1. 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 1

2. International Business Management Unit 1 - Session 1 2

3. Reading Daniels John D, Radebaugh Lee H & Sullivan Daniel P, International Business:Environment and Operations, 10 th Edition, Pearson P. Subba Rao, International Business: Text and cases, 2 nd Edition, Himalaya Publishing house Doing Business in 2006- World Bank World Development Indicator-World Bank 3

4. 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 4

5. International Business Sales & Service Purchase or consumption Investment Transport 5

6. 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 6

7. Why companies engage in International Business?? To expand market for Sales & services To acquire resources To minimize Risk 7

8. Increase Sales ? Utilization of capacity –Leads to lower allocated cost Market expansion Higher profit 8

9. 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 9

10. Minimize Risk Domestic business cycles Seasonality Government hostility Competition targeting 10

11. 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 11

12. 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 12

13. 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 13

14. 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 14

15. Strategic Orientation Domestic Market Extension Multi Domestic Market Concept Global Concept 15

16. 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 16

17. 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 17

18. 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 expansion 18

19. Competitive Strategies Globally standardized vs. Nationally responsive Country vs. Company competitive Sovereign vs.Cross National Relationship 19

20. 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 20

21. 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 21

22. 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 22