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International Business

Dr Navneet Gera

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Session Objectives
○ The objective is to discuss the
concept of International Business.

○ To understand the reasons to


undergo IB.

○ To discuss the nature and scope of


Int Business.

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International Business

○ I.B. can be defined as business


carried on across national
frontiers.
○ I.B. is the performance of business
activities that direct the flow of
goods & services to consumers or
users in more than one nation.

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Concept of IB

○ Thus, international business is the


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

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Role/Comparataive
Advantages - IB
○ Higher living standards
○ Large scale economies
○ Wider Market
○ Reduced risk
○ Economic growth of world
○ Increased socio-economic welfare
○ Optimum & proper utilisation of
resources

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Why go International?

1. Profit Advantage
2. Growth opportunities
3. Domestic market constraints
4. Competition
5. Monopoly power
6. Strategic vision

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Why companies go global

○ Creation of new markets due to


economic integration.
○ Fast-growing foreign markets as
compared to domestic markets.
○ Reduced cost of R&D per unit of product
in foreign markets.
○ Ease of relocation to the markets with
lower manufacturing costs.
○ Constraints or low acceptance in the
domestic market.Dr Gera 7
Why companies go global
○ Increase of profit and sales by entering
new markets.
○ Opportunity to diversify by entering
emerging new markets.
○ Continuous and uninterrupted supply of
raw materials with high reliability.
○ Acquisition of technical and managerial
know-how for in-house development.
○ Strategic vision to enter foreign markets
for expansion. Dr Gera 8
MOTIVES OF GOING GLOBAL:-

○ GROWTH MOTIVE
○ PROTECTION IN THE IMPORTING
COUNTRIES
○ SAVE ON TRASPORTATION COSTS
○ PREVENT FROM MARKET
COMPETITION BY ACQUIRING
POTENTIAL COMPETITORS
○ COST REDUCTION

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Driving Forces - IB

1. Liberalisation
2. MNCs
3. Technology
4. Quality & cost
5. Competition
6. World economic trends
7. Transportation &
communication revolution

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Restraining forces
1. External Factors
○ Govt policies & control

2. Internal Factors
○ Organisational culture

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Scope of IB
○ Opening a branch/subsidiary for
processing/packaging, assembly or even
complete manufacturing through direct
investment.

○ Establishing joint ventures in foreign


countries for manufacturing or marketing.

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Contd .

○ Offering consultancy services &


undertaking turnkey projects abroad
○ Negotiating licensing/franchising
arrangements whereby foreign
enterprises are granted the right to
use the exporting co’s know-how,
patents, processes or trademarks
with or without financial
investment.

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Domestic/International Trade

1. Domestic – Business Within boundaries


i.e in nation.

○ International – More than one


countries.

2. Domestic –Limited documentation


○ International – More documentation

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Contd..
1. Domestic – Mode of transportation
can be Air/Road/Rail.
○ International – Air/Ship
1. Domestic – Cultural knowledge can
be both merits & demerits
○ International – Language & culture
can be barrier to trade.

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Contd..

1. Domestic – indian currency


○ Inetrnational – Foreign
currency
1. Domestic – mode of payment –
cash/cheque/DD
○ International – mode of
payment – Letter of credit, Bill
of Exchange/DD

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Contd.

1. Domestic- less Govt control –Law


○ International –knowledge of
National as well as International
law is is required – FERA/FEMA.

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BOTTLENECKS IN INDIA INC

In spite of the huge growth India Inc


have some bottlenecks, like -
○ Irrational policies (tax structure and trade
barriers).
○ Low investment in infrastructure -
physical and information technology.
○ Slow reforms (political reforms to improve
stability, privatization and deregulation,
labor reforms).

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Assignment
➢ Scope of International Business?

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