DPP20013

Introduction to international business

TOPIC 1: OVERVIEW OF INTERNATIONAL BUSINESS
 Definition of international business

 Term that is used to jointly describe all commercial transactions that take place
between two or more nations or across national borders

 International Business is one whose manufacturing and trade occur beyond the
borders of the home country. All the economic activities indulged in cross-border
transactions comes under international or external business. It includes all the
commercial activities like sales, investment, logistics, etc., in which two or more
countries are involved.

 The company conducting international business is known as a multinational or

transnational company.
Domestic business

So, what is
definition of
domestic
business???
DEFINITION OF DOMESTIC BUSINESS
Main different of international business and domestic
business

The main difference between IB and DB is the prohibitive cost involved in

international business. Higher costs arise from tariffs imposed on trade, time
cost of border delays and cost associated with country differences such as
language, the legal system and different culture.
Differentiation of international business and domestic
business
BASIS FOR COMPARISON DOMESTIC BUSINESS
Meaning A business is said to be
domestic, when its economic
transactions are conducted
within the geographical
boundaries of the country.
Area of operation Within the country
Quality standards Quite low
Deals in Single currency
Capital investment Less
Restrictions Few
Nature of customers Homogeneous
Business research It can be conducted easily.
Mobility of factors of production Free
INTERNATIONAL BUSINESS
International business is one
which is engaged in economic
transaction with several
countries in the world.
Whole world
Very high
Multiple currencies
Huge
Many
Heterogeneous
It is difficult to conduct research.
Restricted
 EXTERNAL environments IN ib
ECONOMIC
ENVIRONMENT
• Politics often
• Economics explains
country differences in
costs, currency values
and market size.
• Economics helps
explain why countries
• Domestic and
exchange goods and
services, why capital
and people travel
among countries in the
course of business,
and why one country’s
currency has a certain
value compared to
another’s.
• Eg: Trademarks,
POLITICAL &
LEGAL SOCIOCULTURAL COMPETITION TECHNOLOGICAL
ENVIRONMENT ENVIRONMENT ENVIRONMENT ENVIRONMENT
determines where and
how IB can take place.
Obviously, political
disputes particularly
• The related • Technological changes
military confrontations
disciplines of also have driven
can disrupt trade and
anthropology, • Companies’ international
investment.
psychology and competitive situations businesses to escalate
sociology can help may differ by their through advances in
international laws play
communications,
a big role in managers better relative size in
information
determining how a understand different countries, the
different values, competitors they face processing and
company can operate
attitudes and by country and the transportation
abroad. International
beliefs to help resources they can technology, including
law in the form of legal
them make commit internationally. the Internet and the
agreements between
operational World Wide Web
countries determines
(WWW)
how earnings are taxed decisions abroad.
by all jurisdictions.
patented knowledge
and copyrights.
 1. CAPITAL

2. RAW
MATERIALS

INTERNAL
ENVIRONMENT
IN IB

3. PEOPLE

4.
PERSONNEL
 5. FINANCE

INTERNAL
ENVIRONMENT
IN IB

6.
PRODUCTION

7.
MARKETING
Definition of globalization

 Globalization can be described as an ongoing process in

which regional economies, societies and cultures
become integrated with an independent on one another.
 The term is often used to refer particularly to economic
globalization through which national economies are
integrated into the international economy by mean of
trade, foreign direct investment (FDI), capital flows,
migration and the spread of technology.
Group activity

In a group of 3, describe the drivers of

globalization towards international business
activities.
DRIVERS OF GLOBALIZATION IN
INTERNATIONAL BUSINESS
International Business
Drivers

Economic Political Technological

Market
Telecommunication
Cost Government Legal
Innovations
Resources Liberalization
ICT
Competition
MOTIVES FOR ENTERING FOREIGN MARKETS IN
IB

1. Increase profits and sales

• A company’s sales depend on consumers’ demand.
• Any good company could raise greater profits and improve
its sales from operating internationally if they enter the
market at the right time and place.
• Pursuing international sales usually increases the
potential sales and potential profits
MOTIVES FOR ENTERING FOREIGN
MARKETS IN IB

2. Protect markets, profits and sales

• An expansion not only helps a company to keep
and protect the same market share, but also
increase its share the pie in a newer market.
• Access to a larger market, gain market power and
maximize production possibilities
• International operations may reduce operating
risk by smoothing sales and profits and
preventing competitors from gaining advantages.
5 KEYS FUNCTIONAL AREAS IN
INTERNATIONAL BUSINESS
INTERNATIONAL
MARKETING

GLOBAL SUPPLY
CHAIN
MANAGEMENT
5
FUNCTIONAL INTERNATIONAL
FINANCE
AREAS
INTERNATIONAL
ACCOUNTING

INTERNATIONAL
HUMAN RESOURCE
 INTERNATIONAL MARKETING
• Definition: The International Marketing is the application
of marketing principles to satisfy the varied needs and wants of
different people residing across the national borders. Simply,
the International Marketing is to undertake the marketing activities
in more than one nation.
• Domestic marketing deals with only a
single market while international marketing deals with
several different countries and markets. ... In domestic marketing,
the company can have the same policies and strategies
while international marketing requires different strategies in
the promotion of their products.
 INTERNATIONAL MARKETING cont.
• Market orientation is a business philosophy where the focus is on
identifying customer needs or wants and meeting them. When a
company has a market orientation approach, it focuses on
designing and selling goods and services that satisfy customer
needs in order to be profitable.
• Market segmentation is the process of dividing a market of potential
customers into groups, or segments, based on different
characteristics. The segments created are composed of consumers
who will respond similarly to marketing strategies and who share
traits such as similar interests, needs, or locations. For example,
common characteristics of a market segment include interests,
lifestyle, age, gender, etc. Common examples of market
segmentation include geographic, demographic, psychographic
and behavioral.
 INTERNATIONAL MARKETING cont.
• Market targeting is the selection of potential customers to whom a
business wishes to sell products or services. The targeting strategy
involves segmenting the market, choosing which segments of
the market are appropriate, and determining the products that will
be offered in each segment.
• Small businesses can best identify their target
markets through market research. For example, a small hardware
company may conduct 300 phone surveys
among customers in its various markets. The company may ask
these consumers to provide information such as age, education,
employment status, household size and income.
• The main target customer for McDonald's includes parents with
young children, young children, business customers, and teenagers.
Perhaps the most obvious marketing for McDonald's is
its' marketing towards children and the parents of young children.
 CONCEPT OF GLOBAL SUPPLY
CHAIN MANAGEMENT
• A global supply chain is a dynamic worldwide network when a
company purchases or uses goods or services from overseas. It
involves people, information, processes and resources involved in
the production, handling and distribution of materials and finished
products or providing a service to the customer.
• Supply chain management is the management of the flow of goods
and services and includes all processes that transform raw materials
into final products. It involves the active streamlining of a
business's supply-side activities to maximize customer value and
gain a competitive advantage in the marketplace.
 CONCEPT OF INTERNATIONAL
FINANCE
 International Finance is an important part of financial economics.
... International finance is concerned with subjects such as

exchange rates of currencies, monetary systems of the

world, foreign direct investment (FDI), and other important issues
associated with international financial management.
 DIFFERENCE IN THE CONTENT OF
FINANCIAL INFORMATION
a. Language Difference
• Financial statement for different country will use different type of language.
• Sometimes, they will use dual language.

b. Currency Difference
• Accounting currency is the monetary unit used when recording transactions in a company's books. It is also
called the reporting currency. ... Often, the accounting currency is in the same currency denomination as the
local currency where the company operates.

c. Underlying GAAP
• GAAP (generally accepted accounting principles) is a collection of commonly-followed accounting rules and
standards for financial reporting. The acronym is pronounced "gap." GAAP specifications include definitions of
concepts and principles, as well as industry-specific rules.
• Principle of regularity: GAAP-compliant accountants strictly adhere to established rules and
regulations. Principle of consistency: Consistent standards are applied throughout the financial reporting
process. Principle of sincerity: GAAP-compliant accountants are committed to accuracy and impartiality
INTERNATIONAL HUMAN RESOURCE

• International Human Resource Management (IHRM) can

be defined as a set of activities targeting human
resource management at the international level. It strives
to meet organizational objectives and achieve
competitive advantage over competitors at national
and international level.
• IHRM comprises of typical HRM functions such as
recruitment, selection, training and development,
performance appraisal and dismissal done at the
international level and additional exercises such as
global skills management, expatriate management and
so on.