Definition of International Business

• International business encompasses a full range of cross-

border exchanges of goods, services, or resources between
two or more nations.
• These exchanges can go beyond the exchange of money for
physical goods to include international transfers of other
resources, such as people, intellectual property (e.g.,
patents, copyrights, brand trademarks, and data), and
contractual assets or liabilities (e.g., the right to use some
foreign asset, provide some future service to foreign
customers, or execute a complex financial instrument).
 INFLUENTIAL FACTORS OF INTERNATIONAL BUSINESS
1. External Factor
SOCIAL CONDITIONS
a. Demography
Demography means the total number of population of any particular territory. They
have a greater influence of any business operation. For example in a mass populated
area demand of consumer products will be comparatively higher than any lesser
populated area. So, we can say that demography has a direct impact on business
environment. Because demand direct towards maximization of sales. The higher the
value of sales the more would be the profits. The more profits impacts on
success business operations.
b. Cultural Forces
Culture is that what we are that means our living, eating, food habit, way of dressing
and way of speaking everything accumulated to our culture. For example wearing lungi,
eating panta with hilsha fish on Bengali New Year is part of Bangladeshi culture, every
Bangladeshi respect or practices this culture. It is usual tasks for Bangladeshi
inhabitants. But it is not acceptable in western or European culture. Wearing shorts
eating fast food, having wine party are their culture. But it is not acceptable in
Bangladeshi culture. As a result demand of shorts and wine is completely higher in the
western society than that of in Bangladeshi society
 INFLUENTIAL FACTORS OF INTERNATIONAL BUSINESS
c. Work Ethics and Personal Value
The importance placed upon work by an individual is known as work ethic. Business
organizations counted upon the desire to work in its employees, a work ethic
expressed in dedication and company loyalty. However work ethic has changed
especially in younger workers and it is obvious that the attitudes of the workers will
impact upon the organization as it recruits, trains, rewards, and retains employees

POLITICAL INFLUENCES
Political environment has a direct impact on any county’s business environment. Some
political environments result in a comparatively better business environment and vice
versa. For instance Instable political environment in Bangladesh is a major obstacle for
Bangladeshi operations. On the other hand before two decades Bangladesh, Vietnam
and Malaysia were same ranking countries from economic aspects. But today Malaysia
and Vietnam have advanced a lot themselves throw their proper political decisions,
skilled leadership, finally stable political situation and responsible leadership make
them emerging economical power in the southeast Asia as well as around the globe
 INFLUENTIAL FACTORS OF INTERNATIONAL BUSINESS
Legal/Regulatory Practices
Laws are the primary way in which Business is directly affected by the legal system of a country. Legal
practices of any country have a direct impact on the business operation of that country. For example, if
there are any bindings on the international business transaction from the legal authority of any country
then no company can break down that rules.
Economic Conditions
In the functioning of a Business Enterprise we can see that an organization makes use of resources (input
factors) to produce goods and service (output). All this takes place within the general economic
environment, which affects each of these factors. Few of those factors are:
a. Economy
Aspects of the economy which must be considered by the management as it makes decisions are:
i. The existing stage of economy and the stage of the Business Cycle.
ii. The Rates of Growth of GNP and Per Capita Income
iii. Rates of Saving and Investment.
iv. Volume of Exports and Imports.
v. Inflation Rate
vi. Interest Rate
vii. Government Budgetary Allocations
viii. Changes in Distribution of income and Wealth
 INFLUENTIAL FACTORS OF INTERNATIONAL BUSINESS
b. Customers
The primary facet of External Economics dimension is a firm’s customers. The
goal of the decision making process is to better and more profitably reach the
customers. Customers seek to have the right product at the correct place, at
the right time, in the right form and at the right price. Management seeks to
know the identity of the customer and as much as possible about the
customer, who is called the target market
c. Competitiveness
There is no monopoly, duopoly, Tripoli market of any product around the
Globe. That means in every product has mass competitors in the market.
To become success in the competitive market one must have competitiveness.
Competitiveness are some features of the product, the features are
i. Distinguished quality
ii. Outstanding performance
iii. Economy in price
iv. Better outlook
 INFLUENTIAL FACTORS OF INTERNATIONAL BUSINESS
Technological Advancement
The final factor in the external environment is that of Technology. It has
one of the most dramatic effects on Business, as changes in technology
are often felt quickly by the company. A Company may be thoroughly
committed to a form of technology and may have invested heavily in
machinery and training, only to see a new, more innovative and cost
effective technology emerge.
a. Process Of Innovation
The source of new technology is generally the Research and Development
(R&D)of Private Industry, Government and Academic Research. A
Company may decide to Invest in R&D and then make use of the
developed technology or license it to other companies. Technological
Discoveries can be patented initially for 17 years which gives the inventor
the exclusive right to make use of technology or invention. If the source of
the innovation is in the past or even in current technology levels, it is said
to be an Evolutionary Technological Innovation. If however the innovation
does not build upon past technology and presents a significant shift from
the past it is known as Revolutionary Technological Innovation.
 INFLUENTIAL FACTORS OF INTERNATIONAL BUSINESS
b. Technology Transfer Process : Once a new technology has been
discovered, the major issue becomes how to introduce it into an established
technological environment. Most workers resist new technology until they
are shown how this new technology will make them more productive and
make their work life more easier. The more radical and innovative the
technology the higher is the resistance.
2. INTERNAL FACTORS
a. Land : Generally land means soil but in business land includes
everything inside the factory like boundary of land, size of building,
machinery installments etc.
b. Labor: Workforce is another vital element of productions and other
business operations. Skilled manpower is not available everywhere but
manpower can be skilled up through a marathon coaching of related
tasks. At the same time we will have to think about the wages, working
environment, job security, job satisfactions of the workers. Job
satisfactions can provide best performance as well as creative outputs.
Labors can be satisfied through offering different motives. It may be
financial rewards and mental supports.
 INFLUENTIAL FACTORS OF INTERNATIONAL BUSINESS

c. Capital: Capital means financial liquidity of the organization. Fund

may be collected from different sources. Such as a) Fully owned capital
b) Through partnership agreement c) Taking loan from the financial
institutions d) Collecting capital from capital market e) Joint venture
fund collection from foreign market Collecting fund is not the final
tasks for proper business operations. Because proper utilization of the
fund i.e. capital management functions have to be operated efficiently.
d. Business Location: Business location is a major factor for successful
operation of any business. Location should be selected based on the
following criterions: a) Transportation facilities b) Availability of raw
materials c) Availability of labors d) Security Better transporting
facilities result in quick communication which is an essential factor for
every business. Business location should be selected after thinking
availability raw materials, skilled labor force and high security.
e. Owners Equity: Owners equity is that portion of capital where
liabilities are not included. Only self owned and other business offered
facilities are included here
 ADDITIONAL INFLUENTIAL FACTORS

Regional Cooperation Association

There are many regional cooperation associations are available
around the globe. These associations are controlling their
respective regional business functions. For example SAFTA,
NAFTA, EU, ASEAN etc.
SAFTA
SAFTA Stands for South Asian Free Trade Area. It creates a
framework for the creation of a free trade zone covering 1.4
billion people in India, Pakistan, Nepal, Sri Lanka, Bangladesh,
Bhutan and Maldives. The seven foreign ministers of the region
signed a framework agreement on SAFTA with zero customs
duty on the trade of practically all products in the region
by end 2012.
 ADDITIONAL INFLUENTIAL FACTORS
NAFTA
The North American Free Trade Agreement (NAFTA) is a commercial agreement
among Canada, the United States of America, and Mexico which promised free
trade and easier flows of capital among the signatory nations. This commercial
business agreement controls their international business a lot.
ASEAN
The Association of Southeast Asian Nations (ASEAN) is a political and economic
organization of countries located in Southeast Asia. ASEAN was formed on
August 8, 1967 by the Philippines, Malaysia, Thailand, Indonesia, and Singapore,
as a display of solidarity against communist expansion in Vietnam and
insurgency within their own borders. Following the Bali Summit of 1976, the
organization embarked on a mission of economic cooperation, which floundered
in the mid-1980s only to be revived around a 1991Thai proposal for a
regional "free trade area". The countries meet annually.
WTO
The World Trade Organization (WTO) is an international organization that
establishes rules for international trade through consensus among its member
states. It also resolves disputes between the members, which are all signatories
to its set of trade agreements
 Why Companies Engage in International Business
To Expand Sales : Western multinationals would like to expand their sales and
acquire newer markets so that they can record impressive growth rates. Considering
the fact that the developing countries are peopled with consumers who have
aspirations to western lifestyles, it is, but natural that the western companies would
like to target this need and hence, expand into these markets. Moreover, with
declining sales in one region, the western companies hope to recoup the losses by
expanding into other markets. Further, the attractive rates of return in the emerging
markets are another reason as well.
Acquire Resources : Companies to expand internationally. Because the developing
and emerging countries have large deposits of minerals, metals and land for
agricultural production, the western multinationals eye these markets in order to get
access to the resources. This is the reason why many international businesses
operate in Africa and South Asia where the humungous deposits of minerals and
metals are attractive for the profits that these multinationals can make. Many
emerging markets and developing countries do not have the expertise or the
resources needed to tap their reserves of these minerals and metals. Hence, they
welcome the multinationals with open arms as it gives them royalties and other
payments to grow their economies. As can be seen from the expansion of Vedanta
and the South Korean steel company (POSCO) into India, the eagerness to tap the
resources is one of the most important reasons for expansion.
Why Companies Engage in International Business

Minimize Risk
Often, businesses expand internationally to offset the risk of
stagnating growth in their home country as well as in other
countries where they are operating. For instance, ever since the
Western countries saw their growth rates slip to below 3% (in
cases recording negative growth i.e. depression), the Western
multinationals have made a beeline to the emerging markets
that are growing in excess of 5%. Since firms exist to make
profits and grow their bottom lines, it is but natural for them to
expand internationally into countries that have better growth
rates than their home country. Further, by operating in a basket
of countries as opposed to a few, they are able to manage
political, economic, and societal risks better. We had discussed
the characteristics of these risks in earlier articles. Because they
vary from country to country, it makes sense to spread risk
across countries and diversify the portfolio rather than placing all
eggs in one basket.
 What is Trade barriers ?
Trade barriers are government-induced restrictions
on international trade. Most trade barriers work on the same
principle: the imposition of some sort of cost (money, time,
bureaucracy, quota) on trade that raises the price or
availability of the traded products. If two or more nations
repeatedly use trade barriers against each other, then a trade
war results.
Barriers take the form of tariffs (which impose a financial
burden on imports) and non-tariff barriers to trade (which
uses other overt and covert means to restrict imports and
occasionally exports).
 Major Barriers to International Trade
Cultural and social barriers: A nation’s cultural and social forces can restrict
international business. Culture consists of a country’s general concept and
values and tangible items such as food, clothing, building etc. Social forces
include family, education, religion and custom. Selling products from one
country to another country is sometimes difficult when the culture of two
countries differ significantly.
Political barriers: The political climate of a country plays a major impact on
international trade. Political violence may change the attitudes towards the
foreign firms at any time. And this impact can create an unfavorable
atmosphere for international business.
Tariffs and trade restrictions: Tariffs and trade restrictions are also the
barriers to international trade. They are discussed below:
Tariffs: A duty or tax, levied on goods brought into a country. Tariffs can
be used to discourage foreign competitors from entering a digestive
market. Import tariffs are two types-protective tariffs and revenue
Tariffs.
Quotas: A limit on the amount of a product that can leave or enter a
country.
Embargoes: A total ban on certain imports or exports.
 Major Barriers to International Trade

Boycotts: A government boycott is an absolute prohibition on the purchase

and importation of certain goods from other countries. For example, Nestle
products were boycotted y a certain group that considered the way nestle
promoted baby milk formula to be misleading to mothers and harmful to
their babies in fewer development countries.
Standards: Non-tariff barriers of this category include standards to protect
health, safety and product quality. The standards are sometimes used in an
unduly stringent or discriminating way to restrict trade.
Anti-dumping Penalties: It is one kind of practice whereby a producer
intentionally sells its products for less than the cost of the product in order
to undermine the competition and take control of the market.
 Major Barriers to International Trade
Monetary Barriers: There are three such barriers to consider:
Blocked currency: Blocked currency is used as a political weapon is response to
difficult balance payments situation. The blockage is accomplished by refusing
to allow importers to exchange their national currency for the seller’s currency.
Differential exchange rate: The differential exchange rate is a particularly
ingenious method of controlling imports. It encourages the importance of
goods the government deems desirable and discourage importation of goods
the government does not want. The essential mechanism requires the
importer to pay the varying amount of domestic currency for foreign currency
with which to purchase products in different categories. Such as desirable and
less desirable products.
Government approval for securing foreign exchange: Countries experiencing
severe shortages of foreign exchange often use it. At one time or another, most
Latin American and East European countries have required all foreign exchange
transactions to be approved by the central bank. Thus importers who want to
buy foreign goods must apply of ran exchange permit that is permission to
exchange an amount of local currency for foreign currency.
 What is globalization ?
Globalization is a process of interaction and
integration among the people, companies, and
governments of different nations, a process
driven by international trade and investment
and aided by information technology. This
process has effects on the environment, on
culture, on political systems, on economic
development and prosperity, and on human
physical well-being in societies around the
world.
 Criticisms of globalization

• Economic impacts
Limitations on growth
The founder of Local Futures (formerly the International Society for Ecology
and Culture), Helena Norberg-Hodge, has suggested that globalization does
not work for all the economies that it affects and that it does not always
deliver the economic growth that is expected of it.
Globalization has been described as an "uneven process" in Africa due to the
global integration of some groups happening alongside the marginalization or
exclusion of others. Therefore, the worldwide trade will have the restrictions
on the growth of economy.
Global Economic Crisis
The Global Economic Crisis, the worst financial crisis since the Great
Depression, can be partially attributed to neoliberal globalization. Although
globalization promised an improved standard of living, it has actually
worsened the financial situation of many homes and has made the financial
crisis global through the influences of international financial institutions such
as the World Bank. Globalization limits development and civilization to a path
that only leads to a Western and capitalistic system. Because of the political
and structural differences in countries, the implementation of globalization
has been detrimental for many countries.
 Criticisms of globalization
• Political impacts
Globalization as American hegemony
John Gray described globalization as a post-Cold War American triumphalism,
and stated “global laissez faire is an American project.” Globalization is a
project in which American ideals and values are executed and implemented
into other countries. However, this effort has been criticized, mainly by the
examination of America today. In America, there are high levels of economic
and social inequalities as the gap between the rich and poor are great.
Furthermore, America has the highest rates of incarceration, and anxiety due
to economic uncertainty is great. The criticism that follows is that the
implementation of the American system into other countries may reproduce
these negative effects.
Power of transnational corporations
Globalization has fueled the rise of transnational corporations, and their power
has vaulted to the point where they can now rival many nation states. Of the
world's one hundred largest economies, forty-two of them are corporations.
Many of these transnational corporations now hold sway over many nation
states, as their fates are intertwined with the nations that they are located in.
 Criticisms of globalization
Also, transnational corporations could offer massive influence regarding the Third World, and
bring about more pressure to help increase worker salaries and working conditions in
sweatshops. However, these corporations are often transnational specifically to take advantage
of different labor laws, which they can keep implemented with their influence and exploit for
their gain. On account of doing the business globally, transnational corporations have the huge
influence in many nation states . In the process of implementing globalization in developing
countries, the creation of winners and losers are often predetermined. Multinational
corporations often benefit from globalization while poor, indigenous locals are negatively
affected. The power of transnational companies inflicts a major threat for indigenous tribes.
Transnational companies have exploited local family land for their businesses. Globalization can
be seen as a new form of colonization or imperialism, as economic inequality and the rise in
unemployment have followed with its implementation. Globalization has been criticized for
benefiting those who are already large and in power at the risk and growing vulnerability of the
countries’ indigenous population. Furthermore, globalization is non-democratic, as it is enforced
through top-down methods.
Sovereignty
Globalization requires a country to give up its sovereignty for the sake of executing Western
ideals in its country. As a result, sovereignty only belongs to a select few: those whose views and
ideals are being implemented. In the name of free markets and with the promise of an
improved standard of living, countries give up their political and social powers to international
organizations. Thus, globalization causes the greater empowerment of these international
organizations and the diminishing influence of local state institutions.
 Criticisms of globalization
Environmental impacts
Damage from transnational corporations
International trade in petroleum products has expanded significantly over the past
decades through globalization so that the environmental problems in Nigeria have
been deteriorated. As the international trade in petroleum products keeps increasing,
there is also corresponding increase in activities in the petroleum industry to meet the
requirement of the ever increasing demand for petroleum products. As a result, it
gives rise to the environmental pollution. The petroleum is toxic to almost all forms of
life and its extraction fuels climate change including air pollution, water
pollution, noise pollution, land degradation and erosion.
Infectious diseases
Infection is the invasion of an organism's body tissues by disease-causing agents, their
multiplication, and the reaction of host tissues to these organisms and the toxins they
produce. Infectious diseases, also known as transmissible diseases or communicable
diseases, kill more people worldwide than any other single cause. Infectious diseases
are caused by germs, such as bacteria, viruses, parasites or fungi. Germs are tiny living
things that are found everywhere in air, soil and water. One can get infected by
touching, eating, drinking or breathing something that contains germs. Infectious
diseases, such as SARS and Ebola, have traveled across the world due to increased
world trade and tourism.
 Criticisms of globalization
Invasive organisms
As International commerce develops new trade routes,
markets and products Globalization facilitates the spread
of invasive species. The modern technology offer the
opportunity that human and commodities can move around
the world. On account of the development of new source,
larger and faster ships and increased air transport, the
commercial trade propels rising annual and cumulative rates of
invasion