INTERNATIOBAL BUSINESS

BBA Semester Program

By Purna Joshi
 Course Detail
Unit 1: Globalization and International Business:… LH 6
Concepts of globalization and international business;
Factors affecting globalization; Reasons for
international business expansion; Drivers of market
globalization; Domestic vs international business.
Unit 2: Theories of International Trade and Invest:… LH 8
Theory of Mercantilism, Theory of Absolute
Advantage, Theory of Comparative Advantage, Factor
Endowment Theory, Product Life-Cycle Theory, Theory
of Competitive Advantage; Foreign direct investment
based theories ; Implications of international trade
and investment theories; Contemporary issues of
international trade.
Unit 3: Global Business Environment: ……. LH 12
Political and legal systems; Actors in political and legal
systems; Political risks; e-commerce and intellectual property
rights; Government interventions and investment barriers;
Cultural environment – concept, why culture matters in
international business?; Regional economic integration –
types, leading economic blocs; Emerging foreign markets; The
changing demographics of the global economy; International
monetary and financial environment – currencies and
exchange rate systems; The floating exchange rate system.;
Modes of payment in international trade; Global financial
system; International economic institutions; WTO and free
trade policies.
Unit 4: International Strategic Management : ……… LH 10
Strategy and opportunity assessment; Role of strategy in
international business; Estimating market potential; Choosing
a strategy; Entering and operating in international markets –
exporting and importing, collaborative ventures and strategic
alliances, licensing, franchising; Global outsourcing; MNCs
and Foreign Direct Investment (FDI) in the world economy –
concept, types and trends.
Unit 5: Functional Areas of International Business: ……… LH 12
Global production, outsourcing and logistics – managing
global supply chain; Global marketing strategy – global
branding, product development, pricing, communications,
and distribution strategies; Global e-marketing strategy;
Financial management – sources of funds for international
operations: Investment decisions; Tax practices; Currency risk
management; International human resource management –
staffing policy, diversity management, labour relations,
preparing employees for repatriation.
 MEANING OF INTERNATIONAL BUSINESS
• International business has become indispensable
for all countries. It comprises of large and growing
shares of world’s total business.
• It is also known as global business. No country in
the world is self-sufficient in producing all the
products of its requirements. Products need to be
imported that are not produced domestically.
Products need to be exported that are in excess of
domestic requirements.
• This is a very fundamental cause of emerging
international business.
• International business includes/involves business
activities between two or more countries. Such
activities cross international borders. They can be
transacted between individuals, firms, companies
and governments. Both large and small firms are
active players in international business. Hence
international business includes the following cross
border transactions:-
• Trade
• Foreign direct investment
• Intellectual property rights
• Technology transfer
• Movement of human resources.
 Main Issues of international Business
1. Cross Border Transaction
International business involves cross border
business transactions between two or more
countries. They can be related to trade,
investment, intellectual property rights,
technology transfer and movement of people.
it involves business beyond national boundary.
2. Competition
International business faces intense
competition. Domestic and foreign players
compete with each other in the global context.
Such competition is based on quantity and
price.
3. Foreign Currency
International business is transacted in foreign
currencies. it is subject to exchange rate variations
and foreign exchange controls. The risk is high.
4. Foreign Laws:
International business is transacted under foreign
laws, customs and regulations. foreign language is
used.
5. Foreign Environment
International business deals with a variety of foreign
environments. They consist of different political,
economics, social, cultural, and technological systems.
6. Border Management Skills
International business requires border range of
management skills, Management practices need to be
adapted to local situations.
 Nature Of International Business
• Need for highly communicative with IT.
• Larger business size to cover many countries.
• Market segment is based on geography.
• High potential with wide in scope and varied in:
 Consumer tastes,
 preferences,
 purchasing abilities,
 incomes and
 population.
• IB is performed under different environments;
with :
 Management of FDI;
 Foreign exchange;
 International finance;
 International human resources; and
 Strategic management.
 Scope of International Business
 International marketing of merchandise, services
and intellectual property (IP);

 International investments; FDI & Portfolio

Investment

 International human resources management;

 International strategic management; and

 International finance and foreign exchange
management.
 Scope of IB
International Business
Activities

International Investment
International Trade: Export,
Import,

Merchandise Foreign Direct

Services Intellectual Properties & Investment
Technology (Capital, Port-folio
Management, Investment
Technology) (Shares, Bonds,
Social Commercial etc.)

Banking, Finance, Manufacturing, Marketing,

Health, Education, Transport, ICT, R&D, Merchandise Trade, Services,
Intellectual Properties (Patent,
Security, Investment, Insurance, Management copyright, trademarks,
Domestic, Tourism, Clubs, Marketing, Advertisement,
Processing, Packaging, business secret, designs,
Entertainment Clearing and geographical locations, etc.)

Forwarding, Warehousing,
Restaurant and
Catering, etc.
 Reasons for IB Expansion
1. Economic globalization or global economic
integration;
2. Liberalized trade and investment ;
3. Availability of fund or/and foreign exchange ;
4. Evolution of Trans-national Corporations
(TNCs) or Multinational Enterprises (MNCs);
5. Change in business culture with innovative,
dynamic and prudent leaderships;
6. Innovation through extensive R&D; and
7. Development of ICT.
 Concept of Globalization
• Globalization is an ongoing social, economic, and
political process that deepens and broadens the
relationships and inter-dependencies amongst
nations—their people, their firms, their
organizations, and their governments
• Globalization is the process of spreading the scope
of international business activities through:
interaction among and integration of people,
companies and governments with optimum use of
resources.
“Globalization is the continuing integration of the countries of the
world” WDR -2000
“Globalization is the increasing integration of national economies
into global markets” M.P.Todaro
 Forms of Globalization
• Economic Globalization
• Technological Globalization
• Socio-Cultural Globalization
• Political and Institutional Globalization
• Ecological or environmental Globalization
 Factors Affecting Globalization
• Improved Transport :
There has been a rapid development in the
means of air, land and water transportation,
enabling greater movement of people and goods
across the globe.
• Improved Technology :
production technology, communication
technology and transportation technology
• Growth of Multinational Companies:
Increase in the presence of MNCs in many
different economies.
• Growth of global trading blocks :
This have reduced national barriers. (e.g.
European Union, NAFTA, ASEAN)
• Reduced tariff barriers:
which encourage global trade. Often this has
occurred through the support of the WTO.
• Firms exploiting gains from economies of
scale to gain increased specialization. This is an
essential feature of new trade theory.
• Growth of global media.
• Increased mobility of capital:
In the past few decades, there has been a general
reduction in capital barriers, making it easier for
capital to flow between different economies. This
has increased the ability for firms to receive
finance. It has also increased the global
interconnectedness of global financial markets
• Increased mobility of labour:
People are more willing to move between different
countries in search for work. This mobility of labour
has increased the inflow of remittance to
developing countries.
• Financial System Increasingly global in nature.
 Drivers of Market Globalization
1. Technical Breakthrough

Manufacturing technology Cheaper : g /s , inputs, energy

Transportation technology Faster: infor. , produc .,transp.
Information technology Frequent : no time lag in supply

2. Economic Liberalization
Economic liberation in terms of regulation and tariffs
Emergence of multilateral trade regime under WTO

Free flow of Goods and services , investment - FDI

and Portfolio , human resource and IPO
3. Development of services
 Transportation
 Communication
 Banking
 insurance
4. Increased global competition

Rising research and development cost

Invention
Innovation
Cost reduction
Quality improvement
Fast and easier delivery
5. Emergence of the global customer segment

Proliferation
transnational satellite
and telecommunication

Accelerated Growing
Advances of modes of the cultural similarity of
transportation customer
convergence preferences .

Increased international
travel
6. Global expansion of business operation
Growing market access
Movement of capital and resource across
countries
7. Supportive Institutions
Emergence of supportive institutions has
accelerated the process of Globalization
 World Bank
 IMF
 WTO
8. Regional Economic Integration
 They harmonize trade polices, laws and regulations of
all member states
 EU
 ASIAN
 SAARCE
 BIMSTEC
 NAFTA
9. Changing political and economic situations
 Move toward free marketing system and
 Demise of planned economies : USSR , China
 Adoption of liberalization and privatization policy
 Increasing democratic system

10. Expanded cross-national treaties and

agreements.
 Benefits of Globalization
1. Access to New Cultures
Globalization makes it easier than ever to access foreign
culture, including food, movies, music, and art.
2. The Spread of Technology and Innovation
Many countries around the world remain constantly
connected, so knowledge and technological advances
travel quickly.

3. Lower Costs for Products

Globalization increases global competition, which
drives prices down and creates a larger variety of
choices for consumers. Lowered costs help people in
both developing and already-developed countries live
better on less money.
4. Higher Standards of Living Across the Globe
According to the World Bank extreme poverty decreased
by 35% since 1990. Further, the target of the first MDG
was to cut the 1990 poverty rate in half by 2015. This
was achieved five years ahead of schedule, in 2010.
Across the globe.
5. Access to New Markets
6. Access lower-cost labor
 Criticism to the Globalization
 National Sovereignty Erodes .
 Uneven Distribution of Income and Benefits.
 TNCs Wipe-out SMEs and Promote Job-less
Growth .
 Threat to Social Cultural Values.
 Energy Crisis and Environment Degradation due
to Prosperity and Poverty .
 Uncertainty to Small Countries .
Reasons that firms engage in international business

 To expand sales
 To acquire resources

 Products, components, services

 Foreign capital
 Technologies

 To minimize risk
 Take advantage of business cycle differences amongst
countries
 Diversify suppliers across countries
 Domestic Vs International Business
1) Nationality of Buyers and Sellers:
• Nationality of the major participants (i.e.,
buyers and sellers)to the business deals differs
from domestic to international businesses .
• With respect to domestic business , both the
buyers and sellers belong to the same country.
This leads us to a better understanding among
each other and enter into business deals.
• But where as with international business the
buyers and sellers belong to different
countries.
• Owing to differences in their languages
,attitudes, social customs , objectives and
practices, it becomes comparatively more
difficult for them to work together and finalize
business deals.
 2) Nationality of Other Stakeholders:
National and international businesses also differ
with respect to the nationalities of the other
stakeholders such as employees, suppliers ;
share holders/partners and general public who
interrelate with business firms.
• Where as , with respect to domestic business
all these factors belong to one country, and
hence depict more consistency in their value
systems and behavior.
• Decision making in international business
becomes even more complicated as the
concerned business organization has to take
into account a set of values and aspirations of
the stakeholders belonging to different
countries.
 3) Mobility of Factors of Production:
• The extent of mobility of factors like labor and
capital is usually less amid other countries than
within a country .While these factors of
movement can move liberally within the
country , there exist many restrictions to their
movement across different countries .
• Apart from legal restrictions, even the
difference in socio-cultural environments ,
geographic influences and economic conditions
contribute in a big way to their movement
across countries
 4) Customer Heterogeneity across Markets:
• Since buyers in international markets belong
to different countries, they vary from , their
socio-cultural background.
• Differences in their tastes, fashions, languages,
beliefs and customs, attitudes and product
preferences is the root for variations in not
only their demand for different products and
services , but also with respect to variations in
their communication patterns and purchase
behavior.
 5) Political System and Risks:
• Political factors such as ,type of government ,
political party system , political ideology
,political risks, etc., have a deep impact on
business operations .
• Since a business person is familiar with the
political environment of his country, he can
well adapt to it and predict its impact on
business operations. But this is not so in
international business
• But this is not so in international business,as
Political environment varies from one country
to another .
• One has to initiate special efforts to
understand the varying political environments
and their business implications .
• Since there is a constant change in political
environment one has to monitor political
changes on an ongoing basis in the respective
countries and plan strategies to deal with
diverse political risks.
 6) Business Regulations and Policies:
• Attached with its socio economic
environment and political philosophy , each
country frames its business laws and
regulations .
• Though these laws, regulations and economic
policies are fairly uniform and applicable
within a country but they differ extensively
among nations.
• Tariff and taxation policies ,import quota
system , subsidies and other controls
executed by a nation are not the same as in
other countries and often discriminate against
foreign products, services and capital.
 7) Currency Used in Business Transactions:
• Yet another important difference between
domestic and international business is that
the use of different currencies.
• Since the exchange rate , i.e., the price of one
currency expressed in relation to that of
another country's currency, keeps varying,
adds to the problems of international business
firms in fixing prices of their products and -
prevention against foreign exchange risks..
 8) Differences in Business Systems and
Practices:
• The variations in business systems and
practices are significantly much more among
countries than within a country .
• Countries differ from one another in terms of
their socio-economic development ,
accessibility, cost and efficiency of economic
infrastructure and market support services
,business customs and practices because of
their socio economic and historical
coincidences.