL RISKS
OPERATIONAL RISKS ECONOMIC RISKS
COMPETITIVE RISKS
- Economic growth
- Variability
- Inflation
- Cost of inputs
- Exchange rates
SHAREHOLDERS EXPOSURE
Assets destruction (war, riots...)
Assets spoilation (expropriation)
Assets immobility (transfer, freeze )
OPERATIONAL EXPOSURE
Market disruption
Labor unrest
Racketing Supply shortages
EMPLOYEES EXPOSURE
Kidnapping
Gangsterism
Harassment
BUSINESS LOGICS:
- Corruption
- Cartels
- Networks
INFRASTRUCTURE
- Power, telecommunication, transport
- Supplier
REGULATIONS
- Nationalistic preferences
- Constraints on local capital, local
content, local employment
- Taxes