INTERNATIONAL

BUSINESS
LECTURE 2
CHAPTER 1 (INTERNATIONAL BUSINESS & GLOBALIZATION)
SUPERIOR COLLEGE WAZIRABAD
Learning objectives

01
Define
02
Grasp why
03
Discuss
04
Illustrate the
05
Recognize
globalization companies globalization different the need to
and engage in IB ’s future and ways a apply social
international and why its the major company science
business growth has criticisms of can disciplines
and explain accelerated it accomplish to
how they its global understand
affect each objectives how
other & Why international
we study IB. and
domestic
business
discussion.
GLOBALIZATIO
N
Learning
Objectives:
Define globalization
and international
business and explain
how they affect each
other.
GLOBALIZATIO
N
DEFINITION:
“Globalization is the widening set
of interdependent relationships
among people from different parts
of a world divided into nations”.
 The term sometimes refers to
the elimination of barriers to
international movement of
goods, services, capital,
technology, and people that
influence the integration of
world economies.
INTERNATIONALIZATI
ON

DEFINITION:
International business consists of all
commercial transactions including sales,
investments, and transportation—That take
place between two or more countries.
 increasingly foreign countries are a
source of both production and sales
for domestic companies.
 increase market share, profitability, and
competitiveness by tapping into new
markets, resources, and opportunities
outside of a companies.
INTERNATIONALIZATION

Importance of International Business:

It is important to study international business because:

Most companies are either international or compete with international
companies
Global events and competition affect almost all companies, regardless of
industry
International companies have more complex environments than domestic firms.

An understanding of IB helps you make better career decisions

An understanding helps you decide what government policies to support.

 INTERNATIONALIZATION
Factors affecting International business
GLOBALIZATION

Forces Driving Globalization:

Increase in and application of technology

Liberalization of cross-border trade and resource movements

Development of services that support international business

Growth of consumer pressures

Increased global competition

Changing political situations and government policies

Expanded cross-national cooperation

GLOBALIZATION

GLOBALIZATION: An opportunity or Threat:

Threats to national sovereignty

lose freedom to

act locally

Economic growth and environmental stress

growth consumes nonrenewable natural resources and increases environmental damage

Growing income inequality and personal stress

promotes global superstars at the expense of others

Globalization

Offshoring

a type of out sourcing, involves the transferring of

production abroad

it can be beneficial because it reduces costs

but, it also means that jobs move abroad

Yet, offshoring may also create new, better jobs at

home
Why Companies Engage in IB

These three reasons

• sales expansion
• resource acquisition
• risk minimization
guide all decisions about whether, where ,
and how to engage in international
business
Why Companies Engage in IB

 To expand sales
pursuing international sales increases the potential market and
potential profits
 To acquire resources
may give companies lower costs, new and better products, and
additional operating knowledge
 To diversify or reduce risks
international operations may reduce operating risk by smoothing
sales and profits, preventing competitor for gaining advantage.
Modes of Operations in IB
Merchandise:

Merchandise exports
goods that are sent out of a country

Merchandise imports
goods that are brought into a country
Sometimes referred to as visible exports and imports
Modes of Operations in IB

Service exports: provider and receiver of payment

Service imports: recipient and payer of payment

Examples: Tourism and transportation, Service

performance, turnkey operations and Management
contracts, Asset use, Licensing and franchising
Modes of
Operations in IB
 Investments
 Foreign Direct Investment (FDI)
 investor takes a controlling
interest in a foreign company
 joint venture
1. Portfolio Investment
 a non-controlling financial
interest in another entity
 Mutual funds often include
interest
 Modes of Operations in IB

 Collaborative arrangements
 Joint ventures
 Licensing arrangements
 Management contracts
 Minority ownership
 Long-term contractual arrangements
 Strategic alliance
 companies that work together, but the agreement is critical to at
least one partner
 an agreement that does not involve joint ownership
Types of
International
Organizations
 Multinational enterprises
(MNEs)
take a global approach to markets
and production or have operations
in more than one country
Sometimes they are referred to
as
 multinational corporations
(MNCs)
 multinational companies (MNCs)
 transnational companies (TNCs)
 Types of International
Organizations
In foreign markets, companies often
have to adapt their typical methods of
doing business

foreign conditions may dictate a

particular method

operating modes may be different from

those used domestically
Domestic, Regional
& International
Business
Domestic Business:
Domestic business is the business
that operates within the
geographical boundaries of a
country. It involves transactions
between buyers and sellers who
belong to the same country and
use the same currency.
For example, a bakery in New
York that sells bread to local
customers is a domestic business.
Domestic, Regional
& International
Business
Regional Business:
used to describe a company or an
organization that operates in a particular
part of a country rather than the whole
country: regional businesses/companies.
International Business:
International business refers to
economic activities across the
boundaries of nation–states, of which
trade and foreign investment are the
most important. While theories of trade
remain the province of economics,
foreign investment has been
approached from three main
perspectives.
WHY IB IS DIFFERENT FROM
Domestic Business ?
 Physical and Social Factors

 Geographic influences
natural conditions influence business locations
 Political policies
countries determine where and how business occurs within their borders
 Legal policies
influence how a company operates
 Behavioral factors
may require adaptation in to local conditions
 Economic forces
explain differences in costs, currency values, market size
 THANK YOU