• To understand the basics of

international business and its

environment • To develop the analytical skills

required to compete effectively in

this environment

International Business

Evaluation and GradingInternal Evaluation 50: Individual assignments: 20% Mid term: 20% Project work: 10% Module Test: 10% End Term: 40% --------------------------------------------------------------- TOTAL 100%External Evaluation 50: PU Board Exam: 100% • Please note that number of assignments can be more than two & some might be in form of test/case study in the class itself •Project work case analysis and presentation • Late submission of assignment will result in grade reduction

Reference Books1. Hill, Charles W.L. & Jain, Arun Kumar (2007): International

Business (Competing in the Global Marketplace); Sixth Edition: Tata McGraw Publishing Company Ltd.

2. Bennett, Roger (2006): International Business; Second Edition: Pearson Education

3. Daniels John D., Radebaugh Lee H., Sullivan Daniel P. & Salwan P. (2010): International Business (Environments and Operations); Twelfth Edition: Pearson Education

- Please make good use of INTERNET

- Please do keep update with the changes

• Meaning of international business and

globalization• Drivers of globalization• Overview of changing global picture• Declining trade barriers• Change in communication, information

and transportation technologies

Overview of Global Business

International BusinessInternational Business involves• Commercial activities that cross national frontiers•International movement of goods, capital, services, employees & technology, import and export • licensing and franchisee • investment in physical infrastructure• buying and selling in foreign countries

• Political risk

•Commercial risk (market failure, product not appeal to customers)

•Financial risk (inflation, tax rate, exchange rate)

•Manager skill should be broad range

•Dependence on foreign consultant, intermediaries, advisers

•Difficult to monitor trends and activities in foreign countries

International Business

International Business & Domestic business

• Special problems and cases that arises in IB that normally not experienced in domestic •Deals carried out in foreign language under foreign law, customs and regulations•Information on foreign countries required difficult to obtain

- Exchange rate- Cultural differences- Complex control and communication- High risk level

Why IB?

- Expand Sales- Acquire source from foreign countries- Diversify activities- Saturation in domestic market- Discovery of lucrative opportunity in foreign market- Obtain economics of scale and also economics of scope might also be available

Why IB?

- High cost of new product development process- Cross border trade is easier to organize than in past (better communication, visit) - Spreading commercial risk in several countries- Involvement in IB can facilitate ‘experience curve’ effect

Globalization- Globalization: the trend towards a more integrated and interdependent global economic system- Effects of globalization can be seen everywhere:

- the cars people drive- the food people eat- the jobs where people work - the clothes people wear

GlobalizationGlobalization of markets:

-Historically distinct and separate national markets are merging into one huge global marketplace

- Tastes and preferences of consumers in different nations are beginning to converge upon some global norm

Examples: Sony Playstation Citicorp credit cards , Coca-Cola, McDonald's hamburgers

GlobalizationGlobalization of production: - Source goods and services from different locations around the globe

- Take advantage of national differences in the cost and quality of factors of production (such as land, labor, capital and energy) -Compete more effectively against their rivals.

Examples: Boeing, Adidas, Nike

Globalization

-Emergence of GLOBAL INSTITUTIONS like WTO, IMF, World Bank, UN -Help to regulate, manage and police the global market place and promote the establishment of multinational treaties to govern global business system

GlobalizationDrivers of globalization

- Declining trade and investment barriers-Technological change-Development of services that support IB-Growing consumer pressure-Increased global competition -Changing political situation-Expanded Cross-national Cooperation

Drivers of Globalization Declining Trade and Investment Barriers

- Industrialized countries of the West began the process of removing barriers to the free flow of goods, services, and capital between nations after World War II

- Under General Agreement of Tariffs and Trade GATT, over 100 nations negotiated further decreases in tariffs & also non-tariff barriers

Drivers of Globalization - Under the WTO: dispute resolution and the

enforcement of trade laws, and cut tariffs on industrial goods, services, and agricultural products

- Removal of barriers to trade has contributed to increased international trade (the export of goods or services to consumers in another country), world output, and foreign direct investment

- With removal of trade barriers many countries have also removal of restrictions in FDI

- Growth of FDI outflow increased from $ 25 billion in 1975 to projected $1.4-1.6 trillion in 2011

Drivers of Globalization

- Firms are dispersing parts of their overall production to different parts of location

around the globe to drive down production costs and increase product quality

- Economies of the world`s nation-sates are becoming more intertwined and

expansion of trade nations are becoming increasingly dependent on each other for

important goods and services

Drivers of Globalization

Drivers of Globalization

Average Tariff Rates on Manufactured Product as Percent of Value

  1913 1950 1990 2003 France 21% 18% 5.9% 4% Germany 20 26 5.9 4 Italy 18 25 5.9 4 Japan 30 - 5.3 3.8 Holland 5 11 5.9 4 Sweden 20 9 4.4 4 Britain - 23 5.9 4 United States 44 14 4.8 4

The Role of Technological Change

The lowering of trade barriers made globalization of markets and production a theoretical possibility, technological change made it a tangible reality

Microprocessors and Telecommunications: Major advances in communications and information processing have lowered the cost of global communication and therefore the cost of coordinating and controlling a global organization

Drivers of Globalization

• The Internet and the World Wide Web: Web-based transactions have grown from virtually zero in 1994 to nearly $7 trillion in 2004

•Transportation Technology: the most important developments are probably development of commercial jet aircraft and super freighters and the introduction of containerization, which greatly simplifies trans-shipment from one mode of transport to another

•Improvements in transportation technology have enabled firms to better respond to international customer demands

London – New York1930: Steam ships, 10 days1950s: Propeller Aircraft 200-300 mph, 2 days1960s: Jet Aircraft 500-700mph, 8 hours1990s: Supersonic Jets, 3 hours

Drivers of Globalization

Country

Users (Latest data)

Penetra-tion

Growth

Japan 99.14 million 78.2% 110.6% 2000-2010

India 100 million 8.5% 1520.0% 2000-2010

EU 475.06 million 58.4% 352.0% 2000-2010

USA 266.22 million 77.4% 146.3% 2000-2010

World 2095 million 30.2% 480.4% 2000-2011

www.internetworldstats.com

Current Internet Users Data

The Shrinking Globe

Drivers of Globalization Development of services that support IB- Companies and government developed variety of

services that facilitate conduct IB- Examples are sale of goods & services in foreign

country & currency- Bank arrangements, credit arrangements

Growing consumer pressure- Consumers are aware and can afford newly offered

goods and services - Want more, newer, better products/services

Drivers of Globalization Growing consumer pressure- Consumers do always search worldwide for better,

newer services & goods via internet, trade fairs, trips abroad etc.

Increased global competition - The pressure, both present and potential of increased

foreign competition persuade to buy and sell aboard - More companies have merged with or been

acquired by foreign companies to gain operating efficiencies and larger market share

Drivers of Globalization Changing political situation - End of schism between non communist world and

once communist world- Business between two camps used to be minimal

and even within communist bloc minimal- Governments willingness to support programmes

favourable to international trade

Expanded cross-national cooperation - Treaties, agreements, consultations among different

countries express and realise the interests of Governments

Drivers of Globalization Expanded cross-national cooperation - The main reasons for this

- to gain reciprocal advantages- to attack problems jointly that one country acting

alone cannot solve- to deal with areas of concern that lie outside the

territory of any nation

Changing Demographics Of Global Economy

In the 1960s:

-U.S. dominated the world economy and the world trade picture

-U.S. multinationals dominated the international business scene

-About half the world-- the centrally planned economies of the communist world-- was off limits to Western international business

Changing World Output and World Trade Picture-In the early 1960s, the U.S. - world's dominant industrial power , 40.3 percent of world manufacturing output - By 2005 the United States accounted for only 20.1 percent-Rapid economic growth is now being experienced by countries such as China, Thailand, and Indonesia with share of world output - Decline in the share of world output by industrialized countries such as Britain, Japan, and the United States

Changing World Output and World Trade Picture

Exports of Countries as % of Total World Exports

CountryYear

1980 1985 1990 1995 2000 2004 2005 2006 2007 2008 2009

China* 1.9 3.0 4.2 6.3 7.0 9.3 10.0 10.6 11.2 11.1 12.3

India 0.4 0.5 0.5 0.5 0.7 0.8 0.9 1.0 1.1 1.2 1.3

Russia       1.6 1.6 2.0 2.3 2.5 2.5 2.9 2.4

Canada 3.3 4.6 3.7 3.7 4.3 3.3 3.4 3.2 3.0 2.8 2.5

USA 11.1 11.1 11.3 11.3 12.1 8.9 8.6 8.6 8.3 8.1 8.5

Japan 6.4 9.0 8.3 8.6 7.4 6.2 5.7 5.4 5.0 4.9 4.7

France 5.7 5.2 6.2 5.8 5.1 4.9 4.4 4.1 3.9 3.7 3.8

Germany 10.3 10.6 11.8 10.1 8.5 9.9 9.2 9.1 9.4 8.9 9.0

Italy 3.8 3.9 4.9 4.5 3.7 3.8 3.6 3.4 3.6 3.4 3.2

United Kingdom 5.4 5.1 5.3 4.6 4.4 3.8 3.7 3.7 3.3 2.8 2.8

*Exports form China includes of Hong Kong and Macau also

Source: UNCTAD Handbook of Statistics 2010

Imports of Countries as % of Total World Imports

CountryYear

1980 1985 1990 1995 2000 2004 2005 2006 2007 2008 2009

China* 2.1 3.6 3.8 6.2 6.6 8.8 8.9 9.1 9.3 9.3 10.8

India 0.7 0.8 0.7 0.7 0.8 1.1 1.3 1.4 1.6 2.0 2.0

Russia       1.3 0.7 1.1 1.3 1.5 1.7 2.0 1.7

Canada 3.0 4.0 3.4 3.2 3.7 3.0 3.1 2.9 2.7 2.5 2.6

USA 12.4 17.3 14.4 14.7 18.9 16.1 16.1 15.5 14.2 13.2 12.8

Japan 6.8 6.4 6.5 6.4 5.7 4.8 4.8 4.7 4.4 4.6 4.4

France 6.6 5.4 6.7 5.7 5.1 5.0 4.7 4.4 4.3 4.3 4.4

Germany 10.0 8.9 9.6 8.9 7.4 7.5 7.2 7.3 7.4 7.2 7.4

Italy 4.8 4.3 5.1 3.9 3.6 3.7 3.6 3.6 3.6 3.4 3.2

United Kingdom 5.6 5.4 6.2 5.1 5.2 5.0 4.8 4.9 4.4 3.8 3.8

*Exports form China includes of Hong Kong and Macau alsoSource: UNCTAD Handbook of Statistics 2010

Changing Foreign Direct Investment Picture

-Share of world output generated by developing countries has been steadily increasing since the 1960s

-Stock (total cumulative value of foreign investments) generated by rich industrial countries has been in decline

- Flow of foreign direct investment (amounts invested across national borders each year) has been directed at developing nations especially China

Stock of FDI by the world’s six most important national sources

- A multinational enterprise is any business that has productive activities in two or more countries. Non-U.S. Multinationals-Expect the growth of new multinational enterprises from the world's developing nations e.g. Wipro, InfosysRise of Mini-Multinationals- Number of mini-multinationals (small and medium-sized companies) is on the rise

Changing Nature of Multinational Enterprises

-Collapse of communism in Eastern Europe represents a host of export and investment opportunities for Western businesses- Economic development of China presents huge opportunities and risks (in spite of its continued Communist control) and also India is catching up -Mexico and Latin America also present tremendous new opportunities both as markets and sources of materials and production- Euro crisis in European Union countries - In recent days there is some socialist movement/trend in Latin America (Bolivia, Venezuela) & recently Argentina nationalizes biggest oil company YPF in which majority of share is that of Repsol from Spain - Lots of democratic movements in Arab World

The Changing World Order