Introduction to International

Business

Ms Kavita ShettyFaculty

DYPDBM

JUST PONDER OVER THIS !!!

There is a shortage of radiologists in the United States and demand for their services is growing twice as fast as the rate of graduation. What should be done?

Solution to the Problem: Send images over the Internet to be interpreted by radiologists in India

Outsourcing health care is not only limited to radiology; we are beginning to see patients travel internationally for treatments as well as surgery

In 2004 some 170,000 foreigners visited India for medical treatments; the number is expected to grow at 15% for the next several years

Question: Will demand for American health services soon collapse as work moves offshore to places like India?

THE FACT OF THE MATTER IS ….

THE ANSWER IS OBVIOUSLY NO BUT IT JUST MAKES ONE START THINKING ABOUT

THE I IMPLICATIONS OF SUCH EVENTS?

It only means that Economies across the world are getting more and more dependent on each

other. And this dependence is for the better for each

one will do things that they can do better.

This of course will have commercial implications and give rise to INTERNATIONAL BUSINESS in a

Globalized Market

What is Globalization?

The shift towards a more integrated and interdependent world economy

Two components:* The globalization of markets* The globalization of production

This is when International Business starts

Globalization of Markets

The merging of distinctly separate

national markets into a global marketplace implies:

Falling barriers to cross-border trade

Tastes and preferences converge onto a global norm

For Example; Every country today knows and relished Chicken Tandoori or Chinese Food for that matter.

Firms offer standardized products worldwide creating a world market

Globalization of Markets

Difficulties that arise from the globalization of markets

Significant differences still exist among national marketsFor Example: Differences in the purchases of Urban and Rural population

Country - specific marketing strategiesFor Example: Freebies may work in one market not necessarily in other markets

Varied product mix For Example: McDonald’s menu for American Market is very different from the one in India

What is International Business?

• International Business is all business transactions that involve two or more countries.

• International Business comprises a large and growing portion of the world’s total business.

• International Business usually takes place within a more diverse external environment.

• To Expand Sales• Acquire Resources• Diversify Sources of Sales and Supplies• Minimize Competitive Risk• Profit Advantage• Growth opportunities• Government policies and regulations

Why Companies Engage in International Business?

• Expansion of Technology, transportation, telecommunications

• Liberalization of Cross-Border Movements of Goods, Services, Labour, Capital

• Development of Supporting Institutional Arrangements For Example: World Bank, IMF

• Increase in Global Competition through Globalization of production

Reasons for Recent International Business Growth

Modes of International Business

A - Merchandise Exports and Imports: visibles

and invisibles

B - Performance of Services: fees; turnkey

operations; management Contracts

C - Use of Assets: licensing agreements; royalties; franchising

Contd….

D - Investments: Foreign Direct Investment: gives the investor acontrolling Interest in a foreign company. It gives access to: - foreign markets- foreign resources- higher profits than exporting- partial ownershipPortfolio Investment: stock in a company or loans to a company or country in the form of bonds, bills, or notes that the investor purchases.

E - Other Operational Definitions - Strategic Alliances

F – MNCs, MNEs, TNCs, Global Company, Multidomestic

CompanyExternal Influences on International BusinessUnderstanding a Company’s Physical and

Societal needs, Environment Managers need, knowledge

of business operations, Knowledge of political

sciences, law, anthropoly, sociology, economics, and

geography.

The Globalization Debate

Pro FactorsLower prices for goods

and servicesEconomic growth

stimulationIncrease in consumer

incomeCreates jobsCountries specialize in

production of goods and services that are produced most efficiently

Con FactorsDestroys

manufacturing jobs in wealthy, advanced countries

Wage rates of unskilled workers in advanced countries declines

Companies move to countries with fewer labor and environment regulations

Loss of sovereignty

Managing International Business

Managing an international business is different from managing a purely domestic business in four areas:

Countries are different

Range of problems confronted by a manager in an international business are wider and more complex

An international business has to work within the limits imposed by government

International transactions involve converting money into different currencies

The Emergence of Global Institutions

Globalization has created the need for institutions to help manage, regulate and police the global Marketplace:

GATTWTOIMFWorld bankUnited Nations

YOUR ????????????

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