INTERNATIONAL BUSINESS

SUBHAM VERMA
2018BMS037
JLU03224

Q1. What do you mean by Culture? Underline the various impacts

culture has on business.
A1. Culture is understood as that complex whole which includes
knowledge, belief, art, morals, law, custom and other capabilities and
habits acquired by an individual’s as a member of a society.
Culture refers to the cumulative deposit of knowledge, experience,
beliefs, values, attitudes, meanings, hierarchies, religion, notions of
time, roles, spatial relations, concepts of the universe, and material
objects and possessions acquired by a group of people in the course of
generations through individual and group striving.
Impact of culture on business:- Global businesses are the repositories
of multicultuers. Multiculturism means that people from many culture
(and frequently many countries) Interact regularly, Managing
multiculturalism is essential for every international firm. Four task are
crucial; spreading, cross-cultural literacy, culture and competitive
1. Spread cross- culture literacy One of the biggest problems
firms face being ill informed about foreign market (Host
country). The company that fails to understand host country’s
culture, fails. Helps in being less deviated than domestic
companies. Understanding that there is a cultural difference.
 2. Culture and competitive advantage Understanding and
decoding culture helps firms to establish and sustain competitive
advantage. Individual and collective values like- Honesty,
loyalty, commitment, obligation, group affiliation helps in
creating competitive advantage as a nation and as a firm.
3. Managing diversity It basically means that working and
managing a diverse team to its best potential. Creating a
conducive work environment remains a challenge. The success
of foreign firm deeply depends on its ability to manage
diversity. As diversity is a challenging and advantageous both.
4. Compatibility between strategy and culture Culture and
strategy fit is very essential, but hard to achieve. Culture
convergence leads to cultural clustering. The concept of cultural
clustering(Grouping of culturally similar nations) has helped
companies.
Q2. Comment on Balance of payment and balance of trade. Also
compare both.
A2. The balance of payments (BOP) is a statement of all transactions
made between entities in one country and the rest of the world over a
defined period of time, such as a quarter or a year.
The balance of payments include both the current account and capital
account. The current account includes a nation's net trade in goods
and services, its net earnings on cross-border investments, and its net
transfer payments.
The capital account consists of a nation's imports and exports of
capital and foreign aid. The sum of all transactions recorded in the
balance of payments should be zero; however, exchange rate
fluctuations and differences in accounting practices may hinder this in
practice.
Balance of Trade (BOT) The balance of trade is the difference
between the value of a country's imports and exports for a given
period. The balance of trade is the largest component of a country's
balance of payments.
Economists use the BOT to measure the relative strength of a
country's economy. The balance of trade is also referred to as the
trade balance or the international trade balance.
Comparison between (BOP) & (BOT)
Basis of Comparison Balance of Trade Balance of Payment
Meaning It is a statement that It is a statement that
captures the country’s keeps records of all
export and import of economic transaction
goods with the done by the company
remaining world. with the remaining
world.

Records Transaction related to Transaction related to

goods only. both goods and
services are recorded.
Capital Transfer Are not included in Are included in the
the balance of trade balance of Payment
Which is better It gives a partial view It gives a clear view of
of country’s economic country’s economic
status. status.
Result It can be favourable, Both the Receipts and
Unfavourable or payment sides tallies.
Balanced.
Component It is the component of Current account and
Current accounts of capital account.
Balance of Payment.
Q3. What do you understand by the Timing of Entering into the
international market? Also, explain the market selection process with
criteria
A3: Timing of Entry : the moment when the initial decision taken by
the firm whether to internationalize or not is defined as “Timing of
Entry” into the international market.
Timing of entry has traditionally been misunderstood as the time
between the founding of a firm and the initiation of its international
operations.
Market selection process
1. Determine the objectives or goals of market selection
2. Determine the parameters to be used for market selection
3. Do a preliminary screening of the market
4. Do a detailed investigation of this screening and short list the
best fit
5. Evaluate the shortlisted markets and select one or two
Criteria
The initial selection for analyzing the global market can be conducted
with the help of the following criteria −
Understanding Business Environment
• It is an essential step in understanding the external, local,
national or international forces that might affect your small
business.
Market analysis
Analysis of the competition
 • It is very important to identify the main competitors and their
description. How the competitors economically evolved over the
past few years should also be analyzed.
Distribution channels
• The entrepreneur should gain complete information regarding
the supply chain of the product.
Demand analysis
The entrepreneur should perform an examination of the present and
potential demand regarding the product and service would have in
source markets.

Q4 Comment on modes of entry. Explain the criteria for selecting/

choosing modes of entry.
A4 There are two major types of market entry modes: equity and non-
equity modes. The non-equity modes category includes export and
contractual agreements. The equity modes category includes: joint
venture and wholly owned subsidiaries.
There are two factors affecting selection of International market entry
mode External factors and Internal factors.
External factors such as :- Target country market factors, Target
country environment factors, Target country production factors hame
country factors
Internal factors such as Company product factors, Company resources
and commitment factors.

 International-Expansion Entry Modes

 Type of Entry Advantages Disadvantages

Low control, low local

knowledge, potential negative
Exporting Fast entry, low risk
environmental impact of
transportation

Less control, licensee may

become a competitor, legal and
Licensing and Fast entry, low cost, low
regulatory environment (IP
Franchising risk
and contract law) must be
sound

Shared costs reduce Higher cost than exporting,

Partnering and investment needed, licensing, or franchising;
Strategic Alliance reduced risk, seen as integration problems between
local entity two corporate cultures

Fast entry; known, High cost, integration issues

Acquisition
established operations with home office

Gain local market

Greenfield Venture
knowledge; can be seen High cost, high risk due to
(Launch of a new,
as insider who employs unknowns, slow entry due to
wholly owned
locals; maximum setup time
subsidiary)
control

Q5 Discuses various international business strategies.

A5 Their are four alternative strategies: international, multi-domestic,
global, trans-national.
Multi-domestic Strategy
It permits subsidiaries to act independently. Multi-domestic strategy
makes companies customise their products, marketing and services
programmes to local conditions. A firm using a Multi-domestic
Strategy sacrifices efficiency in favor of emphasizing responsiveness
to local requirements within each of its markets.
Rather than trying to force all of its American-made shows on viewers
around the globe, MTV customizes the programming that is shown on
its channels within dozens of countries, including Pakistan, and India.
Food company H. J. Heinz adapts its products to match local
preferences. Because some Indians will not eat garlic and onion, for
example, Heinz offers them a version of its signature ketchup that
does not include these two ingredients.
Global Strategy
This strategy asserts that there exist a single global market for many
consumers & industrial goods. Global strategy compels to think in
term of creating products for a world market, manufacturing them on
a global scale in a few efficient plants, and marketing them through a
few focused distribution channels.
A firm using a Global Strategy sacrifices responsiveness to local
requirements within each of its markets in favor of emphasizing
efficiency. This strategy is the complete opposite of a multi-domestic
strategy.
Some minor modifications to products and services may be made in
various markets, but a global strategy stresses the need to gain
economies of scale by offering essentially the same products or
services in each market..Microsoft, for example, offers the same
software programs around the world but adjusts the programs to
match local languages.
Trans-national Strategy
Trans-national strategy seeks to achieve both global responsiveness
& nation responsive pressure. A true trans-national strategy is
difficult as one goal requires close global coordination while the other
goal requires local flexibility.
A firm using a Transnational Strategy seeks a middle ground between
a multi-domestic strategy and a global strategy. Such a firm tries to
balance the desire for efficiency with the need to adjust to local
preferences within various countries.
For example, large fast-food chains such as McDonald’s and KFC
rely on the same brand names and the same core menu items around
the world. These firms make some concessions to local tastes too.In
France, for example, wine can be purchased at McDonald’s. This
approach makes sense for McDonald’s because wine is a central
element of French diets.
International
Using an international strategy means focusing on exporting products
and services to foreign markets, or conversely, importing goods and
resources from other countries for domestic use.
Companies that employ such strategy are often headquartered
exclusively in their country of origin, allowing them to circumvent the
need to invest in staff and facilities overseas.
Businesses that follow these strategies often include small local
manufacturers that export key resources to larger companies in
neighboring countries.
However, this model is not without significant business challenges,
like legally establishing local sales and administrative offices in major
cities internationally.