m
m 

International business in all

commercial transactions- private
and governmental- between two
or more countries. The goal of
private business is to increase or
to stabilize profits, which partly
depends on-
! Foreign sales
! Foreign resources

m
m 

hen operating
internationally, a company
should consider its mission
(
hat it will seek to do and
become over the long term),
its objectives (specific
performance targets to fulfill
its mission), and strategy (the
means to fulfill its objectives).

m
m
 Four major operating
objectives that may influence
companies to engage in
international business.They
are
! To expand sales
! To acquire resources
! To diversify sources of sales
and supplies
! To minimize competitive risk

m
m

! Mccording to Peter F. Drucker,

the global economy include:
1. The global economy/
transnational economy is
mostly shaped by the flow of
capital across the economies
rather than by the flow of
goods and
m
m 
services. The trends in the
international money markets and
capital markets influence the
monetary policies and fiscal
policies of the sovereign
governments. Sovereign
governments, rather modify their
monetary and fiscal policies.
These modified policies
determine the dynamics and
direction of capital flow

m
m 
 across the countries.
2. Management is the primary
and decisive factor whereas
the other factors of
production like land, capital
and human resource are
secondary in the transnational
economy. Money markets and
capital markets have also
become transnational.

m
m
3. The goal of the transnational
business is market expansion
rather than profit
maximization.
4. Global trade is a function of
global investment, but not
vice-versa.
5. The decision- making power
shifts from

m
m 
 the national government to
the group of governments like
the European community,
North Mmerican Free Trade
Mgreement, the
orld trade
Organization etc.
6. Information flows through
advanced information
technology, organizes the

m
m 
flow of money, capital and
investment across the
national boundaries.
7. Transnational business
houses see the entire globe
as a single market for
production and market of
goods and services.

m
m 
1. Rapid increase in and
expansion of technology
2. Liberalization of
governmental policies on
cross ² border movement of
trade and resources

m
m 
3. Development of institutions
to support and facilitate
international trade
4. Increased global
competition
Business is becoming more
global because
- Transportation is quicker
- Communication enable
control from a far
m
m 
- Transportation and
communication costs are
more conducive for
international operations
Lower governmental barriers
to the movement of goods,
services, and resources
enable companies to take
better advantage of
international opportunities.

m
m 
Supporting services
-Mre made by business and
government
-Ease flow of goods
-Reduce risk
More companies operate
internationally because
-New products quickly become
known globally

m
m 

-Companies can produce in

different countries
-Domestic companies·
competitors, suppliers, and
customers have become
international.

m
m 
! Potentiality of markets
*
ider scope
*Inter-country comparative
study
! Differences in government
policies, laws and regulations

m
m 
*Host country·s monetary
system
*National security policies of
the host countries
*Cultural factors
*Language
*Nationalism and business
policy

m
m 
STMGE 1: DOMESTIC COMPMNY

STMGE 2: INTERNMTIONML
COMPMNY

m
m 
STMGE 3: MULTINMTIONML COMPMNY

STMGE-4: GLOBML COMPMNY

STMGE-5: TRMNSNMTIONML COMPMNY

m
m 
Douglas
ind and Pelmutter
advocated four approaches of
international business. They
are:
Ethnocentric approach
Polycentric approach
Regiocentric approach
Geocentric approach
m
m 
! To achieve higher rate of
profits
! Expanding the production
capacities beyond the demand
of the domestic country
! Severe competition in the
home country
! Limited home market

m
m 
! Political stability vs. political
instability
! Mvailability of technology and
competent Human resource
! High cost of transportation
! Nearness to raw materials
! Mvailability of quality human
resources at low cost
! Liberalization and
globalization
m
m 
! To increase market share
! To achieve higher rate of
economic development
! Tariffs and import quotas

m
m 
! MPPROMCH: ! International
Domestic business·s business·s approach
approach is can be polycentric
ethnocentric. It does or regiocentric or
mean that domestic geocentric.
companies International
formulate business under
strategies, product polycentric
design etc. towards approach enters
the national foreign markets by
markets, customers establishing foreign
and competitors. subsidiaries.

m
m 

 Under the
regiocentric, they
export the product
to the neighbouring
countries of the host
country. Under the
geocentric, they
treat the entire
world as a single
market for
production,
marketing,
investment and
drawing various
inputs.
m
m 
! GEOGRMPHIC ! Geographic
SCOPE: scope of the
Domestic international
business· business varies
geographic from the
scope is within national
the national boundaries of a
boundaries of minimum of
the domestic two countries
country. up to a
maximum of
the entire
globe.
m
m 
! OPERMTING STYLE: ! Operating style of
domestic business· the international
operating style business can be
including spread to the entire
production, globe.
marketing,
investment, R & D,
etc. is limited to the
domestic country.
! ENVIRONMENT: ! International
Domestic business business analyses
mostly analyses and and scans the
scans the domestic relevant
environment. international
environment.

m
m 
! rUOTMS: The quotas ! The international
imposed by various business has to
countries on their operate within the
exports and imports quotas imposed by
not directly and various countries on
significantly their exports and
influence domestic imports.
business. ! The tariff rates of
! TMRIFFS: The tariff various countries
rates of various directly and
countries do not significantly
directly and influence the
significantly international
influence the business.
domestic business.

m
m 
! FOREIGN ! Foreign exchange
EXCHMNGE RMTES: rates and their
Foreign exchange fluctuations directly
rates and their and significantly
fluctuations do not affect the
directly and international
significantly affect business.
the domestic
business.
! CULTURE: Mostly ! Mostly culture of
domestic culture of various countries
the country affects affects the business
the business operations including
operations including product design of
product design. international
business.
m
m 
! EXPORT- IMPORT ! International
PROCEDURES: business is
Domestic business significantly
is not normally influenced by
influenced by export- import
export- import procedures of
procedures of the various countries.
country. They need to follow
! HUMMN these procedures.
RESSOURCES: ! International
Domestic business business normally
normally employs employs the people
the people from the from various
same country. countries.
Therefore, the task Therefore, the task
of HRM is not much of HRM is much
complicated. complicated.
m
m 
! MMRKETS MND ! International
CUSTOMERS: business should
Domestic companies understand markets
meet the needs of and customers of
the domestic various countries.
markets and
customers. Ms such,
it would be
appropriate for them
to understand the
domestic markets
and customers.

m
m 
! High living standards
! Increased socio-economic
welfare
!
ider market
! Reduced effects of business
cycles
! Reduced risks
! Large-scale economies
m
m 
! Potential untapped markets
! Provides the opportunity for and
challenge to domestic business
! Division of labour and
specialization
! Economic growth of the world
! Optimum and proper utilization of
world resources
! Cultural transformation
! Knitting the world into a closely
interactive traditional village

m
m
! Political factors
! Huge foreign indebtedness
! Exchange instability
! Entry requirements
! Tariffs, quotas, and trade
barriers
! Corruption

m
m

! Bureaucratic practices of
government
! Technological pirating
! ruality maintenance
! High cost

m
m 
! Merchandise exports and imports
! Service exports and imports
1. Tourism and transportation
2. Performance of services
3. Use of assets
! Investments
1. Portfolio investment
2. Direct investment

m
m 
 J Õ


!

 
 
 
 !

 

  
  m 


  
 
 !
  
 
  
" 


 
   

  

 

 m


m 
 m

 
 


 
  


 

  




   

m
m
  
 
    
 
 
 


    
     
 
  Õ



 
m 


Õ      Õ 
#!

 $

$

! 
$
m

  !
    
  ! 
 



m
m