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International business includes any type of business activity that crosses national borders.

What is Business???
Business may be understood as the organized efforts of enterprises to supply consumers with goods and services for a profit

Contemporary Business goals
Profit (Bottom-line) Growth Market Leadership Customer satisfaction Employee satisfaction Quality Products & Services Service to Society

What do you Environment???

mean

by

Business

The environment of any organization is “ the aggregate of all conditions, events and influences that surround and affect it.” Characteristics of Business Environment:  Complex  Dynamic  Multi-faceted  Far- reaching impact

Why Study Business Environment
Development of broad strategies to ensure

sustainability

To foresee the impact of socio-economic

changes at the national and international levels on firm’s ability

Analysis of competitor’s strategies and

formulation of effective counter measures

To keep oneself dynamic

Types of Environment Internal Environment External Environment Micro environment Macro environment Economic Non Economic .

These include:  Value system  Mission and Objectives  Management Structure and Nature .  Controllable factors.Internal Environment  Refers to all the factors that are within an organization which impart strengths or cause weaknesses of strategic nature.

Components of Internal Environment  Human Resources  Company Image and Brand Equity  Other Factors  Physical Assets and Facilities  R & D and Technological Capabilities  Marketing Resources  Financial Resources .

External Environment Includes all factors outside the organization which provide opportunities or pose threats to the organization Uncontrollable factors Consists of environment Micro and Macro .

Micro Environment “It consists of the factors in the company’s immediate environment that affect the performance of the company”. .

Micro Environment Factors Suppliers Customers Marketing Intermediaries Competitors Publics Financial Community .

Macro Environment : Economic  Non Economic .Macro Environment It comprises general trends and forces that may not immediately affect the organization but sooner or later will alter the way organization operates.

budgets. etc.  Economic Problems  Functioning of economy . industrial and fiscal policies  Economic Indices such as National Income. Capitalistic. Rate of savings. Socialistic or Mixed Economy  Economic planning.  Economic policies for example.Economic Environment  Economic stages that exists at a given time in a country  Economic system that is adopted by a country for example. monetary. Balance of Payments etc. Rate of growth of GNP. Per Capital Income. Distribution of Income. such as five year plans. Disposable Income.

Non Economic Environment Regulatory Environment Socio.Cultural Environment Demographic Environment Technological Environment Political Environment .

Economic Environment  Cultural Environment Social Customs & Rituals and practices Lifestyle patterns Family structure Role & position of men.Non. women. children and aged in family & society .

Non.Economic Environment  Demographic Environment  Growth of population  Age Composition  Life Expectancy  Sex Ratio  Fertility and Mortality rates  Inter-state migration .

Macro Environment  Technological Environment  Sources of technology  Technological development  Impact of technology  Political Environment  Political parties in power  Political Philosophy .

SSIs. development of backward areas and control of environmental pollution .Macro Environment Regulatory Environment Constitutional framework Policies relating investment to pricing and foreign Policies related to the public sector.

WTO ILO  Economic relations between nations  Global human resource-nature and quality of skills.International Environment Important factors that operate at global level which have an impact on organization are:  Growth of world economy  Distribution of world GDP  International institutions IMF. mobility of labor  Global technology and quality standards  Global demographic patterns .

advertising. Need for International Business including: construction. and music companies  Investments  Manufacturing and marketing firms  Service companies ( transportation. wholesaling.  Parties may include  Private individuals  Individual companies  Groups of companies  Governmental agencies 20 . retailing. and mass communication ).  Art. More and more firms around the world are going global. tourism. film.

capital. makes preferential choices. and capital across the world offers consumers new choices permits the acquisition of a wider variety of products facilitates the mobility of labor. services.Need for International Business International business: causes the flow of ideas. and shifts activities to a global level 21 . and technology provides challenging employment opportunities reallocates resources.

and organizations.What is International Business? International business consists of transactions that are devised and carried out across national borders to satisfy the objectives of individuals. companies. 22 .

etc. which involve production or purchase of goods and services with the object of selling them at a profit. services capital or personnel. Functionally. One country depends on another for goods and services as well as one area of a particular country depends on another area for meeting demand. Today’s world is an era of Global Village or specialization. transfer of technology. This activity includes movement of goods.International business deals with business activities (both production and services) that crosses the national boundaries. A particular country is not self-dependent for producing goods and services. This interdependence creates . by business we mean those human activities.

it is not advisable to formulate a uniform business strategy in India. whereas the southern part is known for its 'technology acumen'. with the northern part being the ‘hub of political power'. On the other hand. With such diversities in all the four segments of the country. Different parts of the country are well-known for its different traits. . international business opportunity in India is surely huge. The eastern part of India is known as the 'Land of the intellectuals'.International business in India India being a diverse cultural setup. the western part is known as the 'commercial-capital of the country'.

Titan Industries One of India’s first companies to market a consumer brand overseas. Now present in 26 countries outside India Among the top 3 brands in some Asian countries Total export sales of over Rs 130 crores in 2008-09 .The growth in the international business sector in India is more than 7% annually.

These are:  Indian Oil Corporation  Reliance Industries  Tata Steel  Tata Motors  Bharat Petroleum  Hindustan Petroleum  State Bank of India  ONGC .Indian companies – Fortune 500 8 Indian companies have made it to Fortune 500 list in 2010.

102 32.837 58. 2011 Country Rank 1 2 3 4 5 Company Indian Oil Global 500 rank 98 City New Delhi Mumbai Mumbai Mumbai Mumbai Revenues ($ millions) 68.900 34.450 28.593 Reliance Industries 134 Bharat Petroleum 272 State Bank of India 292 Hindustan Petroleum 336 .Top Five Global Companies in India July 25.

but behind China (27).  Switzerland tops the chart and USA is on 4 th position due to economic instability from 2007-10 . It ranks notably ahead of Latin America’s powerhouse Brazil (58) and way ahead of its neighbors Pakistan (123).Global Competiveness Index  The World Economic Forum has ranked 139 economies in its 2010-2011 Global Competitiveness Report.  In overall competitiveness India scores a passable 51st place. Sri Lanka (62) and Bangladesh (107).

Export-import trade Foreign direct investment Licensing Franchising Management contracts 29 .

produce or sell its product A foreign licensing agreement allows a firm to Subcontracting involves hiring local firms to distribute. Franchising – a contractual agreement where a local entity gains rights to sell the franchisor’s product in the foreign market.ng i s i h c n a r F & e d a r t r e t n u o C Countertrade – international transactions that do not involve currency payments but use bartering. . produce or sell goods and services.

 Acquisition  Joint Ventures  Overseas Division .t c e r i D & g Offshorin Investment The relocation of business processes to a lower- cost overseas location is offshoring  Not initiating business but gaining cost savings  Extremely controversial The ultimate level of global involvement is direct investment  Directly operating production and marketing in foreign country.

Licensing A contractual agreement whereby one company (the licensor) makes an asset available to another company (the licensee) in exchange for royalties. or some other form of compensation Patent Trade secret Brand name Product formulations . license fees.

quotas.Advantages to Licensing Provides additional profitability with little initial investment Provides method of circumventing tariffs. and other export barriers Attractive ROI Low costs to implement .

Disadvantages to Licensing Limited participation Returns may be lost Lack of control Licensee may become competitor Licensee may exploit company resources .

Special Licensing Arrangements Contract manufacturing  Company provides technical specifications to a subcontractor or local manufacturer  Allows company to specialize in product design while contractors accept responsibility for manufacturing facilities Franchising  Contract between a parent company-franchisor and a franchisee that allows the franchisee to operate a business developed by the franchisor in return for a fee and adherence to franchise-wide policies .

Franchising Questions Will local consumers buy your product?  How tough is the local competition?  Does the government respect trademark and franchiser rights?  Can your profits be easily repatriated?  Can you buy all the supplies you need locally?  Is commercial space available and are rents affordable?  Are your local partners financially sound and do they understand the basics of franchising? .

Investment Partial or full ownership of operations outside of home country Foreign Direct Investment Forms Joint ventures Minority or majority equity stakes Outright acquisition .

Joint Ventures Entry strategy for a single target country in which the partners share ownership of a newly-created business entity .

Joint Ventures Advantages  Allows for sharing of risk Disadvantages  Requires more (both financial and political)  Provides opportunity to learn new environment  Provides opportunity to achieve synergy by combining strengths of partners  May be the only way to enter market given barriers to entry investment than a licensing agreement  Must share rewards as well as risks  Requires strong coordination  Potential for conflict among partners  Partner may become a competitor .

Investment via Ownership or Equity Stake Start-up of new operations Greenfield operations or Greenfield investment Merger with an existing enterprise Acquisition of an existing enterprise .

Franchising.International Business Activities Exporting and Importing International Investments Licensing.  and Management Contracts .

Exporting and Importing Exporting: selling of products made in one’s own country for use or resale in other countries Importing: buying of products made in other countries for use or resale in one’s own country .

53% of Boeing’s aircraft sales are to foreign airlines .

International Investments Capital supplied by residents of one country to residents of another 2 categories: Foreign direct investments Portfolio investments .

Other Forms of International Business Activity Licensing: firm in one country licenses the use of its intellectual property to a firm in a second country in return for a royalty payment Franchising: firm in one country authorizes a firm in another country to utilize its operating system and intellectual property .

Management Contracts A firm in one country agrees to operate facilities or provide other management services to a firm in another country for an agreed-upon fee Common in upper-end international hotel industry .

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This Beijing restaurant is one of 430 that McDonald’s has built in China .

goods.United States: A Global Leader The United States has developed a world leadership position due to: the Western world a broad flow of ideas. and services across national borders an encouragement of international communication and transportation its use of market-based transactions in 49 .

50 .S.The the 1930’s. The act was passed in the hope that it would restore domestic employment. The result was a worldwide depression and the collapse of the world financial system.S. passed the The Smoot-Hawley Act Smoot-Hawley Act. the U. which raised import duties to reduce the volume of goods coming into the U.

In the past 30 years. 51 .5 trillion. The sales of foreign affiliates of multinational corporations are now twice as high as global exports. the volume of Expansion of International Trade international trade has expanded from $200 billion to over $7.

institutions. and individuals with trade. For example. 52 . a reduction in coffee production in Brazil would affect individuals and economies worldwide. financial markets.International business has created a Global Links Today network of global links that bind countries. and living standards. technology.

e d a r T s n o i t a N y h W Boosts economic growth Expands markets More efficient production systems Less reliance on economies of Exports: Domestically produced goods and services sold in markets in other countries. home nations Imports: Foreign-made products and services purchased by domestic consumers. .

price. and quality of: – Labor – Natural resources – Capital – Entrepreneurship • Companies can spread risk throughout nations .f o s e c r u o S l a n o i t a n r e t In n o i t c u d o r P f o Factors • Decisions to operate abroad depend upon availability.

4% . opportunities grow Many developing countries have posted high growth rates of annual GDP United States 4.4% China 11.l a n o i t a n r e t n I e h t f o e z i S e c a l p t e k r a M As developing nations expand into the global marketplace.1% India 9.

Balance of payments surplus = more money into country than out Balance of payments deficit = more money out of country than in .e d a r T g n i r u s Mea s n o i t a N n e Betwe Balance of trade: Difference between a nation’s imports and exports. Balance of payments: Overall flow of money into or out of a country.