GLOBALIZATION

• Globalization is a process of interaction and integration among the

people, companies, and governments of different nations.

• Globalization is the process of international integration arising from

the interchange of world views, products, ideas and other aspects
of culture.

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 GLOBALISATION-MEANING

Globalisation of the economy means reduction of import

duties, removal of Non-Tariff Barriers on trade such as
Exchange control, import licensing etc., allowing FDI and
FPI, allowing companies to raise capital abroad and grow
beyond national boundaries and encourage exports. Both
Foreign Trade and Foreign investment volume have grown
rapidly over the last few years.

8/23/23 2
 • The IMF defines globalizations as “the growing
economic interdependence of countries worldwide
through increasing volume and variety of cross border
transactions in goods and services and of
international capital flows, and also through the more
rapid and widespread diffusion of technology.”

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Globalization Definition

• - “Processes by which goods, services, capital, people, information,

and ideas flow across national borders.” (Grewal/Levy)

• - “Trend toward greater economic, cultural , political, and

technological interdependence among national institutions and
economies.” (Wild/Wild/Han)

Grewal, D., & Levy, M. (2009). Marketing. New York: McGraw-Hill Companies, Inc.
Wild, J., Wild, K., & Han, J. (2008). International Business: The Challenges of Globalization. Upper Saddle River, NJ: Pearson Prentice Hall.

8/23/23 4
 CHARACTERISTICS

1. Integration of National economies

It is the process of integration of national economy to global economy.

2. Free movement of products across borders

Due to the Globalization, opportunities for free products transferred are pronounced.

3. Standardized Technology
As globalization makes technology transfer easy, companies across the world have to adopt
globally accepted, standardized technology.

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 4. Extensive use of ICET
Use of information, communication, entertainment & technology through out the world.

5. Emergence of MNCs with global image

MNCs are known as “ Agent of Globalization” because they globalize the business & its
related activities in countries they operate.
Example: Honda, McDonald, Microsoft

6. Economics interdependence
Countries are economically dependent with each others.

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Globalization Involving Us All
• Nearly 23 trillion dollars accounts for • Your Everyday Life:
the total value of imports/exports that • Wake up to a GE alarm clock made in China
cross national borders each year. • Slip on Adidas sandals made in Indonesia
• Put your American Eagle clothes on from
Mexico
• Unplug your Nokia phone made in the U.S.
and Taiwan
• Hop into your Toyota made in Kentucky
• Listen to Coldplay from England
• Grap a Starbuck’s coffee with beans harvested
in Columbia

8/23/23 Wild, J., Wild, K., & Han, J. (2008). International Business: The Challenges of Globalization. Upper Saddle River, NJ: Pearson Prentice Hall. 7
Globalization (Continued)

Two Characteristics: Two Forces:

Falling Barriers
to Trade/
Denationalization- national Investment
boundaries becoming less
• GATT
relevant.
• WTO

Technological
Internationalization- entities Innovation
cooperating across national • Internet
borders. • Communication
• Transportation

Wild, J., Wild, K., & Han, J. (2008). International Business: The Challenges of Globalization. Upper Saddle River, NJ: Pearson Prentice Hall.
8/23/23 8
Globalization (Continued)

Top Ten Globalized Countries

Series1

o re and and tes nds ada ark

d en tria and
ap Irel rl t a la n m e u s n l
g e S r a n w A i
Sin i tz t e d the C D e S F
Sw Uni Ne

8/23/23 Wild, J., Wild, K., & Han, J. (2008). International Business: The Challenges of Globalization. Upper Saddle River, NJ: Pearson Prentice Hall. 9
Globalization’s Current Issue
• Rise of the Anti-Nike Movement (1990’s- early 2000’s)
• One of the top companies that use sweatshops
• Manufactured lower cost products in factory countries
• Underpaid workers in Indonesia
• Less than minimum wage (2,100 rupiah to $1 U.S.)
• Child labor (12 and under) in Cambodia and Pakistan
• Poor work conditions in China and Vietnam
• Auditors found out poor health and safety standards in several plants

Locke, R., & Siteman, A. (2004). The Promise and Perils of Globalization: The Case of Nike. Retrieved February 28, 2009, from
http://web.mit.edu/polisci/research/locke/nikepaperFINAL.pdf.
2006, Feb. 6). Anti-Sweatshop League (ASSL). Retrieved February 28, 2009, Web site:
8/23/23 http://www.geocities.com/whydoyoukeepdeletingme/ASSLLeague.html 10
Globalization’s Current Issue (Cont.)
Nike’s Response: Learning to Become a Global
Corporate Citizen.

• New Staff and Training

• Dedicated to labor and environmental compliance

• Increase Monitoring of its Suppliers

• Safe/clean work conditions, respectful labor-management
relations and fair wages.

• Relations with Non-Profit Organizations

• United Nations Global Compact

• Locke, R., & Siteman, A. (2004). The Promise and Perils of Globalization: The Case of Nike. Retrieved February 28,
8/23/23 2009, from http://web.mit.edu/polisci/research/locke/nikepaperFINAL.pdf. 11
Globalization and Marketing
• Expands the market in which
consumers buy from
• Access EBay sellers from across
the globe.
8/23/23
• Two Strategies for Businesses:
• Global Strategy
• Reduce marketing costs by
standardizing product and marketing
strategy
• Multi-National Strategy
• Adapt products and marketing
strategies in each national market to
suit local preferences
Wild, J., Wild, K., & Han, J. (2008). International Business: The Challenges of
Globalization. Upper Saddle River, NJ: Pearson Prentice Hall. 12
 FORMS/TYPES OF
GLOBALIZATION
1. ECONOMIC GLOBALIZATION
It implies increasing global linkages of market in goods, services,
capital & finance.
It is about liberalization, privatization & declining cost of
transportation & communication.
Growth of MNCs has also become another driving force to boost up
this trend.

2. POLITICAL GLOBALIZATION
It is the mutual framework by exchanging views & ideas of
implementing and billing the plan, policies between countries.
Exchange of views & experience between nation regarding the
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establishment of legal system, human rights, free media etc.
 3. SOCIO- CULTURAL GLOBALIZATION

 It is more reflective, reflected & multifaceted phenomenon.

 It Involves exchange of cultural values, beliefs & customs

through communication, Media, technologies, and consumption pattern.

Example: movies, music & fashions, accessories etc.

3. NATURAL GLOBALIZATION

It helps to solve unprecedented problem of global warming,

depletion of ozone layer & trans-border pollution.

Many countries are pressurize to sign the KYOTO PROTOCAL to

control the green house gas effect.
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 5. TECHNOLOGICAL GLOBALIZATION

It is the technology that has brought the world even closer.

Tremendous development on science & ICET ( information,
communication, entertainment & technology.)
Technologies of production, operation & communication are
developed in one part and used in other parts of world.

example: Gmail, Google etc.

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8/23/23
16
 Main Drivers of Globalization -
Lowered the cost of Transportation

Reduced the cost of Communication

Revolution in Information and Communication

Technologies

Change in political systems

Collapse of Soviet Union
Fall of Berlin Wall
China’s Economic Reforms

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 Other Drivers/Promoters Of
Globalization
1. Cost Drivers:
 The cost of product decreases due to utilization of
local resources.
 Use of low labor cost, easy available transport
cost.
2. Market Drivers:
 The business organization get global market for
its local product.

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 Drivers/Promoters Of Globalization
3. Competition Drivers:
 Due to tough competition in previous/
domestic market.
 To defend the home market also
companies are entering into global
business.
4. Political Drivers:
 Regional integration between the country
help to get trade opportunities and are
reducing the trade barriers.

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 Drivers/Promoters Of Globalization
5. Technology Drivers:
 Computerization, speed online transaction
and development in ICT have brought
different communities of the world closer.

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 Drivers/Promoters Of Globalization
6. Crisis in Capitalism:
 Due to sufficient capital company produce
in large quantity which leads to expand
their market in other country also.

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 Overview Of Changing Global
Picture
1. Declining trade and investment barriers:
Formation of regional groups like SAFTA,
ASEAN, NAFTA are discouraging trade barriers
to encourage the economic prosperity.
2. Change in information and technology:
Information and communication technology is the
major source of innovation and expansion so
development in ICT is increasing.
Some of the IT based system are SWIFT and
ASYCUDA.
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 Overview Of Changing Global Picture
3. Change in transportation technology:
 Increase in service delivery due to modern
transportation facility.
 Use of heavy and electronic vehicle helps to save
time.

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 Overview Of Changing Global Picture
4. Development of service that support IB:
Services like easy payment, sms banking are
supporting the business.
5. Growing consumer pressure:
 Flavors and demands of consumer is giving
pressure to the company.
6. Increased global competition:
 The level of competition is increasing due to
open market economy.
Mini-multinational companies are also growing
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dramatically. 24
Components of Globalization
• Globalization of Market
• Globalization of Production
• Globalization of Investment
• Globalization of Technology

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Globalization of Markets
• Globalization of markets refers to the process of integrating and
merging of the distinct world markets into a single market. This
process involves the identification of some common norm, value,
taste, preference and convenience and slowly enables the cultural
shift towards the use of common product or service.

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Features of Globalization of markets
• The size of the company need not to be large to create a global
market. Even small companies can create a global market .
• The distinction of global market are still prevailing even after the
globalization of market. These distinction require the companies to
formulate different strategies for each market.

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• Most of the foreign markets are the markets for non consumer goods
like machinery, equipments, raw material, software etc.
• The global business firms compete with each other frequently in
different national markets including their home markets.

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Reasons for Globalization of Market
• Large scale industrialization enabled mass production.
• Company in order to reduce the risk diversify the portfolio of
countries.
• To cater to the demand for their product in foreign market.
• Companies globalize markets in order to increase their profits and
achieve company goals.

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Globalization of Production
• Factors influencing the location of manufacturing facilities vary from
country to country. They may be more favorable in foreign countries
rather than in home country.

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Reasons for globalization of production
• Imposition of restrictions on imports by the foreign countries forces
the MNC’s to establish manufacturing facilities in other countries.
• Availability of high quality raw materials.
• Availability of inputs at low cost in foreign countries.
• To reduce the cost of transportation and easy logistic management.

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Globalization of investment
• Globalization of investment refers to investment of capital by a global
company in any part of the world. Global company conducts the
financial feasibility of the new projects in different countries of the
world and invest the capital in that country where it is relatively more
profitable
• Globalization of investment is also known as Foreign direct
investment.

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Reasons of Globalization of investment
• There has been a rapid increase in globalization of trade.

• Many countries provided more congenial environment for attracting

direct investment.

• Limitations of exporting and licensing force the domestic companies

to enter foreign markets through FDI.

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Cont….

• Liberalizing the measures of flow of foreign capital across the borders

of various countries.

• Global companies in order to have the control over manufacturing

and marketing activities , invest in the foreign country.

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Globalization of Technology
Methods of Globalization technology
• Companies with the latest technology acquire distinctive
competencies and gain the advantages of producing high quality
products at low cost.
• Companies may have technological collaboration with the foreign
companies through technology which spreads from country to
country.

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Cont….
• The foreign companies allow the companies of various other
countries adopt their technology on royalty payment basis or on
outright purchase basis.
• Company also globalize the technology through the modes of joint
ventures and mergers.

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How technology fastens the process of
globalization?
• Microprocessors and telecommunication
• The Internet and world wide web
• On-line globalization
• Transportation technology

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 Managing Business in the
Globalization Era
Global strategies adopted by business enterprises may
include:

• Global conception of markets

•Multi-regional integration strategy

•Changes in external organisation of multinational firms

•Changes in internal organisation

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 TRADE LIBERALISATION AND
GLOBALISATION

• First, When Tariffs are lowered and QRs are removed,

relative prices change and resources are reallocated to
production activities that may raise output. However,
increased import of manufactured products will have
adverse impact on domestic production.
• Second, larger long run benefits due to the free flow of
technology and new production structures.
• Exports and Imports - most dynamic factors in the process
of economic growth after 1995.

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 2 VIEWS on Globalisation

• Those stress the Virtues of Import Substitution and limited

openness ie, View against Free Trade and Globalisation

• Those emphasise the importance of Free Trade. Arguments

a) Achieve International Competitiveness b) Reduce the
price level c)More choice for consumers

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 GLOBALISATION - PHASES

 1870-1914 : First Wave

 1914-1945 : Retreat to Nationalism

 1945-1980 : Second wave of Globalisation

 1980 onwards : Third wave of Globalisation

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 Globalization – Changing World

8/23/23 43
 Globalization in different ways -

Concept of Multinationals
MNCs now account for over 33% of world output, and 66% of world trade

Capitalist Approach
Privatization + Deregulation + Globalization = Turbo-capitalism = Prosperity

Homogeneity
Price, Product, Quality, Interest Rates Etc.

Spread and connectedness

of production, communication and technologies

Branding
Brands like Coca Cola, Nike, Sony, LG, Intel, Microsoft etc

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Stages of Globalisation
Ohmae identifies five different stages in the development of a firm
into a global corporation.
• The first stage is the arm’s length service activity of essentially
domestic company which moves into new markets overseas by
linking up with local dealers and distributors.
• In stage two, the company takes over these activities on its own.
• In the next stage, the domestic based company begins to carry out
its own manufacturing, marketing and sales in the key foreign
markets.
• In stage four, the company moves to a full insider position in these
markets, supported by a complete business system including R & D
and engineering.
• In the fifth stage, the company moves toward a genuinely global
mode of operation.
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 Essential Conditions for Globalisation

• Business Freedom
• Facilities
• Government Support
• Resources
• Competitiveness
• Orientation-

8/23/23 46
 While Globalisation has Several Benefits, it has a Number of
Problems.
• Global competition and imports keep a lid on prices, so inflation is less likely to derail
economic growth.
• An open economy spurs innovation with fresh ideas from abroad.
• Export jobs often pay more than other jobs.
• Unfettered capital flows give the US access to foreign investment and keep interest
rates low.
• The adverse effects of globalisation according to the survey are:
• Millions of Americans have lost jobs due to imports or production shifts abroad. Most
find new jobs that pay less.
• Millions of others fear losing their jobs, especially at those companies operating under
competitive pressure.
• Workers face pay cut demands from employers, which often threaten to export jobs.
• Service and white collar jobs are increasingly vulnerable to operations moving
offshore.
• U S employees can lose their comparative advantage when companies build advanced
factories in low-wage countries, making them as productive as those at home.
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 Factors Favouring Globalisation
• Human Resources
• Wide Base
• Growing Entrepreneurship
• Growing Domestic Market
• Niche Markets
• Expanding Markets
• Transnationalisation of World Economy
• NRIs
• Economic Liberalisation
• Competition

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 Map of world dominance relations

Source - HIERARCHY STRUCTURES IN WORLD TRADE, by Valentino Piana (2004)

8/23/23 49
Concept of International Business

• International Trade: Exports of goods and services by a firm to a foreign-based

buyer (importer)

• International Marketing: It focuses on the firm-level marketing practices across

the border, including market identification and targeting, entry mode selection,
and marketing mix and strategic decisions to compete in international markets.

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 • International Investments: Cross-border transfer of resources
to carry out business activities.

• International Management: Application of management

concepts and techniques in a cross-country environment and
adaptation to different social-cultural, economic, legal, political
and technological environments.

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 • International Business: All those business activities which involves

cross border transactions of goods, services, and resources between

two or more nations

• Global Business: Conduct of business activities in several countries

using a highly co-ordinated and single strategy across the world.

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 INTERNATIONAL
BUSINESS

International Business comprises all commercial transactions

(private and governmental, sales , investments, logistics, and transportation)
that take place between two or more regions, countries and nations beyond
their political boundaries.

 It refers to all those business activities which involve cross border transactions
of goods, services, resources between two or more nations.

According to Faggart & MCDermott: “ International business can be defined

as those business activities that involves of crossing of national boundaries”.

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Reasons for International Business Expansion

• Market-Seeking Motives
• Marketing opportunities due to life cycles
• Uniqueness of product or service

• Economic Motives
• Profitability
• Achieving economies of scale
• Spreading R&D costs

• Strategic Motives
• Growth
• Risk spread

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 Types of International Business
Export-import trade
Foreign direct
investment

Licensing

Franchising

Management contracts

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International Business vs. Domestic Business
International business can differ from domestic
business for a number of reasons, including the
following:
• The countries involved may use different currencies, forcing at least
one party to convert its currency into another.
• The legal systems of the countries may differ, forcing one or more
parties to adjust their practices to comply with local law.
• The cultures of the countries may differ, forcing each party to adjust its
behavior to meet the expectations of the other.
• The availability of resources differs by country; the way products are
produced and the types of products that are produced vary among
countries.

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 Differences Between Domestic and
International Business

• Socio-Cultural Environment
• Political & Legal Environment
• Economic Environment
• Natural Environment
• Technological Environment
• Competition
• Infrastructure

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 DIFFERENCE BETWEEN DB AND IB

COUNTRY-SPECIFIC FACTORS: cheap labour, what else?

CULTURE, INSTITUTIONS, LANGUAGE, .. --> NOT A SERIOUS FACTOR IN DB

IMPLICATIONS
-in international marketing, consumer behaviour may differ from DB
-in production, HRM may differ from DB
-standard of living/cost/wages may differ,
but note:
NOT ALL FDI GOES TO LOW WAGE COUNTRIES.

-Competent firms are able to take advantage of the above differences by turning
them into expanded new opportunities not available from domestic sources.

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 Domestic Vs International Business
Basis Domestic Business International Business

Scope - Limited scope - Involves cross- border

transaction so broad scope.
Legal - Run & operate in national - Run and operates under
Framework law. foreign policy.
Risk - Level of risk is low. - Level of risk is high.

Management - Less specialized mgmt - Highly specialized and skilled

team. mgmt team.
Currency - Transactions are made in - Transaction are done in foreign
national currency. currency.
Environment - Familiar environment. - Unfamiliar environment.

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 Differences between Domestic and
International Business
• Difference in Currencies
• Difference in Natural and Geographical Conditions
• Mobility of Factors of Production
• Sovereign Political Entities
• Imposition of tariffs and customs duties on imports and
exports;
• Quantitative restrictions like quotas;
• Exchange control;
• Imposition of more local taxes etc.
• Different Legal Systems

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 It includes:
Trade: import & export of goods
FDI: capital investment in manufacturing,
transport, communication, banking etc.
Intellectual Property Rights: trademark,
copyrights
Movement of human resources

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 International Business

Trade Contract Investment

Export Licensing Joint Venture

Enterpot Franchising Portfolio

Investment

Subsidiary

8/23/23 62
 1. TRADE

Trade is a form of international trade in which certain exports and

import transactions are directly linked with each other and in which
imports of goods are paid for by exports of goods, instead of money
payments. It includes:

• Imports : Imports is defined as goods and services produced by host

country and purchased by parent country. it is reverse process of
Exports.

• Exports : Exports is defined as goods and services produced in one

country then get marketed to other country.

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 2. CONTRACT

• Licensing  : Licensing which involve minimal commitment of

resources and effort on the part of the international marketer, are easy
ways of entering the foreign markets. Under international licensing, a
firm in one country (the licensor) permits a firm in one country permits
the firm in another country to use the intellectual property (such as
patents, trademarks, copyrights, technology). The monetary benefits to
the licensor is the royalty fees, which the licensee pays.

• Franchising : Franchising is giving right at a parent company

(Franchiser) to another company (Franchisee) using his name selling
his products, do business in a prescribed manner and get advantage of
brands of parent company.

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 3. INVESTMENT

• Joint Venture : It is a mutual agreement of two or more partners across globe

to collectively own the company to produce goods and services. This will be

pooling the resources to mutual advantages.

• Portfolio Investment: A portfolio investment is a passive

investment in securities, which entails no active management or control of the
issuing company by the investor. The purpose of the Investment is solely
financial gain.

• Subsidiary:  A subsidiary is a company that is partly or completely owned by

another company that holds a controlling interest in the subsidiary company.
If a parent company owns a foreign subsidiary, the company under which the
subsidiary is incorporated must follow the laws of the country where the
subsidiary operates, and the parent company still carries the foreign

8/23/23
subsidiary's financials on its books. 65
 FEATURES
1. Large Scale Operation
All operations are conducted on very huge scale.

It first sells its goods in local market then the surplus goods are exported.

2. Integration of economic

IB combines the economies of many countries because it uses finance from

one country, labor from another country & infrastructure from another country.

Designs product in one country, assemble in another country and sells the

product in international market.

3. Keen Competition

competitions between developed and developing countries.

In this keen competition, developed countries & their MNCs are in favorable
8/23/23 66
position because they produce superior quality goods & services at low price.
 4. Special role of science & Technology
S & T helps the business to have large-scale production.
International business helps to transfer top high technologies from
developed to the developing countries.

5. Benefits to participating countries

benefited from foreign investment, advance technology, utilization of
resources and employment opportunities while participating with IB.

6. Sensitive Nature
IB is sensitive in Nature. Any changes in economic policies, technology,
political environment have a huge impact on it.
IB must conduct marketing research to find out these changes.

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 Opportunities/Reason for conducting IB
1. Market Expansion
2. Liberalization
3. Resource Acquisition
4. Risk Reduction
5. New Technology
6. Networking

8/23/23 68
8/23/23 69
 Market Expansion:

IB refers to business perform in between two or

more countries so, the market area will be bigger
and the demand also.
IB helps to increase the size of market to increase
the sales.

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 Liberalization

It is a set of policies and practices of easing,

reducing and eliminating the trade barriers.
International institution creates greater opportunity
for IB by removing barriers to trade and investment.

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Resource Acquisition
• International business helps to use the resources
from other countries which are not available in
domestic market.
• Resources can be acquired in lower costs.
• Eg: - china and Japan imports raw materials and
export finished goods.

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 Market Expansion:

IB refers to business perform in between two or

more countries so, the market area will be bigger
and the demand also.
IB helps to increase the size of market to increase
the sales.

8/23/23 73
Risk Reduction
• Business risk level also varies on the basis of geographical area,
political situation, market demand etc.
• IB helps to balance the risk by operating in various countries.

8/23/23 74
New Technology
•IB facilitate technology transfer so that companies
across the world adopt globally accepted technology.
•IB brings competitive advantage over domestic
business by the transfer of technology.

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Networking
• Good relationship is established with foreign govnt,
suppliers etc.
• Networking provide competitive advantage and
increase sales in international market.

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 Importance of IBE
• Helps in expansion: Geographic expansion may be used as
a business strategy. Even though companies may expand
their business at home.
• Helps in managing product life cycle: Every product has
to pass through different stages of product life cycle-when
the product reaches the last stages of life cycle in present
market, it may get proper response at other markets.
• Technology advantages: Some companies have
outstanding technology advantages through which they
enjoy core competency. This technology helps the
company in capturing other markets.

Cont…
8/23/23 77
 Importance of IBE
• New business opportunities: Business opportunities in
overseas markets help in expansion of many companies.
They might have reached a saturation point in domestic
market.
• Proper use of resources: Sometimes industrial resources
like labor, minerals etc. are available in a country but are
not productively utilized.
• Availability of quality products: When markets are open,
better quality goods will be available every where. Foreign
companies will market latest products at reasonable
prices. Good product will be available in the markets.

Cont…
8/23/23 78
 Importance of IBE
• Earning foreign exchange: International business
helps in earning foreign exchange which may be
used for strategic imports. India needs foreign
exchange to import crude oil, deface equipment,
raw material and machinery.
• Helps in mutual growth: Countries depend upon
each other for meeting their requirements. India
depends on gulf countries for its crude oil supplies.
• Investment in infrastructure: International business
necessitates proper development of infrastructure.

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 Problems in International Business
• Controlling the market: Multinational try to control the
market of the host country. Whenever they enter a new
country, the first strategy is to eliminate the competitors
either by taking over their business or forcing them out of
market by following price reduction policies.
• Exhausting natural resources: Multinational corporations
set up their production facilities in those countries where
natural resources are available in sufficient quantities.
• Importance to luxuries: Multinational corporations enter
those areas where margin of profits is high.

8/23/23
Cont… 80
 Problems in International Business
• Trade practices: Since multinational corporations have their
head office in one country and the trade practices followed
there are adhered to.
• Economic development: It is generally felt that the entry of
businessmen from outside may help in the economic
development of that country . The actual practice in many
countries is different.
• Shifting of investment: International business is related to
profitability of its operations. If a business is getting sufficient
profits in a particular country then the investment remain
there. 
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 Need for International
Business
• causes the flow of ideas, services, and capital across the
world
• offers consumers new choices
• permits the acquisition of a wider variety of products
• facilitates the mobility of labor, capital, and technology
• provides challenging employment opportunities
• reallocates resources, makes preferential choices, and
shifts activities to a global level

8/23/23 82
 Trends in IB
• Trade between partners of Regional Trade
Agreements (RTAs)
• Developing countries’ trade
• South-South trade
• Air Cargo; Express cargo
• Global production network
• Intra-firm trade
• E-commerce

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 Challenges of International Business
Changing Environment: IB manager needs to
cope with the change in political, economical,
cultural environment. Eg- revolution, cross-culture
mgmt, currency rate etc.
Need for new strategies: New and applicable
strategies should be developed with respect to
government policy, suppliers, competitors etc.

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 Challenges of IB
Competition: IB manager have to face different
levels of competitors in the international market. So
there will be high competition.
Information Gap: Due to different causes flow of
information is not possible about the international
environment. So it is one of the challenges for IB
managers.

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 Challenges of IB
Management Skills: IB manager should have the
high specialized mgmt team to deal with the foreign
country environment.
Some of the other possible challenges are
Fluctuating exchange rate
Cultural difference
Foreign exchange regulation

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 FEATURES OF IB

1. Large scale operations 

2. Integration of economies 

3. Dominated by developed countries and MNCs 

4. Benefits to participating countries 

5. Keen competition 

6. Special role of science and technology 

7. International restrictions 
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 IMPORTANCE OF IB
1. Earn foreign exchange

2. Optimum utilisation 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

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 GOING INTERNATIONAL

8/23/23 89
 I B APPROACHES

1. Ethnocentric approach

2. Polycentric approach

3. Regiocentric approach

4. Geocentric approach

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 I B APPROACHES

1. Ethnocentric approach

• Under this approach , target market is own country ,

Exccesive production will export due to change in

customer taste, preferences

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 1. Ethnocentric approach
Organization Structure
Managing Director
↓
↓
↓⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻↓⁻⁻⁻⁻⁻⁻⁻⁻⁻↓⁻⁻⁻⁻⁻⁻⁻⁻⁻↓⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻↓
MGR MGR MGR MGR MGR

R&D FIN PROD HRD MKTG

↓
↓⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻↓⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻↓
Asstt. Mgr Asstt. Mgr Asstt. Mgr
North india South India Exports

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 I B APPROACHES

2. 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.

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 2. Polycentric approach
Organization Structure
Managing Director
↓
→→→ CEO
↓ FOREIGN SUBSIDIARY
↓ SOUTH AFRICA
↓
↓
↓
↓
↓⁻⁻⁻⁻⁻⁻⁻⁻↓⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻↓⁻⁻⁻⁻⁻⁻⁻⁻⁻↓⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻↓
MGR MGR MGR MGR MGR
R&D FIN PROD HRD MKTG

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 I B APPROACHES

3. Regiocentric approach

• Under this approach, the company operating successfully in a

foreign country thinks of exporting other neighbouring 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.

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 3. Regiocentric approach
Organization Structure
Managing Director
↓
→→→ CEO
↓
↓ SOUTH AFRICA
↓ ↓⁻⁻⁻⁻⁻⁻⁻↓⁻⁻⁻⁻⁻⁻⁻⁻↓

↓ Mktg Mktg Mktg

↓ ( Lesotho) ( Kenya) ( Nambia)
↓
↓⁻⁻⁻⁻⁻⁻⁻ ⁻ ↓⁻⁻⁻⁻⁻⁻⁻⁻↓⁻⁻⁻⁻⁻⁻⁻↓⁻⁻⁻⁻⁻⁻⁻⁻↓
MGR MGR MGR MGR MGR
8/23/23 96
R&D FIN PROD HRD MKTG
 I B APPROACHES
4. 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.

• Coca-cola adopted this strategy by selling its popular soft drink with the same
content, packaging, branding & advertisement themes worldwide

• Whirlpool designs a world-washer – small, stripped-down automatic washing

machine for Mexico, Brazil & India. However, it modified its product for
Indain market to wash the delicate “sarees”.

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 4. Geocentric approach
Organization Structure
Managing Director
Headquarters India
↓
↓
↓
↓⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻ ↓⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻ ↓⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻ ↓
Subsidiary Subsidiary Subsidiary Subsidiary

India South Africa Kenya Nambia

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 MOTIVATION TO DO I B

1. Proactive:
 to increase profit
 to take advantage of product life cycle
 to achieve Economies of scale
2. Reactive:
 Competitive pressures
 Overproduction and excess capacity
 Declining domestic sales
 saturated domestic markets

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 NEED FOR I B
1. Achieve higher rate of profits

2. Expanding the production capacity beyond the demand of the

domestic country

3. Availability of technology and managerial competence

4. Cost of manpower, transportation & Nearness to R/M

5. LPG Implt.

6. Market share

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 ADOPTING TO CUSTOMERS NEEDS

1. Products and Services should meet to foreign market

2. Price adjustments by considering the cost of foreign trade, such

as transportation, taxes, exchange rate

3. Distribution system through existing transportation system,

suppliers and stores

4. Promotion should be modified based on different languages,

law, and culture from country to country

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 PROBLEMS IN I B

1. Political factors

2. High foreign investments and high cost

3. Exchange instability

4. Entry requirements

5. Tariffs, quota etc.

6. Corruption and bureaucracy

7. Technological policy

8. Quality Management
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 ENTRY STRATEGY

1. Exporting
• Indirect & Direct

2. Licensing
• Agreement
• Patent, trademark, copy right, technology, production
processes, and product
• licensee’s fee

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 ENTRY STRATEGY
2. Franchising
– by franchisers to franchisee
– Usage

3. Foreign Assembly
– Subsidiary
– local assembly

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 ENTRY STRATEGY
4. Turnkey Operation
– Staff of an operating facility
– foreign buyer

5. Foreign production subsidiary

– Establishment
– Purpose

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 ENTRY STRATEGY
6. Foreign production subsidiary
– Purpose of production

7. International Firm
– Significant portion
– In foreign countries

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 ENTRY STRATEGY
8. Multinational Corporation
– Parent country
– host country

9. Joint Venture
– Property rights

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 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

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