International Business

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Features of International Business
• Flow of Capital Across Countries
• Accurate & Timely Information Required
• Market Expansion
• Size of International Business
• Wider Scope
• More potential than Domestic Markets
• Market Segmentation
• Inter – Country Comparison

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 Factors Encouraging International
Business
• To increase sales and acquire scare resources
• Growth opportunities in other countries.
• Potential untapped market
• Limited domestic market
• To increase market size
• To increase profit
• To reduce cost of transportation

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 Domestic V/S International Business
S.No Basis Domestic IB

1 Meaning Domestic company IB enters foreign market by

formulates strategy product establishing foreign
design etc. toward the subsidiary. They treat the
national markets, customers entire world as a single
and competitors. market for production,
marketing investment and
drawing various inputs.
2 Environment Domestic environment Analysis & scanning of
scanning i.e. detailed International Business
analyses of domestic environment and its factors.
business environment
factors.
3 Tariffs The Tariffs rates of various The tariffs rates of various
counties do not directly and counties has direct impact
significantly influence the an international trade.
domestic business.
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 Domestic V/S International Business
S.No Basis Domestic IB

4 Foreign FER and their fluctuation do It directly affects the

exchange rate not directly affect the business as the conversion
business rates are affected

5 Culture Mostly domestic culture of Mostly culture of various

the country affects the countries affects the
business operations business operations
including product design including products design of
IB

6 Scope It involves inter firm It involves intra firm

transaction i.e. within a firm transaction between parents
and firms of same industry and subsidiaries in different
of a country countries.
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Driver of Globalization

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•Divers of Globalization
•Declining Trade
•Barriers
•Declining Investment Barriers
•Regional Integration
•Advancement In Technology
•Generation of Increased Profit
• Expansion of Market

•Utilization of Production Capabilities

•Utilization of Technology & Managerial skill
•Reduction in Transportation Cost
•Aviod Tarrifs & Import Duties
•Quality of Human Resource at Less Cost
•Availability & Nearness to Raw Materials

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Advantages of International Business
“Nation trade with each other because they
benefit from it. Other motives may be involved
of course, but the basic motivation for
international trade is that of gain. The gain
from international trade, like the gain from all
trades, exists because specialization increase
productivity.”

- James C. Ingram

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 Advantages of International Business
1. Higher Standard of Living
2. Free Flow of Capital
3. Increased Consume Income
4. Advantages Due to Product Life Cycle
5. Advantages due to economies of scale
6. Optimum & Proper utilization of World resources
7. Deficiency in Production to remain Competitive
8. Free Flow of Technology
9. Reduction in Effect of Business Cycles
10. Spread of Production facilities throughout the globe
11. Reduced Risk
12. Identifying potential & untapped market
13. Cultural Exchange
14. Employment generation
15. Social Development

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 Disadvantages of International
Business
1. International Business kills domestic business
2. Foreign regulation & Standards
3. Delay in Payment
4. Complex Organizational structure
5. Unemployment & Underemployment
6. Huge Foreign Indebtness
7. Political Instability
8. Exchange Instability
9. Tariffs Quotas & Trade Barriers
10. Drain of Natural Resources
11. Technological Pirating
12. Cultural & Social Barriers
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International Business Approaches
Duglas Wind & Pelmutter advocated four
approaches of IB.
1. Ethnocentric Approaches : Under this approach, the
domestic company do not formulate any different
marketing company do not formulates any different
marketing strategy for foreign market. It view
foreign markets as an extension to domestic market
just like a new region.
This approach can be used by a small company or a
company which is new in the field of international
business but it may be harmful in long run because in
this the same product is market to foreign country
without any modification. 11
International Business Approaches
2. Polycentric Approach: In this the company
adapts an another different approach for
foreign markets.
They formulate strategies according to the
environment of foreign country/host
country.
Companies establish foreign subsidiaries and
empower its executives there which
formulates marketing strategies.

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International Business Approaches
3. Regiocentric Approach: After working
success fully in a foreign country, the firm
now wants to enter into neighboring
counties in that region.
In a company with a regiocentric orientation,
management views regional unique & seek
to develop an integrated regional strategy.
it market more or less same product to
different counties but adapts different
marketing strategies too.
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International Business Approaches
4. Geocentric Approach: a company with
geocentric approach views the entire world
as a potential market and tries to develop
integrated world market strategies.
The company opens different subsidiaries in
different countries and each subsidiary work
as an independent company. It formulates
strategies, policies, design the products as
per the environment of that country.

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