KNOW ME 

 VASANTH KIRAN– B.Sc,MA,MBA

 WORKED WITH NORTHERNTRUST
BANK..(AN AMERICAN CUSTODIAL
SERVICE)
 VISITING FACULTY FOR SEVERAL B
SCHOOLS.
 CORPORATE SKILLS AND SOFT
SKILLS TRAINER FOR SEVERAL
COMPANIES AND COLLEGES.
 What I expect ????
 Be 5 minutes before in class.
 Don’t enter after I enter in the class.
 Attendance is COMPULSORY !!!!!!!
 Either you talk or I !
 Absolutely NO local language.
 Assignments will be collected only on
mentioned time…….no reason accepted
anyways.
 Remember you are NOT kids, but don’t force
me to treat you like one !
 MODULE-1
MR.VASANTH KIRAN
 WHAT DO WE STUDY IN THIS
MODULE
 Introduction to International Business
 Globalization- drivers
 Modes and entry strategies.
 The globalization debate.
 Trends in international trade
 Differences b/w domestic and
International business.
 WHAT IS IB????
 IB is the study of transactions taking
place across national borders for the
purpose of satisfying the needs of
individuals and organizations
 Primary type of transactions are
export-import trade and FDI
 WHY IB???
 Comprises a large & growing portion of the
world’s total business.
 Today global events & competition affects
almost all companies-large/small because
most sell output to & secure supplies from
foreign countries.
 Many companies also compete against products
& services that come from abroad.
 A company operating internationally will
engage in modes of business such as exporting
& importing, that differs from those it is
accustomed to domestically.
 Learning IB helps us to make more informed
decisions.
 WHY COMPANIES ENGAGE IN
IB??
 When operating internationally, a
company should consider its mission,
objectives, strategy.
 1.Expand sales, productivity& profits
 2.Acquire resources
 3.Diversify source of sales & supplies
 4.Minimize competitive risk
 5.Severe competition in home country
 6.Technology
 GLOBALISATION…….
 The shift toward a more integrated
and interdependent world economy
 The merging of historically distinct
and separate national markets into
one huge global marketplace
 Two components:
• The globalization of markets
• The globalization of production
 GLOBALISATION…
 Globalization implies integration of the economy and
opening up of economy for FDI by liberalizing the
rules and regulations and by creating favorable socio
economic and political climate for global business

 IMF defines globalization as growing economy,

economic independence of countries worldwide
through increasing volume and variety of cross
border transactions of goods & services and of
international capital flow and also through the more
rapid & widespread diffusion of technology.

 Charles W .L. Hill defines globalization as a shift

towards a more integrated and interdependent world
economy .
 FEATURES…..
 Globalization encompasses the following features.
 Operating and planning to expand business through out
the world
 Erasing the difference between domestic market &
foreign market.
 Buying & selling goods & services from any country in
the world
 Establishing manufacturing & distribution facilities in
any part of the world based on feasibility and viability
rather than national considerations.
 Product planning and development are based on market
considerations of entire world.
 Global orientation in strategies ,organizational culture
and managerial expertise .
 Setting the mind and attitude to view the entire globe as
a single market.
 GLOBALISATION OF MARKETS
 The merging of distinctly
separate national markets
into a global marketplace
• Falling barriers to cross-border trade have
made it easier to sell internationally
• Tastes and preferences converge onto a
global norm
• Firms offer standardized products worldwide
creating a world market
 DIFFICULTIES THAT ARISE
FROM GLOBALISATION OF
MARKETS
• Significant differences still exist among
national markets
• Country-specific marketing strategies
• Varied product mix
 METHODS OF GLOBALISATION
 Exporting directly
 Exporting indirectly
 Licensing and franchising
 Contract manufacturing
 Establishing full marketing facilities
 Establishing manufacturing facility
 Joint venture
 Strategic alliance
 Merger
 GLOBALISATION OF
PRODUCTION
 Refers to sourcing of goods and
services from locations around the
world to take advantage of
• Differences in cost or quality of the
factors of production
 Labor
 Land

 Capital
 CONT….
 Increasingly companies are taking advantage of modern
communications technology, and particularly the Internet,
to outsource service activities to low-cost producers in
other nations

 Historically this has been primarily confined to

manufacturing enterprises

 Impediments to the globalization of production include

• Formal and informal barriers to trade
• Barriers to foreign direct investment
• Transportation costs
• Issues associated with economic risk
• Issues associated with political risk
 GLOBAL INSTITUTIONS
 Globalization has created the need
for institutions to help manage,
regulate and police the global
marketplace
• GATT
• WTO
• IMF
• World bank
• United Nations
DRIVERS OF GLOBALIZATION
 Decline in trade & investment
barriers-barriers to free flow of
goods, services, capital.
 Technological factor-technological
change,communication,information
, transportation.
 Cont…..
• During the 1920s and ‘30s, many of the
nation-states of the world erected
formidable barriers to international trade
and foreign direct investment
• Decline in barriers to the free flow of
goods, services, and capital that has
occurred since the end of World War II
• Technological change
 ADVANTAGES OF
GLOBALISATION
 Free flow of capital and increase in the total capital
employed.
 Free flow of technology.
 Increase in industrialization .
 Spread of production facilities throughout the globe.
 Balanced development of world economies.
 Increase in production and consumption.
 Commodities at lower prices with high quality.
 Cultural exchange and demand for a variety of
products.
 Increases in Jobs and Income.
 Higher standards of living.
 Balanced Human Development.
 Increase in Welfare and Prosperity
 DISATVANTAGES OF
GLOBALISATION
 Globalization kills domestic business.
 Exploits Human Resource.
 Leads to unemployment and
underemployment.
 Decline in demand for domestic products.
 Decline in income.
 Widening gap between rich and poor.
 Transfer of Natural Resources.
 National sovereignty at stake.
 Leads to commercial and political colonialism.
 OTHER DRIVERS
 Competition
 Technology
 Regional, economic and political
integration
 Economic growth
 Converging consumer needs
 Cost reduction
 Increase sales and profits
 ENRTY MODES
1. EXPORTING:
Eg. most of the leather industries

ADVANTAGES:
 It avoids the cost of establishing manufacturing operations in the
host country
 It may help a firm achieve experience curve and location
economies

DISADVANTAGES:
 High transportation costs can make exporting uneconomical,
particularly for bulk products
 Tariff barriers can make it uneconomical
 Foreign agents often carry the products of competing firm and as
a result have divided royalties
 JV
 LICENSING
 FRANCHISING
 M and A
 WHOLLY OWNED SUBSIDIARIES.
 GLOBALISATION DEBATE
 Pro Factors  Con Factors
• Lower prices for
goods and services
• Economic growth
stimulation
• Increase in
consumer income
• Creates jobs
• Countries specialize
in production of goods
and services that are
produced most efficiently
• Destroys manufacturing
jobs in wealthy, Wage
rates of unskilled
workers in advanced
countries declines
• Companies move to
countries with fewer
labor and environment
regulations
• Loss of sovereignty
advanced countries
 GLOBALISATION IMPACT
 Jobs and income
 Labor policies and environment
• National sovereignty
 TRENDS IN INTERNATIONAL
TRADE.
 World economy grew at 4% in 2004, 4.9%
in 2005, and is expected to grow at 5. 3%
in 2006
 In 2005,

Japan- 2.6%
Developing Asia- 8-10%
South central America- 6.5 %
 ESSENTIAL CONDITIONS OF
GLOBALISATION
 Liberalization of the rules, regulation
& control
 Removal of quotas & tariffs
 Providing freedom to business &
industry
 Providing infrastructural facilities
 Encouraging R&D
 Autonomy to public sector to compete
with private sector
 Providing administrative &
governmental support
 FDI ( FOREIGN DIRECT
INVESTMENT )
 The flow of funds from one country to another is known as
investment
 Companies, which are constantly involved in international
business, invest their money in manufacturing and
marketing bases through ownership and control
 Kellogg, Pepsi and Hyatt group

Foreign firms adopt certain methods as mentioned below:

 They control the operations through subsidiaries to achieve

strategic synergies
 They have control through technology, manufacturing
expertise, intellectual property rights and brand name
 One permanent person in the country of operation is
appointed to monitor day to day operations
 Difference between IB & domestic
business
 Different countries
 Wider & complex problems
 Government regulations
 Price differentiation
 Unfamiliar conditions
 Different departmental
differences
 Risk
 What are the challenges for
managers in global market place ?
Managing an international business is different
from managing a domestic business for at least
four reasons.
1.Countries are different
2.The range of problems confronted by a manager
in an international business in wider and the
problems themselves more complex than these
confronted by a managers in domestic business
3.Managers must find the ways within the limits
imposed by govt. intervention in the
international trade & investment system
4. International transactions involve converting
money into different currencies.
 EXTERNAL INFLUENCES ON IB.
 Company’s physical & societal environments
1.political policies & legal practices
2.cultural factors
3.economic forces
4.geographical influences
 Competitive environment
1.price
2.marketing
3.innovation
4.number of competitors
 THANK YOU

BE READY FOR SURPRISE

TEST ANY DAY , ANY TIME !!
