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5 views

Ib Unit I

Uploaded by

venky528
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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INTERNATIONAL BUSINESS

MANAGEMENT

UNIT-I
INTRODUCTION
TO
INTERNATIONAL
BUSINESS
MANAGEMENT
Introduction
• Definitions:
• all commercial transactions- private and governmental-
between two or more countries. Private companies undertake
such transactions for profit; governments may or may not do
the same in their transaction-John D Daniels and Lee H Radebaugh
• ‘International business is a commercial enterprise that
performs economical activity beyond the bounds of its
location, has branches in two or more foreign countries and
makes use of economic, cultural, political, legal and other
differences between countries’.- International Business
Journal
Reasons of International Business /Trade
• 1. Profit
• 2. Expanding the production capacities:
• 3. Severe Competition in the home country
• 4. Limited home market
• 5. Political stability Vs Political instability
• 6. Availability of technology & managerial competence
• 7. High cost of transportation
• 8. Nearness (proximity) to raw materials
• 9. Availability of quality human resources at less cost
• 10. To increase market share
• 11. To avoid tariffs and import quotas
Stages in Internalization
• 1. Domestic Company:
• It limits operation, mission and vision to the national political boundaries.
These companies focus its view on the domestic market opportunities
domestic suppliers, domestic financial companies, domestic customers
etc. It never thinks of growing globally.
• 2. International Company:
• companies who decide to exploit the opportunity outside the domestic
country. The focus of these companies is domestic but extends the wings
to the foreign countries. These companies extend the domestic product,
domestic price, promotion and other business practices to the foreign
markets
Stages in Internalization
• 3. Multinational Company:
It formulates different strategies for different markets thus the MNC operate
its offices, branches, subsidiaries in other country like domestic company. They
formulate distinct polices and strategies suitable to that country. Thus they
operate like concerned in each of their markets.
• 4. Global company:
A global company is the one which has either global marketing strategy or a
global sourcing strategy. Global company either produces in home country or
in a single country and focuses on marketing these products globally or
produces globally.

• 5. Transnational company:
It produces, markets, invests and operates, across the world. It is an integrated
global enterprise which links global resources with global markets at profit.
There is no pure transnational companies satisfy many of the characteristics of
a global corporation.
Characteristics of International Business

• 1. Geocentric Orientation- thinks globally and act locally


• 2. Scanning or information acquisition- collects the data and information
world wide
• 3. Vision & Aspirations- global markets, global customers
• 4. Geographic scope- global customers,resoureces,R&D and
technology
• 5 Operating Style- key operations are transnational and
globalized
• 6. Adaptation- strategies to market concerns
• 7. HRM Policy- selects the best human resources from global
• 8. Purchasing – global suppliers and purchasing
International Business Approaches:
(EPRG Frameworks )
• 1. Ethnocentric Approach
The domestic company normally formulates their strategies, their product
design and their operations towards the national markets, customers
and competitors. But the excessive production more than the demand
for the product , either due to competition or due to changes in
customer preferences push the company to export the excessive
production to foreign countries without making any changes.
• 2. Polycentric Approach
The domestic companies which are exporting to foreign countries using
the ethnocentric approach find that the foreign market needs a
altogether different approach. Then the company establishes foreign
subsidiary companies and decentralizes all the operation and
delegates decision –making and policy making authority to its
executives.
International Business Approaches:
(EPRG Frameworks )
• 3. Regio - centric Approach:
The company offer operating successfully in a foreign country thinks of
exporting to the neighbouring countries of the host countries. At this
stage the foreign subsidiary considers the regional environment for
formulating policies and strategies. However it markets more or less
the same product designed under polycentric approach in other
countries of the region, but with different market strategies.
• 4. Geocentric Approach:
Under this approach the entire world is just like a single country for the
company. They select the employees from the entire globe and
operate with a number of subsidiaries. The head quarters co-ordinate
the activities of the subsidiaries. Each subsidiaries function like an
independent and autonomous company in formulating policies ,
strategies , product design , human resources policies, operation etc.
Features of International Trade:
• 1. Heterogeneous market
• 2. Different national groups
• 3. Different political unit
• 4. Different national policies
• 5. Government intervention
• 6. Different currencies
• 7. Immobility of factor.
Advantages/Benefits of International Business
• 1. High Living Standard
• 2. Increased socio- Economic Welfare
• 3. Wider market
• 4. Reduced effects of business cycles
• 5. Reduced risks:
• 6. Larger –scale economics
• 7. Potential – Untapped Markets
• 9. Division of labour and specialization
• 10. Optimum & proper utilization world resources
• 11. Cultural Transformation
• 12. Knitting the world into a closely interactive traditional village.
Problems in International Business:
• 1. Political Factors:
Political instability is the major factor that discourages the spread of
international business.
• 2. Huge Foreign Indebtedness;
The developing countries with less purchasing power are lured into debt
trap due to the operations of MNCs in these countries.
• 3. Exchange Instability:
Currencies of countries are depreciated due to imbalances in the balance
of payment political instability and foreign indebtness. This in turn
leads to instability in the exchange rates of domestic currencies in
terms of foreign currencies.
• 4. Entry requirements:
Domestic governments impose entry requirements to multinationals. Eg,
Joint venture, % of FDI, tariff , quota, trade barriers etc
Problems in International Business:
• 5. Corruption.
Corruption has become an international phenomenon. The higher rate bribes
and kickbacks discourage the foreign investor to expand their operations.
• 6. Bureaucratic practices of government:
Bureaucratic attitudes and practices of government delay sanctions, granting
permission and licenses to foreign companies.
• 7. Technology pirating:
Copying the original technology producing imitative products other areas of
business operations were common in Japan during 1950s and 1960s in
Korea,India etc This practices invariably alarms the foreign companies
against expansion.
• 8. High Cost:
Internationalizing the domestic business involves market survey, product
improvement ,quality up gradation and managerial efficiency etc. These
activities need larger investment and involve higher cost and risk.
National Gains from International Trade:

• 1. Availability of variety of goods:


• 2. Enhances the standard of living:
• 3. To get non available natural resources;
• 4. Quantity goods available will increases;
• 5. Wider market -leads for low cost production.
• 6. Transfer of technology
• 7. Provides the means of exports:
THE END

THANK YOU

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