Course Code: MGT-413

International Business
(By Charles W.L.Hill)
 Introduction
• Over the past three decades a fundamental
shift has been occurring in the world economy.
• We are moving away from a world in which
national economies were isolated by the
following ways:
– By barriers to cross-border trade and investment
– By distance, time zones, languages and
– By national differences in government systems,
economic systems and culture.
 Introduction
Introduction
• But now we are moving toward a world in
which national economies are merging into an
– Interdependent and
– Integrated global economic systems
• The process by which this transformation is
occurring is commonly known as
globalization.
 What Is Globalization??
• It refers to the fundamental shift toward a
more integrated and interdependent world
economy.
• It has several dimensions including the
following:
– Globalization of Markets and
– Globalization of Production
 Globalization of Markets
• It refers to the merging of national markets
which were historically distinct and separated.
• It only occurs when there is
– Declining barriers to cross-border trade and
investment and
– Advanced technology in communication,
transportation and information process.
• But it is not that the national markets are
giving way to the global market.
 Globalization of Markets
Globalization of Markets
• Because of it, the taste and preferences of
consumers in different nations are beginning to
converge.
• But the most global markets are not typically
markets for consumer products but for industrial
products.
• In global markets, the same firms frequently
confront each other as competitors.
• As a result, greater uniformity replaces diversity.
 Globalization of Production
• Globalization of production refers to the sourcing of
goods and services from locations around the globe.
• The main purpose of it is to take advantage of
national differences in the cost and quality of factors
of production.
• It helps the companies to lower their total cost of
production and improve the functionality of their
product.
 What is International Business?
• International business is described as any
business activity that crosses national
boundaries.
• International business is all commercial
transactions between two or more countries.
• The entities involved in business can be
private, governmental, or a mixture of the
two.
 How To Engage In International
Business??
• Furthermore, an international business is any
firm that engages in international trade or
investment.
• To engage in international business, a firm
does not have to
– become a multinational enterprise or
– invest directly in operations in other countries
 Facets of International Business
• International business can be broken down
into four types:
– Foreign Trade
– Trade in Services
– Portfolio Investments, and
– Direct Investments.
 Facets of International Business
• In Foreign Trade, visible physical goods or
commodities move between countries as exports or
imports.
• In addition to tangible goods, the international firm is
paid for services it renders in another country as
Trade in Services.
• In Portfolio Investments, the investor purchases debt
or equity in the expectation of nothing more than a
financial return on the investment.
• Direct investments are differentiated by much
greater levels of control over the project or
enterprise by the investor