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People are able to recall
• 20% of what they read• 30% of what they hear• 40% of what they see• 50% of what they say• 60% of what they do• 90% of what they see, hear, say, do
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International Business Management
Unit 1 - Session 1
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Reading
• Daniels John D, Radebaugh Lee H & Sullivan Daniel P ,
International Business:Environment and Operations, 10th Edition, Pearson
• P. Subba Rao, International Business: Text and cases, 2nd Edition, Himalaya Publishing house
• Doing Business in 2006- World Bank
• World Development Indicator-World Bank3
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What is International Business?
• Commercial Transaction– Buying, Selling or providing services (value
addition)– Movement of goods or services across
sovereign borders– Reverse movement of consideration- Money– Motive- Profit ( short term or long term)– Governments may do business without profit
motives
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International Business
• Sales & Service
• Purchase or consumption
• Investment
• Transport
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Why International Business?
• Competition in Domestic Market• Limitation of domestic market- size, product
acceptance• Availability of resources at cheaper prices• Sales at higher prices compared to domestic
market• Too much profit variation in domestic market
( seasonality, Business cycle)• No market for your product in domestic market-
Statutory and environment restriction
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Why companies engage in International Business??
• To expand market for Sales & services
• To acquire resources
• To minimize Risk
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Increase Sales ?
• Utilization of capacity– Leads to lower allocated cost
• Market expansion
• Higher profit
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Acquire Resources
• Products and services– Domestically not available– Cheaper overseas– Better quality which could give market edge
• Investment, technology, service, & information– Not available in the domestic market– Cheaper and abundant– Technologically superior
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Minimize Risk
• Domestic business cycles
• Seasonality
• Government hostility
• Competition targeting
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Why study International Business?
• India moving fast from Developing economy to Developed economy
• We will soon overtake most countries in the world in terms of size of economy– By 2020- we will be # 3– By 2050- We will be # 1 ????
• The growth will come through expanding Indian business across the globe
• India has opened its gate for International business in sales& services as well as Investment
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Reasons for Growth
• Expansion of Technology
• Liberalization of government policies relating to movement of goods and services.
• Development of institution to support International trade ( Support services)
• Increased global competition
• Consumer pressure
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Modes of International Business
• Merchandise Import and Export
• Services Import and Export– Tourism & Transportation– Performance of services– Use of assets
• Investment– Direct (FDI) -Controlling interest– Portfolio- Investment without controlling
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International Companies
• Multi domestic companies– Treats each market separately and has country-specific
strategies• Multinational Companies
– Global approach to foreign markets and production; will consider marketing and locate production facility anywhere in the world
– Must have operations in more than one country • Transnational Companies
– Company owned and managed by nationals in different countries.– An organisation in which capabilities and contribution may differ by
country but are integrated in worldwide operations
• Global Companies– Company which will integrate its operations that are located in
different company
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Strategic Orientation
• Domestic Market Extension
• Multi Domestic Market Concept
• Global Concept
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External Influences on International Business
• Physical and Societal Factors– Political
• India and Pakistan; USA and Cuba– Legal
• Domestic laws- Host and Home countries• Taxation, Forex, Distribution, IP
– Cultural• Interpersonal, social behavior, mental attitude
– Economic• Income Level, Distribution, Growth rate ,Economic status
– Geographical• Mountain, Deserts, Frequency of Natural disasters, climate etc.
– Historical• Affects Culture, behavior
• Competition
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Competition
• Strategy depends on the competition in the local market as well as in other countries where they face each other
• Marketing innovation– Companies surprise their competitors by marketing
innovations
• Number of competitors, capability of competitors• Competitive difference in the individual countries
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Patterns of Expansion
• Passive to Active Expansion– Passive response to proposal – Active search for opportunities
• External to internal handling of operation– Use of intermediary– Handling the operations by themselves
• Deepening mode of commitment– Export Import-Marketing with no production– Marketing & Production in one country– Marketing & Production in many countries with centralized control– Production and marketing in individual country with local decision
making
• Geographic Diversification– One- many- several
• Leapfrogging of expansion18
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Competitive Strategies
• Globally standardized vs. Nationally responsive
• Country vs. Company competitive
• Sovereign vs.Cross National Relationship
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Goals of IB
• 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
• Political stability Vs. Political Instability
• Availability of technology and competent human resources
• High cost of transportation
• Nearness to raw materials
• Availability of quality human resources at less cost
• Liberalization and globalization
• To increase market share
• To achieve higher rate of economic development
• Tariffs and import quotas
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Advantages of IB
• High living standards
• Increased socio-economic welfare
• Wider market
• Reduced effects of business cycles
• Reduced risks
• Large-scale economies
• 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 word into a closely interactive traditional village
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Problems of IB
• Political factors
• Huge foreign indebtedness
• Exchange instability
• Entry requirements
• Tariffs, Quotas and trade barriers
• Corruption
• Bureaucratic practices of government
• Technological pirating
• Quality maintenance
• High cost
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