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Domestic v/s International Business Liberalization, Privatization and Globalization
Wednesday, February 13, 2013 Dr. S. Jain 1
Concept of International Business
• International Trade: Exports of goods and services by a firm to a foreign-based buyer (importer) • International Marketing: It focuses on the firm-level marketing practices across the border, including market identification and targeting, entry mode selection, and marketing mix and strategic decisions to compete in international markets.
Wednesday, February 13, 2013
Dr. S. Jain
Jain 3 . Wednesday. economic.• International Investments: Cross-border transfer of resources to carry out business activities. • International Management: Application of management concepts and techniques in a cross-country environment and adaptation to different social-cultural. legal. S. 2013 Dr. political and technological environments. February 13.
services. February 13. Wednesday. and resources between two or more nations • Global Business: Conduct of business activities in several countries using a highly co-ordinated and single strategy across the world.• International Business: All those business activities which involves cross border transactions of goods. Jain 4 . 2013 Dr. S.
Jain 5 . 2013 Dr. S. February 13.Reasons for International Business Expansion • Market-Seeking Motives – Marketing opportunities due to life cycles – Uniqueness of product or service • Economic Motives – Profitability – Achieving economies of scale – Spreading R&D costs • Strategic Motives – Growth – Risk spread Wednesday.
Types of International Business Export-import trade Foreign direct investment Licensing Franchising Management contracts Wednesday. 2013 Dr. February 13. Jain 6 . S.
forcing one or more parties to adjust their practices to comply with local law. Domestic Business International business can differ from domestic business for a number of reasons. S. – The availability of resources differs by country. – The legal systems of the countries may differ.International Business vs. the way products are produced and the types of products that are produced vary among countries. 2013 7 Dr. forcing each party to adjust its behavior to meet the expectations of the other. February 13. – The cultures of the countries may differ. including the following: – The countries involved may use different currencies. Jain . Wednesday. forcing at least one party to convert its currency into another.
Jain 8 .Differences Between Domestic and International Business • Socio-Cultural Environment • Political & Legal Environment • Economic Environment • Natural Environment • Technological Environment • Competition • Infrastructure Wednesday. 2013 Dr. S. February 13.
--> NOT A SERIOUS FACTOR IN DB IMPLICATIONS -in international marketing. what else? CULTURE. 2013 Dr. consumer behaviour may differ from DB -in production. . February 13. Jain 9 . Wednesday.. -Competent firms are able to take advantage of the above differences by turning them into expanded new opportunities not available from domestic sources. LANGUAGE. but note: NOT ALL FDI GOES TO LOW WAGE COUNTRIES. S.DIFFERENCE BETWEEN DB AND IB COUNTRY-SPECIFIC FACTORS: cheap labour. HRM may differ from DB -standard of living/cost/wages may differ. INSTITUTIONS.
especially trade liberalization or capital market liberalization. the term is used to refer to economic liberalization. 2013 Dr.Liberalization In general. Liberalization refers to relaxation(s) of government restrictions. The economic liberalization in India refers to ongoing economic reforms in India that started on 24 July 1991. Jain 10 . Wednesday. Most often. but not always. usually in areas of social or economic policy. February 13. In some contexts this process or concept is often. referred to as deregulation. Although economic liberalization is often associated with privatization. the two can be quite separate processes. S.
Wednesday. It also means the withdrawal of the State from an industry or sector. partially or fully. Another dimension of privatization is opening up of an industry that has been reserved for the public sector to the private sector. February 13. S. 2013 Dr.Privatization • Privatization means transfer of ownership and/or management of an enterprise from the public sector to the private sector. Jain 11 .
Jain 12 . • Another option for the government is to withdraw from the provision of certain goods and services leaving them wholly or partly to the private sector. or privatisation of ownership. using leases and management contracts.Ways of Privatisation • There are different ways of achieving privatisation. • One of the important ways of privatisation is divestiture. • Privatisation may also take the form of privatisation of management. Wednesday. 2013 Dr. • Another way of privatisation is contracting. S. through the sale of equity. February 13.
Franchising 5. Liquidation Wednesday.• The important ways of privatisation are the following: 1. Privatisation of management 7. 2013 Dr. Divestiture 2. Jain 13 . S. Denationalisation 3. February 13. Government withdrawing 6. Contracting 4.
Some of them are 1. February 13. result in better management of the enterprises 4. enables the government to mop up funds 3. S. encourage entrepreneurship Wednesday.Benefits of Privatisation • Privatisation benefits the society in several ways. reduces the fiscal burden 2. 2013 Dr. Jain 14 .
Managing Business in the Globalization Era Global strategies adopted by business enterprises may include: • Global conception of markets •Multi-regional integration strategy •Changes in external organisation of multinational firms •Changes in internal organisation Wednesday. February 13. 2013 Dr. Jain 15 . S.
Wednesday. Both Foreign Trade and Foreign investment volume have grown rapidly over the last few years. import licensing etc. 2013 Dr. allowing companies to raise capital abroad and grow beyond national boundaries and encourage exports. S. Jain 17 . removal of Non-Tariff Barriers on trade such as Exchange control.GLOBALISATION-MEANING Globalisation of the economy means reduction of import duties. allowing FDI and FPI. February 13..
and also through the more rapid and widespread diffusion of technology.• The IMF defines globalizations as “the growing economic interdependence of countries worldwide through increasing volume and variety of cross border transactions in goods and services and of international capital flows. Jain 18 . 2013 Dr. February 13. S.” Wednesday.
increased import of manufactured products will have adverse impact on domestic production. relative prices change and resources are reallocated to production activities that may raise output. Wednesday.most dynamic factors in the process of economic growth after 1995. February 13.TRADE LIBERALISATION AND GLOBALISATION • First. • Exports and Imports . • Second. Jain 19 . 2013 Dr. larger long run benefits due to the free flow of technology and new production structures. When Tariffs are lowered and QRs are removed. However. S.
View against Free Trade and Globalisation • Those emphasise the importance of Free Trade. 2013 Dr. February 13. Jain 20 .2 VIEWS on Globalisation • Those stress the Virtues of Import Substitution and limited openness ie. S. Arguments a) Achieve International Competitiveness b) Reduce the price level c)More choice for consumers Wednesday.
GLOBALISATION . S. Jain 21 . February 13. 2013 Dr.PHASES 1870-1914 1914-1945 : First Wave : Retreat to Nationalism 1945-1980 : Second wave of Globalisation 1980 onwards : Third wave of Globalisation Wednesday.
Globalization – Changing World Wednesday. Jain 22 . 2013 Dr. S. February 13.
Spread and connectedness of production.Globalization in different ways Concept of Multinationals MNCs now account for over 33% of world output. S. 2013 Dr. Product. Nike. Sony. February 13. Interest Rates Etc. Microsoft etc Wednesday. LG. communication and technologies Branding Brands like Coca Cola. Intel. Quality. Jain 23 . and 66% of world trade Capitalist Approach Privatization + Deregulation + Globalization = Turbo-capitalism = Prosperity Homogeneity Price.
February 13.Main Drivers of Globalization Lowered the cost of Transportation Reduced the cost of Communication Revolution in Information and Communication Technologies Change in political systems Collapse of Soviet Union Fall of Berlin Wall China’s Economic Reforms Wednesday. 2013 Dr. S. Jain 24 .
marketing and sales in the key foreign markets. the domestic based company begins to carry out its own manufacturing. Wednesday. supported by a complete business system including R & D and engineering. the company takes over these activities on its own. • In the fifth stage. Jain 25 . the company moves to a full insider position in these markets.Stages of Globalisation Ohmae identifies five different stages in the development of a firm into a global corporation. • In the next stage. • In stage four. • In stage two. the company moves toward a genuinely global mode of operation. • The first stage is the arm’s length service activity of essentially domestic company which moves into new markets overseas by linking up with local dealers and distributors. 2013 Dr. S. February 13.
February 13. 2013 Dr. Jain 26 . S.Essential Conditions for Globalisation • • • • • • Business Freedom Facilities Government Support Resources Competitiveness Orientation- Wednesday.
Jain 27 . • U S employees can lose their comparative advantage when companies build advanced factories in low-wage countries. which often threaten to export jobs. making them as productive as those at home. it has a Number of Problems. • Workers face pay cut demands from employers. • Service and white collar jobs are increasingly vulnerable to operations moving offshore. • Export jobs often pay more than other jobs. Most find new jobs that pay less. Wednesday. • Global competition and imports keep a lid on prices. especially at those companies operating under competitive pressure. S. 2013 Dr. • The adverse effects of globalisation according to the survey are: • Millions of Americans have lost jobs due to imports or production shifts abroad.While Globalisation has Several Benefits. • Millions of others fear losing their jobs. February 13. • Unfettered capital flows give the US access to foreign investment and keep interest rates low. so inflation is less likely to derail economic growth. • An open economy spurs innovation with fresh ideas from abroad.
to the home market. Wednesday. by and large.Globalisation of Indian Business • India’s economic integration with the rest of the world was very limited because of the restrictive economic policies followed until 1991. however. Jain 28 . February 13. Globalisation has in fact become a buzz-word with Indian firms now. 2013 Dr. there has. Foreign investment by Indian firms was very insignificant. Indian firms confined themselves. been a change. S. and many are expanding their overseas business by different strategies. • With the new economic policy ushered in 1991.
February 13. 2013 Dr.Factors Favouring Globalisation • • • • • • • • • • Human Resources Wide Base Growing Entrepreneurship Growing Domestic Market Niche Markets Expanding Markets Transnationalisation of World Economy NRIs Economic Liberalisation Competition Wednesday. Jain 29 . S.
2013 Dr. S.Map of world dominance relations Source . by Valentino Piana (2004) Wednesday. Jain 30 .HIERARCHY STRUCTURES IN WORLD TRADE. February 13.