BBM 602

International Business Management

UNIT- I
 What is International Business?

International business refers to commercial activities that involve the exchange

of goods, services, or information across national borders. It encompasses a
wide range of business operations, such as exporting and importing goods,
establishing overseas subsidiaries, managing global supply chains, and
navigating international regulations and markets.
 What is International Business Management?

• International business management is the process of overseeing and coordinating business

operations across multiple countries. It involves managing the resources, strategies, and
policies needed to run a business that operates on a global scale.
• This includes understanding diverse markets, cultures, legal environments, and economic
conditions, as well as managing international teams, supply chains, and marketing
strategies.
• The goal of international business management is to help a company successfully expand
and operate on a global scale while managing the complexities that come with
international operations.
 What promotes International Business?
• Globalization: It refers to the increasing interconnectedness of the world, driven by advancements in technology,
communication, and transportation. As businesses and markets become more integrated, companies can more
easily expand operations and trade internationally.
• Technological Advancements: Innovations in technology—such as the internet, e-commerce platforms, and
logistics technology—make it easier for businesses to reach international markets. These advances allow for more
efficient communication, supply chain management, and product delivery across borders.
• Trade Liberalization and Agreements: International trade agreements, such as free trade agreements (FTAs),
regional trade blocs (like the European Union or NAFTA), and the World Trade Organization (WTO) rules, reduce
barriers to trade. Lower tariffs, fewer quotas, and simplified customs procedures help businesses expand
internationally.
• Market Saturation and Competition: As domestic markets become saturated, businesses seek opportunities in
international markets to maintain growth. Entering new countries helps companies access new customers and
diversify their revenue streams.
• Cost Reduction and Access to Resources: Many companies expand internationally to take advantage of lower
production costs, such as cheaper labor or access to raw materials. By outsourcing or setting up operations in
other countries, businesses can achieve greater cost efficiency.
 What promotes International Business? Contd.
• Improved Transportation and Logistics: Advances in transportation, such as faster ships, airplanes, and more
efficient freight systems, have made international trade easier and less expensive. Companies can now transport
goods over long distances quickly and at lower costs.
• Cultural Exchange and Demand for Foreign Products: As cultures become more interconnected, demand for
foreign goods and services increases. Businesses can tap into this by offering products that are in demand in
foreign markets, whether due to cultural interest, lifestyle changes, or global trends.
• Political and Economic Stability in Foreign Markets: Countries that offer stable political environments and
favorable economic conditions (such as low inflation or high GDP growth) attract international business. Stable
economies encourage investments and create an environment where businesses can thrive.
• Foreign Direct Investment (FDI): Countries that attract foreign direct investment (FDI) provide incentives such as
tax breaks, subsidies, and improved infrastructure, which encourage companies to set up operations and engage
in international business.
• Global Talent Pool: The availability of skilled labor across the globe allows businesses to hire talent in
international markets, which can improve innovation and provide a competitive edge.
 LPG
The LPG (Liberalization, Privatization, and Globalization) Policy of 1991 was a crucial
part of India’s economic reforms. This policy was introduced as part of the broader
economic liberalization process initiated by the government to open up the Indian
economy, reduce import restrictions, and increase foreign investment.
Liberalization of the Economy:
1. Prior to 1991, India followed a highly protectionist and regulated economic policy, with strict
controls on imports, foreign exchange, and industrial licenses.
2. The LPG Policy of 1991 was aimed at reducing the government's control over the economy by
allowing private players and foreign investments to enter various sectors, including manufacturing,
trade, and services.
Privatization of Public Sector Enterprises:
1. One of the major reforms was the privatization of several state-owned industries and enterprises.
This was aimed at improving efficiency, competitiveness, and innovation in these sectors.
2. The LPG Policy encouraged the private sector to participate more actively in industries that were
previously dominated by the government.
Globalization and Opening Up of Markets:
1. The policy marked a significant shift toward globalization. India reduced tariffs, liberalized trade,
and allowed foreign companies to enter the Indian market.
2. Foreign Direct Investment (FDI) was encouraged, and restrictions on imports were relaxed, leading
to an influx of global companies into India.
 What can be Globalized?
•Goods and Products
•Services
•Capital/Investment
•Labor and Talent
•Technology and Innovation
•Culture and tradition
•Media
•Festivals
•Lifestyle
•Ideas and Knowledge
•Trade and Commerce
•Infrastructure and Logistics
•Environmental Practices and Standards
Significance of Entering into International Business
• Economic Growth
• Market Expansion
• Resource Access
• Cultural Exchange
• Competitive Advantage
• Resilience
Current trends in International Business Management

• Globalization
• Digitalization
• Sustainability & CSR
• Diversify supply chain
• Emerging Market growths
• Cultural Intelligence
• E-commerce & cross border trade
• Remote work & virtual teams
Ways to enter International Business
 What are…

Multinational Corporation (MNC)?

Transnational Company (TNC)?
International Company (IC)?
Global Company (GC)?
 Multinational Corporation (MNC)
• Multinational Corporation or company operates in several countries but has
a decentralized structure.
• It establishes subsidiaries or branches in various countries, which can
operate independently and adapt to local conditions.
• The decision-making process is often spread across different countries or
regions.
• Key Features:
• Subsidiaries in various countries that are semi-autonomous.
• Products and services may be adapted for local markets.
• Regional decision-making and local market adaptation.
• Example: Coca-Cola — Although its core product remains the same, Coca-
Cola tailors marketing and distribution strategies to local markets.
 Global Company (GC)
• A global company operates with a unified strategy across the entire world. It
has a standard product or service that it offers in all markets, often aiming to
create a consistent global brand.
• Global companies usually centralize their operations, marketing, and
decision-making.
• Key Features:
•Highly standardized products and services across all markets.
•Centralized decision-making at the headquarters.
•Single global marketing strategy.
•Efficiency in production, often using economies of scale.
• Example: Apple — Its products and branding are consistent worldwide.
 Transnational Company (MNC)
• A transnational company operates in multiple countries and is highly
integrated across borders.
• It combines the features of both global and multinational companies. It seeks
to balance global efficiency with local responsiveness.
• These companies often decentralize certain operations, while also creating
global strategies that allow them to function cohesively across all markets.
• Key Features:
•Highly integrated and flexible structure
•Combines global strategies with local adaptations.
•Decentralized operations but with shared global objectives.
•Knowledge and resources are shared across subsidiaries.
• Example: Nestlé — Operates globally, but its local subsidiaries have
significant control over product development, marketing, and distribution,
allowing for adaptation to local tastes.
 International Company (IC)
• An international company expands its operations into foreign markets
but typically adapts its strategy to the local markets.
• These companies primarily focus on exporting products or services to
other countries and often retain a more centralized structure, but with
some degree of local adaptation.
• Key Features:
• Export products to foreign markets.
• Limited adaptation of products for local preferences.
• Focus on expansion rather than extensive local operations.
• Example: Ford — It may adjust vehicles for international markets, but much
of its strategy remains centralized.
 Distinctions
• Global Companies focus on a standardized global strategy and centralized
control.
• International Companies tend to export goods abroad with minimal adaptation
and often have centralized decision-making.
• Multinational Companies decentralize their operations and adapt to local
markets, giving local subsidiaries more autonomy.
• Transnational Companies aim for global integration and local responsiveness,
balancing both aspects to operate efficiently across borders.