INTRODUCTION TO

INTERNATIONAL
BUSINESS

DR.T.A.MAHESH KUMAR
CONTENTS

• Introduction to International Business

• Nature & Scope & Feature of International Business
• Importance of International Business
• Approaches of International Business
• Problems in International Business
• Entry Strategy
• Advantages & Disadvantages of International
Business
• Reasons for recent International Business Growth
• International organisations
What is International Business ?

• The exchange of Goods & Services, Resources, Knowledge, & Skills,

among individuals & businesses in two or more countries.
• Transaction that are carried out across national borders to satisfy the
objectives of individuals and organization
• All Commercial transactions that take place between two or
more
countries.
1. Private & Government
2. Sales
3. Investments
4. Logistics
5. Transportation
Nature

• Accurate Information & timely

• The size of the international business
• Market segmentation
• International markets have more potential than domestic
markets
Scope

• International Marketing
• International Finance and Investments
• Foreign Exchange
• Global HR
Features

• Large scale operations

• Integration of economies
• Dominated by developed countries and
MNCs
• Benefits to participating countries
• Keen competition
• Special role of science and technology
• International restrictions
Importance

1. Earn foreign exchange

2. Optimum utilization of resources
3. Achieve its objectives
4. To spread business risks
5. Improve organization's efficiency
6. Get benefits from Government
7. Expand and diversify
8. Increase competitive capacity
Approaches of IB

Ethnocentric

Polycentric

Regiocentric

Geocentric
IB Approaches

Ethnocentric approach

• Under this approach, target market is own country , Excessive

production will export due to change in customer taste,
preferences
IB Approaches

Polycentric approach

• Under this approach, the companies customizes the marketing mix

to meet the taste, performance and needs of the customers of each
international market.
IB Approaches

Regiocentric approach

• Under this approach, the company operating successfully in a

foreign country thinks of exporting other neighboring countries of
the host country.
• At this stage, the concerned subsidiary considers the regional
environment ( such as laws, culture, policies etc.) for formulating
the policies & strategies.
IB Approaches

Geocentric approach

• Under this approach, the company analyses the tastes,

preference and needs of the customers in all foreign markets
and then adopts a standardized marketing mix for all the
foreign markets.
Problems

• Political factors
• High foreign investments and high cost
• Exchange instability
• Entry requirements
• Tariffs, quota etc.
• Corruption and bureaucracy
• Technological policy
• Quality Management
Entry Strategy

1. Exporting
• Indirect &
Direct
2. Licensing
• Agreement
• Patent, trademark, copy right, technology, production
processes, and product
• licensee’s fee

3. Franchising
• by franchisers to franchisee
• Usage
Entry Strategy

4. Foreign Assembly
• Subsidiary
• local assembly

5. Turnkey Operation
• Staff of an operating facility
• foreign buyer

6. Foreign production subsidiary

• Establishment
• Purpose
Entry Strategy

7. International Firm
• Significant portion
• In foreign countries

8. Multinational Corporation
• Parent country
• host country

9. Joint Venture
• Property rights
Entry Strategy

10. Foreign Direct Investment

• Arrangement in which a firm buys or establishes tangible

assets
• In another country
• Through direct investment
• By buying a company stock in capital markets
Advantages

• Faster growth
• Access to cheaper inputs
• Increased quality and efficiency
• New market opportunities
• Diversification
Disadvantages

• Increased costs
• Foreign regulations and standards
• Delays in payments
• Complex organizational structure
Reason for recent growth in IB

1. Expansion of technology
2. Business is becoming more global because
• Transportation is quicker
• Communications enable control from afar
• Transportation and communications costs are more conducive for
international operations
3. Liberalization of cross-border movements
• Lower Governmental barriers to the movement of goods,
services, and resources enable Companies to take better
advantage of international opportunities
Reason for recent growth in IB

General agreement on Tariff and trade

(GATT)

• An international organization formed to reduce

or eliminate tariff and other barrier to
international trade

International Monetary Fund (IMF)

• An international financial organization that lend

money to countries in conducting international
trade
Reason for recent growth in IB

World Bank

• An international financial organization that lend

money to underdeveloped and developing
countries for development

Economic Communities

• World Trade Organization (WTO)

• European Community (EC)
• North American Free Trade Agreement
(NAFTA)
• Asian Free Trade Agreement (AFTA)
Thank You!