Introduction to International Business, Globalization and Trading Environment of International Trade

International Business Management

Mrs. Charu Rastogi, Asst. Prof.

Agenda

Meaning and features of International Business Management Globalization

Meaning Dimensions Stages Boon or bane

Trading Environment of International Trade

Mrs. Charu Rastogi, Asst. Prof.

International Business Mgt : Meaning

Very simply, IB refers to business transactions crossing national borders at any stage of the transaction. It refers to all business activities which involve cross border transactions of goods, services, resources between two or more nations. Transaction of economic resources include capital, skills, people etc. for international production of physical goods and services such as finance, banking, insurance, construction etc.

Mrs. Charu Rastogi, Asst. Prof.

International Business Mgt : Features

Large scale operations Integration of economies (uses diff resources from diff countries) Dominated by developed countries and MNCs (as they have the best financial, human and technical resources) Benefits to participating countries (foreign capital, technology, industrial dev, employment) Keen competition (weak position of developing cuntries) Special role of science and technology International restrictions (on capital and technology flow; barriers, duties, trade blocks are there) Sensitive nature (Any changes in the economic policies, technology, political environment, etc. have a huge impact)
Mrs. Charu Rastogi, Asst. Prof.

Globalization : Meaning
IMF defines globalization as: the growing economic interdependence of countries worldwide through increasing volume and variety of crossborder transactions in goods and services, freer international capital flows, and more rapid and widespread diffusion of technology Globalization is the movement towards the expansion of economic and social ties between countries through the spread of corporate institutions and the capitalist philosophy that leads to the shrinking of the world in economic terms It is characterized by growing economic, financial, trade, and communications integration.

Mrs. Charu Rastogi, Asst. Prof.

Mrs. Charu Rastogi, Asst. Prof.

Mrs. Charu Rastogi, Asst. Prof.

Globalization : Dimensions

Economic: global finance and economy, multinationals, networking, international trade and business, new labour markets, new development cooperation Political: human rights, international terrorism, war and new security problems Democracy: good governance by peoples participation, Human rights. Ecological: sustainable globalization: use of common resources and legislation (biosphere; water, forest, earth, air, atmosphere) Cultural: multicultural society of different identities: local, political, gender, family, religious, national, Mrs. Charu Rastogi, Asst. Prof. individual and social.

Stages of Globalization
Stages 1. Domestic 2. International 3. Multinational Multinational 4. Global Global

Strategic Orientation

Domestically Oriented

Export Oriented, Multi-domestic

Stage of development

Initial foreign investment

Competitive positioning

Explosion of international operations Somewhat important The least cost way

Global

Cultural Sensitivity Manager Assumptions

Of little importance

Very Important

Critically Important Many good ways

One best way

Many good ways

Mrs. Charu Rastogi, Asst. Prof.

Stage 1: Domestic

Market potential is limited to the home country. Production and marketing facilities located at home Surplus may or may not be exported No overt efforts to develop foreign markets

Mrs. Charu Rastogi, Asst. Prof.

Stage 2: International

Which markets to enter? Market entry strategies

Off-shoring / global outsourcing (seeking cheaper source of raw material or labour) Exporting Licensing Franchising Joint Ventures / Acquisitions Direct Investments

Mrs. Charu Rastogi, Asst. Prof.

Stage 3: Multinational
The domestic based company begins to carry out its own manufacturing, marketing and sales in the key foreign markets. The company moves to a full insider position in these markets, supported by a complete business system including R & D and engineering. This stage calls on the managers to replicate in a new environment the hardware, systems and operational approaches that have worked so well at home. It forces them to extend the reach of domestic headquarters, which now has to provide support functions such as personnel and finance, to all overseas activities.

Mrs. Charu Rastogi, Asst. Prof.

Stage 4: Global

The company moves toward a genuinely global mode of operation. To make this organizational transition, a company must denationalize their operations and create a system of values shared by corporate managers around the globe to replace the glue a nation based orientation once provided. Today's global corporations are nationality-less because consumers have become less nationalistic. True global corporations serve the interests of customers, not Governments. They do not exploit local situations and then repatriate all the profits back home, leaving each local area poorer for their having been there. They invest, they train, they pay taxes, they build up infrastructure and they provide good value to customers in all the countries where they do business. IBM Japan, for instance, has provided employment to about 20,000 Japanese and over the past decade has provided three times more tax revenue to the Japanese Government than has the Japanese company Fujitsu
Mrs. Charu Rastogi, Asst. Prof.

Globalization : Boon or Bane

One mans food is another mans poison.

Mrs. Charu Rastogi, Asst. Prof.

Trading Environment of International Trade

Mrs. Charu Rastogi, Asst. Prof.

Trading Environment of International Trade

Foreign Environment (Uncontrollables)

7. Structure of Distribution 1. Competition Domestic environment (Uncontrollables) Environmental uncontrollables country market A

(Controllables) 1. Competition 2. Technology Price Product 5. PoliticalEnvironmental Target 7 Market uncontrollables 6. Geography and Legal country Promotion Place 2 .Technology Infrastructure market B 4. Culture Environmental 3. Economy uncontrollables 5. Political3. ECONOMY country Legal market C 4. Culture
Mrs. Charu Rastogi, Asst. Prof.

Trading Environment of International Trade

Mrs. Charu Rastogi, Asst. Prof.

Mrs. Charu Rastogi, Asst. Prof.