GLOBAL BUSINESS MANAGEMENT

SBAA5301 GLOBAL BUSINESS MANAGEMENT

DR.TR.KALAI LAKSHMI
FACULTY , SCHOOL MANAGEMENT STUDIES
SATHYABAMA INSITUTE OF SCIENCE AND TECHNOLOGY
 UNIT 1
INTRODUCTION TO INTERNATIONAL BUSINESS

Introduction- Evolution- Theories of global grade and

investment -Mercantilism- Theory of absolute
Advantage – Theory of comparative advantage-Factor
Endowment Theory- Product life cycle theory-Porter’s
national competitive Advantage
 UNIT 1
INTRODUCTION TO INTERNATIONAL BUSINESS

International marketing can be defined as "marketing carried on across National

boundaries".

International marketing has also been defined as ' the performance of business activities that direct the
flow of goods and services to consumers or users in more than in one nation'.

It is different from domestic marketing in as much as the exchange takes place beyond the frontiers,
Hence international market involves
• Different markets
• Different consumers having different needs, wants and behavioral attributes.
 UNIT 1
INTRODUCTION TO INTERNATIONAL BUSINESS

International Marketing:

 International marketing is in essence export marketing,

 It also means entry into international markets.
 It can be Opening a branch/ subsidiary abroad for processing, packaging, assembly or
even complete manufacturing through direct investment.
 It is Negotiating licensing/ franching arrangements whereby foreign enterprises are
granted the right to use the exporting companies on patents, processes or trademarks
with or without financial investment.)
 International business is also establishing joint ventures in foreign countries for
manufacturing and or marketing and offering consultancy services and undertaking
turnkey projects broad.
 Depending upon the degree of firm’s involvement, there may be several variations of
these arrangements.
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INTRODUCTION TO INTERNATIONAL BUSINESS

Scope of International Marketing:

Opening a branch – Involves opening a branch in foreign market for processing,
packaging or assembling the products as per the needs of the market.
Joint Ventures &Collaborations – Involves creating joint ventures and
collaboration in foreign countries with some foreign firm.
Licensing requirements – The firm which opens a branch at abroad gets licensing
arrangements with the foreign firm whereby foreign enterprises are granted the right
to use the exporting company’s knowhow viz patents with or without financial
investment.
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INTRODUCTION TO INTERNATIONAL BUSINESS

Scope of International Marketing:

Consultancy services - The exporting company offers consultancy service by
undertaking Turnkey projects in foreign countries. For this purpose it sends its
consultants and experts to foreign countries who guide and direct the
manufacturing activities of the spot.
Exchange of Technical and Managerial Knowhow – The Technicians and
Managerial personnel of the exporting company guide and train the technicians and
the manager of the importing company.
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Difference between marketing Vs Domestic Marketing
Basis of comparison Domestic Marketing International Marketing

Meaning Domestic marketing refers to marketing International marketing means the activities of
within the geographical boundaries of production, promotion, distribution, advertisement
the nation. and selling are extend over the geographical limits
of the country.
Area served Small Large

Government Less Comparatively high

interference
Business operation In a single country More than one country

Use of technology Limited Sharing and use of latest technology.

Risk factor Low Very high

 Characteristics on International Marketing

Sovereign Political Entities – There are more restrictions imposed on the country
for importing and exporting the goods and services in order to safeguard their national
products. These restrictions include the following.
a. Imposition of Tariffs & Customs Duties – These are levied both on import and on
export of goods and services in order to make them costly in the importing country and
not to ban their entry into the country completely.
b. GATT – General Agreement on Tariffs and Trade has reduced significantly in tariff
globally and on regional basis due to the emergence of regional economic
grouping.
c. Restrictions on Qualities – are imposed in order to protect home industries from the
competition of the foreign commodities.
d. Exchange control and quantitative controls – are put together along with the
grant of import license.
 Characteristics on International Marketing
Legal Systems – Presence of various legal systems makes the task of
businessmen more difficult. Most of the countries follow English common law as
modified from time to time.
Monetary systems – The exchange rates are fixed under the rules framed by the
International Monetary Fund. Some countries follow multiple rates, in which
different rates are applicable to different transactions.
 Characteristics on International Marketing
Mobility of factors on production – Recently the movement of labour has
increased
manifold with the advent of air transport. The development of International
banking has also increased the mobility of capital and labour.
Market Considerations – The demand pattern, channels of distribution, methods of
promotion etc, are different from market to market.
Procedures and documentations – The different laws and customs of trade in
each country demand different procedures and documentary requirements for
the import and export of the goods and services
IMPORTANCE OF EXPORT BUSINESS IN INDIA

1) Meeting imports of industrial needs – Imports of capital equipments,

raw materials of critical nature, technical know-how for building the
industrial base in the country for rapid industrialization and developing the
necessary infrastructure.

2) Debt Servicing – India has been receiving external aid over the years
for its industrial development resulting in the need for debt servicing.
Therefore, it is essential to concentrate on export earnings to cover both
imports and debt servicing.
IMPORTANCE OF EXPORT BUSINESS IN INDIA

Fast Economic Growth – The countries that would like it grow economically should
create exportable surpluses i.e., surpluses after meeting domestic demands.
Optimum Use of Natural Resources – Foreign exchange can be utilized
in establishing industrial unit based on different natural resources availability
in the country by making the necessary imports of plant and machinery for the
purpose.
Meeting Competitions – To improve the exports, the government announces
several concessions and incentives. By utilizing these concessions domestic producers
concentrates his mind towards the improvement of quality of goods produced and
reduces the cost of production so as to face the acute competitive situation in the
foreign markets by making intensive use of latest technology.
IMPORTANCE OF EXPORT BUSINESS IN INDIA

6)Increasing Employment Opportunities – The problem of

employment and Underemployment can be solved to some extent by
increasing the level of export.
7)Increasing National Income – A country’s national income increases to
a sizable extent through organized export marketing.
8)Increasing the standard of Living in the following ways
.Import of necessary items.
Purchasing power increases
Widespread industrialization.
Competitive quality
IMPORTANCE OF EXPORT BUSINESS IN INDIA

9) Develops International Collaboration – To settle international

issues some countries from group or a common platform to discuss various
issues concerning their international trade and take decision. OPEC & EEC are
such groups.
10) Develops Cultural Relations – Local representatives and other related
persons come
into contact with foreign representatives and know their habits and customs.
11) Brings Political Peace – Various countries with different political
ideologies importor export their product, which enhances the chances of
peace.
 TYPES OF MARKETING BASED ON MARKETS

Domestic marketing. This involves the company manipulating a series of

controllable variables, such as price, advertising, distribution, and the
product, in a largely uncontrollable external environment that is made up
of different economic structures, competitors, cultural values, and legal
infrastructure within specific political or geographic country boundaries.

International marketing. This involves the company operating across

several markets in which not only do the uncontrollable variables differ
significantly between one market and another, but the controllable factor in
the form of cost and price structures, opportunities for advertising, and
distributive infrastructure are also likely to differ significantly.
 UNIT 1
TYPES OF MARKETING BASED ON MARKETS
Export marketing. In this case the firm markets its goods and/or services across national/political
boundaries. A firm can export its products in one of three ways: indirect exporting, semi-direct exporting,
and direct exporting.

Multinational marketing. Here the marketing activities of an organization include activities,

interests, or operations in more than one country, and where there is some kind of influence or
control of marketing activities from outside the country in which the goods or services will actually
be sold. Each of these markets is typically perceived to be independent and a profit center in its
own right.

Global marketing. The entire organization focuses on the selection and exploration of global marketing
opportunities and marshals resources around the globe with the objective of achieving a global competitive
advantage. The primary objective of the company is to achieve synergy in the overall operation, so that by taking
advantage of different exchange rates, tax rates, labor rates, skill levels, and market opportunities, the
organization as a whole will be greater than the sum of its parts.
 DOMESTIC MARKETING

1. In Domestic marketing a small survey will prove helpful to know the market conditions.
2. The activities of production, promotion, advertising, distribution, selling and customer
satisfaction within one’s own country is known as Domestic marketing.
3. Domestic marketing caters a small area, whereas International marketing covers a large
area.
4. In domestic marketing, there is less government influence as compared to the international
marketing
5. In domestic marketing, business operations are done in one country only.
6. The risk factor and challenges are comparatively less in the case of domestic marketing
7. In domestic marketing, the executives face less problem while dealing with the people
because of similar nature
 INTERNATIONAL MARKETING

1. International marketing seeks deep research on the foreign market due to lack of
familiarity of buyers .
2. In international marketing, there is an advantage that the business organization can have
access to the latest technology of several countries which is absent in case domestic
countries.
3. The risk involved and challenges in case of international marketing are very high due to
some factors like socio-cultural differences, exchange rates, setting an international price
for the product and so on
4. International marketing requires huge capital investment, but domestic marketing requires
less investment for acquiring resources.
5. In international marketing, it is quite difficult to deal with customers of different tastes,
habits, preferences, segments, etc.
 Introduction
 Trade theories explain trade patterns (Quantity, range of
products and countries)
 Laissez – faire approach: Allows market forces to determine
trade relations
 Interventionist approach: Propagates government
intervention.

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 Theories
I. Mercantilism
II. Absolute Advantage
III. Comparative Advantage
IV. Heckscher – Ohlin Theory
V. International Product Life Cycle Theory
VI. New Trade Theory

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 I. Mercantilism
 England – Mid 16th century
 A country’s wealth is measured by its holdings of gold.
 Countries should export more than they import.
 Gold empowered governments to invest in armies & national
institutions.
 Intended to benefit colonial powers.

 It was in best interest of countries to maintain trade surplus.

 Imports limited by tariffs; Exports subsidized.
 IB treated as a zero – sum game (i.e., win – loss)
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 II. Absolute Advantage
 Adam Smith in his book “Wealth of nations”, 1776.
 Real wealth of nation consists of goods & services available to
its citizens, in their quality of living.
 Different countries produce some goods more efficiently than
other countries.
 Global efficiency can increase through free trade. Buy
V/S Build : Buy whatever you can’t produce efficiently
than others.
 Such specializations will give a country competitive
advantage. 22
 .
 National resources will shift to more efficient industries.
 Overall efficiency will increase due to :
i. Economies of specialization
ii. Labor time saved from job switching
iii. Economies of scale
 Natural Advantage: Climatic conditions, access to natural
resources, etc.
 Acquired Advantage: Product / process technology, Research
& Development, Skilled manpower, etc.

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 III. Comparative Advantage
 David Ricardo, 1817.
 Global efficiency gains may still result from trade if a country
specializes in those products it can produce more efficiently
than other products – regardless of whether other countries
can produce those same products even more efficiently.
 A country gains if it concentrates its resources in producing
products it can produce most efficiently.
 Trade considered to be a positive – sum game.

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 IV. Heckscher – Ohlin Theory
• Swedish economists, Eli Heckscher & Bertil Ohlin (1991 – 1993)
• In the early 1900s, two Swedish economists, Eli Heckscher and Bertil Ohlin, focused their attention on how a
country could gain comparative advantage by producing products that utilized factors that were in
abundance in the country
• Patterns of international trade is determined by differences in factor endowments, rather than differences in
productivity.
• Comparative advantage arise from difference in national factor endowment.

 Factor endowments: the extent to which a country is endowed (gifted) with resources like land, labour and
capital.
 Commonsensical approach to free trade.
 E.g., USA – Exporter of agricultural goods (abundance of agricultural land);
China – Exporter of textiles and footwear (Abundance of low cost labour)
 .
 Factor endowment theory suggests 3 types of relationships:
i. Land – Labour relationship
ii. Labour – capital relationship
iii. Technological complexities
 Raymond Vernon, 1996
International markets tend to follow a cyclical pattern due to a variety of factors over
a period of time, which explains the shifting of markets as well as the location of
production.
It explains the variations & reasons for change in production and consumption
patterns among various markets over a time period.
V. International Product Life Cycle Theory

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 V. Theory-Porter’s national competitive Advantage

A nation’s competitiveness depends on the capacity of its industry to innovate and upgrade.
Companies gain advantage against the world’s best competitors because of pressure and challenge.
They benefit from having strong domestic rivals, aggressive home-based suppliers, and demanding
local customers.
In a world of increasingly global competition, nations have become more, not less, important. As
the basis of competition has shifted more and more to the creation and assimilation of knowledge,
the role of the nation has grown. Competitive advantage is created and sustained through a highly
localized process. Differences in national values, culture, economic structures, institutions, and
histories all contribute to competitive success. There are striking differences in the patterns of
competitiveness in every country; no nation can or will be competitive in every or even most
industries. Ultimately, nations succeed in particular industries because their home environment is
the most forward-looking, dynamic, and challenging.

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THANKYOU

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