INTRODUCTION TO

INTERNATIONAL BUSINESS AND

GLOBALIZATION

PRESENTATION OUTLINE

Philosophy of International Business

Reasons for International Business
Differences between Domestic and International Business
Globalization
Advantages / Disadvantages
Key Drivers of Globalization

PHILOSOPHY OF INTERNATIONAL BUSINESS

What is International Business?
Business Activities involving transactions of goods, services and resources beyond
national boundaries

Why countries engage in International Business?

Stimulates Foreign Trade, Improves Technical Collaboration and brings in
Foreign Investments

INDIAS EXPORT AND IMPORT STATISTICS (IN USD MILLION)

2014-15

2015-16

% Growth 2015-16 /
2014-15

Exports (including reexports)

27998.50

22346.75

-20.19

imports

39233.24

32752.99

-16.52

Trade Balance

-11234.74

-10406.24

Merchandise

Services
Exports

13012.00

Imports

7324.00

Trade Balance

5688.00

REASONS FOR INTERNATIONAL BUSINESS

How long ago did International Business start?

Earliest civilizations engaged in trade of exotic goods

International Production gained prominence in the colonization era, limited to
extracting minerals and production of primary commodities in colonies

MNCs are the torch bearers of International Business today

REASON: Scarcities lead to interdependence

DIFFERENCES: DOMESTIC AND INTERNATIONAL BUSINESS

Transactions for International Businesses mostly intra-firm and use Transfer Pricing
(arbitrary pricing of intra-firm transactions at more/less than the arm's length
prices). Designing of prices a complicated task.

Transactions carried out in unfamiliar conditions and hence business strategy must
be chalked out carefully to minimize friction with host countrys government.
Legal Environment: Rules, Regulations, Policies
Political Environment: Stability in political climate
Economic Environment: Foreign Exchange constraints
Socio-Cultural Environment: Language, Social Behaviour, attitude towards consumption and
production

DIFFERENCES: DOMESTIC AND INTERNATIONAL BUSINESS

Risks are involved when conducting International Business. Political risks threaten
business execution (Nestle's Maggi), economic risks such as fluctuating exchange
rates lead to profitability risks.

Management functions in organizations involved in International Business have

different accounting, marketing, personnel and production priorities; keeping the
International Marketplace as the focus

GLOBALISATION: ADVANTAGES AND DISADVANTAGES

Advantages

Disadvantages

Economies of different countries integrate leading to Cross border flow of goods and services not exactly
efficient utilization and allocation of resources
free due to rigid tariff and non tariff barriers
between nations, social implications
Rapid growth in trade

Creates an inequitable gap between developed

and developing countries; Africa, Balkan regions
excluded from the globalization story. Unskilled and
less skilled labour experience significant wage
reductions due to globalization pressures exerted by
developed nations

Economic liberalization in developing countries

opens up business opportunities for transnational
companies through Foreign Direct Investments
leading to increase in cross-border capital
movement

Global brands, under the pretext of competition,

threaten the sustenance of local firms in the industry

GLOBALISATION: ADVANTAGES AND DISADVANTAGES

Advantages

Disadvantages

Increased competition from global firms force local

businesses to improve quality standards and reduce
cost

Developed nations face challenges from skilled

labor in developing countries leading to poor job
security, suppressing bargaining influence of trade
unions. Eg: Business Process Outsourcing

Consumers enjoy wider set of products and services

to select. Quality and price competition ultimately
leads to customer's gain

Forces of globalization, via the Internet and mass

media, have led to cultural convergence with
individuals forgetting their cultural values and
national identity

KEY DRIVERS OF GLOBALIZATION

International Economic
Integration

MOVERS

CONSTRAINTS

Move towards free

marketing systems

Multilateral Institutions

Rising R&D costs

Technological
Breakthrough

Advents in Logistics
Management

Economic
Liberalization

Emergence of Global
Customer Segments

Globalization

Regulatory
Controls

Management
Myopia

Emerging New
Trade Barriers

Wars and Civil

Disturbances
Cultural Factors

Nationalism

KEY DRIVERS OF GLOBALIZATION

Liberalized tariff structures and regulations
The breakthroughs achieved in technology help firms in functioning efficiently
in the global marketplace

Multilateral institutions such as WTO and GATT have contributed to

globalization by consistently reducing tariffs and increasing market access

International economic integrations such as the European Union reduce trade

barriers among member countries

KEY DRIVERS OF GLOBALIZATION

Countries that had centrally planned economies previously have begun
adopting free market systems which integrates with the global economy

A surge in business operations executed at a global level is observed due to

growing market access and movement of capital

Affordable access to swift transportation and strides taken in logistics

management benefit global movement of goods

Consumer preferences in different nations are becoming similar due to global

standardization of products and services

THANK YOU
THIS PRESENTATION HAS BEEN PUT TOGETHER BY GROUP 1, SECTION M2