INTERNATIONAL BUSINESS

M.Sc. in Fashion Technology Students

(Distance)
By: Dr. Merertu Wakuma (PhD)
2023

4/1/2023 1
 Learning Objectives

 To understand the history and impact of

international business.

 To learn the definition of international business.

 To recognize the growth of global linkages today.

 To understand the impact of international

business

 To appreciate the opportunities and challenges

offered by international business.

4/1/2023 2
Assessment and Evaluation

 Article review (I & II) (20%)

 Assignment (20%)
 Seminar ( 25%)
 Final Exam (40%)
 Chapter 1

Introduction to International Business

4/1/2023 4
Introduction to International Business

GLOBALIZATION

What is globalization?

4/1/2023 5
Introduction to International Business
 A fundamental shift is occurring in the world economy.
 people are moving away from a world in which national
economies were relatively self-contained entities, isolated
from each other by barriers to cross-border trade
and investment.
 And then people are moving toward a world in which
barriers to cross-border trade and investment are
declining.
 The process by which this is occurring is commonly
referred to as globalization .

4/1/2023 6
 Introduction to International Business

 Because of globalization, for the first time in history, the

availability of international products and services can be
accessed by individuals in many countries, from diverse
economic backgrounds.

4/1/2023 7
 Introduction to International Business

 More and more firms around the world are going

global, including:

 Manufacturing firms

 Service companies (i.e. banks, insurance, consulting firms)

 Art, film, and music companies

4/1/2023 8
What is International Business?
International business: all commercial transactions
between parties in two or more countries.

These transactions include the transfer of

 goods,

 services,

 technology, and

 capital to other countries, and involves exports and

imports.
4/1/2023 9
 What is 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.

4/1/2023 10
Fig. 1.1: International Business:
Operations and Influences

4/1/2023 11
Why Studying International Business
is Important?
 Most companies are either international or compete with
international companies.

 Significant differences exist in countries such as:

 Consumer tastes and preferences.

 Distribution channels.

 Culturally rooted value systems.

 Business systems.

 Legal systems.
4/1/2023 12
Introduction to International Business

 The international business environment is more complex

and diverse than the domestic business environment.

4/1/2023 13
 Introduction to
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
4/1/2023 14
 Reasons That Firms Engage in
International Business
 To expand sales

 Volkswagen [Germany]

 Ericsson [Sweden]

 Michelin [France]

 Nestlé [Switzerland]

 IBM [USA]

 Seagram [Canada]

 Sony [Japan]
4/1/2023 15
 Reasons That Firms Engage in
International Business

 To acquire resources
 Products, components, services
 Foreign capital
 Technologies
 Information

 To minimize risk
 Take advantage of business cycle
differences amongst countries
 Diversify suppliers across countries
 Counter competitors’ advantages
4/1/2023 16
 Introduction to International Business

Discussion Question

 Name & function of Emerged Global Institutions?

 Where is the current position of Ethiopia in WTO?

4/1/2023 17
Types of International Business

Export-import trade
Foreign direct
investment

Licensing

Franchising

Management contracts

4/1/2023 18
Fig. 1.2: Means for Conducting
International Operations

4/1/2023 19
International Business Terminology

 Strategic alliance: a collaborative arrangement of critical

importance to one or more of the alliance partners

 Multinational enterprise [MNE]: a firm that takes a

global approach to its foreign markets and production
Multinational corporation [MNC] and
transnational company [TNC]
may be used in this same context.

4/1/2023 20
International Business Managers
 Must understand the relevance of:
◦ Domestic and international law

◦ Political science

◦ Anthropology

◦ Sociology

◦ Psychology

◦ Economics

◦ Geography

 Must be knowledgeable about the competitive

dimensions of the international
4/1/2023 business environment21
Fig. 1.3: Physical and Societal Influences on
International Business

4/1/2023 22
Fig. 1.4: Competitive Factors Affecting
International Business

4/1/2023 23
International Business Questions

 How will an idea, good, or service fit into the international

market?

 Should trade or investment be used to enter a foreign

market?

 Should supplies be obtained domestically or abroad?

 What product adjustments are necessary to be responsive

to local conditions?

 What are the threats from global competitors, and how can
these threats be counteracted?
4/1/2023 24
 The Need for International Business

 There are several answers to the question “why firms go

international?” the factors which motivate or provoke firms
to go international may be broadly divided in to two groups:

 Pull factors and

 Push factors

4/1/2023 25
The Need for International Business

 The pull factors, most of which are proactive reasons, are

those forces of attraction which pull the business to the
foreign markets.

 The push factors refer to the compulsions of the domestic

market, like saturation of the market, which prompt
companies to internationalise.

4/1/2023 26
Factors Contributing to Fast Growth of
International Business

 Increase in and expansion of technology.

 Development of services that support international

business.

 Growing consumer pressures.

 Increased global competition.

 Changing political situations.

 Expanded cross-national cooperation.

4/1/2023 27
Stages of international Business
involvement

 No Direct Foreign Marketing

 Infrequent Foreign Marketing

 Regular Foreign Marketing

 International Marketing

 Global Marketing

4/1/2023 28
 Implications/Conclusions

 Managing an international business differs from managing

a domestic business because:

countries and cultures are different

international business operations are more

complex than domestic operations

4/1/2023 29
Implications/Conclusions

 A company’s own competitive strategy influences how and

where it can best operate.

 From one country to another, a company’s relative

competitiveness will vary because of the differences in the
local and foreign competitors that are present.

4/1/2023 30
 Chapter Two
International Marketing

4/1/2023 31
 Definition of International Marketing

 Multinational process of planning and executing the

conception, pricing, promotion, and distribution of ideas,
goods, and services and to create exchanges that satisfy
individual and organizational objectives

4/1/2023 32
 Dimensions of Marketing

 Consumer Marketing vs. Business-to-Business Marketing

 Domestic Marketing vs. Foreign Marketing

 Comparative Marketing

 International Marketing vs. Global/Multinational

Marketing

 Domestic Marketing vs. International Marketing

similar in nature but not in scope (scale)

different in degree but not in kind

4/1/2023 33
Important reasons for going international
 Important reasons for going international are:

 Profit advantage

 Growth opportunities

 Domestic market constraints

 Competition

 Government policies and regulations

 Monopoly power

 Spin-off benefits

 Strategic vision
4/1/2023 34
Profit Advantage

An important incentive for international business is the

profit advantage. International business could be more
profitable than the domestic.

One of the important motivations for foreign

investment is to reduce the cost of production (by
taking advantage of the cheap labour, for example).

4/1/2023 35
Growth opportunities

 To take advantage of the business opportunities in other

countries. MNCs are getting increasingly interested in a
number of developing countries as the income and
population are rapidly rising in these countries.

4/1/2023 36
Domestic market constraints

 Drive many companies towards expanding the market

beyond the national border. The market for a number of
products tend to saturate or decline in the advanced
countries. This often happens when the market potential
has been almost fully tapped.

4/1/2023 37
 Competition

 Competition may become a driving force behind

internationalization. A protected market does not
normally motivate companies to seek business outside.

4/1/2023 38
 Government Policies and Regulations

 Government policies and regulations may also motivate

internationalization. There are both positive and negative
factors which could cause internationalization.

4/1/2023 39
 Monopoly Power

 In some cases international business is a corollary of the

monopoly power which a firm enjoys internationally.

 Monopoly power may arise from such factors as

monopolization of certain resources, patent rights,
technological advantage, product differentiation, etc.

4/1/2023 40
 Spin-off Benefits

 International business has certain spin-off benefits too.

 International business may help the company to improve

its domestic business; by doing so it helps improve the
image of the company. International business, thus,
becomes a means of gaining better market share
domestically.

4/1/2023 41
 Strategic Vision

 The systematic and growing internationalization of many

companies is essentially a part of their business policy or
strategic management.

 The stimulus for internationalization comes from the urge

to grow, the need to become more competitive, the need
to diversify and to gain strategic advantages of
internationalization.

4/1/2023 42
Domestic vs international Business

 There are three basic points of similarities

between DM and IM:

 success depends upon satisfying the basic requirement

of the consumers.

 necessary to build good will

 Research and development for product improvement

and adaptation is necessary

4/1/2023 43
Trade Barriers

 International trade is carried out by both businesses and

governments—as long as no one puts up trade barriers

 Trade barriers keep firms from selling to one another in

foreign markets.

4/1/2023 44
Trade Barriers

 Natural barriers

 Natural barriers to trade can be either physical or cultural

 Tariff Barriers

 A tariff is a tax imposed by a nation on imported goods.

 Nontariff Barriers

 Governments also use other tools besides tariffs to restrict

trade.

4/1/2023 45
4/1/2023 46