INTERNATIONAL BUSINESS

MODULE-1
 International business is a term used to
collectively describe topics relating to the
operations of firms with interests in multiple
countries.
 international business occurs when a
business sells its product or service to a
purchaser who lives in a different country,
such as, through a way of an e-commerce
transaction.
 “ Toda y's su ccess ful bu si ne ss
ex ec uti ves thi nk gl oba lly . 
Marke ti ng, ma nufa ctu ring a nd
fi nanc e manager s mu st b e we ll
ed ucate d in inte rna tion al bu si ness,
bo lst er ed by a flu en cy in a se co nd
langu age, to c om pet e in both
do me sti c a nd inter nati on al
en vir on men ts "  
 MNCs typically have subsidiaries or joint-
ventures in each national market. How these
companies are organized, how they operate, and
their lines of business are heavily influenced by
socio-cultural, political, global, economic and
legal environments of each country a firm does
business in. The management of the parent
company typically must incorporate all the legal
restrictions of the home company into the
management of companies based in very
different legal and cultural frameworks.
 THE STUDY OF IB
INCLUDES…
 Areas of study within this topic include
differences in legal systems, political systems,
economic policy, language, accounting standards
, labor standards, living standards,
environmental standards, local culture,
corporate culture, foreign exchange, tariffs,
import and export regulations, trade agreements,
climate, education and many more topics.
 EVOLUTION OF IB
 INTERNATIONAL TRADE TO
INTERNATIONAL MARKETING

 INTERNATIONAL MARKETING TO
INTERNATIONAL BUSINESS
NATURE OF IB…
 ACCURATE INFORMATION

 TIMELY INFORMATION

 SIZE OF BUSINESS

 MARKET SEGMENTATION

 POTENTIALITY OF MARKETS

 WIDER SCOPE
 INTER-COUNTRY COMPARITIVE STUDY
 REASONS FOR IB
 HIGHER PROFITS

 EXPANDING PRODUCTION CAPACITY

 SEVERE COMPETITION IN DOMESTIC COUNTRY

 LIMITED HOME MARKET

 POLITICAL STABILITY

 COST
 TECHNOLOGY AVILABILITY
 NEARNESS TO RAW MATERIALS

 QUALITY HUMAN RESOURCES

 LPG

 INCREASE MARKET SHARE

 TARIFFS AND IMPORT QUOTAS

 DEFINITION OF
INTERNATIONAL BUSINESS
In today’s technology-connected global economy, even
small businesses can compete in the
international marketplace.
 According to business directory.com
 Definition 1
The economic system of exchanging good and services,
conducted between individuals and businesses in multiple
countries.
 Definition 2
The specific entities, such as multinational corporations
(MNCs) and international business companies (IBCs),
which engage in business between multiple countries
 STAGES OF
INTERNATIONALISATION
 Stage 1: Domestic Operations
– Firms offer products or services that are designed to
primarily serve consumers in the domestic market
(e.g., law firms)
 Stage 2: Export Operations
– Products and services are opened up to markets in
other countries, but production facilities remain in
Canada.
 It extends the domestic country marketing mix and
business model and practices to foreign countries.
Stage 3: Subsidiaries or Joint Ventures
 Some operational facilities (e.g., parts assembly) are
physically moved to other countries.
 Corporate headquarters in home country has high control
over foreign operations.
 Eg. Dr.reddy’s lab
Stage 4: Multinational Operations
 Much more prevalent international
dispersion of production and service
provision facilities.
 Decentralization of decision-making more
prevalent, but “major” personnel decisions
still made within home country.
 Expatriates still primarily manage foreign
facilities.
Stage 5: Transnational Operations
 Little allegiance to the firm’s country of
origin.
 Large-scale decentralization of decision-
making.
 Dominant role of expatriates is removed.
 It produces, markets invests and operates
across the world.(eg. coke and pepsi)
 Approaches to IB…
 Ethnocentric:
• Export the excess to foreign countries.
• View the foreign market as an extension of the
domestic market.
• Maintaining the domestic approach towards inter.
Bus is called ethnocentric approach.
• Eg. when whirlpool entered Japan.
 Polycentric: the company establishes a
foreign subsidiary company and
decentralizes all the operations. Eg.lays
 Regiocentric: formulate policies according
to the cultures, norms and laws pertaining
to the regional environment.{product is the
same as polycentric approach}
 Geocentric: a company going global
 THEORIES OF IB…
The Mercantilist's View on Trade :
During 17 th and 18 th centuries,
a group of men (merchants ,bankers,
government officials, and even
philosophers) wrote essays and pamphlets
on international trade that advocated an
economic philosophy known as
mercantilism.
 The Mercantilist's View on
Trade
Briefly, the mercantilists maintained that the way
for a nation to become rich and powerful was
to export more than it imported.
The resulting export surplus would then be settled
by an inflow of bullion, or precious metals ,
primarily gold and silver.
The more the gold and silver the nation had,
richer and more powerful it was.
Thus the government had to do all in it’s
power to stimulate the nation’s exports
and discourage and restrict imports.
Their view was that a nation can gain only at the
expense of other nations by each specializing
in the production of the commodity of it’s
absolute advantage and exchanging part of
it’s out put with the other nation for the
commodity of it’s absolute disadvantage.
The End.