INTRODUCTION TO
INTERNATIONAL BUSINESS
UNIT - 1
International Business
by Charles Hill or
Aswathappa
Lesson – 01
GLOBALISATION
Prof. R. Srinivasan
Learning Objectives:
• Meaning of International Business
• Importance of International Business
• Problems in IB
• Need for IB
• Theories of IB
3
What is International Business ?
• International Business is all business transactions that
involve two or more countries.
• International Business comprises a large and growing
portion of the world’s total business.
• International Business usually takes place within a more
diverse external environment.
• What does it cover ?
4
It cover--------
• Export and Import of goods and Services
• Investments – FDI, FII
• Human resources
• IPR- Intellectual Property Rights-
Licensing, Franchising.
• Manufacturing
• Commercial Borrowings
5
IB is the whole gamut of business
activities that crosses national
borders:
• IB can effect people in many broad ways
such as,
• People's economic well being,
• Political status
• Skill level or knowledge
6
Definition:
• IB is a field of study and practice that
encompasses public and private business
activity affecting the persons or institutions
of more than one national state, territory or
colony
7
Problems or Challenges in
International Business:
• Language, law, customs and regulations
• Country information may be difficult to
obtain
• Foreign Exchange transactions
• Cultural differences
8
• Broader range of managerial skills
required
• Need to take help from intermediaries
• Monitoring trends in foreign market may
be difficult.
• Control & communication systems
• Market risks
9
Why Firms engage in IB ?
• To expand sales/ market – PLC
• To acquire resources
• To diversify sources of sales and supplies
• To minimise competitive risk
• Rapid increase in and expansion of technology
• Development of the institutions needed to
support and facilitate international trade
• Increased global competition
10
What is globalization?
The shift towards a more integrated and
interdependent world economy
Two components:
The globalization of markets
The globalization of production
Globalization of markets
The merging of distinctly separate national
markets into a global marketplace
Tastes and preferences converge onto a global
norm
Firms offer standardized products worldwide
creating a world market
Globalization of markets
Significant differences still exist between
national markets on many relevant dimensions
These differences require that marketing and
operating strategies and product features be
customized to best match conditions in a
country.
Globalization of markets
Countries are different
Range of problems are wider and more
complex
Government intervention in trade and
investment creates problems
International investment is impacted by
different currencies
Globalization of production
Refers to sourcing of goods and services from
locations around the world to take advantage
of
Differences in cost or quality of the factors of
production
Labor
Land
Capital
Emergence of global institutions
Globalization has created the need for
institutions to help manage, regulate and
police the global marketplace
GATT
WTO
IMF
World bank
United Nations
Global drivers
Macro factors that underlie trend towards
greater globalization
Decline in trade barriers
Technological change
WORLD TRADE ORGANISATION
• Successor to GATT in 1995
• GATT established in 1947
• Headquartered in Geneva.
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INTERNATIONAL MONETARY
FUND
• Established in 1947 to manage fixed
exchange rates and liquidity problems of
countries.
• Each country deposited with IMF a certain
amount so that IMF accumulated a large
pool of foreign exchange.
• Countries with Balance of Payment
problems would borrow from IMF.
19
IMF’s objectives :
• Promote exchange rate stability
• Maintain orderly exchange arrangements
• Avoid competitive currency devaluations
• Establish multilateral system of payments
• Eliminate exchange restrictions
• Create standby resources
20
UNITED NATIONS CONFERENCE
ON TRADE AND DEVELOPMENT
• Formed in 1964 as a permanent body
attached to UNO
• To bridge the gap between developing and
developed nations.
• Conferences held once in 4 years.
21
Functions of UNCTAD
• Promote international trade
• Speed up economic development of
developing nations
• Negotiate multilateral trade agreements.
• Co-ordinate the activities of other
insitutions.
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Declining barriers to trade
Globalization of markets and production has
been facilitated by
Reduction in trade barriers
Removal of restrictions to foreign direct
investment
Globalization debate-Pro
Lower prices for goods and services
Economic growth stimulation
Increase in consumer income
Creates jobs
Countries specialize in production of goods
and services that are produced most
efficiently
Globalization debate-Con
Destroys manufacturing jobs in wealthy,
advanced countries
Wage rates of unskilled workers in advanced
countries declines
Companies move to countries with fewer
labor and environment regulations
Loss of sovereignty
The drivers of globalisation
The drivers of globalisation
The drivers of globalisation
The drivers of globalisation
The drivers of globalisation
The drivers of globalisation
