Unit - I

Concepts of globalization and international business; Factors affecting

globalization; Reasons for international business expansion; Drivers of
market globalization; Domestic vs. international
business.
 Globalization
It is a process of unboardering of the world to facilitate free movements of
almost everything on the globe viz. people, culture, lifestyle, ideas capital,
products, materials, technology etc.

It is a process of integrating and knitting countries, societies, and markets into

a single unit to facilitate people across the world to benefit from one another's’
wealth or assets resulting in the promotion of standard of living and quality of
life.
 Human nature at the root of globalization. Physically man is limited; but
spiritually he is unlimited, he is universal.

There are three sciences to be mastered: Physical science, social science, and
spiritual science.
Physical science: . Physical science is not all of science, it is limited by
the word physical. Thomson has said in his book, Introduction to
Science, we learn science not only from the laboratory, but also from a
statesman or a businessman dealing with things. Observation of facts
and deduction of laws therefrom is what constitute scientific method
Social science: Understanding, compassion, love, maturity – all these come
from a higher science, the science of values, “social science” – science of
dealing with others. No values can come from the body or from physical
nature.

Spiritual science: Richard Dawkins in his book, “The Selfish Gene” has
stated that the genetic system is essentially selfish. But Vedanta has
discovered spiritual “super-conscious” dimension of man. The super
conscious or spiritual dimension of man propels a man and move beyond the
boundary of his physical confinements and explore and unite with the divine
source. When you realize this truth you become “self actualized” universal.

Economic globalization refers to the merging of historically distinct and separate

national markets into one huge global marketplace. Falling barriers to cross boarder
trade have made it easier to sell internationally.
Factors affecting globalization

* Increase in and expansion of technology,

* Liberalization of cross-boarder trade and resource movement
* Development of services supporting international business
* Changing political situations
* Expanded cross-national cooperation
* Growing consumer pressures
* Increased global competition
Reasons for international business expansion

* Expanding sales and profit

* Minimizing risk
* Acquiring resources
* Availability of technology, support services and conducive policies
* Globalization of production, integration of markets, and falling trade
and investment barriers
Drivers of market globalization

* Development of science, technology & innovations

* Collaborative efforts of governments
* Conducive business rules institutional support
* Global interaction of people and culture
* Lifestyle and standard of living
* Efficient transportation
* Intense competition
 Scope Domestic Int. Business
Scope Limited to national boundaries Cross boarder transactions

Currency National Currency Foreign currency. They are subject to

exchange rate variations.
Legal framework Subject to national laws, customs and Foreign country’s laws customs and
regulations. regulations. Rules of international like
IMF, WTO are also applicable

Risks Relatively low risk Uncertainties and risks are higher

Environment Familiar domestic environment. Diverse and highly complex to

Transfer pricing Does not involve transfer pricing
Management Requires better understanding of
national characteristics and
environment
understand and predict
Use of transfer pricing among various
subsidiaries possible to reduce tax
burden
Good knowledge about geocentric,
cross cultural & good

Domestic vs. International Trade