Presentation on

International Business

Chapter No. 1

WEL COMEWEL COME

INDEXINDEX• Introduction to International Business

• Nature & Scope & Feature of I B

• Importance of I B

• Approaches of I B

• Motivation to do I B

• Need for I B

• Adopting to Customers Needs

• Problems in I B

• Entry Strategy

• Advantages & Disadvantages of I B

• Reasons for recent I B Growth

• International Organization

WHAT IS INTERNATIONAL WHAT IS INTERNATIONAL BUSINESS ?BUSINESS ?

• The exchange of 

goods & services, 

Resources,

Knowledge,

& Skills , among individuals & businesses in multiple/two or more countries.

• Transaction that are carried out across national borders to satisfy the objectives of

individuals and organization

WHAT IS INTERNATIONAL WHAT IS INTERNATIONAL BUSINESS ?BUSINESS ?

• All Commercial transactions that take place between two or more countries. –

1-Private & Government

2-Sales

3-Investments

4-Logistics

5- Transportation

NATURE OF IBNATURE OF IB

1. Accurate Information & timely

2. The size of the international business

3. Market segmentation

4. International markets have more potential than

domestic markets

SCOPE OF IBSCOPE OF IB

1. International Marketing

2. International Finance and Investments

3. Foreign Exchange

4. Global HR

 

FEATURES OF IBFEATURES OF IB

1. Large scale operations 

2. Integration of economies 

3. Dominated by developed countries and MNCs 

4. Benefits to participating countries 

5. Keen competition 

6. Special role of science and technology 

7. International restrictions 

IMPORTANCE OF IBIMPORTANCE OF IB

1. Earn foreign exchange

2. Optimum utilisation of resources

3. Achieve its objectives

4. To spread business risks

5. Improve organization's efficiency

6. Get benefits from Government

7. Expand and diversify

8. Increase competitive capacity

GOING INTERNATIONALGOING INTERNATIONAL

I B APPROACHESI B APPROACHES

1. Ethnocentric approach

2. Polycentric approach

3. Regiocentric approach

4. Geocentric approach

I B APPROACHESI B APPROACHES

1. Ethnocentric approach

• Under this approach , target market is own

country , Exccesive production will export

due to change in customer taste, preferences

1. Ethnocentric approach

Organization Structure

Managing Director

↓

↓

↓⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻↓⁻⁻⁻⁻⁻⁻⁻⁻⁻↓⁻⁻⁻⁻⁻⁻⁻⁻⁻↓⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻↓

MGR MGR MGR MGR MGR

R & D FIN PROD HRD MKTG

↓

↓⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻↓⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻↓

Asstt. Mgr Asstt. Mgr Asstt. Mgr

North india South India Exports

I B APPROACHESI B APPROACHES

2. Polycentric approach

• Under this approach, the companies

customizes the marketing mix to meet the

taste, performance and needs of the

customers of each international market.

2. Polycentric approach

Organization Structure Managing Director

↓

→→→ C E O

↓ FOREIGN SUBSIDIARY

↓ SOUTH AFRICA

↓

↓

↓

↓

↓ ↓ ↓ ↓ ↓⁻⁻⁻⁻⁻⁻⁻⁻ ⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻ ⁻⁻⁻⁻⁻⁻⁻⁻⁻ ⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻

MGR MGR MGR MGR MGR

R & D FIN PROD HRD MKTG

I B APPROACHESI B APPROACHES

3. Regiocentric approach

• Under this approach, the company operating

successfully in a foreign country thinks of exporting

other neighbouring countries of the host country.

• At this stage, the concerned subsidiary considers the

regional environment ( such as laws, culture, policies

etc) for formulating the policies & strategies.

3. Regiocentric approach

Organization Structure Managing Director

↓

→→→ C E O

↓

↓ SOUTH AFRICA

↓ ↓ ↓ ↓ ⁻⁻⁻⁻⁻⁻⁻ ⁻⁻⁻⁻⁻⁻⁻⁻

↓ Mktg Mktg Mktg

↓ ( Lesotho) ( Kenya) ( Nambia)

↓

↓ ↓ ↓ ↓ ↓⁻⁻⁻⁻⁻⁻⁻ ⁻ ⁻⁻⁻⁻⁻⁻⁻⁻ ⁻⁻⁻⁻⁻⁻⁻ ⁻⁻⁻⁻⁻⁻⁻⁻

MGR MGR MGR MGR MGR

R & D FIN PROD HRD MKTG

I B APPROACHESI B APPROACHES

4. Geocentric approach• Under this approach, the company analyses the tastes,

preference and needs of the customers in all foreign markets

and then adopts a standardized marketing mix for all the foreign

markets.

• Coca-cola adopted this strategy by selling its popular soft drink

with the same content, packaging, branding & advertisement

themes worldwide

• Whirlpool designs a world-washer – small, stripped-down

automatic washing machine for Mexico, Brazil & India. However,

it modified its product for Indain market to wash the

delicate “sarees”.

4. Geocentric approach

Organization Structure

Managing Director

Headquarters India

↓

↓

↓

↓ ↓ ⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻ ⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻↓ ↓⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻⁻

Subsidiary Subsidiary Subsidiary Subsidiary

India South Africa Kenya Nambia

MOTIVATION TO DO I BMOTIVATION TO DO I B

1. Proactive: to increase profit

to take advantage of product life cycle

to achieve Economies of scale

2. Reactive: Competitive pressures

Overproduction and excess capacity

Declining domestic sales

saturated domestic markets

NEED FOR I BNEED FOR I B

1. Achieve higher rate of profits

2. Expanding the production capacity beyond the demand

of the domestic country

3. Availability of technology and managerial competence

4. Cost of manpower, transportation & Nearness to R/M

5. LPG Implt.

6. Market share

ADOPTING TO CUSTOMERS ADOPTING TO CUSTOMERS NEEDSNEEDS

1. Products and Services should meet to foreign

market

2. Price adjustments by considering the cost of

foreign trade, such as transportation, taxes,

exchange rate

3. Distribution system through existing transportation

system, suppliers and stores

4. Promotion should be modified based on different

languages, law, and culture from country to

country

PROBLEMS IN I BPROBLEMS IN I B

1. Political factors

2. High foreign investments and high cost

3. Exchange instability

4. Entry requirements

5. Tariffs, quota etc.

6. Corruption and bureaucracy

7. Technological policy

8. Quality Management

ENTRY STRATEGY ENTRY STRATEGY

1. Exporting

• Indirect & Direct

2. Licensing

• Agreement

• Patent, trademark, copy right, technology, production processes, and product

• licensee’s fee

ENTRY STRATEGY ENTRY STRATEGY

2. Franchising

– by franchisers to franchisee

– Usage

3. Foreign Assembly

– Subsidiary

– local assembly

ENTRY STRATEGY ENTRY STRATEGY

4. Turnkey Operation

– Staff of an operating facility

– foreign buyer

5. Foreign production subsidiary

– Establishment

– Purpose

ENTRY STRATEGY ENTRY STRATEGY

6. Foreign production subsidiary

– Purpose of production

7. International Firm

– Significant portion

– In foreign countries

ENTRY STRATEGY ENTRY STRATEGY

8. Multinational Corporation

– Parent country

– host country

9. Joint Venture

– Property rights

ENTRY STRATEGY ENTRY STRATEGY

10. Foreign Direct Investment

– Arrangement in which a firm buys or establishes

tangible assets

– In another country

– Through direct investment

– By buying a company stock in capital markets

MAIN BARRIERSMAIN BARRIERS

1. Cultural and social barriers

2. Legal and political barriers

3. Economic barriers:

ADVANTAGES OF I BADVANTAGES OF I B

1. Faster growth

2. Access to cheaper inputs

3. Increased quality and efficiency

4. New market opportunities

5. Diversification

DISADVANTAGES OF I BDISADVANTAGES OF I B

1. Increased costs

2. Foreign regulations and standards

3. Delays in payments

4. Complex organizational structure

REASONS FOR RECENT REASONS FOR RECENT GROWTH IN I BGROWTH IN I B

1. Expansion of technology

2. Business is becoming more global because

•Transportation is quicker

•Communications enable control from afar

•Transportation and communications costs are more

conducive for international operations

3. Liberalization of cross-border movements

4. Lower Governmental barriers to the movement of

goods, services, and resources enable Companies to

take better advantage of international opportunities

INTERNATIONAL INTERNATIONAL ORGANIZATION ORGANIZATION

• General agreement on Tariff and trade

(GATT) – an international organization formed to

reduce or eliminate tariff and other barrier to

international trade

• International Monetary Fund (IMF) – an

international financial organization that lend money to

countries in conducting international trade

INTERNATIONAL INTERNATIONAL ORGANIZATION ORGANIZATION

• World Bank – an international financial

organization that lend money to underdeveloped and

developing countries for development

• Economic Communities – the creation of

common economic policies

– World Trade Organization (WTO)

– European Community (EC)

– North American Free Trade Agreement (NAFTA)

– Asian Free Trade Agreement (AFTA)

• Rahul Boddhul -

MBA

• UNIVERSITY of

SOLAPUR

Presented by -

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