International

Business
 Topics of International Business

Introduction of International Business

• Objective
• Scope
• Perlmutter’s EPRG Model
Country Analysis
• PESTEL analysis
• The Atlas of Economic Complexity
• Porters Diamond -Country Risk analysis
Cross Cultural Management
• Hofstede’s Cultural
• Dimension
• CAGE Framework Pankaj
• Ghemawat
• Culture and Leader Effectiveness
Mode of Entry
• Market/Country Entry
• Strategic Alliances/- JV /
• M&A
Investment Decisions
• Drivers of FDI – Special
• Emphasis on emerging markets
• Offshore Banking
• Forex Management –ADR-GDR’s- EU bonds
WTO Regional Trade
• Agreements
• Building Blocks of WTO
• Major agreements of WTO
Global manufacturing and supply chain
International Trade Organizations
The International Trade Organization, or ITO was the proposed name for an
international institution for the regulation of trade.
It is led by the United States in collaboration with allies. Until the creation of
the World Trade Organization in 1994, international trade was managed
through GATT.
 World Trade Organization
 WTO deals with the rules of trade between nations at a Global Level.
 It is an organization that intends to supervise and liberalize international trade

 The organization officially commenced on 1 January 1995.

 It replaced the General Agreement on Tariffs and Trade (GATT) in the 8 th round of (GATT)

commonly known as the Uruguay round.

 It’s a set of rules: WTO agreements, negotiated and signed by the bulk of the world’s trading

nations.
 Objectives Functions

Implementing WTO agreements &

To implement the new world trade agreement administering the international trade.
& also to promote multilateral trade .

Cooperating with IMF & World Bank &

To promote free trade. its associates.

To enhance competitiveness among all trading 
Settling trade related disputes
partners

To increase the level of production

Reviewing trade related economic policies
of member countries with help of its Trade

To expand & utilize world resources Policy Review Body (TPRB).

To improve the level of living for the global 
Providing technical assistance & guidance
population & speed up economic development related
of the member nations. 
Acting as forum for trade liberalization.

To take special steps for the development of
poorest nations.
 INTERNATIONAL MONETARY FUND (IMF)
 

The International Monetary Fund or IMF came into existence in 1945,

after the end of World War II and at the beginning of the Cold War.

Currently, the IMF has its headquarters in Washington, D.C. and

comprises 185 member nations
Reasons for Founding the IMF

• Facilitate global financial stability by stabilizing prevailing exchange

rates.
• Reduce poverty so that economic growth is triggered.
• Increase international trade and employment.
Main responsibilities of IMF which
are as follows
• Promoting international monetary cooperation.
• Facilitating the expansion and balanced growth of international trade.
• Promoting exchange stability.
• Assisting in the establishment of a multilateral system of payments
and
• Making its resources available (under adequate safeguards) to
members experiencing balance of payments difficulties.
 Agreement of WTO
• Multilateral Agreements on Trade in Goods (Annex 1A)
• General Agreement on Tariffs and Trade 1994 (1994 GATT)
• Agreement on Agriculture
• Agreement on the Application of Sanitary and Phytosanitary Measures
• Agreement on Textiles and Clothing (expired at the end of 2004)
• Agreement on Technical Barriers to Trade (TBT)
• Agreement on Trade-Related Investment Measures (TRIMs)
• Trade 1994 (Anti-Dumping Agreement)
• Trade 1994 (Customs Valuation Agreement)
• Agreement on Pre-shipment Inspection (PSI)
• Agreement on Import Licensing Procedures
• General Agreement on Trade in Services (GATS) (Annex 1B)
• Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) (Annex IC)
• Understanding on Rules and Procedures Governing the Settlement of Disputes (Annex 2)
• Trade Policy Review Mechanism (TPRM) (Annex 3)
MNC
• Multinational corporation (MNC) / company is having business in
more than one country .A MNC company engages in various activities
like exporting, importing, manufacturing in different countries.
 Highlight points ……

• MNCs consider opportunities throughout the globe through they do

the business in a few countries

• MNCs engage in international production and operate plants in a

number of countries

• MNC’s take managerial decisions based on a global perspective.

Structure of MNC’s:
International Transnational
corporations Corporation

Multinational
Corporation Global
Corporation
Structure of MNC’s:
• International corporations: International company ( IC ) conducts the operations (
exporting , producing etc. ) in one or more foreign countries , but domestic
orientation .

• This company believes that the practices adopted in domestic business, the
people and products of domestic business are superior to those of other
countries. This company extended the domestic product, domestic price,
promotion and other business practices to the foreign markets.

• Multinational Corporation: Multinational Corporation responds to the specific

needs of the different country markets regarding product, price and promotion.
Thus, MNC operates in more than one country, but operates like a domestic
company of the country concerned
 Structure of MNC’s:
• Global Corporation: Global Corporation produces in home country or in a
single country and forces on marketing these products globally or produces
the products globally.

• Transnational Corporation: Transnational Corporation produces market and

invest and operated across world.
 Advantages of MNC's for the host country
• 1. The investment level, employment level, and income level of the host country
increases due to the operation of MNC's.
• 2. The industries of host country get latest technology from foreign countries through
MNC's.
• 3. The host country's business also gets management expertise from MNC's.
• 4. The domestic traders and market intermediaries of the host country gets increased
business from the operation of MNC's.
• 5. MNC's break protectionism, curb local monopolies, create competition among
domestic companies and thus enhance their competitiveness.
• 6. Domestic industries can make use of R and D outcomes of MNC's.
• 7. The host country can reduce imports and increase exports due to goods produced by
MNC's in the host country. This helps to improve balance of payment.
• 8. Level of industrial and economic development increases due to the growth of MNC's
in the host country.
Advantages of MNC's for the home country

• 1. MNC's create opportunities for marketing the

products produced in the home country throughout
the world.
• 2. They create employment opportunities to the
people of home country both at home and abroad.
• 3. It gives a boost to the industrial activities of home
country.
• 4. MNC's help to maintain favorable balance of
payment of the home country in the long run.
• 5. Home country can also get the benefit of foreign
culture brought by MNC's.
Disadvantages of MNC's for the host country

• 1. MNC's may transfer technology which has become

outdated in the home country.
• 2. MNC's may kill the domestic industry by
monopolizing the host country's market.
• 3. In order to make profit, MNC's may use natural
resources of the home country indiscriminately and
cause depletion of the resources.
• 4. A large sums of money flows to foreign countries in
terms of payments towards profits, dividends and
royalty.
Disadvantages of MNC's for the home country

• 1. MNC's transfer the capital from the home country to various host
countries causing unfavorable balance of payment.
• 2. MNC's may not create employment opportunities to the people of
home country if it adopts geocentric approach.
• 3. As investments in foreign countries is more profitable, MNC's may
neglect the home countries industrial and economic development.
 SUPPLY CHAIN MANAGEMENT

“Supply Chain Management encompasses the planning and management of all activities
involved in sourcing and procurement, conversion, and all Logistics Management
activities.

Importantly, it also includes coordination and collaboration with channel partners, which
can be suppliers, intermediaries, third-party service providers, and customers.
In essence, Supply Chain Management integrates supply and demand management
within and across companies.”

Source: Council of Supply Chain Management Professionals

INTERNATIONAL LOGISTICS

International Logistics is the process of planning,

implementing, and controlling the flow and storage of goods,
services, and related information from a point of origin to a
point of consumption located in a different country.
 GLOBAL SUPPLY CHAIN

Suppliers Corporation Customers

Order
Order
processing placement

transportation
transporta Materials Physical
tion management distribution
Physical
distribution

storage Inventory Inventory

Storage
management management

Forward and reverse flows of information, products and funds

COMPONENTS OF GLOBAL LOGISTICS
Demand forecasting
Materials
Purchasing
management
Requirement planning
Production planning
Manufacturing inventory
Warehousing
Logistics
Material handling
management
Industrial packaging
Supply
Finished goods inventory
chain
Distribution planning
mgmt
Order processing
Transportation Physical
Customer service distribution
Strategic planning
Information technology
Marketing
Sales
International HRM
How to develop Global Mindset ?
How to develop Global Mindset ?
• Curiosity about the world
• A desire to become smarter about how the world worked
• Self conscious awareness of one’s current mindset
• Exposure to different experience and to diversity
• A disciplined effort for continuously learning
• Know the business environment
• Create and convey a clear vision with integrity
• Complex thinking
• Data Collection
IHRM encompasses:
• ‘. . . the worldwide management of people in the multinational enterprise’
(Poole, 1990; p1)
• ‘. . . human resource management in an international environment . . .
problems created in an MNC performing business in more than one
country, rather than those posed by working for a foreign firm at home or
by employing foreign employees in the local firm’ (Briscoe and Schuler,
2004; p1)
• ‘. . .how MNCs manage their geographically dispersed workforce in order to
leverage their HR resources for both local and global competitive
advantage’ (Scullion, 2005; p5)
• ‘. . . a branch of management studies that investigates the design of and
effects of organisational human resource practices in cross-cultural
contexts’ (Peltonen, 2006; p523)
• ‘.. . . the subject matter of IHRM [must be] covered under three headings:
cross-cultural management; comparative human resource management;
and international human resource management’ (Brewster et al, 2007, p5)
• ‘. . . the ways in which the HRM function contributes to the process of
globalisation within multinational firms’ (Sparrow and Braun, 2008; p96)
• ‘. . . the implications that the process of internationalisation has for the
activities and policies of HRM’ (Dowling et al, 2008; p293).
REFLECTIVE ACTIVITY
• Look at the sequence of definitions used above to
define what IHRM is about.
• How do the definitions change over time?
• What do these changing definitions tell you about the
sorts of knowledge – and the theoretical
understanding – that might be important for the field
and that should be incorporated from this topics ?
Importance of International HRM
Organizations also shape career development via human resource
system that recruit , select , compensate, train and evaluate people’s
work. The integrative approach to human resource management is
called Strategic International Human Resource Management
Expatriate Management
Definition of expatriate. :-
An employee who is sent to live abroad for a defined time period.
An expatriate is expected to relocate abroad, with or without family,
for as short a period as six months to a year; typical expat assignments,
however, are from two to five years long.
Importance of Expatriates in Organizations

• Improve Local Market Knowledge

• Instill Company Culture
• Transfer Knowledge
• Increase Local Control
• Develop Management Talent
• Changing Role
PROBLEMS WITH EXPAT

• Social life.
• Feeling lonely.
• Relocation process.
• Career concerns.
• Language barriers.
• Food.
• Sorting out healthcare.
• Standard of living.
• Cultural adaptation.
• Bureaucracy/corruption.
• Raising children.
Hofstede’s Cultural Dimension

• Hofstede's cultural dimensions theory is a

framework for cross-cultural communication,
developed by Geert Hofstede.
• It describes the effects of a
society's culture on the values of its members,
and how these values relate to behavior, using
a structure derived from factor analysis.
• Hofstede developed his original model as a
result of using factor analysis to examine the
results of a worldwide survey of employee
values by IBM between 1967 and 1973.
Hofstede's Cultural Dimensions
Theory Base
• National culture Vs Values
• How company people behave and react in business?
Six Dimensions of Natural
Culture
Power distance (strength of social hierarchy) and
Individualism-Collectivism
Masculinity-femininity (task orientation versus person-
orientation)
Uncertainty Avoidance;
Long/short-term orientation
Indulgence versus Self-restraint
Power distance (strength of
social hierarchy)
Boss Boss

You
39/100 You (80/100)
Canada China
Individualism-Collectivism

You are You are

responsible for responsible for
yourself only society

USA/CANADA KORIA/INDIA
I am more Society is more
important responsible
Masculinity-Femininity

• Competitive • Cooperative

• Success oriented • Quality of Life

• Need to be best • Enjoy Work

• A+ grade • C grade

JAPAN/KOREA CANADA
Uncertainty Avoidance

• Minimum Risk
• Accept Risk
• Control Future
• Go with the flow
JAPAN
CANADA
Long/Short-term orientation( View Something
)- eg. Because of Climate saving habit

Long term Short Term

• Stability • Immediate Gain
• Durability • Temporary
• Save Money • Spend Money
INDIA USA
Indulgence V/S Self-Restraint
Indulgence (express Self-restraint ( control
desires) desires )
Leisure ( Ease ) Time Work

Release desires Control Desire

CANADA JAPAN
CAGE Framework Pankaj
Ghemawat
The CAGE Distance Framework identifies Cultural, Administrative,
Geographic and Economic differences or distances between countries
that companies should address when crafting international strategies
 Cultural Distance Administrative Distance Geographic Distance Economic Distance

• Different languages
• Different ethnicities; • Rich/poor differences
• Physical distance
lack of connective • Lack of colonial ties
• Other differences in
ethnic or social • Lack of land border
• Lack of shared cost or quality of
networks regional trading bloc • Differences in time natural resources,
Country Pairs (Bilateral) zones financial resources,
• Different religions • Lack of common
human resources,
• Lack of trust currency • Differences in climates
infrastructure,
/ disease
• Different values, • Political hostility
environments
information or
norms, and knowledge
dispositions

• Land lockedness
• Nonmarket/closed
economy (home bias • Lack of internal
navigability
vs. foreign bias)
Lack of membership in •
• Insularity Geographic size • Economic size
Countries (Unilateral / •
Multilateral) • Traditionalism international • Geographic • Low per capita income
organizations remoteness
• Weak institutions, • Weak transportation
corruption or communication
links