Ibm module 1 by rahul rk(9986510206)

8/14/2019 Ibm module 1 by rahul rk(9986510206)

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KNOW MEKNOW ME

VASANTH KIRAN B.Sc,MA,MBAVASANTH KIRAN B.Sc,MA,MBA WORKED WITH NORTHERNTRUSTWORKED WITH NORTHERNTRUST

BANK..(AN AMERICAN CUSTODIALBANK..(AN AMERICAN CUSTODIAL

SERVICE)SERVICE) VISITING FACULTY FOR SEVERAL BVISITING FACULTY FOR SEVERAL B

SCHOOLS.SCHOOLS.

CORPORATE SKILLS AND SOFTCORPORATE SKILLS AND SOFTSKILLS TRAINER FOR SEVERALSKILLS TRAINER FOR SEVERALCOMPANIES AND COLLEGES.COMPANIES AND COLLEGES.


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What I expect ????What I expect ????

Be 5 minutes before in class.Be 5 minutes before in class. Dont enter after I enter in the class.Dont enter after I enter in the class. Attendance is COMPULSORY !!!!!!!Attendance is COMPULSORY !!!!!!!

Either you talk or I !Either you talk or I ! Absolutely NO local language.Absolutely NO local language. Assignments will be collected only onAssignments will be collected only on

mentioned time.no reason acceptedmentioned time.no reason accepted

anyways.anyways. Remember you are NOT kids, but dont forceRemember you are NOT kids, but dont force

me to treat you like one !me to treat you like one !


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MODULE-1MODULE-1

MR.VASANTH KIRANMR.VASANTH KIRAN


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WHAT DO WE STUDY IN THISWHAT DO WE STUDY IN THIS

MODULEMODULE

Introduction to International BusinessIntroduction to International Business

Globalization- driversGlobalization- drivers

Modes and entry strategies.Modes and entry strategies. The globalization debate.The globalization debate.

Trends in international tradeTrends in international trade

Differences b/w domestic andDifferences b/w domestic andInternational business.International business.


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WHAT IS IB????WHAT IS IB????

IB is the study of transactions takingIB is the study of transactions taking

place across national borders for theplace across national borders for the

purpose of satisfying the needs ofpurpose of satisfying the needs of

individuals and organizationsindividuals and organizations Primary type of transactions arePrimary type of transactions are

export-import trade and FDIexport-import trade and FDI


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WHY IB???WHY IB???

Comprises a large & growing portion of theComprises a large & growing portion of theworlds total business.worlds total business.

Today global events & competition affectsToday global events & competition affectsalmost all companies-large/small becausealmost all companies-large/small becausemost sell output to & secure supplies frommost sell output to & secure supplies from

foreign countries.foreign countries. Many companies also compete against productsMany companies also compete against products

& services that come from abroad.& services that come from abroad. A company operating internationally willA company operating internationally will

engage in modes of business such as exportingengage in modes of business such as exporting

& importing, that differs from those it is& importing, that differs from those it isaccustomed to domestically.accustomed to domestically. Learning IB helps us to make more informedLearning IB helps us to make more informed

decisionsdecisions..


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WHY COMPANIES ENGAGE INWHY COMPANIES ENGAGE IN

IB??IB?? When operating internationally, aWhen operating internationally, a

company should consider its mission,company should consider its mission,

objectives, strategy.objectives, strategy.

1.Expand sales, productivity& profits1.Expand sales, productivity& profits 2.Acquire resources2.Acquire resources

3.Diversify source of sales & supplies3.Diversify source of sales & supplies

4.Minimize competitive risk4.Minimize competitive risk

5.Severe competition in home country5.Severe competition in home country 6.Technology6.Technology


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GLOBALISATION.GLOBALISATION.

The shift toward a more integratedThe shift toward a more integrated

and interdependent world economyand interdependent world economy

The merging of historically distinctThe merging of historically distinct

and separate national markets intoand separate national markets into

one huge global marketplaceone huge global marketplace

Two components:Two components: The globalization of marketsThe globalization of markets

The globalization of productionThe globalization of production


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GLOBALISATIONGLOBALISATION

Globalization implies integration of the economy andGlobalization implies integration of the economy andopening up of economy for FDI by liberalizing theopening up of economy for FDI by liberalizing therules and regulations and by creating favorable sociorules and regulations and by creating favorable socioeconomic and political climate for global businesseconomic and political climate for global business

IMF defines globalization as growing economy,IMF defines globalization as growing economy,economic independence of countries worldwideeconomic independence of countries worldwidethrough increasing volume and variety of crossthrough increasing volume and variety of crossborder transactions of goods & services and ofborder transactions of goods & services and ofinternational capital flow and also through the moreinternational capital flow and also through the morerapid & widespread diffusion of technology.rapid & widespread diffusion of technology.

Charles W .L. Hill defines globalization as a shiftCharles W .L. Hill defines globalization as a shifttowards a more integrated andtowards a more integrated andinterdependent worldinterdependent worldeconomy .economy .


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FEATURES..FEATURES..

Globalization encompasses the following features.Globalization encompasses the following features. Operating and planning to expand business through outOperating and planning to expand business through out

the worldthe world Erasing the difference between domestic market &Erasing the difference between domestic market &

foreign market.foreign market.

Buying & selling goods & services from any country inBuying & selling goods & services from any country inthe worldthe world

Establishing manufacturing & distribution facilities inEstablishing manufacturing & distribution facilities inany part of the world based on feasibility and viabilityany part of the world based on feasibility and viabilityrather than national considerations.rather than national considerations.

Product planning and development are based on marketProduct planning and development are based on marketconsiderations of entire world.considerations of entire world.

Global orientation in strategies ,organizational cultureGlobal orientation in strategies ,organizational cultureand managerial expertise .and managerial expertise .

Setting the mind and attitude to view the entire globe asSetting the mind and attitude to view the entire globe asa single market.a single market.


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GLOBALISATION OF MARKETSGLOBALISATION OF MARKETS

The merging of distinctlyThe merging of distinctlyseparate national marketsseparate national markets

into a global marketplaceinto a global marketplace Falling barriers to cross-border trade haveFalling barriers to cross-border trade havemade it easier to sell internationallymade it easier to sell internationally

Tastes and preferences converge onto aTastes and preferences converge onto a

global normglobal norm Firms offer standardized products worldwideFirms offer standardized products worldwide

creating a world marketcreating a world market

DIFFICULTIES THAT ARISE


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DIFFICULTIES THAT ARISEDIFFICULTIES THAT ARISE

FROM GLOBALISATION OFFROM GLOBALISATION OF

MARKETSMARKETS

Significant differences still exist amongSignificant differences still exist among

national marketsnational markets

Country-specific marketing strategiesCountry-specific marketing strategies

Varied product mixVaried product mix


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METHODS OF GLOBALISATIONMETHODS OF GLOBALISATION

Exporting directlyExporting directly Exporting indirectlyExporting indirectly Licensing and franchisingLicensing and franchising Contract manufacturingContract manufacturing Establishing full marketing facilitiesEstablishing full marketing facilities Establishing manufacturing facilityEstablishing manufacturing facility Joint ventureJoint venture Strategic allianceStrategic alliance MergerMerger


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GLOBALISATION OFGLOBALISATION OF

PRODUCTIONPRODUCTION

Refers to sourcing of goods andRefers to sourcing of goods and

services from locations around theservices from locations around the

world to take advantage ofworld to take advantage of Differences in cost or quality of theDifferences in cost or quality of thefactors of productionfactors of production LaborLabor

LandLand CapitalCapital


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CONT.CONT.

Increasingly companies are taking advantage of modernIncreasingly companies are taking advantage of moderncommunications technology, and particularly the Internet,communications technology, and particularly the Internet,to outsource service activities to low-cost producers into outsource service activities to low-cost producers inother nationsother nations

Historically this has been primarily confined toHistorically this has been primarily confined tomanufacturing enterprisesmanufacturing enterprises

Impediments to the globalization of production includeImpediments to the globalization of production include Formal and informal barriers to tradeFormal and informal barriers to trade Barriers to foreign direct investmentBarriers to foreign direct investment

Transportation costsTransportation costs Issues associated with economic riskIssues associated with economic risk Issues associated with political riskIssues associated with political risk


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GLOBAL INSTITUTIONSGLOBAL INSTITUTIONS

Globalization has created the needGlobalization has created the needfor institutions to help manage,for institutions to help manage,regulate and police the globalregulate and police the global

marketplacemarketplace GATTGATT

WTOWTO

IMFIMF

World bankWorld bank

United NationsUnited Nations


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DRIVERS OF GLOBALIZATIONDRIVERS OF GLOBALIZATION

Decline in trade & investmentDecline in trade & investment

barriers-barriers to free flow ofbarriers-barriers to free flow of

goods, services, capital.goods, services, capital.

Technological factor-technologicalTechnological factor-technologicalchange,communication,informationchange,communication,information

, transportation., transportation.


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Cont..Cont..

During the 1920s and 30s, many of theDuring the 1920s and 30s, many of the

nation-states of the world erectednation-states of the world erected

formidable barriers toformidable barriers to international tradeinternational trade

andand foreign direct investmentforeign direct investment Decline in barriers to the free flow ofDecline in barriers to the free flow of

goods, services, and capital that hasgoods, services, and capital that has

occurred since the end of World War IIoccurred since the end of World War II

Technological changeTechnological change


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ADVANTAGES OFADVANTAGES OF

GLOBALISATIONGLOBALISATION Free flow of capital and increase in the total capitalFree flow of capital and increase in the total capital

employed.employed. Free flow of technology.Free flow of technology. Increase in industrialization .Increase in industrialization . Spread of production facilities throughout the globe.Spread of production facilities throughout the globe.

Balanced development of world economies.Balanced development of world economies. Increase in production and consumption.Increase in production and consumption. Commodities at lower prices with high quality.Commodities at lower prices with high quality. Cultural exchange and demand for a variety ofCultural exchange and demand for a variety of

products.products. Increases in Jobs and Income.Increases in Jobs and Income. Higher standards of living.Higher standards of living. Balanced Human Development.Balanced Human Development. Increase in Welfare and ProsperityIncrease in Welfare and Prosperity


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DISATVANTAGES OFDISATVANTAGES OF

GLOBALISATIONGLOBALISATION Globalization kills domestic business.Globalization kills domestic business. Exploits Human Resource.Exploits Human Resource. Leads to unemployment andLeads to unemployment and

underemployment.underemployment. Decline in demand for domestic products.Decline in demand for domestic products. Decline in income.Decline in income. Widening gap between rich and poor.Widening gap between rich and poor. Transfer of Natural Resources.Transfer of Natural Resources. National sovereignty at stake.National sovereignty at stake. Leads to commercial and politicalLeads to commercial and political colonialism.colonialism.


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ENRTY MODESENRTY MODES

1.1. EXPORTING:EXPORTING:

Eg. most of the leather industriesEg. most of the leather industries

ADVANTAGES:ADVANTAGES:

It avoids the cost of establishing manufacturing operations in theIt avoids the cost of establishing manufacturing operations in thehost countryhost country

It may help a firm achieve experience curve and locationIt may help a firm achieve experience curve and locationeconomieseconomies

DISADVANTAGES:DISADVANTAGES: High transportation costs can make exporting uneconomical,High transportation costs can make exporting uneconomical,

particularly for bulk productsparticularly for bulk products Tariff barriers can make it uneconomicalTariff barriers can make it uneconomical Foreign agents often carry the products of competing firm and asForeign agents often carry the products of competing firm and as

a result have divided royaltiesa result have divided royalties


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JVJV

LICENSINGLICENSING

FRANCHISINGFRANCHISING M and AM and A

WHOLLY OWNED SUBSIDIARIES.WHOLLY OWNED SUBSIDIARIES.


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GLOBALISATION DEBATEGLOBALISATION DEBATE

Pro FactorsPro Factors

Lower prices forLower prices for

goods and servicesgoods and services

Economic growthEconomic growth

stimulationstimulation Increase inIncrease in

consumer incomeconsumer income

Creates jobsCreates jobs

Countries specializeCountries specialize

in production of goodsin production of goods

and services that areand services that are

produced most efficientlyproduced most efficiently

Con FactorsCon Factors

Destroys manufacturingDestroys manufacturing

jobs in wealthy, Wagejobs in wealthy, Wage

rates of unskilledrates of unskilled

workers in advancedworkers in advancedcountries declinescountries declines

Companies move toCompanies move to

countries with fewercountries with fewer

labor and environmentlabor and environment

regulationsregulations Loss of sovereigntyLoss of sovereignty

advanced countriesadvanced countries


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GLOBALISATION IMPACTGLOBALISATION IMPACT

Jobs and incomeJobs and income

Labor policies and environmentLabor policies and environment

National sovereigntyNational sovereignty


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TRENDS IN INTERNATIONALTRENDS IN INTERNATIONAL

TRADE.TRADE. World economy grew at 4% in 2004, 4.9%World economy grew at 4% in 2004, 4.9%

in 2005, and is expected to grow at 5. 3%in 2005, and is expected to grow at 5. 3%

in 2006in 2006

In 2005,In 2005,Japan- 2.6%Japan- 2.6%

Developing Asia- 8-10%Developing Asia- 8-10%

South central America- 6.5 %South central America- 6.5 %


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ESSENTIAL CONDITIONS OFESSENTIAL CONDITIONS OF

GLOBALISATIONGLOBALISATION Liberalization of the rules, regulationLiberalization of the rules, regulation

& control& control Removal of quotas & tariffsRemoval of quotas & tariffs Providing freedom to business &Providing freedom to business &

industryindustry Providing infrastructural facilitiesProviding infrastructural facilities Encouraging R&DEncouraging R&D Autonomy to public sector to competeAutonomy to public sector to compete

with private sectorwith private sector Providing administrative &Providing administrative &

governmental supportgovernmental support


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FDI ( FOREIGN DIRECTFDI ( FOREIGN DIRECT

INVESTMENT )INVESTMENT ) The flow of funds from one country to another is known asThe flow of funds from one country to another is known as

investmentinvestment Companies, which are constantly involved in internationalCompanies, which are constantly involved in international

business, invest their money in manufacturing andbusiness, invest their money in manufacturing andmarketing bases through ownership and controlmarketing bases through ownership and control

Kellogg, Pepsi and Hyatt groupKellogg, Pepsi and Hyatt group

Foreign firms adopt certain methods as mentioned below:Foreign firms adopt certain methods as mentioned below:

They control the operations through subsidiaries to achieveThey control the operations through subsidiaries to achievestrategic synergiesstrategic synergies

They have control through technology, manufacturingThey have control through technology, manufacturingexpertise, intellectual property rights and brand nameexpertise, intellectual property rights and brand name One permanent person in the country of operation isOne permanent person in the country of operation is

appointed to monitor day to day operationsappointed to monitor day to day operations


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Difference between IB & domesticDifference between IB & domestic

businessbusiness Different countriesDifferent countries Wider & complex problemsWider & complex problems Government regulationsGovernment regulations Price differentiationPrice differentiation Unfamiliar conditionsUnfamiliar conditions Different departmentalDifferent departmental

differencesdifferences RiskRisk


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What are the challenges forWhat are the challenges for

managers in global market place ?managers in global market place ?Managing an international business is differentManaging an international business is different

from managing a domestic business for at leastfrom managing a domestic business for at leastfour reasons.four reasons.

1.Countries are different1.Countries are different

2.The range of problems confronted by a manager2.The range of problems confronted by a manager

in an international business in wider and thein an international business in wider and theproblems themselves more complex than theseproblems themselves more complex than theseconfronted by a managers in domestic businessconfronted by a managers in domestic business

3.Managers must find the ways within the limits3.Managers must find the ways within the limitsimposed by govt. intervention in theimposed by govt. intervention in theinternational trade & investment systeminternational trade & investment system

4. International transactions4. International transactionsinvolve convertinginvolve convertingmoney into different currencies.money into different currencies.


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EXTERNAL INFLUENCES ON IB.EXTERNAL INFLUENCES ON IB.

Companys physical & societal environmentsCompanys physical & societal environments

1.political policies & legal practices1.political policies & legal practices

2.cultural factors2.cultural factors

3.economic forces3.economic forces

4.geographical influences4.geographical influences Competitive environmentCompetitive environment

1.price1.price

2.marketing2.marketing

3.innovation3.innovation4.number of competitors4.number of competitors


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THANK YOUTHANK YOU

BE READY FOR SURPRISEBE READY FOR SURPRISE

TEST ANY DAY , ANY TIME !!TEST ANY DAY , ANY TIME !!

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Ibm module 1 by rahul rk(9986510206)