Unit 1 Notes - International Business Management - KMB302

Faculty: Mr.
Atul Stanley Hermit

Assistant Professor,
United Institute of Management, Prayagraj
IBM 2020, Atul Stanley Hermit
International Business
Management
Unit 1: Introduction
CONTENTS
Meaning
Reasons to Study
Drivers
Influencing Factors
International Business Management
An Overview
Domestic vs. International Business Management
Multinational Enterprise and Corporation
Types of Operations
Modes of Entry
Globalization
An Overview
Drivers
Stages
Dimensions
International Business Environment
Economic, Political, Social & Cultural, Technological Natural Environment
International Business – Meaning

Simply speaking, International Business involves the cross-border trade transactions of
goods and services between two or more countries. International Business transactions
can include the transfer of technology, managerial knowledge, and capital from one
country to the other.
The international business transactions can also include transactions involving economic
resources which include capital, skills, and knowledge of people for the purpose of the
international production of physical goods and services such as finance, banking,
insurance, and construction.
As such, International Business refers to the commercial exchange of products and
services among individuals and trading companies from different countries. The study
area of international business provides an extensive understanding of international
markets and managing cross-border transactions that support business development.
International Business is also known as ‘Global Business’.
International Business – Meaning (Cont.)

The meaning and scope of International Business includes the
various commercial and business transactions that take place
between two or more regions and countries beyond their
physical and political boundaries. These transactions can
include or/and result in:
1. Product presence in diverse markets of the world.
2. Production bases across various countries.
3. Highly diversified human resource base in different
countries.
4. Investment in various services industries rendering
services to different parts of the world.
5. Transactions involving intellectual property rights
(IPRs) between two or more countries.
Reasons to Study International Business

1. Companies are increasingly sourcing their human resource requirements globally. A prior
understanding of the international business, its complexities, opportunities and
challenges, etc. helps prepare management students for possible international business
assignments.
2. Most of the products utilized everyday are supplied by global businesses. The knowledge
and awareness of how an international business operates helps the consumers
understand and appreciate the international brands (such as Sony, Toyota, Nike, Gap T-
Shirts, etc.) and the quality of goods and services these bring in with them.
3. Managing an international business is more complex and difficult in comparison to
running a domestic business. Nevertheless, as most of the companies are getting
affected by or are involved in international business transactions, today’s managers
are required to mandatorily have an in-depth knowledge of these transactions.
4. The study of international business & its management helps in understanding and
appreciation of the important roles the governments of various nations play in
furtherance of this role. Governments of two or more countries facilitate international
business transactions through bi-lateral or multi-lateral trade agreements.
Reasons to Study International Business

(Cont.)
5. The competitive edge and advantages (enabled by international business and) enjoyed
by specific countries globally is importantly based on the skill, knowledge and expertise
of its business executives and professionals. The respect and acknowledgement for India
in the Information Technology arena comes from years of dedicated hard-work by
business leaders like Mr. Azim Premji and Mr. Narayan Murthy. The skills and expertise of
these contemporary business leaders has influenced successful business strategies and
resource allocations to enable a leadership business position for the country.
6. More employment opportunities are available beyond the national boundaries of a
country as international business also continuously enables the balancing of shortage of
skilled human resources (mainly in developed countries) with surplus manpower
(available in developing countries with large populations).
7. The state-of-the-art technology, best human resource practices, advanced inventory
management techniques and operation management practices utilized by the global
enterprises, enable the local businesses to also become aware of these, incorporate
these and benefit from these practices and techniques. A local vendor supplying
components to Toyota will automatically incorporate the most updated supply chain
techniques used by the automotive giant.
Drivers of International Business

A number of developments around the world have facilitated and
promoted international business. These are:
1. Markets in developing economies as huge potential markets.
2. Low location costs and associated advantages in emerging
countries.
3. Changing demographic patterns of countries.
4. Boost given to the world trade and business by regional trading
blocks such as ASEAN, BRICS, SAARC.
5. Advancements in technology that enables trade.
6. Availability of services in most countries to support international
business.
7. Huge earning potential in international business as the
motivation factor for organizations.
8. International business is facilitated by world institutions like
WTO, etc.
Factors Influencing International

Business (1/3)
1. Economic policy and scenarios in the transacting countries – Developing & developed
countries undertake different business transactions with other countries. Moreover, a
capitalist economy will differ from a socialist economy in its business transactions.
2. Legal systems in these countries – are generally based on one of four basic legal systems:
civil law, common law, statutory law, religious law or combinations of these. Legal system
of each country is shaped by its unique history & hence incorporates individual variations.
3. Political systems – A political system is a system of politics and governance. The type of
political system prevalent in a country (a democratic political system, a dictatorship, a
monarchy coupled with democracy) also decides on the extent of and type of international
business transactions that country enters into with other countries.
4. Living standards of people (per capita income, etc.) – Developed nations & the high living
standards of the people in those nations, do allow international business transactions of
only quality goods and services. On the contrary, developing nations are more liberal in
allowing the business transactions of quality as well as sub-standard goods & services
(often consumed by poor people in these countries) with other countries.

Business (2/3)
5. Accounting Standards – the existence of a mature accounting system in a country that is very capable of
correctly accounting for the domestic and international transactions as well as being in sync with (& at par
with) the international accounting standards, facilitates the international business & transactions with
other countries. Indian accounting system (based on double entry system book-keeping) is in sync with
international accounting standards like US GAAP, to facilitate international business for India.
6. Language and Ease of Conversations – the more easy it is for the people of a country to communicate
with the people of other countries and understand (& relate to) their culture, traditions, etc. the greater is
the possibility of international business relations between the two countries.
7. Labour Standards & laws – The existence of stringent and well thought of labour and (minimum) wages
laws also do determine the international business transactions in a country. Example, assembling units of
Apple iPhone are mostly situated in China and not India as Indian labour laws do not allow very long
working hours, very low wages and inhuman working conditions, otherwise prevalent in China, thereby
helping very low cost production of cell phones.
8. Environmental standards (climate consciousness, etc.) – The level of environment standards and the
consciousness to maintain and improve the climatic conditions in ones’ own country also determines
the international business transactions. Countries, particularly the developed nations, do prefer to
import goods (especially those, the manufacturing of which has a climatic cost in terms of air/water
pollution) rather than produce these within the country. Such decisions also lead to international
business transactions.

Business (3/3)
9. Existence of corporate entities & laws – The extent to which the corporate entities and laws have been
developed & matured in a country, also has an impact on the type of international business transactions
that that country can enter into with other countries. For example, the Indian corporate laws as well as
Ministry or Corporate Affairs, Government of India, has a great influence in not allowing international
business transactions that are detrimental to or against the applicable Indian laws.
10. Policy to control foreign exchange transactions – The Government policy to control and allow only
legitimate foreign exchange transactions in international business transactions also affects the extent of
these transactions. Foreign Exchange Management Act (or FEMA) allows for payments and receipts of
foreign exchange through legitimate sources only. The law discourages illegal payment channels or
unaccounted sources like ‘Hawala’.
11. Existence of trade agreements (bi-lateral, tri-lateral or multi-lateral) to facilitate international
business – the existence of bi-lateral or multi-lateral agreements for trade and commerce between two
or more countries provides the basic framework in terms of the required regulations, rules and
guidelines to facilitate trade. Existence of these agreements provides an understanding of the areas in
which international business transactions are feasible.
12. Existence or absence of Tariffs – Traditionally, tariffs are known to discourage the free movement of
goods and services between two countries. In older days, tariffs used to be implemented by the
governments to support the development of domestic organizations and protect them against undue
international competition. With global trade becoming more of a necessity, the concept of tariffs (or the
restrictions/limitations imposed on international trade) has become almost redundant and unnecessary.
CONTENTS
Meaning
Reasons to Study
Drivers
Influencing Factors
An Overview
Types of Operations
Modes of Entry
Globalization
An Overview
Drivers
Stages
Dimensions

‘International Business Management’ or ‘International
Management’ is all about the management of the business
operations for an organization that conducts business in more
than one country. International management requires the
knowledge and skills above and beyond normal business
expertise, such as familiarity with the business regulations of
the nations in which the organization operates, understanding
of local customs and laws, and the capability to conduct
transactions that may involve multiple currencies.
In simple words, International Management may be
understood as the comprehensive management of those
business transactions which go beyond the national
boundaries.
Domestic Business Management vs.

International Business Management (1/2)
A few differentiate points between the management of international business and that of the
domestic business are:
1. Countries are different, and so are the prevalent tastes and preferences of people, their
customs and traditions, etc. – While the domestic businesses are aware of the local tastes &
preferences, it may take considerable time for an international business to understand these for
the people in the foreign country (they are approaching for business) and successfully adopt their
goods and services to these local tastes and preferences. For example: McDonalds had to bring in
pure vegetarian menu to some of its outlets in the Indian states of Gujarat & Maharashtra to suit
local eating habits. This experience (of selling only vegetarian food) was very new to them.
2. Problems confronted by an international business (& its managers) are bigger and more
complex than those faced by the domestic businesses – The domestic business organizations are
aware of the environment, business regulations and laws, limitations, etc. that they have to live
with when the operate in their base country. For an international business organization, the local
consumer and business needs, regulations, government intervention and local traditions,
climate, etc. are unique and different for each of countries that they operate. International
businesses have to overcome a herculean task of successfully understanding each of these
aspects with respect to a foreign country and then successfully adapt to these to carry on their
business operations efficiently.
Domestic Business Management vs.

International Business Management (2/2)
3. Managers in international businesses must find out the ways to work within the limits of the
governments (both local/home and foreign governments) in the international trade and
investment system – Though the domestic business managers also do face these limitations in
their business operations, they are often more quick to adapt to these as the awareness of these
limitations is imbibed in their psyche from the very beginning.
For example: A European food & beverage company which is used to operating its restaurants 24-
hours a day, will have to get used to working in the very limited business hours in India, especially
the smaller cities and towns.
4. International businesses involve exchange of foreign currencies into home currencies and vice-
versa. Thus the application of foreign exchange & interest rate risks – As the domestic business
organizations do operate only the home currency, they do not face such risks.
CONTENTS
Meaning
Reasons to Study
Drivers
Influencing Factors
An Overview
Types of Operations
Modes of Entry
Globalization
An Overview
Drivers
Stages
Dimensions
Multinational Enterprises / Corporations

A Multinational Enterprise (MNE) is a company that has a
worldwide approach to markets and production or/and with
operations in 2 or more countries. Usually, a Multinational
Enterprise (MNE) is a state-owned enterprise and is different from
a Multinational Corporation (MNC) which is a private company
with operations in many countries.
An MNC (or an MNE) is an organization that engages in production
or service activities, through its own affiliates, in several countries,
maintains control over the policies of those affiliates and manages
work & business from a global perspective.
Well-known MNEs & MNCs include:
Fast-food companies such as McDonald's and Yum Brands
Vehicle manufacturers such as General Motors, Ford Motor
Company and Toyota
Consumer-electronics producers like Samsung, LG and Sony
Energy companies such as ExxonMobil, Shell and British
Petroleum
Multinational Enterprises / Corporations

(Cont.)
Objectives of an MNE / MNC
The fundamental objective of an MNC is to earn profits, thereby increasing the wealth of
its promoters / investors and increasing its operations an size. The main objective of an
MNE can, however, be to achieve a better quality of life for its citizens and ensuring
regional trade cooperation and development.
Below mentioned are some of the usual goals of an MNC:
To manufacture goods in those countries where the MNC finds a greater competitive
advantage.
To purchase and sell goods (including raw material / semi-finished goods) in other
country(s) with most favourable price advantage.
To benefit from the changes in labour costs, productivity, trade agreements and
currency fluctuations.
To expand business in various countries with suitable environment.
To manage business/trade risks through diversification across geographic locations.
To maintain and improve technological and other company strengths.
To maintain control over subsidiary companies / affiliates, while helping them
achieve success in their respective area / region of operations.
Type of Operations of an MNE / MNC

1. Merchandize Exports: Export of goods only and not including services.
2. Merchandize Imports: Import of goods only and not including services.
3. Export or import of services only (not including merchandize) can happen in formats
such as:
a. Tourism and transportation
b. Service performance
c. Asset usage & maintenance
d. Finance & Insurance services
e. Export or import of both goods and services.
Modes of Entry (1/4)

A multi-national enterprise or corporation carries its operations of
export or import (or both) or goods / services / both via the
following routes (in order of least to most risky):
1. Wholly owned subsidiary (e.g. Vodafone India) – full control of
the MNC with new business establishment.
2. Merger or acquisition (e.g. Rosneft Oil Company acquiring Essar
Oil) – Merging with an existing business or taking over an existing
business to reap the benefits of an already existing market share.
3. Alliance or Joint ventures (e.g. Air Asia, a JV between Tata group
and Singapore Airlines) – coming up with a new company, jointly
with a business partner established in the foreign country to take
up related business activities.
4. Licensing (e.g. Jubliant Food Works Ltd. In India for Dominos Pizza)
– Not taking up a direct work but assigning rights and authority to
a domestic entity in the foreign country to use the brand name of
the MNC and conduct business in its name.

Trade Related Entry Modes
1. Exporting – involves exporting goods directly to the foreign customers.
2. International Sub-contracting – occurs when a firm in host country has surplus
manufacturing capacity and agrees to loan the surplus capacity to an independent entity
for capacity utilization.
3. Countertrade – involves countries exchanging goods for goods or services, which are paid
for (at least in part) with goods or services from a foreign country, along with a monetary
transaction. For example, India can offer to export wheat in return of crude oil.
4. Management Contract – enforceable agreements on trade related activities. A
management contract is a legal agreement that grants operational control of a business
initiative to a separate group. For example, the non-resident owners of a star-hotel in
India might award a hotel management contract to an operations firm with expertise in
hospitality industry to run the hotel on behalf of the former.

Transfer Related Entry Modes
1. International Leasing – The international lease is the agreement between the lessor and the
lessee (usually residing in different countries); wherein the lessor grants permission to the lessee
to use his property in return for periodical rental payments. For example, Leasing company
Meridian arranges international leasing for equipment exports to creditworthy foreign lessees
and also provides other export financing alternatives.
2. International Licensing – An international licensing agreement allows foreign firms, either
exclusively or non-exclusively, to manufacture a proprietor's product for a fixed term in a specific
market. For example, Warner Bros license their motion pictures to be showcased in different
parts of the world.
3. International Franchising – International franchising is a strategic way to reduce dependence on
domestic demand and grow new, future revenue and profit centers worldwide. Extending a brand
globally through franchising involves a low risk, requires minimal investment and offers a huge
upside potential for scaling capabilities. For example, McDonald’s provides franchise rights to own
and operate its stores outside the US.
4. Build-operate-transfer (BOT) – for Turnkey projects: For example, the contractors investing in
building/developing the expressing ways in India, operate these for sometime and collect
revenue from the road usage (in form of tolls) before transferring the ownership to the
government/state.

Foreign Direct Investment (FDI) related Entry Modes
1. Branch office – A branch office is a location, other than the main office, where business is
conducted. For example, Starbucks has branch offices to better serve their retail stores' district
managers in a more cost-effective manner.
2. Co-operative joint venture – In cooperative joint ventures companies have the choice to
organise themselves as a limited liability company or as a non-legal person in which the
partners are subject to unlimited liability. This means that the partners are entirely liable for
losses the joint venture may incur.
3. Equity joint-venture – An equity joint venture (EJV) is an agreement between two companies
to enter into a separate business venture together. ... This shields each partner and business
from liability. Each partner participates in gains and losses according to the percentage equity
ownership they have in the joint venture
4. Wholly owned subsidiary – A wholly owned subsidiary of the MNC manages and operates the
business under its brand name.
CONTENTS
Meaning
Reasons to Study
Drivers
Influencing Factors
An Overview
Types of Operations
Modes of Entry
Globalization
An Overview
Drivers
Stages
Dimensions
Globalization
The world is moving to a scenario where barriers to cross-border trade and investments are
declining; perceived distance is shrinking due to advances in transportation and
telecommunications technology; business culture is starting to look similar the world-over; and
national economies are becoming more interdependent, integrated global economic system. The
process by which this transformation is occurring is commonly referred to as globalization.
The first 2 causes i.e. the declining barriers to cross-border trade and investment and advancements
to transportation and communication technologies are the main contributors to increasing
globalization.
Globalization can be referred to as the opening of local and national perspectives to enable a
broader, interconnected and independent work scenario with free transfer of capital, goods and
services across the national frontiers. In simple words, globalization is the process by which
businesses / organizations develop international influence or start operating on international scale.
Globalization refers to the shift towards a more integrated and interdependent world economy.
Globalization has several facets, including the globalization of markets and globalization of
production.
Globalization is the free movement of goods, services and people across the world in a seamless and
integrated manner. Globalization can be thought of to be the result of the opening up of the global
economy and the concomitant increase in trade between nations.
Globalization (Contd.)
Globalization of Markets – refers to the merging of the historically distinct and separate national
markets into one huge global marketplace.
The international businesses are increasingly looking at the creation of a global marketplace for their
goods and services, more so as the tastes and preferences of the consumers in different nations are
beginning to converge on or confirm to some global norms. Products & services such as McDonald’s
Hamburger, Starbucks’ Coffee, Coca-Cola Soft Drinks are classic examples of globalization of markets.
However, significant differences do still exist among national markets along many relevant
dimensions, including consumer tastes and preferences, distribution channels, culturally embedded
values systems, business systems and legal regulations. These differences frequently require
international companies to customize marketing strategies, product features and operating practices
to best match the conditions in a particular country.
Hence, the globalization of markets does not necessarily happen typically for markets for consumer
products – where national differences in tastes and preferences can still act as globalization
deterrence – but for the markets for industrial goods and materials that are kind of uniform and
serve the inputs needs (for further processing to consumer goods) the world over. Markets for
commodities such as aluminium, oil and wheat, etc.; industrial products such as microprocessors,
computer memory chips for computers; and jet engines, aircraft assemblies for jet aircrafts are the
global markets.
Globalization (Contd.)
Globalization of Production – refers to the sourcing of goods and services from locations around
the globe to take advantage of national differences in the cost and quality of the factors of
production (such as labour, energy, land & capital, etc.). Through specific sourcing, the
multinational companies hope to keep their overall production costs at the bare minimum while
ensuring best quality of goods /services / both that they in turn render to the consumers in
various locations in the world, most competitively.
The concepts of specialization and division of labour also ensure that the local vendors /
producers are able to very competitively provide the global firms the sourcing opportunities the
later are looking for.
For example: The sourcing of various parts of the Boeing Dreamliner aircraft happens from
vendors and suppliers located in various nations, primarily Japan, South Korea and Taiwan, etc.
Part of the Boeing rationale for outsourcing a large proportion of its production to foreign
suppliers is that these suppliers are best in the world at their particular activity. Also, a global web
of suppliers yields a better final product, which helps Boeing enhance changes of winning greater
business (in terms of total number of aircraft ordered) vis-à-vis its competition (Airbus, Embrear,
etc.)
Drivers of Globalization (1/2)

The main factors responsible for an increased globalization are:
1. Declining Trade and Investment Barriers – Establishment of GATT (General Agreement on Trade &
Tariff) and then the WTO (World Trade Organization) have significantly helped to enhance global
cooperation on international trade & business. Also, the interdependence of various countries on
each other for the fulfilment of their sustenance needs has also encouraged global trade and
business. These have resulted in the decline/elimination of trade and investment barriers, while in
turn promoting globalization.
2. The Role of Technological Change – The changes ushered in by the technological advancements,
mainly in the areas of telecommunication, transportation and the digital transactions enabled using
microprocessors in computers, as well as the increased usage of internet for trade & commerce has
helped promote globalization immensely. Technology has enabled faster, safer and efficient means
of transport of human beings & cargo to almost any part of the world, thereby enabling global trade.
3. Changes in the demography of world population – Compared to the olden days, people are now
more willing and capable of travelling to the different regions and places for better employment
opportunities & livelihood sources. This capability and readiness has been based on better health
services, living standards and importantly far more business or trade opportunities.
Drivers of Globalization (2/2)

4. Changing Foreign Direct Investment Picture – New areas and modes of investment in the world
coupled with newly developed countries (Western Europe, Middle East countries) willing and
capable of foreign direct investments has encouraged global trade. Also, the various countries being
increasingly aware of the new investment opportunities that are existing elsewhere in the world, the
scope for foreign direct investment has increased considerably.
5. Changing Nature of Multinational Enterprises – Global trade has also got promoted based on
notable changes in form of: (1) Non-US multinational enterprises coming up and gaining dominance
in the business world; (2) Growth of mini-multinational enterprises and their contribution towards
the expansion of global trade, commerce and the required investments.
Stages of Globalization
A business organization typically goes through below four stages in its conversion from a domestic company to a
truly global firm:
1. Domestic Stage – In this stage, the market potential of the concerned business organization is limited to just its
home country. It is only capable of selling its goods and services within the country of its origin, as it is aware of
the regulations and laws, customs, traditions and tastes & preferences. Here, the production and marketing
facilities (including the distribution channels & retail stores owned/managed by the company) are all located
within the national boundaries of the home country.
2. International Stage – After a domestic company has achieved optimal growth in its home country (with zero /
negligible scope for any further increase in business operations), it begins to look at having presence in similar
markets elsewhere. For this purpose, the company plans to export its goods or services to few other countries, by
adopting a multi-domestic approach. In this stage, the company ensures that it has very well understood the
foreign market (it desires to enter), the market’s environment, regulations, etc. To ensure successful operations,
the company usually keeps the product design, advertising & marketing efforts, etc. in sync with the specific needs
of foreign country. As such, the company acquires a high level of sensitivity & understanding to local values and
interests, customs & traditions.
3. Multinational Stage – The next globalization stage for the company is to gradually expand its market presence in
more countries with its production and marketing facilities getting located in many countries. The company is said
to have achieved the multinational presence for its business when a minimum of one third of its sales (or business
turnover) starts coming from outside its origin country. In this stage, the company begins to slowly adopt standard
operating procedures in various countries it has its presence as by now. Also, a company having achieved this
stage, has usually established itself as a considerably large firm. Here, the product design, manufacturing
processes, advertising & marketing strategies all start getting standardized around the world.
4. Global (or Stateless) Stage – The last & final stage is when the company has acquired sufficient resources (financial
& other resources), business knowhow, technological leadership and foothold in the important world markets, to
be able to operate as a leading world-wide company . Corporations operate in true global fashion, making sales
and acquiring resources in whatever country offers the best opportunities and lower cost.
Dimensions of Globalization
The four main dimensions of globalization are:
1. Economic Dimension – Globalism in its economic dimension involves the long-distance flows of goods, services
and capital as well as the information and perceptions that accompany market exchange. This leads to intensifying
and stretching of economic interrelations globally. It encompasses such things as the emergence of a new global
economic order, the internationalization of trade and finance, the changing power of transnational corporations,
and the enhanced role of international economic institutions.
2. Political Dimension – The political dimension of globalization is focused on the intensification and expansion of
political interrelations around the world. It includes aspects such as the modern-nation state system and its
changing place in today’s world, the role of global governance, and the direction of our global political systems.
The Military dimension, which is a sub-domain of political dimension, is defined as the intensification and
stretching of military power across the globe through various means of military power (nuclear military weapons,
radiation weapons simply weapons of mass destruction). This form of globalization occurs across offensive and
defensive uses of power and survival in international field. Beyond states, global organizations such as the United
Nations also extend military means globally through support given by both Global North and South countries.
Simply put, military dimension refers to the long-distance networks in which force, and the threat or promise of
force, are deployed.
3. Cultural Dimension – Cultural globalization is the intensification and expansion of cultural flows across the globe.
Culture is a very broad concept and has many facets, but in the discussion on globalization, Steger means it to refer
to “the symbolic construction, articulation, and dissemination of meaning.” Topics under this heading include
discussion about the development of a global culture, or lack thereof, the role of the media in shaping our
identities and desires, and the globalization of languages.
4. Ecological Dimension – This dimension involves the topics of ecological globalization include population growth,
access to food, worldwide reduction in biodiversity, the gap between rich and poor as well as between the global
North and global South, human-induced climate change, and global environmental degradation.
CONTENTS
Meaning
Reasons to Study
Drivers
Influencing Factors
An Overview
Types of Operations
Modes of Entry
Globalization
An Overview
Drivers
Stages
Dimensions
International Business Environment (1/3)

The environment of international business is regarded as the sum total
of all the external forces working upon the business organization as it
goes about with its operations in domestic and foreign markets.
The holistic understanding of the international business environment is
critical for any business organization which desires to successfully
operate in different countries with varied aspects. The various
components of international business environment are:
Economic Environment
Economic Environment might vary with the ownership / control of
means of production and the applicability of regulations. A country may
have any one of the following types of economies an environment:
1. Market Economy – level of state intervention only to the extent of policy
making and essential services (medical & health services, national &
internal security & policy making).
2. Socialistic / Command Economy – for the social benefit of all, the
government has an absolute control over the means of production as
well as the essential services.
3. Mixed Economy – the government as well as private entities own and
control the productive forces. Essential services are managed by the
government.

Political Environment – Political environment refers to the extent of
influence & the type of the government, bureaucratic and judiciary
system in a country on international business.
1. Democracy – government comprises of representatives elected by
citizens.
2. Totalitarianism – individual freedom is completely subordinated to the
power of the authority of state. Example, erstwhile USSR.
3. Rule of Monarch – a head of state rules the country as per the lineage of
the royal family.
4. Monarchy Supporting Democracy – the monarch is a nominal head of
state with the government having the greater control over the country.
Example England.
5. Dictatorship – Example, Iraq under Saddam Hussein’s regime.
Social and Cultural Environment – Comprises of the thought and

behaviour pattern of the society members and their language, religion,
customs, traditions, education, etc. that brings them together as a social
entity.
Social factors such as language, customs, religious beliefs and values have
a bearing have a significant bearing on the international business
environment in a country.

Technological Environment
The technology environment includes the various relevant
technologies in use, the service provider for those
technologies (the technology partners) as well as the
regulations and laws in place to ensure correct technology
utilization. The overall technological infrastructure and
support available in a country also has a bearing on the
extent of international business.
Natural Environment
The natural environment is another important factor of the
macro-environment. This includes the natural resources that
a company uses as inputs that affects their marketing
activities. The concern in this area is the increased pollution,
shortages of raw materials and increased governmental
intervention.
This is true for all parts of the surface of the Earth including
the land and the upper parts of the ocean. The four natural
resources; soil/rock, air, water, sunshine constitute the
major components of the natural and physical environment.

Unit 1 Notes - International Business Management - KMB302

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Unit 1 Notes - International Business Management - KMB302

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Faculty: Mr.

Atul Stanley Hermit

International Business – Meaning

International Business – Meaning (Cont.)

Reasons to Study International Business

Reasons to Study International Business

Drivers of International Business

Factors Influencing International

Factors Influencing International

Factors Influencing International

International Business Management

Domestic Business Management vs.

Domestic Business Management vs.

Multinational Enterprises / Corporations

Multinational Enterprises / Corporations

Type of Operations of an MNE / MNC

Modes of Entry (1/4)

Modes of Entry (2/4)

Modes of Entry (3/4)

Modes of Entry (4/4)

Drivers of Globalization (1/2)

Drivers of Globalization (2/2)

International Business Environment (1/3)

International Business Environment (2/3)

Social and Cultural Environment – Comprises of the thought and

International Business Environment (3/3)

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