INTERNATIONAL

BUSINESS

Composed by :-
MS. KIRTI KAMAL
(UGC –NET 2017)
ASSISTANT PROFESSOR
PATNA WOMEN’S COLLEGE
Unit 1
 Introduction to international business : Globalization and
its growing importance in world economy
• Impact of globalization
• International business contrasted with domestic business
complexities of international business
• Modes of entry into international business.
 International business Environment : National and Foreign
environments and their components – economic , cultural
and political –legal environments
• Global trading environment – recent trends in world trade in
goods and services
• Trends in India’s foreign trade.
 Introduction to
international business
 “ According to International Business Journal , International business
is a commercial enterprise that perform economical activity beyond
the bounds of its location , has branches in two or more foreign
countries and make use of economic , cultural , political , legal and
other differences between countries.”
 Characteristics of International business –
o Involvement of two or more countries
o Economic Integration
o Large scale operations
o Intense competition
o Benefits to participating countries
o International restriction
o Dynamic in nature
o Risk and Uncertainties
 Significance of
International Business
 Profitable
 Increasingstandard of living
 Rapid Industrialization
 Foreign Exchange earning
Globalization and its growing
importance in world economy
 Globalization refers to an integration of world economy where the whole
world is viewed as a single market. In other words enlarged and intensified
unification of a nation with the globe in terms of product ,process ,people etc
is termed as globalization.
 Globalization denotes a scenario where countries and Nations around the
World are interconnected and interdependent for meeting their needs and
requirements removing the seamless distance.
Globalization is driven by many
factors , the major drivers of
globalization include:
• Reduced trade and investment barriers
• International trade
• Financial flow in term of FDI, FPI etc
• Communication
• Technological advancement
• Population mobility
• Political drivers
 Impact of globalization
❖ Business expanding global introduce the concept of multinational corporation.
❖ Multinational enterprises offer wider scope of choice of various goods and
services to the consumers trade across world meeting their changing
expectations and preferences . The wave of globalization has brought a social
and cultural transformation and increased opportunities of trade and business
for these multinational.
 Increased trade - greater choice of goods
 Greater competition - lower prices
 Economies of scale - more efficient production
 Increased capital and labor mobility
 Tax avoidance - easier
 Structural unemployment- from shifting sectors
 Monopoly power of multinational
 Some of the positive impact of
globalization includes
 Increase foreign investment
 Resource mobilization
 Increase in employment opportunities
 Wider scope of choice
 Economies of scale
 Improved standard of living
 Negative impact of globalization
 globalization has increased unequal distribution of economic power in the
hands of economically powerful nation who then tend to dominate less
powerful or poor Nations
 globalization has led to increased import over exports which ultimately might
result in growing trade deficit and give rise to balance of payment problems.
 At one end globalization increase job opportunities with labor mobility . On
the other end it affects employment rates with more loss of jobs with
technological up-dation and introduction of artificial intelligence which has
lead to unemployment growth.
 Due to globalization small emerging firms cannot withstand the competition
arising from well organized MNCs.
 One argument against globalization is that increases wealth inequality
worldwide.
 Concept of domestic business
Trade is one of the important component of commerce. the business that is carried within the
national boundaries is termed as domestic business.
Characteristics of domestic business-
✓ Any economic activity that involves production and distribution of goods and services within the
nation territory is termed as domestic business. It involves production and distributional
activities within the boundary of country . it is also called as internal trade or home trade.
✓ Domestic business involves domestic currency as a medium of exchange.
✓ there are minimum legal bureaucratic and administrative formalities involved in domestic
business.
✓ Internal trade has two component wholesale trade and retail trade
✓ Internal trade/ business optimally uses domestic resources such as domestic raw materials ,
manpower , machine etc thereby making efficient utilization of available resources within the
territory of a country.
✓ Internal business supports ancillary industries .This generates revenue to the government and
also increases national income and purchasing power of domestic citizens.
✓ There are no restriction on exchange of goods and services between buyer and seller.
Advantages of domestic business
 Low transaction and transportation cost.
 Loss or no problem related to tariffs and exchange rates.
 It helps to create more jobs and increase employment opportunities
 Presented wider choice of goods within the country
 It helps to grow the economy
 Improves standard of living of the people.
 The companies operating domestic business are familiar with legal
system and are acquainted with policy and economy situation prevailing
in the home country.
 Domestic business enjoys the use of common language and easy means
of communication as the common language is shared between the
suppliers and the consumers.
 Disadvantages of
domestic business
 Diversity of control exercised by multiple
authorities at different levels.
 Restrictions on inter-state and inter-district
movement of goods.
 lack of uniformity in standards laid down by
different authorities and agencies and in taxes
 Huge capital requirement.
 Lack of resources that restrict growth.
 Advantages of
international business
 Spreading of risk
 Growthand expansion
 Government incentives and privileges
 Favorable international policies
 Opportunities for growth
 Disadvantages of
international business
 Depletion of exhaustible natural resources
 Import of harmful commodities
 Rivalry among nation
 Dumping
 Forbid the growth of home industries
 Resistance of cultural complications
International business Vs.
domestic business
Domestic International
Meaning when the business is conducted within the national International is a signifies business
boundary is it is called domestic business another words transaction between two or more
it takes place within a country countries of the world.
Currency It deals with local or domestic currency. it deals with multiple international
currencies.
capital capital investment is low. capital investment is high.
investment
Risk factor less risky to conduct . highly risky to conduct
Influenced by it is less risky and not largely influenced by external highly influenced by external factors
factor.
competition it faces less or no competition. Domestic business International business faces stiff
competition is restricted to local boundary. competition.
Tariffs and The tariff and quotas imposed by various countries on International business are directly
quotas their export and import do not directly and significantly and significantly influenced by the
influence domestic business operations. tariff rates imposed by various
countries.
Culture Operates in relatively uniform Operates in quite divergent
culture culture

Customs Domestic business is not subject to International business is

custom obligation subject to custom obligation

Business homogeneous heterogeneous

values and
attitudes
Complexities of international
business
Driving forces
Liberalization
technology change
market need and requirements
security
cost advantage
management vision
economic integration
Challenges
taxation
political challenge
operation and supply chain
management
cultural difference
stringent rules and regulation
fluctuating exchange rates
energy and environment al
security.
THANK YOU