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Any business transaction that involves
persons of firms of more than one country may be described as International Business An international business is any business that intentionally buys, sells or invests internationally International business includes all business activities that involve business organizations from two or more countries
Methods of buying and selling products internationally a. Exporting and Importing b. Licensing-i.e. granting foreign firms permission to produce your product for a fee c. Franchising-licensing plus operational controls
India's exports rose 37.6 billion. exports went up by 43. while imports rose 17.9% to $29. resulting in a trade deficit of $5.7 billion.3 billion during the last financial year In March.5% to $350. which rose 21.5% in 2010-11 to touch a record $246 billion as traders targeted new markets and gained from improved sentiments in the US and Europe oil appeared to be the main culprit when it came to imports.3% to 34. .1 billion.
MNCs Is that only MNCs who play the role in ib?? .
Globalization The term ―globalization‖ describes the increased mobility of goods. technology and capital throughout the world. especially in the area of telecommunications. Although globalization is not a new development. labor. . Globalization has resulted in economic restructuring Resources have flowed out of one country into another Jobs have been lost and new jobs are created Some resource owners have been winners and some have been losers Some evidence demonstrates that globalization brings great benefits as well as costs. its pace has increased with the advent of new technologies. services.
police. and regulate the international business GATT – General Agreement on Tariffs and Trade WTO – World Trade Organization IMF World Bank UN.to preserve peace through international cooperation .Global Institutions To manage.
"In India in the past decade.British call centre to return home from costly Mumbai (Times of India – 5/6/11 New Call Telecom. while salaries have also crept up. salaries "We did a cost and service analysis of returning home and there was an absolute parity between what we are paying for a third-party call centre in India and here in the UK." says New Call's chief executive Nigel Eastwood. a UK company says outsourcing in India is no longer cheaper. as call centres have grown. real-estate prices have gone up massively. Increasing prices." .
which Eastwood says is similar to that in Mumbai and New Delhi. we will get good 'sticky' employees who will also receive bonuses linked to performance. which competes with BT and Sky to offer home telephone services. we will pay workers the minimum wage. broadband and lowcost international calls. "In the UK. is opening a call centre in Lancashire after being attracted by low commercial rents and cheap labour costs . New Call will pay four pounds a square foot for a space in Burnley." New Call Telecom. Given the current economic environment.
Boeing. quality Ex. Global rivalry . Microsoft…. Sony. IBM.Facets of globalization Globalization of market – single market Falling barriers Offer same product Globalization of product – sourcing of goods & services from locations around the globe to take advantage of cost .
freely and orderly Ministerial Conference – highest level decision –making body . when it was replaced by the World Trade Organization in 1995 WTO ensures trade among nations operates smoothly. meets once in every two years .Drivers ofGlobalization The General Agreement on Tariffs and Trade (typically abbreviated GATT) GATT was signed in 1947 and lasted until 1993.
transportation Restrictions in FDI removed FDI – firm invest in another country in business activities Foreign Direct Investment (FDI) is one of the mostly used ways of internationalization which plays an important role as an engine of employment.. economic intensification. as an instrument of technology transfer especially from developed to developing countries. productivity enhancement. India – still 2nd FDI spot Decline – 2008 – 2010. Technological change – communication.Drivers of globalization Decline in the barriers of trade GATT WTO – (Doha round)Cutting tariffs. and more importantly. technological development. . phasing out subsidies to agricultural products .
on the other hand. is divided into two different types: Backward Vertical FDI .Types of FDI Horizontal FDI refers to when firms invest in the same industry in which they work in their homeland For example.when the abroad sales of a company serve as inputs for the downstream operations of domestic companies . the automobile company Ford builds an automobile manufacturing facility in Mexico Vertical FDI.
S.A.S. Forward Vertical FDI ..A.when there is investment into a foreign industry that sells the output of a company's domestic production processes EX: if Ford builds an engine production facility in Mexico which ships engines to its manufacturing unit in U. this would be forward vertical FDI .. this would be backward vertical FDI Ford buys ten dealers in Mexico to distribute cars made in the U.
conglomerate FDI involves companies operating in different businesses . The third type of FDI.
"culture" refers to a group or community with which you share common experiences that shape the way you understand the world Culture is the "lens" through which you view the world. how you make sense of what you see. and how you express yourself .IB Environments Cultural Environment Culture is concerned with beliefs and values on the basis of which people interpret experiences and behave. It is central to what you see. individually and in groups.
cultural difference Different communication styles Americans Europeans – do not like loud people Want more quality products Punctuality important .
Culture Shock Failure to identify cultural issues and take action can lead to a culture shock. Not coping with culture shock symptoms when they appear can lead to a very negative situation . the most often found symptoms of culture shock are: feeling isolated anxiety and worry reduction in job performance high nervous energy helplessness. In order of priority.
Geert Hofstede’s model Study of How culture relates to value in the workplace (conducted at IBM) power distance – high in India Individualism vs collectivism – US Uncertainty avoidance – France high Masculinity vs femininity the Swedish culture is one of the societies that have the lowest score on masculinity. . The role of the women in society is almost equal to the role of men.
Mexico has the highest score on the masculine dimension. aggressive and decisive . this means that the society of this country is more assertive.
posture— and even the person’s family history and status. High context culture – ex china. explicit. France High-context means that ―most of the information is either in the physical context or initialized in the person.‖ High-context communication tends to be more indirect and more formal . A Japanese manager explained his culture’s communication style to an American: ―We are a homogeneous people and don’t have to speak as much as you do here. transmitted part of the message. gestures. which might include the speaker’s tone of voice. while very little is in the coded. facial expression.‖ Words are not so important as context. we understand ten. but here you have to say ten to understand one. When we say one word.
Low context culture – US. And communicators are expected to be straightforward. and efficient in telling what action is expected. To be absolutely clear. Decisions are based on fact rather than intuition. concise.―the mass of information is vested in the explicit code‖ Solving a problem means lining up the facts and evaluating one after another. Discussions end with actions. Germany low-context communication . they strive to use precise words and intend them to be taken literally .
Political . from one angle there are the socio-political risks such as political instability 'political risk' refers to the possibility that political decisions or events in a country will affect the business climate in such a way that investors will lose money or not make as much money as they expected when the investment was made. the political situation is explained from two perspectives. The political risk of the host country is one of the most important determinants in investment decision making . Technological & Economic Environments When FDI is made in a host country.
Factors that determine political risk Nationalization -the process of shifting the ownership of private property from private individuals to the government Confiscation .the process of nationalization of a property with compensation .the process of nationalization of a property without compensation Expropriation .
Hostilities between countries affect IB country trade policies such as tariffs and rigid quotas have to be studied before a company enters a foreign market .
Technological Environment Technology is ―a systematic application of scientific or other organized knowledge to particular tasks‖ Changes at a fast rate Brings change in the society. economy and politics One of the significant factor which determines the level of economic development of a country Difference between a country is reflected by the level of the technology .
USA .Economic Environment Economic Systems Economic system is an organization of institutions established to satisfy human needs Three types of Economic systems : 1) market economy – all production privately owned Production is determined by the interaction of supply & demand Consumer is the king Monopoly of single producer is restricted Government encourages free and fair competition in order to avoid the monopoly Ex.
2) command economy – government owns / controls production (communism) Businesses are state owned .
. Brazil..benefits equally divided .Mixed Economy – major factors of production and distribution are owned and controlled by the state . Italy.believes in full employment and rewards for the employees India .