INTERNATIONAL

FINANCE
UNIT I
 International Business
Environment
• Macro Environment
• Economic Environment
• Political and Legal Environment
• Socio-Cultural Environment
• Demographic Environment
• Natural Environment
• Physical and Technological Environment
• International Environment
• Micro Environment
 International Business
Environment
• Micro Environment
• Suppliers
• Customers
• Competitors
• Marketing Intermediaries
Modes of Entry into International Business
• Exporting
• Direct Exports
• Sales representatives
• Importing distributors
• Indirect exports:
• Export Trading Companies
• Export Management Companies
• Export Merchants
• Confirming Houses
• Nonconforming Purchasing Agents
 Advantages of Indirect Exporting
➢➢ Fast market access
➢➢ Concentration of resources for production
➢➢ Little or no financial commitment. The export partner usually
covers most expenses associated with international sales
➢➢ Low risk exists for those companies who consider their domestic
market to be more important and for those companies that are still
developing their R&D, marketing, and sales strategies.
➢➢ The management team is not distracted
➢➢ No direct handle of export processes
 Disadvantages of Indirect Exporting
Higher risk than with direct exporting
➢➢ Little or no control over distribution, sales, marketing, etc. as
opposed to direct exporting
➢➢ Inability to learn how to operate overseas
➢➢ Wrong choice of market and distributor may lead to inadequate
market feedback affecting the international success of the company
➢➢ Potentially lower sales as compared to direct exporting, due to
wrong choice of market and distributors by export partners.
Modes of Entry into International Business
Licensing
Franchising
Advantages of the International Franchising Mode
➢ Low political risk ➢➢ Low cost ➢➢ Allows simultaneous expansion into different regions of
the world ➢➢ Well selected partners bring financial investment as well as managerial capabilities to
the operation.
Disadvantages of the International Franchising Mode
➢➢ Franchisees may turn into future competitors
➢➢ Demand of franchisees may be scarce when starting to franchise
a company, which can lead to making agreements with the wrong
candidates
➢➢ A wrong franchisee may ruin the company’s name and reputation
in the market
Modes of Entry into International Business
• Joint Venture
• Strategic Alliance
• Advantages of a Strategic Alliance
• Technology Exchange
• Global Competition
• Industry Convergence
• Economies of Scale and Reduction of Risk
• Alliance as an Alternative to Merger
•D
 Special Difficulties in International
Business
• Political and Legal Differences
• Cultural Differences
• Economic Differences
• Differences in the Currency Unit
• Differences in the Language
• Differences in the Marketing Infrastructure
• Trade Restrictions
• High Costs of Distance
• Differences in Trade Practices
 Benefits of International Business
• Growth of Overseas Markets
• Sales and Profit
• Diversification
• Employment
• Standards of Living