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INTERNATIONAL BUSINESS MANAGEMENTDefinition
International trade consists of transaction between residence of different countries – byWasser man & Haltman. Thus domestic trade occurs within the political boundaries of nations whereas international trade occurs across the political boundaries of differentnations. The trade is made up of transactions in goods or exchanges of goods or purchase& sale of goods between countries collectively called import & export.
Why Go International?
The factors which motivate or provoke firms to go international may be broadly dividedinto two groups, they are1. Pull Factors2. Push Factors
Pull Factor:
These are the proactive reason which forces the business to the foreign markets. In other words, companies are motivated to internationalize because of the attractiveness of theforeign market, such attractiveness includes profitability & growth prospects.
Push Factor
:It refers to the compulsions of domestic market like saturations of market, which promptcompanies to internationalize. Most of the push factors are reactive reasons.
Reasons Of International Trade1. Profit
:The main aim of any business organization is profit. When the domestic markets do not promise high rate of return, business firm search for foreign market which promises for high rate of profits.
2. Expanding the production capacities
:Some of the domestic companies expanded their production capacities, more than thedemand for the product in the domestic countries. These companies in such cases areforced to sell their excess production in foreign developed countries.
3. Severe Competition in the home country:
The countries oriented towards market economics since 1960 had severe competitionfrom other business firms in home countries. The weak companies which could not meetthe competitions of the strong companies in the domestic country started entering themarkets of the developing countries.
4. Limited home market
:When the size of the home market is limited, either due to the smaller size of the population or due to lower purchasing power of the people or both. The companiesinternationalize their operations.
5. Political stability Vs Political instability
:Political stability does not simply mean that continuation of same policies of the govt. for a quiet longer period, business firms prefer to enter the politically stable countries that arerestrained from locating the business operations in politically instable countries.
 
6. Availability of technology & managerial competence
:Availability of advanced technology & managerial competence in some countries act as a pulling factor for a business firm from the home country. The companies from developingcountries are attracted by the developed countries due to these reasons.
7. High cost of transportation
:When at initial stage companies enter foreign countries through marketing suffer becauseof domestic competition. The domestic company may enjoy high profit margin due tolocalized manufacturing. Hence foreign companies are also inclined for locating their manufacturing facilities in foreign itself. It may increase their profit margin due toreduction of transportation facilities.
8. Nearness to raw materials
:The source of highly qualitative raw materials and bulk raw materials is a major factor for attracting the companies from various foreign countries.
9. Availability of quality human resources at less cost
.The sources of highly qualitative & bulk raw materials and is a major factor for attractingthe companies from various for attracting the companies from various foreign countries.Most of the US and European based companies locate their manufacturing facilities inIndia due to availability of high quality and low cost human resources.
10. To increase market share
:Some of the large scale business firms would like to enhance their market share in theglobal market by expanding and intensifying their operations in various foreign countries.Companies that expand internally tend to be oligopolistic. Smaller companies expandinternationally for survival while the larger companies expand to increase the marketshare.
11. To avoid tariffs and import quotas:
It was quite common before globalization that government imposed tariffs or duty onimports to protect the domestic company. The government also fixes quotas in order toreduce the competition to the domestic companies from the competent foreigncompanies. To avoid high tariffs and quotas, companies prefer direct investment to goglobally.
Stages in Internalization
.1.
Domestic Company
:It limits operation , mission and vision to the national political boundaries. Thesecompanies focus its view on the domestic market opportunities domesticsuppliers, domestic financial companies, domestic customers etc. It never thinksof growing globally. If it grows, beyond it present capacity the company selectsthe diversification strategy of entering into new domestic markets, new products,technology etc. It does not select the strategy of expansion into the internationalmarkets.
2.International Company:
Some of the domestic companies which grow beyond their production / marketingcapacities think of internalizing their operations. Those companies who decide toexploit the opportunity outside the domestic country. The focus of thesecompanies is domestic but extends the wings to the foreign countries. These
 
companies extend the domestic product, domestic price, promotion and other  business practices to the foreign markets.3.
Multinational Company
:It formulates different strategies for different markets thus the MNC operate itsoffices, branches, subsidiaries in other country like domestic company. Theyformulate distinct polices and strategies suitable to that country. Thus they operatelike concerned in each of their markets.4.
Global company
:A global company is the one which has either global marketing strategy or aglobal sourcing strategy. Global company either produces in home country or in asingle country and focuses on marketing these products globally or producesglobally and focuses on marketing these products domestically.5.
Transnational company
:It produces , markets, invests and operate, across the world. It is an integratedglobal enterprises which links global resources with global markets at profit.There is no pure transnational companies satisfy many of the characteristics of aglobal corporation.
Characteristics:
1.
Geocentric Orientation
:This company thinks globally and act locally. This company adopts globalstrategy but allows value addition to the customer of a domestic country. Theassets of a transnational company are distributed throughout the world.2.
Scanning or information acquisition
:It collects the data and information world wide. These companies scan theenvironmental information regarding economic environment, politicalenvironment, social and cultural environment and technological environment.
3.Vision & Aspirations
The vision & aspiration of transnational companies are global markets, globalcustomers and grow ahead of global companies.4.
Geographic scope
:The transnational companies scan the global data and information. Theyanalyze the global opportunities regarding the availability of resourcescustomers, market , technology, research and development etc. Similarlythey also analyze the global challenge and threats like competition fromthe other global companies, local companies etc. They formulate globalstrategy.
5Operating Style:
Key operations of a transnational are globalised. The transnational companiesglobalize the function like R & D, Product development, placing key humanresources procurement of high valued material etc.
6. Adaptation
:These companies adapt their products, marketing strategies and other functional strategies to the environment factors of the market concerned.
7. HRM Policy
:This company is not restricted by national political or legal constraints. Itselects the best human resources and develops them regardless of nationality,
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