 INTERNATIONAL BUSINESS

Unit: 1
Globalization &
International Business
TMC –MBS Third Semester
Course Instructor- Prerana Maharjan
  Concept of International Business:
International Business encompasses all commercial activities that
take place to promote the transfer of goods, services, resources,
people, ideas & technologies across national boundaries.
International business is also known as globalization. International
business occurs in many different formats:
• The movement of goods from one country to another country
( exporting, importing, trade).
• Contractual agreements that allows foreign firms to use products &
services & processes from other nations( licensing, franchising).
• The formation & operation of sales, manufacturing, research &
development, & distribution facilities in foreign markets.
An important feature of IB is transformation of domestic economic
operation into foreign market. The most important features of IB are:
• Transactions across the national boundaries as these take place
between parties from more than one country.
• Payments for such transactions are made in foreign currencies.

Therefore, to conduct business overseas, companies should be aware

of all the factors that might affect any business activities including:
difference in legal systems, political systems, economic policy,
language, labor standards, living standards, local cultures, corporate
cultures, foreign-exchange markets, tariffs, import &export
regulations, trade agreements, climate &education.
 Reasons for International Business Expansion:
There are many reasons why international business is growing at such a rapid
pace. Below are some of those reasons:
1. Saturation of Domestic Markets:
In most of the countries due to continuous production of similar products over
the years has led to the saturation of domestic markets. For example in Japan
95% of people have all types of electronic appliances and there is no growth of
organization there, as a result they have to look out for new markets in overseas.
2. Opportunities in Foreign Markets:
As domestic markets in some countries have saturated, there are many
developing countries where these markets are blooming. Organizations have
great opportunities to boost their sales and profits by selling their products in
these markets. Also countries that are attaining economic growth are demanding
new goods and services at unprecedented levels.
3. Increased Demands:
Consumers in countries that did not have the purchasing power to acquire
high-quality products are now purchasing them due to improved economic
conditions.
4. Availability of Low Cost Labor:
When we compare labor cost in developed countries with respect to
developing countries they are very high as a result organizations find it
cheaper to shift production in these countries. This leads to lower
production cost for the organization and increased profits.
5. Competitive Reasons:
Either to stem the increased presence of foreign companies in their own
domestic markets or to counter the expansion of their domestic markets
more and more organizations are expanding their operations abroad.
International companies are using overseas market entry as a counter
measure to increase competition.
6. Consumer Pressure:
Innovations in technology and communication as led to
development of more aware consumer. This has led to
consumers demanding new and better goods and services. The
pressure has led to companies researching, merging or entering
into new zones.
7. Reduction of Trade Barriers:
Most of the developing economics are now relaxing their trade
barriers and opening doors to foreign multinationals and
allowing their companies to set-up their organizations abroad.
This has stimulated cross border trade between countries and
opened markets that were previously unavailable for
international companies.
8. Development of communications and Technology:
Over last few years there has been a tremendous development in
communication and technology, which has enabled people sitting at
their home at one part of the world to know about demands, products
and services offered in other part of the world. Adding to this is the
reducing cost of transport and improved efficiency has also led to
people expanding their business.
9. Global Competition:
More companies operate internationally because
• New products quickly become known globally
• Companies can produce in different countries
• Domestic companies, competitors, suppliers have becomes
international
 Concept of Globalization:
 Concept of Globalization:
Globalization is not a new concept. Traders traveled vast distances in
ancient times to buy commodities that were rare and expensive for sale
in their homelands. The Industrial Revolution brought advances in
transportation and communication in the 19th century that eased trade
across borders.
Globalization is the spread of products, technology, information, and
jobs across national borders and cultures. Corporations gain a 
competitive advantage on multiple fronts through globalization. They
can reduce operating costs by manufacturing abroad. They can buy raw
materials more cheaply because of the reduction or removal of tariffs.
Most of all, they gain access to millions of new consumers.
Globalization is a social, cultural, political, and legal phenomenon. 
• Socially, it leads to greater interaction among various populations.
• Culturally, globalization represents the exchange of ideas, values, and
artistic expression among cultures.
• Politically, globalization has shifted attention to intergovernmental
organizations like the United Nations (UN) and the 
World Trade Organization (WTO).
• Legally, globalization has altered how international law is created and
enforced.
Globalization is the process of spreading the scope of international
business activities through interaction among & integration of people,
companies & governments & optimum use of resources. The globalization
promotes world economic & socio-cultural interdependence through
international business. It involves integrations of the national economy to
global economy & national business to global business. An
MNCs(Multinational enterprises) or TNC(Transnational corporations) views
the globalization as a strategy of beating the competitors mostly by
standardizing the products or services.
 Forms/Types of Globalization:
1. Economic Globalization:
A worldwide economic system that permits easy movement of goods,
production, capital, and resources (free trade facilitates ). Economic
globalization implies increasing global inter-linkages of the markets in
goods, services, capital & finance. It is all about declining cost of
transportation, communication, deregulation of foreign exchange- leading
to full convertibility of currency, etc.
2. Technological Globalization:
It is the technology that has brought the world even closer, meaning
globalization. The technologies of production, operations &
communications developed in one part of the world get instantly
globalized & used in other parts. It includes information, communication,
connection between nations through technology such as television, radio,
telephones, internet, websites ,etc.
3. Political Globalization :
Political Globalization is the mutual framework by exchanging the views of
implementing & billing(preparing) the policies , plans & other implementation
between countries. There is a exchange of view & experiences between
nations regarding the establishment of legal system, protection of women
rights, human rights, child rights, etc. Countries are attempting to adopt
similar political policies and styles of government in order to facilitate other
forms of globalization.
4. Socio- Cultural Globalization:
Socio- Cultural Globalization is taking place with worldwide assimilation
(integration/combination) of cultural values, beliefs, customs through
communication technologies, media, tourism as well as the international
exchange of ideas. The implication of socio-cultural globalization consists of
mutual understanding peaceful co-existence & learning from each other.
Socio-Cultural Worldwide exchange of socio-cultural values & norms, women
rights, global citizen & tourism.
5. Natural/Ecological Environmental Globalization:
Environmental Globalization has become a broad spectrum(a
broad range of ideas/activities) to solve the most alarming
problems of global warming, depletion(thinning) of the O-zone
layer, acute loss of biodiversity, pollution, etc. They are working
together to conserve the world environment by preventing further
degradation(destruction) of global ecology. Seeing the Earth as a
single ecosystem rather than a collection of separate ecological
systems because so many problems are global in nature.
e.g. International treaties to deal with environmental issues like
biodiversity, climate change or the ozone layer, wildlife reserves
that spread over several countries.
 Drivers of Market Globalization:
A driver is a contributing factor of change. The term is most commonly
used to describe factors associated with some type of growth. The
main drivers of globalization include technological advancement,
international trade, and international investment.
• Technological advancement drives globalization by making it easier
for people, goods, and ideas to move across borders. For example,
advancements in transportation have made it possible to move vast
amounts of people and product around the world in just a short
amount of time. Advancements in telecommunications have allowed
people to send messages and information to each other in seconds as
opposed to days, weeks, or even months. And advancements in
automation have made it possible to increase the production and flow
of goods and services.
• International trade drives globalization because it encourages and
strengthens interdependence between countries. It is very difficult for
any nation to be self-sufficient. They must import goods, services, and
capital to maintain a certain standard of living for their citizens. As a
result, many countries and international organizations have
enacted(approved) economic policies that fuel globalization. For
example, the elimination of trade barriers and the reduction of foreign
investment restrictions has helped to create a global marketplace.
• International investment drives globalization by increasing economic
integration. In recent years, there has been an uptick in international
investment, including commercial loans, foreign direct investment (FDI),
and foreign portfolio investment (FPI). Many countries have encouraged
this to reap(received) the benefits of international investment, which
include the creation of productive enterprises, jobs, and new sources of
income.