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International Business IB consists of all commercial transactions

between two or more countries. (the goal of private business is to make

profits where the govt. business may or may not be motivated by profits).

IB means carrying business beyond national boundaries including the transaction of economic resources such as goods, capital services (comprising technology, skilled labor, transportation etc.)

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Eg. e.g. Kia Sorrento(Korea car), the CD player from Matsushita Japan, Optical pick up unit from China, mechanical structure & electronic components from Japan then transport the semi finished products to Mexico for final assembly and trucks completed CD players to a US Port & they finally shipped to Kia’s South Korean factory.

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Why to study IB?

IB comprises of a large & growing portion of the world’s total business. Companies irrespective of size always affected by the global events & competition. Thus, most managers, regardless of size & nature need to consider both where to obtain the inputs of your reqd. quality at the best possible price where you can best sell the product or service that you’ve put together from them.

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Why studying of IB is important?Most companies either are international or

compete with international companies.Modes of operations may differ from those

used domestically.The best way of conducting business may

differ by country.An understanding helps you make better

career decisions.It also helps you to decide what

governmental policies to support.

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Map view:

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Factors in increased GlobalizationExpand sales(Tata International)Increased in & advancement of technology.Liberalization of cross-border trade &

resource movement. (Tata Steel, KPO)Minimize risk (Nestle) Cost factor (Toshiba laptop)Counter-CompetitionsChanging political situationsOpenness of economic policies

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MNCs/Transnational/Supranational corp.It is an enterprise with a substantial part of

its operations in a number of foreign countries. For qualifying as an MNC, the numbers of countries where the firm operates must be atleast 6 (Vernox 1971, UN 1978)

Firm must generate sizeable proportion of its revenue from the foreign operation, although no such exact % is agreed upon.

Out of 500 top MNCs, 176 are from US, 81 from Japan, 39 are from France-as per fortune’s annual ranking in July 25. 2005.

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• Year 2007 was a record year for out-bound M&As from India, total 223 deals, worth $33billion were transacted. Average deal size was $58 million in 2006 to $150 million in 2007.

• Europe topped in investment for MNCs with 54%, US ranked as second with 27%.

• Sectorial composition of M&A deals, Metal 56%, engineering 7%, IT 7%, Oil & gas 4%, Pharma & Healthcare 3% and others 23%.

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Types of MNCsEthnocentric Firms

> adopt HOME oriented policy & seldom distinguish between domestic & global operation policy

Polycentric Firms> follow a HOST market oriented

policy.Geocentric Firms

> maintain a balance between HOME & HOST market.

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Indian MNCsTata Group of CompaniesBirla Group of CompaniesReliance GroupHindalco Industries, Aditya Birla

Group(Aluminium & Copper)Dr. Reddys Lab (World best pharmaceutical co.)Dr. Morepen (Self monitoring health care

product)Suzlon Bloomberg (Wind turbine maker)Bharat Forge Ltd. (Producer of machine

components)Sundaram Fasteners (Manufacturer of automotive

components)

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Forces drive Indian to InternationalGo global & take charge, Global mindsetBrand imageCoping StrategiesManagerial Skills to deal with varied

customerWork for team in different cultures &

IntegrationManaging companies through M&AWork under Mutual respect & trust

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Modes of IB:Exports & Imports -Samsung, Tata Motors in 70

countries, Sony (Tv), Matsushita(VCR).Licensing- Xerox with Fuji (Fuji Xerox), Arvind

Brands from Arrow, Lee, Wrangler, Tommy Hilfiger.

Franchising- McDonald strategies of running Restaurant like cooking methods, menu, staffing policies, designs & locations.

Management Contracts- British Airport Authority contract to manage some of the airports of US, Italy & Australia. Disney manages theme park in France & Japan. Tata Tea & Harrison Malayalam contract to manage plantations in Sri Lanka

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Contd..Joint Ventures- IBM with Tata Groups.

TACO(Tata Autocomp Systems) has JV with# Johnson Controls (U.S)# Faurecia (France)# Yazaki Corp.,Yataka Giken,

T.Rad(Japan)# Ficosa International (Spain)# Stadco (U.K)# Owens Corning (U.S.A)# Sungwoo (S. Korean)# Knorr- Bremse (Germany)

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Contd..Turnkey project- Devanahalli airport of Bangalore

is a joint turnkey project of L&T(civil) & Siemens(all technical works).

# IRCON International Ltd. public sector unit of the Ministry of Railways, India.

Wholly –Owned Subsidiaries/ Greenfield Venture- Microsoft in Hyderabad.

# ING group of Netherland formed in 1991 by way of acquisition.

# Tata steel subsidiary unit NatSteel in Malaysia sold its stake 27.03% to southern Steel Berhard, Malaysia.

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Contd..# Elcoteq of Finland entered in India

2005 as Elcoteq Electronics India & OEMS handset with manufacturing 7 infrastructure facilities.

# $ 21.5 billion LG Korean MNC entered in India in 1997 and had a turnover of Rs.6500 crore in 2004.

Strategic Alliances- Motorola of Japan to enter the Chinese market allied with Toshiba for producing microprocessor in 1987.

# Philips allied with Matsushita in 1992 to manufacture the digital compact cassette in order to outclass the mini compact disk developed by SONY.

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Contd..

Mergers & Acquisitions- Roche(Swiss) pharmaceutical co. merged with Chugai(Japan) in 2001.

#Tata Motors (India) acquired Daewoo(Korea)commercial vehicles in 2004 to manufacture 15T GVW to 45T GVW.

# Tata Tea acquired Tetley the 2nd largest tea brand in 2000 and thereby got access to new markets of the developed nations & products both.

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Contd…Contract Manufacturing- Godrej soaps

manufactured Dettol for Reckitt & Coleman.# Clearton for Nicolas Labs.# Ponds Dreamflower & creams

for Ponds.# adidas gets manufactured from

Apache footwear Ltd.(China) on a contract basis, now it wants to estb. A plant in Hyderabad.

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WHY TO GO FOR GLOBAL? Expand Sales- Tata International says “ expansion of sales is

very important to keep the company commercially viable”

E.g. National market of USA is 25%, Japan 15%, Germany 6% and Company wise Nestle derive 98%, Phillips 92% & Coca-Cola 62% of them 50% are of foreign sales.

Acquire resources- For acquiring RM, capital services, technologies components, products, domestic business goes for international.E.g Tata steel supplies FERROCHROME to the quality conscious country Europe & Japan.

Survey by Evalueserve, the share of India in global KPO is 56% & estimated to reach 71% by 2010-2011.

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Contd..Minimizes Risk- Cos. Tries to reduce the

vulnerability to a single economy by having a “BROADER BASE IN MULTIPLE GEOGRAPHIES” that equip better against the downturn. Eg. Nestle

Cost factor- It plays an important role in inclination of org. towards IB and results became more competitive internationally by reducing cost.E.g. Toshiba Laptop (Display +Chips from Japan, Hard drive + microprocessor from US, other components from Singapore & Taiwan and finally assemble in Singapore)

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Contd..Cross national co-operation/Emergence of

supportive institution- Today govt. realized that their own interest can be addressed through international co-operation for gaining the reciprocal advantage, attack problem jointly, deals with area of concern outside the territory of any nation.

E.g. G8(Canada, France, Germany, Italy, Japan, Russia & UK),G20 meet regularly to share information and pool ideas.

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Contd..Changing political situations- End of SCHISM

between non-communist & communist world leads to a great success of IB. E.g.The Govt. now provide an array of services about foreign market, potential buyers & insurance against the non-payment in the home country currency to help domestic companies to sell more abroad.

• Increased global competition- The pressure, both present & potential of increased foreign competition can persuade companies to buy or sell abroad.