Ref: International Business- P Subba Rao

Introduction to International Business

PEST factors & Impact on IB
Investment Management in IB
Multinational Corporations
Globalization
International Organisations and their role in IB
Regional Trade agreements & Free Trade
Agreements
Trade Theories and relevance in IB
International Logistics & Supply Chain
International HR Strategies

International business comprises of all

commercial transactions (private & Govt., sales,
investments, logistics and transportation) that take
place between two or more regions, countries and
nations beyond their political boundries

International Business is the process of focussing on

the resources of the globe and objectives of
organisations on the global business opportunities
and threats, in order to produce, buy, sell or
exchange goods/services worldwide

Generating Revenue
Corporate image and Brand building
Customer satisfaction and building loyalty
Generation of employment opportunities
Corporate governance
Adhering local rules and regulations

Approach: Ethnocentric Vs Polycentric/

Regiocentric/ Geocentric
Geographic Scope
Operating Style
Environment: known Vs Unknown
Effect of Govt. imposed Quotas & Tariffs
Effect of currency fluctuations
Effect of change in culture
Import- Export procedures
Human Resources
Markets & Customers

Managing Product Life cycle

Wider market
Economics of scale
Corporate ambition
Technology advantage
Building a corporate image
The spirit of younger generations in the
organisation
Utilization of Incentives
Labour advantage
New business opportunities

Earning for foreign exchange

Better socio-economic welfare of citizens
Interlinking Trade & Diplomacy
Interdependency for various products
Knowledge transfer
Infrastructure investment & hence betterment
Utilization of core competency
Optimum utilization of natural resources
Countrys brand image
Foreign trade policy
Global standing among organizations like the
WTO

To achieve higher profits

Expanding Production capacities beyond
domestic demand
Severe competition in Home country
Limited Home market
Political stability
Availability of Technology & HR
High cost of Transportation
Nearness to raw material
Liberalisation & globalisation
To increase market Share
Tariffs & Import Quota

High living standards

Increased Socio-economic welfare
Wider market
Reduced effects of business cycle
Reduced risk
Larger economies of scale
Potential untapped market
Knowledge transfer leading to growth of domestic
players
Division of labour & specialisation
Optimum utilization of the world resources
Cultural transformation

For multinational companies,political riskrefers to

the risk that a host country will make political
decisions that will prove to have adverse effects on
the multinational's profits and/or goals.
Type of political system: Democratic (Two party,
multi-party, single-party, one-party dominated) &
Totalitarian
Political risks:

Confiscation
Expropriation
Nationalisation
Domestication
General Instability (corruption, social unrest, attitudes,
Govt. change)
Operation risk

How to minimize political risks:

Do not enter without thorough research and have
regular risk audits
Stimulation of local economy
Employment of Nationals
Sharing ownerships
Being Civic minded
Political neutrality
Behind the scenes lobbying
Buy insurance
Keep exit strategies ready

Economic system is an organization of institutions

established to satisfy human needs/wants

World Bank classifications of economies on per

capita income
Low Income countries: USD 755 or less (Also
called third world or pre-industrial countries)
Lower middle Income countries: USD 756 to USD
2,995 (less developed countries)
Upper middle Income countries: USD 2,996 to
USD 9,265 (industrialising countries)
Higher Income countries: USD 9,266 or more (first
world countries or post-industrial countries or
advanced countries)

Macro Issues affecting Business decisions

Economic growth
Inflation
Balance of Payments
Economic transition

Culture is the combination of many elements that

might Collaborate together to create a unique
society
Communication differences
Communication through languages

Over punctuate
Make one point at a time
Confirm discussion in writing
Research and adjust language to level of your counterpart
Use visual aids whenever possible
Avoid jargons

Basically speak as if you are answering a slightly

deaf, very sick old aunt, who just asked you how
much to leave for you in her will

Non-verbal communication
Time & culture
Space & culture
Agreement & Culture
Friendship first or business first?
Negotiation & culture
Superstition & culture
Gifts & culture
Behavioral factors: motivation, power distance,
individualism vs. collectivism, risk-taking
Behavior

Social factors:

RELIGION

Family System

How to deal with these risks?

Thorough research on the culture & religion
before entering the market
Start with small focus group & then expand after
learning from experiences
Audit regularly and make adjustments whenever
required
Be cautious while communicating: spoken &
written language, translating & silent language
Attention to basics:
Respect human values & human rights
Respect local tradition
Consider situation factors while deciding what is ethical
and what is not

Tendency to invest in technology

Lower technology knowledge can keep the
country poor
Inventions & global competitiveness are two
determinants of a nations wealth (USA, Japan,
Germany)
International business spreads technology from
advanced countries to developing countries by:

Establishing subsidiaries
Establishing JV
Acquiring or merging with host countrys firms
Forming technological transfer

Advantages of technology
Reducing the size of the inventories
Reducing delivery time
Reducing unproductive waiting time
Reducing the incidents of stock-outs and stock sales
Responding to market changes at a faster rate
Reducing rush orders
Cutting down overproduction
Reducing unnecessary forwarding and back tracking
Reducing paperwork and wasteful process
Planning production levels accurately
Reducing/ avoiding physical movement of
stakeholders

Steps for technology transfer

Note Technology level of the industry in home
country
Note Technology level of the industry in proposed
country
Compatibility between the two technologies
Compatibility with the host countrys culture and
customers
If incompatible, select appropriate median
Study knowledge transfer rules and regulations of
host Govt.
Finalise technology transfer mechanism
Study technology transfer effects on environment
including home countries regulations

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4.
5.
6.

Cadbury worms fiasco

Cola pesticide fiasco
Daiichis Ranbaxy acquisition fiasco
Tata Corus Union trouble
Nestles two minutes million dollar controversy
KFC/ McDonalds Beef controversy

Why do companies and the countries enter into

International Business when the opportunities
exist in domestic business (10 marks) Nov 2008
What do you mean by risk analysis and to what
extent companies use this tool for framing
policies in International Business both at the time
of entry and operations (10 marks)- Nov 2009
International business is more complex than
Domestic business. Define IB; state its objectives
and give an overview of IB comparing with
domestic biz. (10 marks)-Nov 2010

Country risk and political risk studies are important

before one enters IB. Explain in detail the process of
Country Risk and Political Risk analysis (10 marks)Nov 2010
Describe the political, social, economic and other
factors in IB environment. How do these affect the
country selection for new companies to enter
international markets (10 marks)-Nov 2012
Explain some non-Tariff barriers in International
Trade with examples (10 marks)- Nov 2013
IB is more complex than Domestic Business. Discuss
with suitable examples (10 marks) Nov 2014

Explain EPRG [ Ethnocentric, Polycentric,

Regiocentric & Geocentric] orientation of
management models with suitable examples of
MNCs operating in India (10 marks)- Nov 2014
Besides Economic factors, which other factors
have a bearing on International business?
Substantiate your answer with suitable examples.
(10 marks)- Nov 2014