An Overview of International

Business

Introduction

GIM | PGDM 20-21 | Term V

Sangram Sinha
“Your own mind is a sacred enclosure into
which nothing can enter except with your
permission”
- Arnold Bennett

Sangram Sinha
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 • Notion of sovereignty
DO • Concept of Nation + State = Nation-
State
COUNTRIE • (People) (Land)
• Olsonian ”bandits”
S STILL • National Governance

MATTER ? • Why do Nations compete ?

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 What is International Business ?

the buying, selling, and

trading of goods and services
across national boundaries.

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Ancient Time
International Trade
• 3000 BCE : Sumerians & Egyptians with Harappan
civilization
• Evolution of Silk route opened by Han Dynasty
( 206 BC – 220 AD)
• From Greek Civilization to the fall of Roman
empire in 5th century – Europe traded spice with
Far East
• Sogdians ruled East-West trade route from 4th to
8th century AD
• Vikings & Varangians traded from 8th to 11th
century and sailed through Scandinavia, Western
Europe & Russia
• Indian export of spices got mentions in history
post 850 AD.

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Middle Age International Trade
1498 1799 early 19th century
Vasco da Gama started European spice Dutch East India Co. goes bankrupt Late entry of Americans –
trade in 1498 Massachusetts trading with Sumatran
in early 19th century. Siamese
American treaty (1833) calls for free
trade (except rice & arms)

Free Trade Agreement (1860) between

Dutch expedition (1595) & Dutch East Opium War (1840) – Britain invades Britain & France under the presidency
India Co. (1602) China of Napoleon III

1595 1840 1860

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 • Treaty of Westphalia (1648) : Ending European War
• World War I (1914 – 1918 )

Modern Age • Bolshevik Revolution (1917): Dismantling Tsar / USSR

• Treaty of Versailles / ILO (1919)

International • World War II (1939- 1945)

• OEEC (1949)  OECD (1961)

Trade - • Council for Mutual Economic Assistance /COMECON (1949)

• 3 Big Groups
• BENELUX + France-Germany + Italy  ECSC (1951) 

Political EEC (Treaty of Rome, 1957)

• UK , Swiss, Nordic countries & Austria  Free Trade Area
• Spain, Portugal, Greece, Turkey  remained loose

Events • Tax Heavens : Andorra, Monaco, Liechtenstein, Virgin Islands

• Berlin Wall breakdown (1990)
• European Union  BREXIT (1918 – 19)

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Evolution of Trade
Theories
• Mercantilism (pre -16th Century)
• Nation’s wealth = Accumulated treasure
• Gold & Silver  Currency
• Free Trade Theories (17-18th Century)
• Absolute advantage (Adam Smith, 1776)
• Comparative Advantage (David Ricardo,
1817)
• Neo-Classical Theories
• Heckscher-Olin Theory (1919)
• PLC Theory – Raymond Vernon
• New Trade Theory - Krugman
• Porter’s Diamond Theory

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Worldwide Market Place

Location & Control Specific Types

• Multinational & Transnational Corporations.
• Global & International Companies
Based on Company Orientation
• Ethnocentric,
• Polycentric,
• Regiocentric,
• Geocentric management.

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 • Marketing Mix
• 4Ps
• Markets - Need - Want
• Segmentation – Targeting Positioning
• Forces that influence the degree of adaptation
1. the drivers of globalization
- Channel of Communication
Essentials of International - Lower Transportation Cost

Marketing - Immigration & Emigration Patterns

- Government actions
2.  Factors making International Marketing Complex
- Culture
- Language
- Political & Legal
- Infrastructure

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 Motivation
to Go
Global

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Globalisation

• Definition:
• An economic phenomenon?
• A social phenomenon?
• A cultural phenomenon?

• The movement towards the expansion of economic and social ties between countries
through the spread of corporate institutions and the capitalist philosophy that leads
to the shrinking of the world in terms of reach & access.

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 Globalisatio
n could
involve all
these things!

Ref : http;//bized.co.uk 19
Balance of Trade
VS
Balance of Payment

• The difference in the value between what a

nation exports and imports is its balance of
trade. A trade deficit is also called a nation’s
negative balance of trade.
• Balance of payments – the difference between
the flow of money into and out of a country.

• A nation’s balance of trade, foreign

investments, foreign aid, loans, tourists dollars,
and military expenditures comprise its balance
of payments

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 • Absolute advantage – a monopoly that exists
when a country is the only source of an
item, the only producer of an item, or the
most efficient producer of an item

• Comparative advantage – the basis of most

international trade, when a country

Free Trade specializes in products that it can supply

more efficiently or at a lower cost than it can
produce other items.

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International
Trade Barriers Barriers to International Trade :
Economic
Legal
Political
Social
Cultural
Technological

Completely free trade seldom exists.

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Economic
• Economic development
• Less-developed countries
• Low per-capita income
Barriers • Less economically advanced
• Potentially huge & profitable markets
• Infrastructure
physical facilities that support economic activities,
including railroads, highways, ports, airfields, utilities,
power plants, schools, hospitals, and commercial
distribution systems
• Exchange rates
The ratio at which one nation’s currency can be
exchanged for another nation’s currency.

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 • Complex relationships
Legal & • Different laws
Political • International laws
• Trade restrictions
Barriers • Changing political climates
• Different ethical values

Cartel – a group of firms or nations that agrees

to act as a monopoly and not compete with
each other, in order to generate a competitive
advantage in world markets.

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Social & Cultural Barrier

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 Technological advances are
creating global marketing
opportunities

Technologica
10 nations outrank the U.S.
l Barriers in terms of fast &
affordable mobile or
broadband Internet access

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 General Agreement on Tariffs and Trade (GATT)
Trade • Signed by 23 nations in 1947

Agreements,
• Forum for tariff negotiations
• Place for international trade issue discussion
and resolution
Alliances, &
Organizations World Trade Organization (WTO) – International
organization dealing with the rules of trade
between nations (1994)

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 United Nations Conference on Trade and Employment entered
discussions about forming an International Trade Organization (ITO).

A compromise structure resulted: the General Agreement on Tariffs and

Trade (GATT).

For the next forty-seven years, the GATT provided the rules governing
trade between signatory countries.
Trade Agreements, The agreement continually evolved. Member countries, including new

Alliances, & signatories, met in a series of eight rounds of negotiations

Organizations
the Uruguay Round, ended in 1994 and created the World Trade
Organization. On January 1, 1995, the GATT was replaced by the WTO.

The World Trade Organization (WTO) facilitates trade between its 153
member countries

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 • World Bank – International Bank for
Reconstruction and Development.
Organization established in 1946 by
industrialized nations to loan money to
International underdeveloped and developing countries.

Financial • International Monetary Fund (IMF)–

Organizations Organization established in 1947 to
promote trade among member nations by
eliminating trade barriers and fostering
financial cooperation

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WTO & Integration allows governments to facilitate
trade. Integration refers to the process of using
agreements between countries to lower limits
Integration on the movements of products, capital, and/or
labor.

Levels of Integration

Free Trade Area Least Integrated

Custom Union
Common Market

Economic Union

Political Union Most Integrated

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 Trade Agreements, Alliances, & Organizations

North American Free Trade Agreement (NAFTA) : agreement that eliminates most
tariffs and trade restriction on agricultural and manufactured products to
encourage trade among Canada, the U.S., and Mexico.

European Union (EU) : a union of European nations established in 1958 to

promote trade among its members; one of the largest single markets today

Asia-Pacific Economic Cooperation (APEC) : an international trade alliance that

promotes open trade and economic and technical cooperation among member
nations.

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 International Trade Integration
Integration in Asia, Integration in the
Integration in the
European Integration Africa, and the Middle East and
Americas
Middle East Africa
• Organization of the • NAFTA • ASEAN • GAFTA
European Union • MERCOSUR • APEC
• Beef Exports in the • Andean Community • Trans-Pacific
European Union Strategic Economic
Partnership
Agreement
• SAARC
• Beef Exports in Asia

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Africa Example
AFcFTA ( Mar 2018)
 SA just signed few months back,
 Nigeria is still excluded
• intra-African trade creates brings
prosperity to Africa

New Approach for Africa

• Gain more industrial and value-
COMESA
added jobs in Africa

SADC • Build internal competitiveness

CEMAC
• Remove domestic market
EAC distortions,

ECOWAS

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 Qs
Which country India has an FTA
with ?

Compare and contrast NAFTA and

the European Union.

Go to the World Trade

Organizations homepage & see
their latest dispute settlements

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 Thank You

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