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International Business

• To understand the basics of


international business and its
environment
• To develop the analytical skills
required to compete effectively in
this environment
By Pankaj Agrawal
Evaluation and Grading
Internal Evaluation 50:
Individual Assignments: 20%
Attendance: 10%
Project work: 10%
Modular Tests 20%
End Term: 40%
---------------------------------------------------------------
TOTAL 100%
External Evaluation 50:
PU Board Exam: 100%

• Project work is group work and presentation at the end is


mandatory for it
• Late submission of assignment will result in grade
reduction
By Pankaj Agrawal
Reference Books
1. Hill, Charles W.L. & Jain, Arun Kumar (2007):International
Business (Competing in the Global Marketplace): Tata McGraw
Publishing Company Ltd.
2. Bennett, Roger (2006): International Business: Pearson
Education
3. Daniels John D., Radebaugh Lee H. & Sullivan Daniel P.(2007):
International Business (Environments and Operations): Pearson
Education
4. Hill, Charles W.L. (2005):International Business (Competing in
the Global Marketplace): Tata McGraw – Hill Edition
- Please make good use of INTERNET
- Please do keep update with the changes
By Pankaj Agrawal
Overview of Global Business
• Meaning of international business and
globalization
• Drivers of globalization
• Overview of changing global picture
• Declining trade barriers

• Change in communication, information

and transportation technologies

By Pankaj Agrawal
International Business
International Business involves
• Commercial activities that cross national
frontiers
•International movement of goods, capital,
services, employees & technology, import and
export
• licensing and franchisee
• investment in physical infrastructure
• buying and selling in foreign countries
By Pankaj Agrawal
International Business
• Political risk
•Commercial risk (market failure, product not
appeal to customers)
•Financial risk (inflation, tax rate, exchange
rate)
•Manager skill should be broad range
•Dependence on foreign consultant,
intermediaries, advisers
•Difficult to monitor trends and activities in
foreign countries By Pankaj Agrawal
International Business &
Domestic business
• Special problems and cases that arises in IB
that normally not experienced in domestic
•Deals carried out in foreign language under
foreign law, customs and regulations
•Information on foreign countries required
difficult to obtain
- Exchange rate
- Cultural differences
- Complex control and communication
- High risk level
By Pankaj Agrawal
Why IB?
- Expand Sales
- Acquire source from foreign countries
- Diversify activities
- Saturation in domestic market
- Discovery of lucrative opportunity in foreign
market
- Obtain economics of scale and also
economics of scope might also be available

By Pankaj Agrawal
Why IB?
- High cost of new product development
process
- Cross border trade is easier to organize than
in
past (better communication, visit)
- Spreading commercial risk in several
countries
- Involvement in IB can facilitate ‘experience
curve’ effect
By Pankaj Agrawal
Globalization
- Globalization: the trend towards a
more integrated and interdependent
global economic system
- Effects of globalization can be seen
everywhere:
- the cars people drive
- the food people eat
- the jobs where people work
- the clothes people wear
By Pankaj Agrawal
Globalization
Globalization of markets:
-Historically distinct and separate national
markets are merging into one huge global
marketplace
- Tastes and preferences of consumers in
different nations are beginning to converge
upon some global norm
Examples: Sony Playstation Citicorp credit
cards , Coca-Cola, McDonald's hamburgers
By Pankaj Agrawal
Globalization
Globalization of production:
- Source goods and services from different
locations around the globe
- Take advantage of national differences
in the cost and quality of factors of production
(such as land, labor, capital and energy)
-Compete more effectively against their rivals.

Examples: Boeing, Adidas, Nike


By Pankaj Agrawal
Globalization
-Emergence of GLOBAL INSTITUTIONS
like WTO, IMF, World Bank, UN
-Help to regulate, manage and police the global
market place and promote the establishment of
multinational treaties to govern global business
system
Drivers of globalization
- Declining trade and investment barriers

- Technological change
By Pankaj Agrawal
Drivers of Globalization
Declining Trade and Investment Barriers
- Industrialized countries of the West began
the process of removing barriers to the free
flow of goods, services, and capital between
nations after World War II
- Under General Agreement of Tariffs and
Trade GATT, over 100 nations negotiated
further decreases in tariffs & also non-tariff
barriers
By Pankaj Agrawal
Drivers of Globalization
- Under the WTO: dispute resolution and the
enforcement of trade laws, and cut tariffs on
industrial goods, services, and agricultural products
- Removal of barriers to trade has contributed to
increased international trade (the export of goods
or services to consumers in another country), world
output, and foreign direct investment
- With removal of trade barriers many countries have
also removal of restrictions in FDI
- Growth of FDI outflow increased from $ 25 billion
in 1975 to a record of $1.3 trillion in 2006
By Pankaj Agrawal
Drivers of Globalization

By Pankaj Agrawal
Drivers of Globalization

- Firms are dispersing parts of their overall production to different parts of


location
around the globe to drive down production costs and increase product quality
- Economies of the world`s nation-sates are becoming more intertwined and
expansion of trade nations are becoming increasingly
By Pankaj Agrawal dependent on each other for
Drivers of Globalization

By Pankaj Agrawal
Drivers of Globalization
The Role of Technological Change
The lowering of trade barriers made globalization
of markets and production a theoretical possibility,
technological change made it a tangible reality
Microprocessors and Telecommunications: Major
advances in communications and information
processing have lowered the cost of global
communication and therefore the cost of
coordinating and controlling a global organization

By Pankaj Agrawal
Drivers of Globalization
• The Internet and the World Wide
Web: Web-based transactions have
London – New York
grown from virtually zero in 1994 to
1930:
nearly $7 trillion in 2004
Steam ships, 10 days
•Transportation Technology: the most 1950s:
important developments are probably Propeller Aircraft 200-300
development of commercial jet aircraft mph, 2 days
and super freighters and the 1960s:
introduction of containerization, which Jet Aircraft 500-700mph, 8
greatly simplifies trans-shipment from hours
one mode of transport to another 1990s:
Supersonic Jets, 3 hours
•Improvements in transportation
technology have enabled firms to better
respond to international customer
demands
By Pankaj Agrawal
The Shrinking Globe

By Pankaj Agrawal
Changing Demographics Of Global Economy
In the 1960s:
-U.S. dominated the world economy and the
world trade picture
-U.S. multinationals dominated the
international business scene
-About half the world-- the centrally planned
economies of the communist world-- was off
limits to Western international business

By Pankaj Agrawal
Changing World Output and World Trade
Picture
-In the early 1960s, the U.S. - world's dominant
industrial power , 40.3 percent of world
manufacturing output
- By 2005 the United States accounted for only 20.1
percent
-Rapid economic growth is now being experienced
by countries such as China, Thailand, and
Indonesia with share of world output
- Decline in the share of world output by
industrialized countries such as Britain, Japan, and
the United States
By Pankaj Agrawal
Changing World Output and World Trade
Picture

By Pankaj Agrawal
Changing Foreign Direct Investment
Picture
-Share of world output generated by developing
countries has been steadily increasing since the
1960s
-Stock (total cumulative value of foreign
investments) generated by rich industrial countries
has been in decline
- Flow of foreign direct investment (amounts
invested across national borders each year) has been
directed at developing nations especially China

By Pankaj Agrawal
Stock of FDI by the world’s six most
important national sources

By Pankaj Agrawal
Changing Nature of Multinational Enterprises
- A multinational enterprise is any business that
has productive activities in two or more
countries.
Non-U.S. Multinationals
-Expect the growth of new multinational
enterprises from the world's developing nations
e.g. Wipro, Infosys
Rise of Mini-Multinationals
- Number of mini-multinationals (small and
medium-sized companies) is on the rise

By Pankaj Agrawal
The Changing World Order
-Collapse of communism in Eastern Europe
represents a host of export and investment
opportunities for Western businesses
- Economic development of China presents huge
opportunities and risks (in spite of its continued
Communist control)
-Mexico and Latin America also present
tremendous new opportunities both as markets and
sources of materials and production
- In recent days there is some socialist
movement/trend in Latin America (Bolivia,
Venezuela)
By Pankaj Agrawal

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