International Business _ Module 1_ Evolution, Meaning, Importance,
TSNSWAMY
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Jul 11, 2024
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About This Presentation
International Business for MBA
Slide Content
International Business (22MBA401)
Module 1
Dr TSN, JSSATEB International Business
Module 1
Dr TSN, JSSATEB International Business
Course Outcomes
Dr TSN, JSSATEB International Business
Dr TSN, JSSATEB International Business
Course Outcomes V/S Program Outcomes
Dr TSN, JSSATEB International Business
Dr TSN, JSSATEB International Business
Introduction
•International Business is a foundational exploration of the principles,
theories, and practices underlying the global exchange of goods, services,
and ideas.
•It investigates the complexities and opportunities presented by conducting
business across national borders in an interconnected world.
•This course typically covers key topics such as globalization, trade
theories, cultural dimensions, international trade policies, foreign direct
investment, multinational corporations, global supply chains, and the role
of international organizations like the World Trade Organization and the
International Monetary Fund.
Dr TSN, JSSATEB International Business
•International Business is a foundational exploration of the principles,
theories, and practices underlying the global exchange of goods, services,
and ideas.
•It investigates the complexities and opportunities presented by conducting
business across national borders in an interconnected world.
•This course typically covers key topics such as globalization, trade
theories, cultural dimensions, international trade policies, foreign direct
investment, multinational corporations, global supply chains, and the role
of international organizations like the World Trade Organization and the
International Monetary Fund.
Dr TSN, JSSATEB International Business
Evolution IB
•The evolution of IB is a dynamic process shaped by historical, economic,
political, and technological factors.
•It has transformed significantly over centuries, reflecting changes in global trade
patterns, advancements in communication and transportation, shifts in
geopolitical dynamics, and the emergence of new economic paradigms.
Dr TSN, JSSATEB International Business
•The evolution of IB is a dynamic process shaped by historical, economic,
political, and technological factors.
•It has transformed significantly over centuries, reflecting changes in global trade
patterns, advancements in communication and transportation, shifts in
geopolitical dynamics, and the emergence of new economic paradigms.
Dr TSN, JSSATEB International Business
Cont..
1.Pre-Industrial Revolution:
•Before the Industrial Revolution, international trade primarily consisted of the
exchange of goods and services between neighbouring regions or empires
through established trade routes such as the Silk Road.
•Merchants and explorers played key roles in facilitating cross-border trade,
often driven by the pursuit of luxury goods, spices, and precious metals.
Dr TSN, JSSATEB International Business
1.Pre-Industrial Revolution:
•Before the Industrial Revolution, international trade primarily consisted of the
exchange of goods and services between neighbouring regions or empires
through established trade routes such as the Silk Road.
•Merchants and explorers played key roles in facilitating cross-border trade,
often driven by the pursuit of luxury goods, spices, and precious metals.
Dr TSN, JSSATEB International Business
Cont..
Dr TSN, JSSATEB International Business
Source:https://www.khanacademy.org/humanities/world-history/ancient-medieval/silk-road/a/the-silk-road
Dr TSN, JSSATEB International Business
Source:https://www.khanacademy.org/humanities/world-history/ancient-medieval/silk-road/a/the-silk-road
Cont..
2. Industrial Revolution:
•The 18th and 19th centuries witnessed the IR, which transformed
manufacturing processes and transportation infrastructure.
•Steam-powered ships and railways revolutionized long-distance trade, enabling
goods to be transported more efficiently across continents.
•This era saw the rise of colonial empires, with European powers establishing
trade networks and exploiting resources in Asia, Africa, and the Americas.
Dr TSN, JSSATEB International Business
2. Industrial Revolution:
•The 18th and 19th centuries witnessed the IR, which transformed
manufacturing processes and transportation infrastructure.
•Steam-powered ships and railways revolutionized long-distance trade, enabling
goods to be transported more efficiently across continents.
•This era saw the rise of colonial empires, with European powers establishing
trade networks and exploiting resources in Asia, Africa, and the Americas.
Dr TSN, JSSATEB International Business
Cont..
3. Post-World War II and Bretton Woods System:
•World War II marked a new phase in international business, characterized by
efforts to promote economic stability and cooperation.
•The Bretton Woods Conference in 1944 established institutions like the
International Monetary Fund (IMF) and the World Bank to facilitate
international monetary cooperation and reconstruction.
•This era saw the establishment of the General Agreement on Tariffs and Trade
(GATT), which later evolved into the World Trade Organization (WTO), aiming
to liberalize global trade and reduce barriers.
Dr TSN, JSSATEB International Business
3. Post-World War II and Bretton Woods System:
•World War II marked a new phase in international business, characterized by
efforts to promote economic stability and cooperation.
•The Bretton Woods Conference in 1944 established institutions like the
International Monetary Fund (IMF) and the World Bank to facilitate
international monetary cooperation and reconstruction.
•This era saw the establishment of the General Agreement on Tariffs and Trade
(GATT), which later evolved into the World Trade Organization (WTO), aiming
to liberalize global trade and reduce barriers.
Dr TSN, JSSATEB International Business
Cont..
4. Globalization and Information Age:
•The latter half of the 20th century and the early 21st century witnessed rapid
globalization driven by technological advancements, deregulation, and the
liberalization of trade and investment.
•The emergence of the internet, telecommunications, and revolutionized supply
chains and enabled real-time communication and coordination across borders.
•MNCs expanded their operations globally, capitalizing on new markets and
seeking cost advantages through offshoring and outsourcing.
Dr TSN, JSSATEB International Business
4. Globalization and Information Age:
•The latter half of the 20th century and the early 21st century witnessed rapid
globalization driven by technological advancements, deregulation, and the
liberalization of trade and investment.
•The emergence of the internet, telecommunications, and revolutionized supply
chains and enabled real-time communication and coordination across borders.
•MNCs expanded their operations globally, capitalizing on new markets and
seeking cost advantages through offshoring and outsourcing.
Dr TSN, JSSATEB International Business
Cont..
5. Contemporary Challenges and Opportunities:
•In recent years, IB has faced various challenges and opportunities.
•These include geopolitical tensions, trade disputes, environmental concerns,
the rise of emerging markets, and the digital transformation of industries.
•Issues such as climate change, human rights, and supply chain
sustainability have also come to the forefront, reshaping business strategies
and practices in a more socially responsible and environmentally conscious
manner.
Dr TSN, JSSATEB International Business
5. Contemporary Challenges and Opportunities:
•In recent years, IB has faced various challenges and opportunities.
•These include geopolitical tensions, trade disputes, environmental concerns,
the rise of emerging markets, and the digital transformation of industries.
•Issues such as climate change, human rights, and supply chain
sustainability have also come to the forefront, reshaping business strategies
and practices in a more socially responsible and environmentally conscious
manner.
Dr TSN, JSSATEB International Business
Cont..
The evolution of IB reflects a continuous adaptation to changing economic,
technological, and geopolitical landscapes, with globalization and
interconnectedness serving as defining characteristics of the modern global
economy.
Dr TSN, JSSATEB International Business
The evolution of IB reflects a continuous adaptation to changing economic,
technological, and geopolitical landscapes, with globalization and
interconnectedness serving as defining characteristics of the modern global
economy.
Dr TSN, JSSATEB International Business
Meaning of International Business
•IB refers to commercial activities involving the exchange of goods, services,
capital, or ideas across national borders.
•It encompasses a wide range of business transactions and interactions
conducted between individuals, companies, governments, and other
organizations located in different countries.
•The primary goal of IB is to leverage opportunities in global markets to expand
operations, increase revenue, access resources, and diversify risks.
Dr TSN, JSSATEB International Business
•IB refers to commercial activities involving the exchange of goods, services,
capital, or ideas across national borders.
•It encompasses a wide range of business transactions and interactions
conducted between individuals, companies, governments, and other
organizations located in different countries.
•The primary goal of IB is to leverage opportunities in global markets to expand
operations, increase revenue, access resources, and diversify risks.
Dr TSN, JSSATEB International Business
Cont..
•It involves navigating diverse cultural, economic, legal, and political
environments, as well as managing complexities associated with international
trade, investment, and operations.
Dr TSN, JSSATEB International Business
•It involves navigating diverse cultural, economic, legal, and political
environments, as well as managing complexities associated with international
trade, investment, and operations.
Dr TSN, JSSATEB International Business
Key aspects of international business
•Globalization:
IB operates within the framework of globalization, which involves the
integration of economies, cultures, and societies on a global scale.
This interconnectedness facilitates the flow of goods, services, capital, and
information across borders.
Dr TSN, JSSATEB International Business
•Globalization:
IB operates within the framework of globalization, which involves the
integration of economies, cultures, and societies on a global scale.
This interconnectedness facilitates the flow of goods, services, capital, and
information across borders.
Dr TSN, JSSATEB International Business
Cont…
•Cross-border Trade:
International business encompasses the import and export of goods and
services between countries.
This involves negotiating trade agreements, complying with international
regulations, managing logistics, and dealing with tariffs, quotas, and trade
barriers.
Dr TSN, JSSATEB International Business
•Cross-border Trade:
International business encompasses the import and export of goods and
services between countries.
This involves negotiating trade agreements, complying with international
regulations, managing logistics, and dealing with tariffs, quotas, and trade
barriers.
Dr TSN, JSSATEB International Business
Cont..
•Foreign Direct Investment (FDI):
IB also involves investment in foreign countries to establish or acquire
businesses, subsidiaries, or production facilities.
FDI allows companies to access new markets, technologies, resources,
and talent pools, while also contributing to economic development and job
creation in host countries.
Dr TSN, JSSATEB International Business
•Foreign Direct Investment (FDI):
IB also involves investment in foreign countries to establish or acquire
businesses, subsidiaries, or production facilities.
FDI allows companies to access new markets, technologies, resources,
and talent pools, while also contributing to economic development and job
creation in host countries.
Dr TSN, JSSATEB International Business
Cont..
•Global Supply Chains:
Many businesses operate within global supply chains, sourcing raw
materials, components, and finished products from different countries to
optimize efficiency, reduce costs, and meet customer demands.
Managing supply chains across borders requires coordination, risk
mitigation, and responsiveness to changes in market conditions.
Dr TSN, JSSATEB International Business
•Global Supply Chains:
Many businesses operate within global supply chains, sourcing raw
materials, components, and finished products from different countries to
optimize efficiency, reduce costs, and meet customer demands.
Managing supply chains across borders requires coordination, risk
mitigation, and responsiveness to changes in market conditions.
Dr TSN, JSSATEB International Business
Cont..
•Cultural and Institutional Differences: IB requires an understanding of
cultural differences, business practices, and regulatory frameworks in diverse
countries. Successful IB adapt their strategies, products, and marketing
approaches to local preferences and norms.
•International Finance: Managing financial transactions, currency exchange,
and foreign exchange risk are essential aspects of international business.
Companies must navigate fluctuations in exchange rates, interest rates,
and capital flows to optimize financial performance and mitigate risks.
Dr TSN, JSSATEB International Business
•Cultural and Institutional Differences: IB requires an understanding of
cultural differences, business practices, and regulatory frameworks in diverse
countries. Successful IB adapt their strategies, products, and marketing
approaches to local preferences and norms.
•International Finance: Managing financial transactions, currency exchange,
and foreign exchange risk are essential aspects of international business.
Companies must navigate fluctuations in exchange rates, interest rates,
and capital flows to optimize financial performance and mitigate risks.
Dr TSN, JSSATEB International Business
Cont..
•Global Competition: IB operates in a competitive landscape shaped by global
competitors, technological advancements, and evolving consumer
preferences.
Companies must innovate, differentiate, and build competitive advantages
to succeed in international markets.
Dr TSN, JSSATEB International Business
•Global Competition: IB operates in a competitive landscape shaped by global
competitors, technological advancements, and evolving consumer
preferences.
Companies must innovate, differentiate, and build competitive advantages
to succeed in international markets.
Dr TSN, JSSATEB International Business
Importance of International Business
1. Economic Growth and Development
•Increased Market Size: By expanding beyond domestic markets,
businesses can access a larger customer base, leading to higher sales
and revenue.
•Foreign Investment: International business activities often attract FDI,
which can stimulate economic growth in host countries through job
creation, technology transfer, and infrastructure development.
Dr TSN, JSSATEB International Business
1. Economic Growth and Development
•Increased Market Size: By expanding beyond domestic markets,
businesses can access a larger customer base, leading to higher sales
and revenue.
•Foreign Investment: International business activities often attract FDI,
which can stimulate economic growth in host countries through job
creation, technology transfer, and infrastructure development.
Dr TSN, JSSATEB International Business
Cont..
2. Diversification and Risk Management
•Market Diversification:
–Engaging in international markets allows companies to spread their
risks.
–Economic downturns or political instability in one country can be
offset by operations in more stable or growing markets.
•Resource Access:
–Companies can secure essential resources or raw materials not
available domestically, ensuring stable supply chains and cost
efficiencies.
Dr TSN, JSSATEB International Business
2. Diversification and Risk Management
•Market Diversification:
–Engaging in international markets allows companies to spread their
risks.
–Economic downturns or political instability in one country can be
offset by operations in more stable or growing markets.
•Resource Access:
–Companies can secure essential resources or raw materials not
available domestically, ensuring stable supply chains and cost
efficiencies.
Dr TSN, JSSATEB International Business
Cont..
3. Competitive Advantage
•Innovation and Learning:
–Exposure to global markets fosters innovation as companies
encounter new ideas, technologies, and business practices.
–Learning from international competitors can lead to improved
processes and products.
•Economies of Scale:
–Operating on a global scale can help companies achieve economies of
scale, reducing per-unit costs and increasing profitability.
Dr TSN, JSSATEB International Business
3. Competitive Advantage
•Innovation and Learning:
–Exposure to global markets fosters innovation as companies
encounter new ideas, technologies, and business practices.
–Learning from international competitors can lead to improved
processes and products.
•Economies of Scale:
–Operating on a global scale can help companies achieve economies of
scale, reducing per-unit costs and increasing profitability.
Dr TSN, JSSATEB International Business
Cont..
4. Cultural Exchange and Global Understanding
•Cultural Exchange:
–International business promotes the exchange of culture and ideas,
fostering global understanding and cooperation.
–This can lead to more harmonious international relations and cultural
enrichment.
•Diversity:
–Companies operating internationally benefit from a diverse workforce,
which can enhance creativity, problem-solving, and decision-
making processes.
Dr TSN, JSSATEB International Business
4. Cultural Exchange and Global Understanding
•Cultural Exchange:
–International business promotes the exchange of culture and ideas,
fostering global understanding and cooperation.
–This can lead to more harmonious international relations and cultural
enrichment.
•Diversity:
–Companies operating internationally benefit from a diverse workforce,
which can enhance creativity, problem-solving, and decision-
making processes.
Dr TSN, JSSATEB International Business
Cont..
5. Enhanced Reputation and Brand Value
•Global Presence:
–Having a presence in multiple countries can enhance a company's
reputation and brand value, making it more recognizable and
trustworthy globally
•Corporate Responsibility:
–International operations often require adherence to global standards and
practices, improving corporate responsibility and ethical behavior.
Dr TSN, JSSATEB International Business
5. Enhanced Reputation and Brand Value
•Global Presence:
–Having a presence in multiple countries can enhance a company's
reputation and brand value, making it more recognizable and
trustworthy globally
•Corporate Responsibility:
–International operations often require adherence to global standards and
practices, improving corporate responsibility and ethical behavior.
Dr TSN, JSSATEB International Business
Cont..
6. Access to Emerging Markets
•Growth Opportunities:
–Emerging markets offer significant growth opportunities due to their
increasing consumer base, rising incomes, and urbanization trends.
–Companies that tap into these markets early can establish strong
brand loyalty and market share.
Dr TSN, JSSATEB International Business
6. Access to Emerging Markets
•Growth Opportunities:
–Emerging markets offer significant growth opportunities due to their
increasing consumer base, rising incomes, and urbanization trends.
–Companies that tap into these markets early can establish strong
brand loyalty and market share.
Dr TSN, JSSATEB International Business
Cont..
7. Political and Economic Stability
•Diplomatic Relations:
–International trade and business can strengthen diplomatic ties
between countries, fostering political stability and cooperation.
•Economic Integration:
–Global business activities contribute to economic integration,
reducing trade barriers and fostering a more interconnected global
economy.
Dr TSN, JSSATEB International Business
7. Political and Economic Stability
•Diplomatic Relations:
–International trade and business can strengthen diplomatic ties
between countries, fostering political stability and cooperation.
•Economic Integration:
–Global business activities contribute to economic integration,
reducing trade barriers and fostering a more interconnected global
economy.
Dr TSN, JSSATEB International Business
Cont..
8. Technological Advancements
•Technology Transfer:
–IB often leads to the transfer of technology and innovation across
borders, which can spur development in less developed regions.
•Research and Development:
–Collaboration with international partners can enhance research and
development efforts, leading to new technologies and
advancements.
Dr TSN, JSSATEB International Business
8. Technological Advancements
•Technology Transfer:
–IB often leads to the transfer of technology and innovation across
borders, which can spur development in less developed regions.
•Research and Development:
–Collaboration with international partners can enhance research and
development efforts, leading to new technologies and
advancements.
Dr TSN, JSSATEB International Business
Cont..
9. Legal and Regulatory Standards
•Global Standards:
–Companies engaged in IB often need to comply with multiple legal and
regulatory standards, leading to improved business practices and
higher standards globally.
•Intellectual Property:
–Protecting intellectual property rights becomes more critical in IB,
encouraging innovation and investment in new ideas.
Dr TSN, JSSATEB International Business
9. Legal and Regulatory Standards
•Global Standards:
–Companies engaged in IB often need to comply with multiple legal and
regulatory standards, leading to improved business practices and
higher standards globally.
•Intellectual Property:
–Protecting intellectual property rights becomes more critical in IB,
encouraging innovation and investment in new ideas.
Dr TSN, JSSATEB International Business
Nature of International Business
IB is complex and multifaceted, includes various activities, challenges, and
considerations that distinguish it from domestic business operations. Here
are some key aspects that define the nature of international business:
1. Global Scope and Diversity
•Cross-Border Transactions: IB involves trade and investment
activities that cross national borders, including exporting, importing,
and FDI.
•Cultural Diversity: Companies must navigate diverse cultural
environments, which affect consumer behavior, management
practices, and marketing strategies.
Dr TSN, JSSATEB International Business
IB is complex and multifaceted, includes various activities, challenges, and
considerations that distinguish it from domestic business operations. Here
are some key aspects that define the nature of international business:
1. Global Scope and Diversity
•Cross-Border Transactions: IB involves trade and investment
activities that cross national borders, including exporting, importing,
and FDI.
•Cultural Diversity: Companies must navigate diverse cultural
environments, which affect consumer behavior, management
practices, and marketing strategies.
Dr TSN, JSSATEB International Business
Cont..
2. Market Dynamics
•Market Entry Strategies:
–Businesses need to select appropriate market entry strategies such as
exporting, licensing, franchising, joint ventures, or wholly owned
subsidiaries based on market conditions and company objectives.
•Competition:
–Firms face competition not only from local companies but also from
other international players, requiring robust competitive strategies.
Dr TSN, JSSATEB International Business
2. Market Dynamics
•Market Entry Strategies:
–Businesses need to select appropriate market entry strategies such as
exporting, licensing, franchising, joint ventures, or wholly owned
subsidiaries based on market conditions and company objectives.
•Competition:
–Firms face competition not only from local companies but also from
other international players, requiring robust competitive strategies.
Dr TSN, JSSATEB International Business
Cont..
3. Economic Environment
•Economic Systems:
–Understanding different economic systems (capitalist, socialist, mixed
economies) is crucial for international business operations.
•Economic Indicators:
–Businesses must monitor economic indicators such as GDP, inflation
rates, and exchange rates to make informed decisions.
Dr TSN, JSSATEB International Business
3. Economic Environment
•Economic Systems:
–Understanding different economic systems (capitalist, socialist, mixed
economies) is crucial for international business operations.
•Economic Indicators:
–Businesses must monitor economic indicators such as GDP, inflation
rates, and exchange rates to make informed decisions.
Dr TSN, JSSATEB International Business
Cont..
4. Legal and Regulatory Framework
•Legal Compliance:
–Companies must comply with a international, regional, and local laws
and regulations, including trade laws, labor laws, and environmental
regulations.
•Intellectual Property Rights:
–Protecting intellectual property across different jurisdictions is a
significant concern in international business.
Dr TSN, JSSATEB International Business
4. Legal and Regulatory Framework
•Legal Compliance:
–Companies must comply with a international, regional, and local laws
and regulations, including trade laws, labor laws, and environmental
regulations.
•Intellectual Property Rights:
–Protecting intellectual property across different jurisdictions is a
significant concern in international business.
Dr TSN, JSSATEB International Business
Cont..
5. Political Environment
•Political Stability:
–The political stability of a country affects business operations,
investment decisions, and risk management strategies.
•Government Policies:
–Trade policies, tariffs, and government incentives or restrictions can
significantly impact international business activities.
Dr TSN, JSSATEB International Business
5. Political Environment
•Political Stability:
–The political stability of a country affects business operations,
investment decisions, and risk management strategies.
•Government Policies:
–Trade policies, tariffs, and government incentives or restrictions can
significantly impact international business activities.
Dr TSN, JSSATEB International Business
Cont..
6. Cultural and Social Factors
•Cultural Sensitivity:
–Understanding and respecting cultural differences is vital for successful
international operations, affecting everything from marketing to
management styles.
•Consumer Preferences:
–Social and cultural norms influence consumer preferences and demand
for products and services.
Dr TSN, JSSATEB International Business
6. Cultural and Social Factors
•Cultural Sensitivity:
–Understanding and respecting cultural differences is vital for successful
international operations, affecting everything from marketing to
management styles.
•Consumer Preferences:
–Social and cultural norms influence consumer preferences and demand
for products and services.
Dr TSN, JSSATEB International Business
Cont..
7. Technological Environment
•Technological Advancements:
–Keeping up with global technological advancements is crucial for
maintaining competitiveness in international markets.
•Communication and Connectivity:
–Advances in communication and information technology facilitate
international business operations by improving connectivity and reducing
transaction costs.
Dr TSN, JSSATEB International Business
7. Technological Environment
•Technological Advancements:
–Keeping up with global technological advancements is crucial for
maintaining competitiveness in international markets.
•Communication and Connectivity:
–Advances in communication and information technology facilitate
international business operations by improving connectivity and reducing
transaction costs.
Dr TSN, JSSATEB International Business
Cont..
8. Financial Considerations
•Currency Exchange:
–Fluctuations in exchange rates can impact profitability and pricing
strategies.
–Managing currency risk is a key aspect of international finance.
•Funding and Investment:
–Access to international capital markets and understanding different
financing options are important for funding global operations.
Dr TSN, JSSATEB International Business
8. Financial Considerations
•Currency Exchange:
–Fluctuations in exchange rates can impact profitability and pricing
strategies.
–Managing currency risk is a key aspect of international finance.
•Funding and Investment:
–Access to international capital markets and understanding different
financing options are important for funding global operations.
Dr TSN, JSSATEB International Business
Cont..
9. Supply Chain and Logistics
•Global Supply Chains:
–International business often involves complex supply chains that span
multiple countries, requiring efficient logistics and supply chain
management.
•Transportation and Infrastructure:
–The availability and quality of infrastructure, including transportation and
logistics networks, affect international business operations.
Dr TSN, JSSATEB International Business
9. Supply Chain and Logistics
•Global Supply Chains:
–International business often involves complex supply chains that span
multiple countries, requiring efficient logistics and supply chain
management.
•Transportation and Infrastructure:
–The availability and quality of infrastructure, including transportation and
logistics networks, affect international business operations.
Dr TSN, JSSATEB International Business
Cont..
10. Strategic Management
•Global Strategy:
–Developing a global strategy that aligns with overall business objectives
and leverages global opportunities is essential.
•Adaptation vs. Standardization:
–Companies must decide between adapting products and strategies to
local markets or standardizing them across all markets to achieve
efficiencies.
Dr TSN, JSSATEB International Business
10. Strategic Management
•Global Strategy:
–Developing a global strategy that aligns with overall business objectives
and leverages global opportunities is essential.
•Adaptation vs. Standardization:
–Companies must decide between adapting products and strategies to
local markets or standardizing them across all markets to achieve
efficiencies.
Dr TSN, JSSATEB International Business
Cont..
11. Risk Management
•Political Risk: Companies must assess and manage risks related to
political instability, government actions, and regulatory changes.
•Economic Risk: Managing economic risks such as inflation, currency
fluctuations, and economic downturns is crucial.
•Cultural Risk: Misunderstanding or misinterpreting cultural differences
can lead to operational challenges and lost opportunities.
Dr TSN, JSSATEB International Business
11. Risk Management
•Political Risk: Companies must assess and manage risks related to
political instability, government actions, and regulatory changes.
•Economic Risk: Managing economic risks such as inflation, currency
fluctuations, and economic downturns is crucial.
•Cultural Risk: Misunderstanding or misinterpreting cultural differences
can lead to operational challenges and lost opportunities.
Dr TSN, JSSATEB International Business
Scope of International Business
The scope of IB is extensive, encompassing a wide range of activities and
disciplines. Here are the primary areas that outline the scope of international
business:
1. International Trade
•Exporting and Importing:
–The exchange of goods and services across national borders.
–Exporting involves selling domestic goods to foreign markets, while
importing involves buying foreign goods for domestic use.
•Trade Agreements:
–Participation in and navigation of trade agreements and treaties that
govern international trade relationships.
Dr TSN, JSSATEB International Business
The scope of IB is extensive, encompassing a wide range of activities and
disciplines. Here are the primary areas that outline the scope of international
business:
1. International Trade
•Exporting and Importing:
–The exchange of goods and services across national borders.
–Exporting involves selling domestic goods to foreign markets, while
importing involves buying foreign goods for domestic use.
•Trade Agreements:
–Participation in and navigation of trade agreements and treaties that
govern international trade relationships.
Dr TSN, JSSATEB International Business
Cont..
2. Foreign Direct Investment (FDI)
•Equity Capital: Investments in foreign enterprises through the purchase of
equity shares.
•Reinvestment of Earnings: Profits earned from foreign investments that
are reinvested in the foreign market.
•Intra-company Loans: Loans made by a parent company to its foreign
subsidiaries.
Dr TSN, JSSATEB International Business
2. Foreign Direct Investment (FDI)
•Equity Capital: Investments in foreign enterprises through the purchase of
equity shares.
•Reinvestment of Earnings: Profits earned from foreign investments that
are reinvested in the foreign market.
•Intra-company Loans: Loans made by a parent company to its foreign
subsidiaries.
Dr TSN, JSSATEB International Business
Cont..
3. International Market Entry Strategies
•Exporting: Selling products directly to foreign markets or through
intermediaries.
•Licensing and Franchising: Allowing foreign companies to produce and
sell products under the company's brand in exchange for royalties or fees.
•Joint Ventures and Strategic Alliances: Partnering with foreign
companies to share resources, knowledge, and risks.
•Wholly Owned Subsidiaries: Establishing a fully owned operation in a
foreign country through acquisition or new establishment.
Dr TSN, JSSATEB International Business
3. International Market Entry Strategies
•Exporting: Selling products directly to foreign markets or through
intermediaries.
•Licensing and Franchising: Allowing foreign companies to produce and
sell products under the company's brand in exchange for royalties or fees.
•Joint Ventures and Strategic Alliances: Partnering with foreign
companies to share resources, knowledge, and risks.
•Wholly Owned Subsidiaries: Establishing a fully owned operation in a
foreign country through acquisition or new establishment.
Dr TSN, JSSATEB International Business
Cont..
4. Global Supply Chain Management
•Sourcing and Procurement: Identifying and engaging suppliers from
different countries.
•Logistics and Transportation: Managing the movement of goods across
international borders.
•Inventory Management: Optimizing inventory levels across multiple
countries to ensure supply chain efficiency.
Dr TSN, JSSATEB International Business
4. Global Supply Chain Management
•Sourcing and Procurement: Identifying and engaging suppliers from
different countries.
•Logistics and Transportation: Managing the movement of goods across
international borders.
•Inventory Management: Optimizing inventory levels across multiple
countries to ensure supply chain efficiency.
Dr TSN, JSSATEB International Business
Cont..
5. International Marketing
•Market Research: Understanding foreign market dynamics, consumer
behavior, and competitive landscapes.
•Product Adaptation: Modifying products to meet local preferences and
regulatory requirements.
•Branding and Advertising: Developing global branding strategies and
localized marketing campaigns.
Dr TSN, JSSATEB International Business
5. International Marketing
•Market Research: Understanding foreign market dynamics, consumer
behavior, and competitive landscapes.
•Product Adaptation: Modifying products to meet local preferences and
regulatory requirements.
•Branding and Advertising: Developing global branding strategies and
localized marketing campaigns.
Dr TSN, JSSATEB International Business
Cont..
6. International Finance
•Foreign Exchange Management: Managing currency risk through
hedging and other financial instruments.
•International Funding: Accessing capital in global markets, including
international banks and investors.
•Cross-border Taxation: Navigating different tax regimes and optimizing
tax liabilities.
Dr TSN, JSSATEB International Business
6. International Finance
•Foreign Exchange Management: Managing currency risk through
hedging and other financial instruments.
•International Funding: Accessing capital in global markets, including
international banks and investors.
•Cross-border Taxation: Navigating different tax regimes and optimizing
tax liabilities.
Dr TSN, JSSATEB International Business
Cont..
7. Cross-Cultural Management
•Cultural Awareness: Understanding and respecting cultural differences in
business practices and communication.
•Human Resource Management: Managing a diverse workforce, including
expatriate assignments, recruitment, and training.
•Negotiation and Conflict Resolution: Developing skills to negotiate and
resolve conflicts in a multicultural environment.
Dr TSN, JSSATEB International Business
7. Cross-Cultural Management
•Cultural Awareness: Understanding and respecting cultural differences in
business practices and communication.
•Human Resource Management: Managing a diverse workforce, including
expatriate assignments, recruitment, and training.
•Negotiation and Conflict Resolution: Developing skills to negotiate and
resolve conflicts in a multicultural environment.
Dr TSN, JSSATEB International Business
Cont..
8. Global Strategic Management
•Global Strategy Development: Formulating strategies that leverage
global opportunities and mitigate international risks.
•Competitive Analysis: Assessing global competition and adapting
strategies to maintain competitive advantage.
•Corporate Governance: Ensuring effective governance practices that
meet international standards.
Dr TSN, JSSATEB International Business
8. Global Strategic Management
•Global Strategy Development: Formulating strategies that leverage
global opportunities and mitigate international risks.
•Competitive Analysis: Assessing global competition and adapting
strategies to maintain competitive advantage.
•Corporate Governance: Ensuring effective governance practices that
meet international standards.
Dr TSN, JSSATEB International Business
Cont..
9. International Legal and Regulatory Environment
•Compliance: Adhering to international laws, regulations, and standards,
including trade laws, labor laws, and environmental regulations.
•Intellectual Property Protection: Safeguarding intellectual property rights
in different jurisdictions.
•Dispute Resolution: Handling legal disputes through international
arbitration or litigation.
Dr TSN, JSSATEB International Business
9. International Legal and Regulatory Environment
•Compliance: Adhering to international laws, regulations, and standards,
including trade laws, labor laws, and environmental regulations.
•Intellectual Property Protection: Safeguarding intellectual property rights
in different jurisdictions.
•Dispute Resolution: Handling legal disputes through international
arbitration or litigation.
Dr TSN, JSSATEB International Business
Cont..
10. Technology and Innovation
•Technology Transfer: Sharing and adopting technologies across borders
to improve productivity and innovation.
•Digital Transformation: Leveraging digital technologies to enhance global
business operations and customer engagement.
•Research and Development (R&D): Conducting R&D activities in multiple
countries to tap into local expertise and innovation.
Dr TSN, JSSATEB International Business
10. Technology and Innovation
•Technology Transfer: Sharing and adopting technologies across borders
to improve productivity and innovation.
•Digital Transformation: Leveraging digital technologies to enhance global
business operations and customer engagement.
•Research and Development (R&D): Conducting R&D activities in multiple
countries to tap into local expertise and innovation.
Dr TSN, JSSATEB International Business
Cont..
11. International Economic Environment
•Economic Analysis: Understanding global economic trends, including
inflation, interest rates, and economic growth.
•Risk Assessment: Evaluating economic risks in different countries, such
as political instability, currency fluctuations, and economic recessions.
•Market Potential: Assessing market potential and opportunities for growth
in various regions.
Dr TSN, JSSATEB International Business
11. International Economic Environment
•Economic Analysis: Understanding global economic trends, including
inflation, interest rates, and economic growth.
•Risk Assessment: Evaluating economic risks in different countries, such
as political instability, currency fluctuations, and economic recessions.
•Market Potential: Assessing market potential and opportunities for growth
in various regions.
Dr TSN, JSSATEB International Business
Cont..
•The scope of international business is broad and multi-dimensional,
requiring expertise in various areas such as trade, investment, marketing,
finance, management, law, and technology.
•Successful international business operations demand a comprehensive
understanding of global dynamics and the ability to navigate complex and
diverse environments.
•Companies engaged in international business must be agile, innovative,
and culturally aware to capitalize on global opportunities and manage
associated risks effectively.
Dr TSN, JSSATEB International Business
•The scope of international business is broad and multi-dimensional,
requiring expertise in various areas such as trade, investment, marketing,
finance, management, law, and technology.
•Successful international business operations demand a comprehensive
understanding of global dynamics and the ability to navigate complex and
diverse environments.
•Companies engaged in international business must be agile, innovative,
and culturally aware to capitalize on global opportunities and manage
associated risks effectively.
Dr TSN, JSSATEB International Business
Characteristics of International Business
IB is characterized by several distinctive features that differentiate it from
domestic business operations. These characteristics include:
1. Cross-Border Operations
•Geographical Spread: IB activities span multiple countries and
continents, involving the movement of goods, services, capital, and
personnel across national borders.
•Cultural Diversity: Companies must manage and adapt to diverse cultural
practices, languages, and business etiquettes in different countries.
Dr TSN, JSSATEB International Business
IB is characterized by several distinctive features that differentiate it from
domestic business operations. These characteristics include:
1. Cross-Border Operations
•Geographical Spread: IB activities span multiple countries and
continents, involving the movement of goods, services, capital, and
personnel across national borders.
•Cultural Diversity: Companies must manage and adapt to diverse cultural
practices, languages, and business etiquettes in different countries.
Dr TSN, JSSATEB International Business
Cont..
2. Varied Market Environments
•Multiple Markets: IB operate in varied market environments, each with
its own economic conditions, consumer preferences, and competitive
landscapes.
•Market Adaptation: Products and services often need to be adapted to
meet local tastes, legal requirements, and cultural preferences.
Dr TSN, JSSATEB International Business
2. Varied Market Environments
•Multiple Markets: IB operate in varied market environments, each with
its own economic conditions, consumer preferences, and competitive
landscapes.
•Market Adaptation: Products and services often need to be adapted to
meet local tastes, legal requirements, and cultural preferences.
Dr TSN, JSSATEB International Business
Cont..
3. Legal and Regulatory Complexity
•Diverse Legal Systems: IB must comply with a wide range of legal
systems and regulations, including trade laws, labor laws, environmental
laws, and intellectual property rights.
•Regulatory Challenges: Navigating different regulatory environments can
be complex and requires expertise in international law and compliance.
Dr TSN, JSSATEB International Business
3. Legal and Regulatory Complexity
•Diverse Legal Systems: IB must comply with a wide range of legal
systems and regulations, including trade laws, labor laws, environmental
laws, and intellectual property rights.
•Regulatory Challenges: Navigating different regulatory environments can
be complex and requires expertise in international law and compliance.
Dr TSN, JSSATEB International Business
Cont..
4. Currency and Financial Management
•Currency Exchange: Dealing with multiple currencies introduces
foreign exchange risk, which must be managed through hedging and
other financial strategies.
•Financial Regulations: Companies must comply with financial regulations
in each country, affecting taxation, repatriation of profits, and financial
reporting.
Dr TSN, JSSATEB International Business
4. Currency and Financial Management
•Currency Exchange: Dealing with multiple currencies introduces
foreign exchange risk, which must be managed through hedging and
other financial strategies.
•Financial Regulations: Companies must comply with financial regulations
in each country, affecting taxation, repatriation of profits, and financial
reporting.
Dr TSN, JSSATEB International Business
Cont..
5. Global Supply Chain and Logistics
•Supply Chain Complexity: Managing a global supply chain involves
coordinating production, transportation, and logistics across
multiple countries, which can be challenging due to differences in
infrastructure, regulations, and customs procedures.
•Efficiency and Cost Management: Efficiently managing the global
supply chain is crucial for controlling costs and ensuring timely
delivery of products.
Dr TSN, JSSATEB International Business
5. Global Supply Chain and Logistics
•Supply Chain Complexity: Managing a global supply chain involves
coordinating production, transportation, and logistics across
multiple countries, which can be challenging due to differences in
infrastructure, regulations, and customs procedures.
•Efficiency and Cost Management: Efficiently managing the global
supply chain is crucial for controlling costs and ensuring timely
delivery of products.
Dr TSN, JSSATEB International Business
Cont..
6. Strategic Planning and Decision Making
•Global Strategy: Developing and implementing a global strategy requires
understanding international markets, competition, and strategic
positioning.
•Decision-Making Complexity: Decision-making in IB is more complex
due to factors like political risk, cultural differences, and market
volatility.
Dr TSN, JSSATEB International Business
6. Strategic Planning and Decision Making
•Global Strategy: Developing and implementing a global strategy requires
understanding international markets, competition, and strategic
positioning.
•Decision-Making Complexity: Decision-making in IB is more complex
due to factors like political risk, cultural differences, and market
volatility.
Dr TSN, JSSATEB International Business
Cont..
7. Risk and Uncertainty
•Political Risk: International businesses face risks related to political
instability, government actions, and changes in trade policies.
•Economic Risk: Economic fluctuations, such as inflation, recession, and
changes in interest rates, can impact international business operations.
•Cultural Risk: Misunderstanding or misinterpreting cultural norms can
lead to business failures or conflicts.
Dr TSN, JSSATEB International Business
7. Risk and Uncertainty
•Political Risk: International businesses face risks related to political
instability, government actions, and changes in trade policies.
•Economic Risk: Economic fluctuations, such as inflation, recession, and
changes in interest rates, can impact international business operations.
•Cultural Risk: Misunderstanding or misinterpreting cultural norms can
lead to business failures or conflicts.
Dr TSN, JSSATEB International Business
Cont..
8. Technological and Innovation Dynamics
•Technology Transfer: IB often engage in the transfer of technology
between countries, which can drive innovation and competitive advantage.
•Adaptation of Technology: Adapting technology to meet local market
needs and conditions is crucial for success.
Dr TSN, JSSATEB International Business
8. Technological and Innovation Dynamics
•Technology Transfer: IB often engage in the transfer of technology
between countries, which can drive innovation and competitive advantage.
•Adaptation of Technology: Adapting technology to meet local market
needs and conditions is crucial for success.
Dr TSN, JSSATEB International Business
Cont..
9. Human Resource Management
•Diverse Workforce: Managing a diverse workforce that includes
employees from various cultural and national backgrounds requires
specialized HR practices.
•Expatriate Management: Deploying and managing expatriates, including
issues related to relocation, compensation, and cultural adjustment, is a
significant aspect of IB.
Dr TSN, JSSATEB International Business
9. Human Resource Management
•Diverse Workforce: Managing a diverse workforce that includes
employees from various cultural and national backgrounds requires
specialized HR practices.
•Expatriate Management: Deploying and managing expatriates, including
issues related to relocation, compensation, and cultural adjustment, is a
significant aspect of IB.
Dr TSN, JSSATEB International Business
Cont..
10. Ethical and Social Responsibility
•Corporate Social Responsibility (CSR): IB are increasingly expected to
adhere to ethical standards and contribute to social and environmental
sustainability.
•Ethical Practices: Ensuring ethical practices across different areas,
including fair labor practices, environmental protection, and anti-
corruption measures, is essential.
Dr TSN, JSSATEB International Business
10. Ethical and Social Responsibility
•Corporate Social Responsibility (CSR): IB are increasingly expected to
adhere to ethical standards and contribute to social and environmental
sustainability.
•Ethical Practices: Ensuring ethical practices across different areas,
including fair labor practices, environmental protection, and anti-
corruption measures, is essential.
Dr TSN, JSSATEB International Business
Cont..
11. Market Research and Intelligence
•Market Analysis: Conducting thorough market research to understand
local market conditions, consumer behavior, and competitive dynamics is
critical.
•Data Collection: Gathering and analyzing data from multiple countries to
inform strategic decisions and identify opportunities.
Dr TSN, JSSATEB International Business
11. Market Research and Intelligence
•Market Analysis: Conducting thorough market research to understand
local market conditions, consumer behavior, and competitive dynamics is
critical.
•Data Collection: Gathering and analyzing data from multiple countries to
inform strategic decisions and identify opportunities.
Dr TSN, JSSATEB International Business
Cont..
12. Networking and Relationships
•International Partnerships: Building and maintaining relationships with
foreign partners, suppliers, and customers is crucial for success.
•Global Networks: Leveraging global networks and alliances can enhance
market access, resource sharing, and competitive positioning.
Dr TSN, JSSATEB International Business
12. Networking and Relationships
•International Partnerships: Building and maintaining relationships with
foreign partners, suppliers, and customers is crucial for success.
•Global Networks: Leveraging global networks and alliances can enhance
market access, resource sharing, and competitive positioning.
Dr TSN, JSSATEB International Business
Factors affecting International Business
1. Economic Factors
•Market Size and Growth: The size and growth rate of a country's market
can determine the potential for sales and profitability.
•Economic Stability: Stable economies with consistent growth rates
provide a conducive environment for business operations, while volatile
economies pose higher risks.
•Exchange Rates: Fluctuations in currency exchange rates can impact
profitability, pricing, and competitiveness.
Dr TSN, JSSATEB International Business
1. Economic Factors
•Market Size and Growth: The size and growth rate of a country's market
can determine the potential for sales and profitability.
•Economic Stability: Stable economies with consistent growth rates
provide a conducive environment for business operations, while volatile
economies pose higher risks.
•Exchange Rates: Fluctuations in currency exchange rates can impact
profitability, pricing, and competitiveness.
Dr TSN, JSSATEB International Business
Cont…
•Inflation and Interest Rates: High inflation can erode purchasing power,
while high-interest rates can increase the cost of capital.
•Per Capita Income: The average income of a country’s population affects
consumer purchasing power and demand for products and services.
Dr TSN, JSSATEB International Business
•Inflation and Interest Rates: High inflation can erode purchasing power,
while high-interest rates can increase the cost of capital.
•Per Capita Income: The average income of a country’s population affects
consumer purchasing power and demand for products and services.
Dr TSN, JSSATEB International Business
Cont..
2. Political Factors
•Government Policies: Policies related to trade, taxation, labor, and the
environment can significantly impact business operations.
•Political Stability: Countries with stable political environments are more
attractive for IB compared to those with frequent changes in government,
political unrest, or conflict.
•Trade Agreements: Bilateral and multilateral trade agreements can
facilitate or restrict trade flows and investment.
•Regulatory Environment: The complexity and enforcement of regulations
affect ease of doing business and compliance costs.
Dr TSN, JSSATEB International Business
2. Political Factors
•Government Policies: Policies related to trade, taxation, labor, and the
environment can significantly impact business operations.
•Political Stability: Countries with stable political environments are more
attractive for IB compared to those with frequent changes in government,
political unrest, or conflict.
•Trade Agreements: Bilateral and multilateral trade agreements can
facilitate or restrict trade flows and investment.
•Regulatory Environment: The complexity and enforcement of regulations
affect ease of doing business and compliance costs.
Dr TSN, JSSATEB International Business
Cont..
3. Legal Factors
•Legal Systems: Differences in legal systems (common law, civil law,
religious law) can affect contract enforcement, property rights, and dispute
resolution.
•Intellectual Property Protection: Strong IP laws are crucial for protecting
innovations and encouraging investment.
•Labor Laws: Regulations governing labor practices, wages, working
conditions, and employee rights vary by country and can impact
operational costs and management practices.
•Environmental Regulations: Compliance with environmental laws and
standards can affect production processes, costs, and corporate
reputation.
Dr TSN, JSSATEB International Business
3. Legal Factors
•Legal Systems: Differences in legal systems (common law, civil law,
religious law) can affect contract enforcement, property rights, and dispute
resolution.
•Intellectual Property Protection: Strong IP laws are crucial for protecting
innovations and encouraging investment.
•Labor Laws: Regulations governing labor practices, wages, working
conditions, and employee rights vary by country and can impact
operational costs and management practices.
•Environmental Regulations: Compliance with environmental laws and
standards can affect production processes, costs, and corporate
reputation.
Dr TSN, JSSATEB International Business
Cont..
4. Cultural Factors
•Cultural Norms and Values: Understanding local customs, traditions, and
values is essential for effective marketing, negotiations, and management.
•Language: Language barriers can impact communication, marketing, and
customer service.
•Consumer Behavior: Preferences, tastes, and buying behavior vary
significantly across cultures and influence product adaptation and
marketing strategies.
•Business Etiquette and Practices: Differences in business etiquette,
negotiation styles, and management practices must be respected and
adapted to.
Dr TSN, JSSATEB International Business
4. Cultural Factors
•Cultural Norms and Values: Understanding local customs, traditions, and
values is essential for effective marketing, negotiations, and management.
•Language: Language barriers can impact communication, marketing, and
customer service.
•Consumer Behavior: Preferences, tastes, and buying behavior vary
significantly across cultures and influence product adaptation and
marketing strategies.
•Business Etiquette and Practices: Differences in business etiquette,
negotiation styles, and management practices must be respected and
adapted to.
Dr TSN, JSSATEB International Business
Cont..
5. Technological Factors
•Technological Infrastructure: The availability and quality of technological
infrastructure, including internet connectivity, transportation, and
communication systems, impact business operations.
•Innovation and R&D: The level of technological innovation and support
for research and development in a country can drive competitive
advantage.
•Technology Transfer: The ease with which technology and innovation
can be transferred between countries affects global business
strategies.
Dr TSN, JSSATEB International Business
5. Technological Factors
•Technological Infrastructure: The availability and quality of technological
infrastructure, including internet connectivity, transportation, and
communication systems, impact business operations.
•Innovation and R&D: The level of technological innovation and support
for research and development in a country can drive competitive
advantage.
•Technology Transfer: The ease with which technology and innovation
can be transferred between countries affects global business
strategies.
Dr TSN, JSSATEB International Business
Cont..
6. Environmental Factors
•Natural Resources: Availability of natural resources can determine the
feasibility and cost of production in different countries.
•Environmental Sustainability: Increasing emphasis on sustainable
business practices and compliance with international environmental
standards can influence operations and corporate strategies.
•Climate and Geography: Climate conditions and geographical features
can impact logistics, production, and market accessibility.
Dr TSN, JSSATEB International Business
6. Environmental Factors
•Natural Resources: Availability of natural resources can determine the
feasibility and cost of production in different countries.
•Environmental Sustainability: Increasing emphasis on sustainable
business practices and compliance with international environmental
standards can influence operations and corporate strategies.
•Climate and Geography: Climate conditions and geographical features
can impact logistics, production, and market accessibility.
Dr TSN, JSSATEB International Business
Cont..
7. Social Factors
•Demographics: Population size, age distribution, and growth rates affect
market potential and labor availability.
•Education and Skills: The level of education and skill sets in the labor
force influence productivity and operational efficiency.
•Urbanization: The degree of urbanization affects market concentration,
infrastructure development, and consumer behavior.
Dr TSN, JSSATEB International Business
7. Social Factors
•Demographics: Population size, age distribution, and growth rates affect
market potential and labor availability.
•Education and Skills: The level of education and skill sets in the labor
force influence productivity and operational efficiency.
•Urbanization: The degree of urbanization affects market concentration,
infrastructure development, and consumer behavior.
Dr TSN, JSSATEB International Business
Cont..
8. Competitive Factors
•Local Competitors: Understanding the strengths and weaknesses of local
competitors is essential for strategic positioning.
•Global Competitors: Companies must also consider competition from
other international businesses and their strategies.
Dr TSN, JSSATEB International Business
8. Competitive Factors
•Local Competitors: Understanding the strengths and weaknesses of local
competitors is essential for strategic positioning.
•Global Competitors: Companies must also consider competition from
other international businesses and their strategies.
Dr TSN, JSSATEB International Business
Cont..
9. Globalization and Trade Integration
•Global Trade Networks: Participation in global trade networks and supply
chains affects market access and competitive dynamics.
•Integration into the Global Economy: Countries more integrated into the
global economy typically offer better opportunities for international
business.
Dr TSN, JSSATEB International Business
9. Globalization and Trade Integration
•Global Trade Networks: Participation in global trade networks and supply
chains affects market access and competitive dynamics.
•Integration into the Global Economy: Countries more integrated into the
global economy typically offer better opportunities for international
business.
Dr TSN, JSSATEB International Business
Changing scenario of International Business
•Many factors contributed for the significant change in the scenario of
international business and resulted in the variations in the operations of
international companies.
•These variations in the scenarios generally categorized into five stages
viz.,
1.Domestic company,
2.International company,
3.Multinational company,
4.Global company and
5.Transnational company.
Dr TSN, JSSATEB International Business
•Many factors contributed for the significant change in the scenario of
international business and resulted in the variations in the operations of
international companies.
•These variations in the scenarios generally categorized into five stages
viz.,
1.Domestic company,
2.International company,
3.Multinational company,
4.Global company and
5.Transnational company.
Dr TSN, JSSATEB International Business
Cont…
Dr TSN, JSSATEB IB
Source:https://collegehive.in/docs/4th_sem/site/G
B/Unit-1%20Introduction%20to%20Global %
20Business/1.d%20Stages%20of%20Internationaliza
tion.html
Dr TSN, JSSATEB IB
Source:https://collegehive.in/docs/4th_sem/site/G
B/Unit-1%20Introduction%20to%20Global %
20Business/1.d%20Stages%20of%20Internationaliza
tion.html
Scenario - 1 : Domestic Company
•Domestic company limits its operations, mission and vision to the national
political boundaries.
•This company focuses its view on the domestic market opportunities,
domestic suppliers, domestic financial companies, domestic customers
etc.
•These companies analyse the national environment of the country,
formulate the strategies to exploit the opportunities offered by the
environment.
•The domestic companies unconscious motto is that, if it is not
happening in the home country, it is not happening.
Dr TSN, JSSATEB International Business
•Domestic company limits its operations, mission and vision to the national
political boundaries.
•This company focuses its view on the domestic market opportunities,
domestic suppliers, domestic financial companies, domestic customers
etc.
•These companies analyse the national environment of the country,
formulate the strategies to exploit the opportunities offered by the
environment.
•The domestic companies unconscious motto is that, if it is not
happening in the home country, it is not happening.
Dr TSN, JSSATEB International Business
Cont..
•The domestic company never thinks of growing globally.
•If it grows, beyond its present capacity, the company selects the
diversification strategy of entering into new domestic markets, new
products, technology etc.
•The domestic company does not select the strategy of
expansion/penetrating into the international markets.
Dr TSN, JSSATEB International Business
•The domestic company never thinks of growing globally.
•If it grows, beyond its present capacity, the company selects the
diversification strategy of entering into new domestic markets, new
products, technology etc.
•The domestic company does not select the strategy of
expansion/penetrating into the international markets.
Dr TSN, JSSATEB International Business
Scenario - 2 : International Company
•Some of the domestic companies, which grow beyond their production
and/or domestic marketing capacities, think of internationalizing their
operations.
•Those companies who decide to exploit the opportunities outside the
domestic country are the stage two companies.
•These companies remain ethnocentric or domestic country oriented.
•These companies believe that the practices adopted in domestic
business, the people and products of domestic business are superior
to those of other countries.
Dr TSN, JSSATEB International Business
•Some of the domestic companies, which grow beyond their production
and/or domestic marketing capacities, think of internationalizing their
operations.
•Those companies who decide to exploit the opportunities outside the
domestic country are the stage two companies.
•These companies remain ethnocentric or domestic country oriented.
•These companies believe that the practices adopted in domestic
business, the people and products of domestic business are superior
to those of other countries.
Dr TSN, JSSATEB International Business
Cont..
•The focus of these companies is domestic but extends the wings to
the foreign countries.
•These companies select the strategy of locating a branch in the foreign
markets and extend the same domestic operations into foreign
markets.
“These companies extend the domestic product, domestic price,
promotion and other business practices to the foreign markets”.
•Normally internationalisation process of most of the global companies
starts with this stage two process.
Dr TSN, JSSATEB International Business
•The focus of these companies is domestic but extends the wings to
the foreign countries.
•These companies select the strategy of locating a branch in the foreign
markets and extend the same domestic operations into foreign
markets.
“These companies extend the domestic product, domestic price,
promotion and other business practices to the foreign markets”.
•Normally internationalisation process of most of the global companies
starts with this stage two process.
Dr TSN, JSSATEB International Business
Cont..
•Most of the companies follow this strategy due to limited resources and
also to learn from the foreign markets gradually before becoming a
global company without much risk.
•The international company holds the marketing mix constantly and
extends the operations to new countries.
•Thus, the international company extends the domestic country
marketing mix and business model and practices to foreign
countries.
Dr TSN, JSSATEB International Business
•Most of the companies follow this strategy due to limited resources and
also to learn from the foreign markets gradually before becoming a
global company without much risk.
•The international company holds the marketing mix constantly and
extends the operations to new countries.
•Thus, the international company extends the domestic country
marketing mix and business model and practices to foreign
countries.
Dr TSN, JSSATEB International Business
Scenario - 3 : Multinational Company
•Later, the international companies learn that the extension strategy
(i.e., extending the domestic product, price and promotion to foreign
markets) will not work.
Eg: Toyota exported Toyopet cars produced for Japan in Japan to the
USA in 1957. Toyopet was not successful in the USA.
Toyota could not sell these cars in the USA as they were over
priced, underpowered and built like tanks.
Thus, these cars were not suitable for the US markets. The unsold cars
were shipped back to Japan.
Dr TSN, JSSATEB International Business
•Later, the international companies learn that the extension strategy
(i.e., extending the domestic product, price and promotion to foreign
markets) will not work.
Eg: Toyota exported Toyopet cars produced for Japan in Japan to the
USA in 1957. Toyopet was not successful in the USA.
Toyota could not sell these cars in the USA as they were over
priced, underpowered and built like tanks.
Thus, these cars were not suitable for the US markets. The unsold cars
were shipped back to Japan.
Dr TSN, JSSATEB International Business
Cont..
Toyota took this failure as a rich learning experience and as a
source of invaluable intelligence but not as failure.
Toyota based on this experience designed new models of cars suitable
for the US market.
The international companies turn into multinational companies when
they start responding to the specific needs of the different country
markets regarding product, price and promotion.
Dr TSN, JSSATEB International Business
Toyota took this failure as a rich learning experience and as a
source of invaluable intelligence but not as failure.
Toyota based on this experience designed new models of cars suitable
for the US market.
The international companies turn into multinational companies when
they start responding to the specific needs of the different country
markets regarding product, price and promotion.
Dr TSN, JSSATEB International Business
Cont..
•This stage of multinational company is also referred to as multidomestic.
•Multidomestic company formulates different strategies for different
markets; thus, the orientation shifts from ethnocentric to polycentric.
•“Under polycentic orientation the offices/branches/subsidiaries of a
multinational company work like domestic company in each country
where they operate with distinct policies and strategies suitable to
the country concerned”.
•Thus, they operate like a domestic company of the country concerned in
each of their markets.
Dr TSN, JSSATEB International Business
•This stage of multinational company is also referred to as multidomestic.
•Multidomestic company formulates different strategies for different
markets; thus, the orientation shifts from ethnocentric to polycentric.
•“Under polycentic orientation the offices/branches/subsidiaries of a
multinational company work like domestic company in each country
where they operate with distinct policies and strategies suitable to
the country concerned”.
•Thus, they operate like a domestic company of the country concerned in
each of their markets.
Dr TSN, JSSATEB International Business
Cont..
Eg: Philips of Netherlands was a multidomestic company of this stage during
1960s.
It used to have autonomous national organisations and formulate the
strategies separately for each country.
Its strategy did work effectively until the Japanese companies started
competing with this company based on global strategy.
Global strategy was based on focusing the company resources to
serve the world market.
Philips strategy was to work like a domestic company, and
produce a number of models of the product.
Dr TSN, JSSATEB International Business
Eg: Philips of Netherlands was a multidomestic company of this stage during
1960s.
It used to have autonomous national organisations and formulate the
strategies separately for each country.
Its strategy did work effectively until the Japanese companies started
competing with this company based on global strategy.
Global strategy was based on focusing the company resources to
serve the world market.
Philips strategy was to work like a domestic company, and
produce a number of models of the product.
Dr TSN, JSSATEB International Business
Cont..
Consequently, it increased the cost of production and price of the product.
But the Japanese strategy was to give the value, quality, design
and low price to the customer.
Philips lost its market share as Japanese offered more value to the
customer.
Consequently, Philips changed its strategy and created industry
main groups in Netherlands which are responsible for formulating a
global strategy for producing, marketing and R & D.
Dr TSN, JSSATEB International Business
Consequently, it increased the cost of production and price of the product.
But the Japanese strategy was to give the value, quality, design
and low price to the customer.
Philips lost its market share as Japanese offered more value to the
customer.
Consequently, Philips changed its strategy and created industry
main groups in Netherlands which are responsible for formulating a
global strategy for producing, marketing and R & D.
Dr TSN, JSSATEB International Business
Scenario - 4: Global Company
•A global company is the one, which has either global marketing
strategy or a global strategy.
•Global company either produces in home country or in a single
country and focuses on marketing these products globally, or
produces the products globally and focuses on marketing these
products domestically.
Eg: Harley Davidson designs and produces super heavy weight
motorcycles in the USA and markets in the global market.
Similarly, Dr. Reddyís Lab designs and produces drugs in India and
markets globally.
Thus, Harley and Dr. Reddyís Lab are examples of global
marketing focus.
Dr TSN, JSSATEB International Business
•A global company is the one, which has either global marketing
strategy or a global strategy.
•Global company either produces in home country or in a single
country and focuses on marketing these products globally, or
produces the products globally and focuses on marketing these
products domestically.
Eg: Harley Davidson designs and produces super heavy weight
motorcycles in the USA and markets in the global market.
Similarly, Dr. Reddyís Lab designs and produces drugs in India and
markets globally.
Thus, Harley and Dr. Reddyís Lab are examples of global
marketing focus.
Dr TSN, JSSATEB International Business
Cont..
Eg: Gap procures products in the global countries and markets the
products through its retail organisation in the USA.
Thus, Gap is an example for global sourcing company.
Harley Davidson designs and produces in the USA and gains competitive
advantage as Mercedes in Germany.
The Gap understands the US consumer and gets competitive
advantage.
Dr TSN, JSSATEB International Business
Eg: Gap procures products in the global countries and markets the
products through its retail organisation in the USA.
Thus, Gap is an example for global sourcing company.
Harley Davidson designs and produces in the USA and gains competitive
advantage as Mercedes in Germany.
The Gap understands the US consumer and gets competitive
advantage.
Dr TSN, JSSATEB International Business
Scenario - 5: Transnational Company
•Transnational company produces, markets, invests and operates across
the world.
•It is an integrated global enterprise that links global resources with global
markets at profit.
•There is no pure transnational corporation.
•However, most of the transnational companies satisfy many of the
characteristics of a global corporation.
Eg:Coca-Cola, Pepsi-Cola etc.
Dr TSN, JSSATEB International Business
•Transnational company produces, markets, invests and operates across
the world.
•It is an integrated global enterprise that links global resources with global
markets at profit.
•There is no pure transnational corporation.
•However, most of the transnational companies satisfy many of the
characteristics of a global corporation.
Eg:Coca-Cola, Pepsi-Cola etc.
Dr TSN, JSSATEB International Business
Advantages of International Business
1. Market Expansion
•Increased Sales and Revenue: Access to larger, global markets allows
companies to expand their customer base, leading to higher sales and
revenue.
•Diversification of Markets: By operating in multiple countries, businesses
can diversify their markets, reducing dependence on any single market
and mitigating risks associated with local economic downturns.
Dr TSN, JSSATEB International Business
1. Market Expansion
•Increased Sales and Revenue: Access to larger, global markets allows
companies to expand their customer base, leading to higher sales and
revenue.
•Diversification of Markets: By operating in multiple countries, businesses
can diversify their markets, reducing dependence on any single market
and mitigating risks associated with local economic downturns.
Dr TSN, JSSATEB International Business
Cont…
2. Economies of Scale
•Cost Reduction: Larger production volumes achieved through
international sales can lead to lower per-unit costs, benefiting from
economies of scale.
•Enhanced Efficiency: Streamlining operations to meet the demands of
international markets can lead to more efficient production processes and
cost savings.
Dr TSN, JSSATEB International Business
2. Economies of Scale
•Cost Reduction: Larger production volumes achieved through
international sales can lead to lower per-unit costs, benefiting from
economies of scale.
•Enhanced Efficiency: Streamlining operations to meet the demands of
international markets can lead to more efficient production processes and
cost savings.
Dr TSN, JSSATEB International Business
Cont…
3. Competitive Advantage
•Global Brand Recognition: Operating internationally can enhance brand
visibility and recognition, strengthening a company’s reputation and
credibility.
•Access to New Technologies and Innovations: Exposure to global
markets often leads to the adoption of new technologies and innovative
practices that can improve competitiveness.
Dr TSN, JSSATEB International Business
3. Competitive Advantage
•Global Brand Recognition: Operating internationally can enhance brand
visibility and recognition, strengthening a company’s reputation and
credibility.
•Access to New Technologies and Innovations: Exposure to global
markets often leads to the adoption of new technologies and innovative
practices that can improve competitiveness.
Dr TSN, JSSATEB International Business
Cont…
4. Resource Acquisition
•Access to Raw Materials: Companies can secure essential raw materials
and resources that may not be available or are more expensive in their
home country.
•Talent and Expertise: International business provides access to a diverse
pool of talent and expertise, fostering innovation and improving the quality
of the workforce.
Dr TSN, JSSATEB International Business
4. Resource Acquisition
•Access to Raw Materials: Companies can secure essential raw materials
and resources that may not be available or are more expensive in their
home country.
•Talent and Expertise: International business provides access to a diverse
pool of talent and expertise, fostering innovation and improving the quality
of the workforce.
Dr TSN, JSSATEB International Business
Cont…
5. Risk Diversification
•Economic Risk Mitigation: Diversifying business operations across
various regions can help mitigate risks associated with economic
fluctuations, political instability, and other local challenges.
•Currency Diversification: Earning revenue in multiple currencies can
protect against exchange rate volatility and provide a financial hedge.
Dr TSN, JSSATEB International Business
5. Risk Diversification
•Economic Risk Mitigation: Diversifying business operations across
various regions can help mitigate risks associated with economic
fluctuations, political instability, and other local challenges.
•Currency Diversification: Earning revenue in multiple currencies can
protect against exchange rate volatility and provide a financial hedge.
Dr TSN, JSSATEB International Business
Cont…
6. Growth Opportunities
•Emerging Markets: Many developing countries present significant growth
opportunities due to their expanding middle class, rising disposable
incomes, and urbanization trends.
•New Customer Segments: Entering international markets can help
businesses tap into new customer segments with distinct needs and
preferences.
Dr TSN, JSSATEB International Business
6. Growth Opportunities
•Emerging Markets: Many developing countries present significant growth
opportunities due to their expanding middle class, rising disposable
incomes, and urbanization trends.
•New Customer Segments: Entering international markets can help
businesses tap into new customer segments with distinct needs and
preferences.
Dr TSN, JSSATEB International Business
Cont…
7. Learning and Innovation
•Cross-Cultural Insights: Exposure to different cultures and business
practices fosters learning and innovation, helping companies develop
better products and services.
•Best Practices Adoption: International experience allows companies to
adopt best practices from various markets, enhancing their overall
efficiency and effectiveness.
Dr TSN, JSSATEB International Business
7. Learning and Innovation
•Cross-Cultural Insights: Exposure to different cultures and business
practices fosters learning and innovation, helping companies develop
better products and services.
•Best Practices Adoption: International experience allows companies to
adopt best practices from various markets, enhancing their overall
efficiency and effectiveness.
Dr TSN, JSSATEB International Business
Cont…
8. Increased Profitability
•Higher Margins: Some international markets may offer higher profit
margins due to less competition, lower production costs, or higher demand
for premium products.
•Favorable Trade Terms: Benefiting from favorable trade agreements,
lower tariffs, and reduced trade barriers can enhance profitability.
Dr TSN, JSSATEB International Business
8. Increased Profitability
•Higher Margins: Some international markets may offer higher profit
margins due to less competition, lower production costs, or higher demand
for premium products.
•Favorable Trade Terms: Benefiting from favorable trade agreements,
lower tariffs, and reduced trade barriers can enhance profitability.
Dr TSN, JSSATEB International Business
Cont…
9. Improved Supply Chain Management
•Supply Chain Optimization: Operating in multiple countries allows
businesses to optimize their supply chain by sourcing materials and
components from the most cost-effective and reliable suppliers globally.
•Risk Management: A global supply chain can help mitigate risks
associated with supply disruptions by diversifying suppliers and production
locations.
Dr TSN, JSSATEB International Business
9. Improved Supply Chain Management
•Supply Chain Optimization: Operating in multiple countries allows
businesses to optimize their supply chain by sourcing materials and
components from the most cost-effective and reliable suppliers globally.
•Risk Management: A global supply chain can help mitigate risks
associated with supply disruptions by diversifying suppliers and production
locations.
Dr TSN, JSSATEB International Business
Cont…
10. Enhanced Corporate Image
•Global Presence: A strong international presence can enhance a
company’s image as a global player, attracting investors, partners, and top
talent.
•Corporate Social Responsibility (CSR): Engaging in international
business often necessitates adherence to global standards and practices,
improving the company’s CSR profile.
Dr TSN, JSSATEB International Business
10. Enhanced Corporate Image
•Global Presence: A strong international presence can enhance a
company’s image as a global player, attracting investors, partners, and top
talent.
•Corporate Social Responsibility (CSR): Engaging in international
business often necessitates adherence to global standards and practices,
improving the company’s CSR profile.
Dr TSN, JSSATEB International Business
Cont…
11. Access to Financial Resources
•Global Capital Markets: Companies engaged in international business
can tap into global capital markets for funding, potentially accessing better
financing options and lower costs of capital.
•Foreign Investments: Attracting foreign direct investment can provide
additional resources for expansion and development.
Dr TSN, JSSATEB International Business
11. Access to Financial Resources
•Global Capital Markets: Companies engaged in international business
can tap into global capital markets for funding, potentially accessing better
financing options and lower costs of capital.
•Foreign Investments: Attracting foreign direct investment can provide
additional resources for expansion and development.
Dr TSN, JSSATEB International Business
Challenges in International business
1. Cultural Differences
•Communication Barriers: Language differences can lead to
misunderstandings and miscommunication in business dealings.
•Cultural Norms and Practices: Differences in business etiquette,
negotiation styles, and management practices can create challenges in
building relationships and conducting business smoothly.
•Consumer Preferences: Varying consumer tastes and preferences
across cultures require businesses to adapt their products and marketing
strategies.
Dr TSN, JSSATEB International Business
1. Cultural Differences
•Communication Barriers: Language differences can lead to
misunderstandings and miscommunication in business dealings.
•Cultural Norms and Practices: Differences in business etiquette,
negotiation styles, and management practices can create challenges in
building relationships and conducting business smoothly.
•Consumer Preferences: Varying consumer tastes and preferences
across cultures require businesses to adapt their products and marketing
strategies.
Dr TSN, JSSATEB International Business
Cont..
2. Political and Legal Environment
•Political Instability: Political instability, such as changes in government,
civil unrest, and conflicts, can disrupt business operations and increase
risks.
•Regulatory Compliance: Navigating different legal and regulatory
environments can be complex and costly, requiring businesses to comply
with a wide range of laws and standards.
•Intellectual Property Protection: Protecting IP rights in foreign markets
can be challenging, particularly in countries with weak enforcement
mechanisms.
Dr TSN, JSSATEB International Business
2. Political and Legal Environment
•Political Instability: Political instability, such as changes in government,
civil unrest, and conflicts, can disrupt business operations and increase
risks.
•Regulatory Compliance: Navigating different legal and regulatory
environments can be complex and costly, requiring businesses to comply
with a wide range of laws and standards.
•Intellectual Property Protection: Protecting IP rights in foreign markets
can be challenging, particularly in countries with weak enforcement
mechanisms.
Dr TSN, JSSATEB International Business
Cont..
3. Economic Environment
•Economic Fluctuations: Economic instability, inflation, and recession in
different markets can affect demand for products and services.
•Exchange Rate Volatility: Fluctuations in currency exchange rates can
impact profitability, pricing strategies, and financial planning.
•Access to Financing: Obtaining financing in foreign markets can be
difficult due to differing banking systems, interest rates, and financial
regulations.
Dr TSN, JSSATEB International Business
3. Economic Environment
•Economic Fluctuations: Economic instability, inflation, and recession in
different markets can affect demand for products and services.
•Exchange Rate Volatility: Fluctuations in currency exchange rates can
impact profitability, pricing strategies, and financial planning.
•Access to Financing: Obtaining financing in foreign markets can be
difficult due to differing banking systems, interest rates, and financial
regulations.
Dr TSN, JSSATEB International Business
Cont..
4. Logistical and Supply Chain Issues
•Complex Supply Chains: Managing supply chains that span multiple
countries can be challenging due to differences in infrastructure,
regulations, and logistical capabilities.
•Transportation Costs and Delays: High transportation costs and
potential delays due to customs procedures, tariffs, and border controls
can affect the efficiency and cost-effectiveness of international operations.
•Supply Chain Disruptions: Natural disasters, political instability, and
other disruptions can impact the availability and reliability of supply chains.
Dr TSN, JSSATEB International Business
4. Logistical and Supply Chain Issues
•Complex Supply Chains: Managing supply chains that span multiple
countries can be challenging due to differences in infrastructure,
regulations, and logistical capabilities.
•Transportation Costs and Delays: High transportation costs and
potential delays due to customs procedures, tariffs, and border controls
can affect the efficiency and cost-effectiveness of international operations.
•Supply Chain Disruptions: Natural disasters, political instability, and
other disruptions can impact the availability and reliability of supply chains.
Dr TSN, JSSATEB International Business
Cont..
5. Technological Barriers
•Technology Infrastructure: Variations in technology infrastructure, such
as internet connectivity and telecommunications, can impact business
operations and digital strategies.
•Cybersecurity Risks: Operating in multiple countries increases the
complexity of protecting against cyber threats and ensuring data security.
Dr TSN, JSSATEB International Business
5. Technological Barriers
•Technology Infrastructure: Variations in technology infrastructure, such
as internet connectivity and telecommunications, can impact business
operations and digital strategies.
•Cybersecurity Risks: Operating in multiple countries increases the
complexity of protecting against cyber threats and ensuring data security.
Dr TSN, JSSATEB International Business
Cont..
6. Human Resource Management
•Recruitment and Training: Finding and retaining skilled employees in
foreign markets can be challenging, and training staff to understand and
adapt to different cultures is crucial.
•Labor Laws and Practices: Different labor laws, wage standards, and
employment practices require careful navigation to ensure compliance and
effective management.
•Expatriate Management: Managing expatriate employees involves
additional considerations such as relocation, compensation packages, and
cultural adjustment.
Dr TSN, JSSATEB International Business
6. Human Resource Management
•Recruitment and Training: Finding and retaining skilled employees in
foreign markets can be challenging, and training staff to understand and
adapt to different cultures is crucial.
•Labor Laws and Practices: Different labor laws, wage standards, and
employment practices require careful navigation to ensure compliance and
effective management.
•Expatriate Management: Managing expatriate employees involves
additional considerations such as relocation, compensation packages, and
cultural adjustment.
Dr TSN, JSSATEB International Business
Cont..
7. Market Entry and Competition
•Market Entry Strategies: Choosing the right market entry strategy (e.g.,
exporting, joint ventures, wholly-owned subsidiaries) requires careful
analysis of market conditions, risks, and potential rewards.
•Local Competition: Competing with established local businesses that
have a better understanding of the market and consumer behavior can be
difficult.
•Brand Recognition: Building brand recognition and trust in foreign
markets takes time and investment.
Dr TSN, JSSATEB International Business
7. Market Entry and Competition
•Market Entry Strategies: Choosing the right market entry strategy (e.g.,
exporting, joint ventures, wholly-owned subsidiaries) requires careful
analysis of market conditions, risks, and potential rewards.
•Local Competition: Competing with established local businesses that
have a better understanding of the market and consumer behavior can be
difficult.
•Brand Recognition: Building brand recognition and trust in foreign
markets takes time and investment.
Dr TSN, JSSATEB International Business
Cont..
8. Financial Management
•Currency Risk: Managing currency risk through hedging and other
financial instruments is essential but adds complexity to financial
management.
•Taxation: Navigating different tax regimes and optimizing tax liabilities
across multiple jurisdictions can be complex and require specialized
knowledge.
•Repatriation of Profits: Transferring profits back to the home country can
be subject to restrictions and additional taxation.
Dr TSN, JSSATEB International Business
8. Financial Management
•Currency Risk: Managing currency risk through hedging and other
financial instruments is essential but adds complexity to financial
management.
•Taxation: Navigating different tax regimes and optimizing tax liabilities
across multiple jurisdictions can be complex and require specialized
knowledge.
•Repatriation of Profits: Transferring profits back to the home country can
be subject to restrictions and additional taxation.
Dr TSN, JSSATEB International Business
Cont..
9. Ethical and Social Responsibility
•Corporate Social Responsibility (CSR): Ensuring ethical business
practices and adhering to CSR standards in different countries can be
challenging but is increasingly important for global reputation.
•Environmental Regulations: Compliance with varying environmental
regulations and standards requires careful planning and execution to avoid
legal and reputational risks.
Dr TSN, JSSATEB International Business
9. Ethical and Social Responsibility
•Corporate Social Responsibility (CSR): Ensuring ethical business
practices and adhering to CSR standards in different countries can be
challenging but is increasingly important for global reputation.
•Environmental Regulations: Compliance with varying environmental
regulations and standards requires careful planning and execution to avoid
legal and reputational risks.
Dr TSN, JSSATEB International Business
Cont..
10. Adaptation to Local Markets
•Product and Service Customization: Adapting products and services to
meet local tastes, regulatory requirements, and market conditions can be
costly and time-consuming.
•Marketing and Distribution: Developing effective marketing strategies
and distribution channels that resonate with local consumers is crucial for
success.
Dr TSN, JSSATEB International Business
10. Adaptation to Local Markets
•Product and Service Customization: Adapting products and services to
meet local tastes, regulatory requirements, and market conditions can be
costly and time-consuming.
•Marketing and Distribution: Developing effective marketing strategies
and distribution channels that resonate with local consumers is crucial for
success.
Dr TSN, JSSATEB International Business
Modes of entry into International Business
1. Exporting
•Direct Exporting: The company sells its products directly to foreign buyers.
–Advantages: Simple and low risk, retains control over production, and
provides quick entry into foreign markets.
–Disadvantages: Limited market knowledge, potential high transportation
costs, and less control over marketing and distribution.
•Indirect Exporting: The company uses intermediaries such as export agents or
trading companies to sell its products.
–Advantages: Lower risk, minimal investment required, intermediaries have
market knowledge and established distribution channels.
–Disadvantages: Lower profit margins, less control over marketing, and
potential dependency on intermediaries.
Dr TSN, JSSATEB International Business
1. Exporting
•Direct Exporting: The company sells its products directly to foreign buyers.
–Advantages: Simple and low risk, retains control over production, and
provides quick entry into foreign markets.
–Disadvantages: Limited market knowledge, potential high transportation
costs, and less control over marketing and distribution.
•Indirect Exporting: The company uses intermediaries such as export agents or
trading companies to sell its products.
–Advantages: Lower risk, minimal investment required, intermediaries have
market knowledge and established distribution channels.
–Disadvantages: Lower profit margins, less control over marketing, and
potential dependency on intermediaries.
Dr TSN, JSSATEB International Business
Cont..
2. Licensing
•Licensing Agreement: The company grants a foreign entity the rights to
produce and sell its products in exchange for royalties or fees.
–Advantages: Low investment and risk, quick market entry, and
leverages the licensee’s market knowledge.
–Disadvantages: Limited control over production and marketing,
potential for creating a future competitor, and reliance on the licensee's
performance.
Dr TSN, JSSATEB International Business
2. Licensing
•Licensing Agreement: The company grants a foreign entity the rights to
produce and sell its products in exchange for royalties or fees.
–Advantages: Low investment and risk, quick market entry, and
leverages the licensee’s market knowledge.
–Disadvantages: Limited control over production and marketing,
potential for creating a future competitor, and reliance on the licensee's
performance.
Dr TSN, JSSATEB International Business
Cont..
3. Franchising
•Franchise Agreement: The company allows a foreign entity to operate a
business under its brand and business model in exchange for fees and
royalties.
–Advantages: Low investment and risk, rapid market expansion, and
benefits from franchisee’s local market expertise.
–Disadvantages: Limited control over operations, potential quality control
issues, and risk of brand reputation damage.
Dr TSN, JSSATEB International Business
3. Franchising
•Franchise Agreement: The company allows a foreign entity to operate a
business under its brand and business model in exchange for fees and
royalties.
–Advantages: Low investment and risk, rapid market expansion, and
benefits from franchisee’s local market expertise.
–Disadvantages: Limited control over operations, potential quality control
issues, and risk of brand reputation damage.
Dr TSN, JSSATEB International Business
Cont..
4. Joint Ventures
•Joint Venture (JV): The company partners with a local firm to create a
new, jointly owned entity.
–Advantages: Shared investment and risk, access to partner’s local
market knowledge and resources, and potential for synergy and
innovation.
–Disadvantages: Complex management and decision-making, potential
for conflicts between partners, and sharing of profits.
Dr TSN, JSSATEB International Business
4. Joint Ventures
•Joint Venture (JV): The company partners with a local firm to create a
new, jointly owned entity.
–Advantages: Shared investment and risk, access to partner’s local
market knowledge and resources, and potential for synergy and
innovation.
–Disadvantages: Complex management and decision-making, potential
for conflicts between partners, and sharing of profits.
Dr TSN, JSSATEB International Business
Cont..
5. Strategic Alliances
•Strategic Partnership: The company forms a cooperative agreement with
a foreign firm without creating a new entity.
–Advantages: Shared resources and expertise, flexible arrangement,
and reduced risk.
–Disadvantages: Potential for conflicts, less control over operations, and
reliance on partner’s performance.
Dr TSN, JSSATEB International Business
5. Strategic Alliances
•Strategic Partnership: The company forms a cooperative agreement with
a foreign firm without creating a new entity.
–Advantages: Shared resources and expertise, flexible arrangement,
and reduced risk.
–Disadvantages: Potential for conflicts, less control over operations, and
reliance on partner’s performance.
Dr TSN, JSSATEB International Business
Cont..
6. Wholly Owned Subsidiaries
•Greenfield Investment: The company establishes a new, wholly-owned
operation from scratch in the foreign market.
–Advantages: Full control over operations, brand protection, and potential for
long-term profitability.
–Disadvantages: High investment and risk, longer time to establish, and
potential for local market resistance.
•Acquisition: The company acquires an existing firm in the foreign market.
–Advantages: Quick market entry, access to established operations and
market presence, and immediate revenue generation.
–Disadvantages: High investment and risk, potential integration challenges,
and cultural and operational differences.
Dr TSN, JSSATEB International Business
6. Wholly Owned Subsidiaries
•Greenfield Investment: The company establishes a new, wholly-owned
operation from scratch in the foreign market.
–Advantages: Full control over operations, brand protection, and potential for
long-term profitability.
–Disadvantages: High investment and risk, longer time to establish, and
potential for local market resistance.
•Acquisition: The company acquires an existing firm in the foreign market.
–Advantages: Quick market entry, access to established operations and
market presence, and immediate revenue generation.
–Disadvantages: High investment and risk, potential integration challenges,
and cultural and operational differences.
Dr TSN, JSSATEB International Business
Cont..
7. Turnkey Projects
The company designs, constructs, and equips a facility, then hands it over to
the foreign client fully operational.
–Advantages: Provides immediate revenue, leverages specialized
expertise, and mitigates operational risk.
–Disadvantages: Limited long-term involvement, potential for quality
control issues, and dependency on the client’s continued operation.
Dr TSN, JSSATEB International Business
7. Turnkey Projects
The company designs, constructs, and equips a facility, then hands it over to
the foreign client fully operational.
–Advantages: Provides immediate revenue, leverages specialized
expertise, and mitigates operational risk.
–Disadvantages: Limited long-term involvement, potential for quality
control issues, and dependency on the client’s continued operation.
Dr TSN, JSSATEB International Business
Cont..
8. Management Contracts
The company provides management expertise to a foreign firm in exchange
for fees.
–Advantages: Low investment and risk, leverages management
expertise, and generates immediate revenue.
–Disadvantages: Limited control over the business, reliance on the local
firm's performance, and potential for short-term engagement.
Dr TSN, JSSATEB International Business
8. Management Contracts
The company provides management expertise to a foreign firm in exchange
for fees.
–Advantages: Low investment and risk, leverages management
expertise, and generates immediate revenue.
–Disadvantages: Limited control over the business, reliance on the local
firm's performance, and potential for short-term engagement.
Dr TSN, JSSATEB International Business
Cont..
9. Contract Manufacturing
The company contracts with a foreign firm to produce its goods.
–Advantages: Low investment and risk, cost savings, and flexibility in
production.
–Disadvantages: Less control over production quality, potential for
intellectual property risks, and dependency on the manufacturer’s
reliability.
Dr TSN, JSSATEB International Business
9. Contract Manufacturing
The company contracts with a foreign firm to produce its goods.
–Advantages: Low investment and risk, cost savings, and flexibility in
production.
–Disadvantages: Less control over production quality, potential for
intellectual property risks, and dependency on the manufacturer’s
reliability.
Dr TSN, JSSATEB International Business
Internationalization Process
•The internationalization process involves a series of steps and strategies
that a company undertakes to expand its operations and presence into
foreign markets.
•This process is often gradual and can be influenced by various internal
and external factors.
Key stages and considerations in the internationalization process:
Dr TSN, JSSATEB International Business
•The internationalization process involves a series of steps and strategies
that a company undertakes to expand its operations and presence into
foreign markets.
•This process is often gradual and can be influenced by various internal
and external factors.
Key stages and considerations in the internationalization process:
Dr TSN, JSSATEB International Business
Cont…
1. Initial Market Research and Analysis
•Market Assessment: Conducting thorough research to understand
potential markets, including economic conditions, market size, growth
potential, and consumer behavior.
•Competitive Analysis: Identifying and analyzing existing competitors,
their market share, strengths, weaknesses, and strategies.
•Risk Analysis: Assessing political, economic, legal, and cultural risks
associated with entering new markets.
Dr TSN, JSSATEB International Business
1. Initial Market Research and Analysis
•Market Assessment: Conducting thorough research to understand
potential markets, including economic conditions, market size, growth
potential, and consumer behavior.
•Competitive Analysis: Identifying and analyzing existing competitors,
their market share, strengths, weaknesses, and strategies.
•Risk Analysis: Assessing political, economic, legal, and cultural risks
associated with entering new markets.
Dr TSN, JSSATEB International Business
Cont..
2. Strategic Planning
•Setting Objectives: Defining clear objectives for international expansion,
such as market entry goals, revenue targets, and brand recognition.
•Market Selection: Choosing target markets based on research findings,
strategic fit, and potential for growth.
•Entry Mode Selection: Deciding on the most suitable entry mode
(exporting, licensing, joint ventures, etc.) based on company capabilities,
resources, and market conditions.
Dr TSN, JSSATEB International Business
2. Strategic Planning
•Setting Objectives: Defining clear objectives for international expansion,
such as market entry goals, revenue targets, and brand recognition.
•Market Selection: Choosing target markets based on research findings,
strategic fit, and potential for growth.
•Entry Mode Selection: Deciding on the most suitable entry mode
(exporting, licensing, joint ventures, etc.) based on company capabilities,
resources, and market conditions.
Dr TSN, JSSATEB International Business
Cont..
3. Resource Allocation and Capability Development
•Financial Planning: Allocating budgets for market entry activities,
including marketing, distribution, and operational setup.
•Building Capabilities: Enhancing the company's capabilities to support
international operations, such as supply chain management, customer
service, and local market expertise.
•Talent Acquisition: Recruiting or training personnel with the necessary
skills and knowledge to manage international operations.
Dr TSN, JSSATEB International Business
3. Resource Allocation and Capability Development
•Financial Planning: Allocating budgets for market entry activities,
including marketing, distribution, and operational setup.
•Building Capabilities: Enhancing the company's capabilities to support
international operations, such as supply chain management, customer
service, and local market expertise.
•Talent Acquisition: Recruiting or training personnel with the necessary
skills and knowledge to manage international operations.
Dr TSN, JSSATEB International Business
Cont..
4. Market Entry and Execution
•Establishing Presence: Setting up operations in the target market, which
may include establishing local offices, production facilities, or partnerships
with local firms.
•Marketing and Branding: Adapting marketing strategies to fit local
preferences and cultural nuances, and building brand awareness in the
new market.
•Sales and Distribution: Developing effective sales and distribution
channels to reach customers efficiently.
Dr TSN, JSSATEB International Business
4. Market Entry and Execution
•Establishing Presence: Setting up operations in the target market, which
may include establishing local offices, production facilities, or partnerships
with local firms.
•Marketing and Branding: Adapting marketing strategies to fit local
preferences and cultural nuances, and building brand awareness in the
new market.
•Sales and Distribution: Developing effective sales and distribution
channels to reach customers efficiently.
Dr TSN, JSSATEB International Business
Cont..
5. Monitoring and Evaluation
•Performance Tracking: Continuously monitoring key performance
indicators (KPIs) such as sales, market share, and profitability to assess
the success of the internationalization efforts.
•Feedback and Adaptation: Gathering feedback from local customers,
partners, and employees to identify areas for improvement and make
necessary adjustments to strategies and operations.
Dr TSN, JSSATEB International Business
5. Monitoring and Evaluation
•Performance Tracking: Continuously monitoring key performance
indicators (KPIs) such as sales, market share, and profitability to assess
the success of the internationalization efforts.
•Feedback and Adaptation: Gathering feedback from local customers,
partners, and employees to identify areas for improvement and make
necessary adjustments to strategies and operations.
Dr TSN, JSSATEB International Business
Cont..
6. Expansion and Scaling
•Scaling Operations: Expanding operations within the initial target market
or entering additional markets based on initial success and learnings.
•Leveraging Synergies: Utilizing synergies between different markets to
optimize operations, share resources, and enhance competitive
advantage.
•Innovation and Development: Continuously innovating products and
services to meet the evolving needs of global customers and stay ahead of
competitors.
Dr TSN, JSSATEB International Business
6. Expansion and Scaling
•Scaling Operations: Expanding operations within the initial target market
or entering additional markets based on initial success and learnings.
•Leveraging Synergies: Utilizing synergies between different markets to
optimize operations, share resources, and enhance competitive
advantage.
•Innovation and Development: Continuously innovating products and
services to meet the evolving needs of global customers and stay ahead of
competitors.
Dr TSN, JSSATEB International Business
Key Considerations in the Internationalization Process
•Cultural Awareness
Understanding and respecting cultural differences is crucial for
successful internationalization. This includes adapting communication styles,
marketing messages, and business practices to align with local customs and
preferences.
•Legal and Regulatory Compliance
Complying with local laws and regulations, including labor laws, tax
requirements, and industry-specific regulations, is essential to avoid legal
issues and build a positive reputation in the new market.
Dr TSN, JSSATEB International Business
•Cultural Awareness
Understanding and respecting cultural differences is crucial for
successful internationalization. This includes adapting communication styles,
marketing messages, and business practices to align with local customs and
preferences.
•Legal and Regulatory Compliance
Complying with local laws and regulations, including labor laws, tax
requirements, and industry-specific regulations, is essential to avoid legal
issues and build a positive reputation in the new market.
Dr TSN, JSSATEB International Business
Cont..
•Local Partnerships
Forming strategic partnerships with local businesses can provide valuable
market insights, distribution networks, and credibility. These partnerships can
facilitate smoother entry and faster market penetration.
•Technology and Infrastructure
Leveraging technology to streamline operations, improve efficiency, and
enhance customer experiences is critical. Ensuring robust technological
infrastructure supports international operations, including data security and
communication systems.
•Risk Management
Developing a comprehensive risk management strategy to address potential
challenges such as political instability, currency fluctuations, and supply chain
disruptions is vital for sustaining international operations.
Dr TSN, JSSATEB International Business
•Local Partnerships
Forming strategic partnerships with local businesses can provide valuable
market insights, distribution networks, and credibility. These partnerships can
facilitate smoother entry and faster market penetration.
•Technology and Infrastructure
Leveraging technology to streamline operations, improve efficiency, and
enhance customer experiences is critical. Ensuring robust technological
infrastructure supports international operations, including data security and
communication systems.
•Risk Management
Developing a comprehensive risk management strategy to address potential
challenges such as political instability, currency fluctuations, and supply chain
disruptions is vital for sustaining international operations.
Dr TSN, JSSATEB International Business
Questions
•How has international business evolved over the past century?
•What were the major historical events that influenced the development of
international business?
•How have technological advancements influenced the evolution of
international business?
•What is the definition of international business?
•What are the main components of international business?
•Why is international business important in today's globalized world?
•How does international business contribute to economic growth and
development?
Dr TSN, JSSATEB International Business
•How has international business evolved over the past century?
•What were the major historical events that influenced the development of
international business?
•How have technological advancements influenced the evolution of
international business?
•What is the definition of international business?
•What are the main components of international business?
•Why is international business important in today's globalized world?
•How does international business contribute to economic growth and
development?
Dr TSN, JSSATEB International Business
Cont…
•What are the benefits of international business for companies?
•How does international business promote cultural exchange and
understanding?
•What is the scope of international business activities?
•How do multinational corporations (MNCs) influence international
business?
•What are the main characteristics of international business?
•How do cultural differences impact international business?
•What are the characteristics of a successful international business?
•What are the major factors that affect international business operations?
Dr TSN, JSSATEB International Business
•What are the benefits of international business for companies?
•How does international business promote cultural exchange and
understanding?
•What is the scope of international business activities?
•How do multinational corporations (MNCs) influence international
business?
•What are the main characteristics of international business?
•How do cultural differences impact international business?
•What are the characteristics of a successful international business?
•What are the major factors that affect international business operations?
Dr TSN, JSSATEB International Business
Questions
•How do political and legal environments impact international business?
•What is the role of economic factors in shaping international business
strategies?
•How do technological changes influence international business?
•How has the scenario of international business changed in recent years?
•How has globalization influenced the changing scenario of international
business?
•What are the advantages of engaging in international business?
•How does international business lead to technological and knowledge
transfer?
Dr TSN, JSSATEB International Business
•How do political and legal environments impact international business?
•What is the role of economic factors in shaping international business
strategies?
•How do technological changes influence international business?
•How has the scenario of international business changed in recent years?
•How has globalization influenced the changing scenario of international
business?
•What are the advantages of engaging in international business?
•How does international business lead to technological and knowledge
transfer?
Dr TSN, JSSATEB International Business
Cont…
•What are the main challenges faced by companies in international
business?
•How do cultural differences pose challenges in international business?
•What are the risks associated with international business?
•How can companies overcome the challenges of international business?
•What are the different modes of entry into international business?
•How do exporting and importing function as modes of entry?
•What is the role of joint ventures and strategic alliances in international
business?
•How do companies use franchising and licensing as modes of entry?
Dr TSN, JSSATEB International Business
•What are the main challenges faced by companies in international
business?
•How do cultural differences pose challenges in international business?
•What are the risks associated with international business?
•How can companies overcome the challenges of international business?
•What are the different modes of entry into international business?
•How do exporting and importing function as modes of entry?
•What is the role of joint ventures and strategic alliances in international
business?
•How do companies use franchising and licensing as modes of entry?
Dr TSN, JSSATEB International Business
Cont…
•What are the advantages and disadvantages of foreign direct investment
(FDI)?
•What is the process of internationalization for businesses?
•How do companies develop internationalization strategies?
•What are the stages of the internationalization process?
•How do firms assess their readiness for internationalization?
•What factors influence the speed and success of the internationalization
process?
Dr TSN, JSSATEB International Business
•What are the advantages and disadvantages of foreign direct investment
(FDI)?
•What is the process of internationalization for businesses?
•How do companies develop internationalization strategies?
•What are the stages of the internationalization process?
•How do firms assess their readiness for internationalization?
•What factors influence the speed and success of the internationalization
process?
Dr TSN, JSSATEB International Business
Reference
•The International Business Environment: Anant K. Sundaram/ J. Stewart Black-Prentice Hall.
•International Business environments and Operations John D Daniel, Lee H Radebaugh, Daniel P Sulivan- Pearson Education, 10 th edition, 2004.
•International Business (text and cases): P Subba Rao, HPH, 4/e, 2017.
•The International Business Environment Janet Morrison Mac Millan Palgrave, 2004
•International Business Environment by Francis Cherunilam- Himalaya Publishing House, 2004.
•International Business: competing in the global market place, Charles W L Hill, Tata McGraw-Hill., 5th Edition, 2005.
•https://www.khanacademy.org/humanities/world-history/ancient-medieval/silk-road/a/the-silk-road
•https://www.pdfdrive.com/international-business-environment-e56594187.html
•https://www.pdfdrive.com/business-environment-e54194142.html
https://ebooks.lpude.in/commerce/mcom/term_3/DCOM501_INTERNATIONAL_BUSINESS .pdf
•https://www.yumpu.com/en/document/view/63865501/pdf-download-international-business-case-studies-for-the multicultural-marketplace-full-online
•http://elibrary.gci.edu.np/bitstream/123456789/681/1/BM727%20The%20International%20Business%20Environ
ment%20Challenges%20and%20Changes%20by%20Jamie%20Weatherston.pdf
•https://www.taylorfrancis.com/books/edit/10.4324/9780080511306/international-business-case-studies-robertmoran-david-braaten-ph-john-walsh
•https://www.youtube.com/watch?v=3hMNnvd_HbQ
•https://onlinecourses.nptel.ac.in/noc20_mg54/preview
•https://www.coursera.org/learn/international-business
Dr TSN, JSSATEB International Business
•The International Business Environment: Anant K. Sundaram/ J. Stewart Black-Prentice Hall.
•International Business environments and Operations John D Daniel, Lee H Radebaugh, Daniel P Sulivan- Pearson Education, 10 th edition, 2004.
•International Business (text and cases): P Subba Rao, HPH, 4/e, 2017.
•The International Business Environment Janet Morrison Mac Millan Palgrave, 2004
•International Business Environment by Francis Cherunilam- Himalaya Publishing House, 2004.
•International Business: competing in the global market place, Charles W L Hill, Tata McGraw-Hill., 5th Edition, 2005.
•https://www.khanacademy.org/humanities/world-history/ancient-medieval/silk-road/a/the-silk-road
•https://www.pdfdrive.com/international-business-environment-e56594187.html
•https://www.pdfdrive.com/business-environment-e54194142.html
https://ebooks.lpude.in/commerce/mcom/term_3/DCOM501_INTERNATIONAL_BUSINESS .pdf
•https://www.yumpu.com/en/document/view/63865501/pdf-download-international-business-case-studies-for-the multicultural-marketplace-full-online
•http://elibrary.gci.edu.np/bitstream/123456789/681/1/BM727%20The%20International%20Business%20Environ
ment%20Challenges%20and%20Changes%20by%20Jamie%20Weatherston.pdf
•https://www.taylorfrancis.com/books/edit/10.4324/9780080511306/international-business-case-studies-robertmoran-david-braaten-ph-john-walsh
•https://www.youtube.com/watch?v=3hMNnvd_HbQ
•https://onlinecourses.nptel.ac.in/noc20_mg54/preview
•https://www.coursera.org/learn/international-business
Dr TSN, JSSATEB International Business
Cont..
Dr TSN, JSSATEB International Business
Dr TSN, JSSATEB International Business
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