INTERNATIONAL BUSINESS

MANAGEMENT

MBA 1st Year

 By- Ms. Ruba Nasim

INTERNATIONAL BUSINESS MANAGEMENT NOTES

UNIT-1

Definition of International Business

The world has become a ‘global village’. Business has expanded and is no longer restricted to the physical
boundaries of a country.

“International business involves commercial activities that cross national frontiers”

– Roger Bennett

Definition of International Business Management

International Business Management is the management of business operations in an organization serving

markets and operations in more than one country.
Some such examples are Amazon, Coca-Cola etc. These companies have independent operations in many
countries, and each country has its own set of offices, employees, etc. In fact, even the products and
marketing campaigns are customized as per local needs.

International Business Management– Nature and Scope

Nature:

1. International Business Management is much broader term that is use globally.

2. IBM is export and import of goods.

3. IBM is export and import of services or intellectual property rights.

4. IBM also involves Licensing and franchising.

5. IBM plays a important role in Foreign Investments.

Scope:
 (i) International Trade:
International business involves export and import of goods.

(ii) Export and Import of Services:

It is also called invisible trade. Items of invisible trade include tourism, transportation, communication,
banking, warehousing, distribution and advertising.

(iii) Licensing and Franchising:

Licensing is a contractual agreement in which one firm (the licensor) grants access to its patents, copyrights,
trademarks or technology to another firm in a foreign country (the licensee) for a fee called royalty. It is
under the licensing system that Pepsi and Coca Cola are produced and sold all over the world.

(iv) Foreign Investments:

It involves investments of funds abroad in exchange for financial return.
Foreign investments can be of two types:
(a) Foreign Direct Investment (FDI) – Investment in properties such as plant and machinery in foreign
countries with a view to undertaking production and marketing of goods and services in those countries.
(b) Portfolio Investment – Investments in shares or debentures of foreign companies with a view to earn
income by way of dividends or interest.

Driving and Restraining forces of International Business

Driving factors

The important forces driving globalization are as follows:

1. Liberalization: It is a process where a state frees from restrictions on some activities that were earlier
banned by the government.
2. MNC’s: These are the companies, which have taken a complete advantage of trade as they are working at
national & international level. Hence MNC’s play an important role in Globalization.
3. Technology: Technology is a powerful driving force of Globalization. Once a Technology is developed, it
soon becomes available everywhere in the world.

4. Transportation and Communication revolutions: Technological revolution in several spheres, like

transport and Communication, has given a great success to globalization. It has played a pivotal role in
reducing space and time. Flow of information has increased rapidly & it determines profit. Hence
technology is a strong driving force for Globalization.
5. Product development and efforts: The immediate impact of increase of Technology is the growth of new
products due to innovation. The fast is the technology; the fast is the development of products. This has
made many firms to invest heavily on R&D activities with cross – boundaries. This results in globalization.
6. Rising aspirations and wants: Because of the increasing levels of education and exposure to the media,
aspirations of people around the world are rising. They aspire for everything that can make life more
comfortable and satisfying. This promotes Globalization.
7. Regional Integration: Nowadays many countries are joining hands together to promote free and fair
international trade across the borders.
8. Leverages: Leverage is simply some type of advantage that a company enjoys by conducting business in
more than one country.

Restraining forces On Globalisation

There are also several factors which restrain Globalization trend. They are

1. External Factors
2. Internal Factors

External Factors: These are government policies and controls which prevents cross-border business.

Internal Factors: These are collection of factors that exists within the organisation that prevents
Globalisation. One such factor is called as management myopia. The company with an aim to make
immediate profit engage itself in short-term plan and target local markets for business. This is called
as management myopia. This acts against Globalisation of business.

International-Expansion Entry Modes

Type of Entry Advantages Disadvantages

Low control, low local knowledge, potential
Exporting Fast entry, low risk negative environmental impact of
transportation
Less control, licensee may become a
competitor, legal and regulatory
Licensing and Franchising Fast entry, low cost, low risk
environment (IP and contract law) must be
sound
 Type of Entry Advantages Disadvantages
Shared costs reduce investment
Higher cost than exporting, integration
Partnering needed, reduced risk, seen as
problems between two corporate cultures
local entity
Greenfield Venture Gain local market knowledge; can
High cost, high risk due to unknowns, slow
(Launch of a new, wholly be seen as insider who employs
entry due to setup time
owned subsidiary) locals; maximum control