INTERNATIONAL BUSINESS

INTERNATIONAL BUSINESSInternational Business is an attitude of mind, approach of the Company with a global outlook, seeking profits around the world on a planned and systemic basis

INTERNATIONAL BUSINESSInternational Business is all commercial transactions private and governmental - between two or more countries Private companies transact for Profits Government may or may not Transactions may include Sales, Investments, Services - Transportation

INTERNATIONAL BUSINESSInternational Business - Large and Growing Portion of World Business Growing Importance of International Business Expand Sales Acquire Resources Minimize Risk

INTERNATIONAL BUSINESSExpand SalesDiversify Source of Sales and Supplies Domestic Market Constraints Market on Decline Domestic Recession Scarcity of Resources International Market Opportunities Number of People Amount of Purchasing Power Better Availability of Resources

INTERNATIONAL BUSINESSAcquire ResourcesBetter Quality & Profits Foreign Capital Finance, Technology, HR Monopoly Power IPR, Licenses Govt. Policies & Regulations Tax Benefits, Incentives

INTERNATIONAL BUSINESSMinimize RiskSituational Advantage Business Cycles Recession & Expansion Minimize Impact of Price Swings Minimize Impact of Shortages PLC Competition Counter Competition Effectively

INTERNATIONAL BUSINESSGrowth FactorsTechnology Production, Promotion Telecommunication Revolution Better Transportation Cost Reductions Telecom & Transport Liberalizations Lower Government Barriers Consumer Desire Affluence Competition in Domestic Manufacturers

INTERNATIONAL BUSINESSGrowth FactorsIncrease in Global Competition Global Opportunities for Domestic Manufacturers and Suppliers Faster Availability of New Product Technology Multiple Manufacturing Locations Uniformity in quality and price

INTERNATIONAL BUSINESSResponsible Growth FactorsDevelopment of Supporting Institutions Insurance WTO Banking Shipping Trade Associations Consular Services Government Agencies

INTERNATIONAL BUSINESSDomestic vs. International BusinessControllableProduct Price Promotion Distribution Channel

Domestic Environment (Uncontrollable)Political / Legal Forces Competitive Forces Economic Climate

Foreign Environment (Uncontrollable)Political / Legal Forces Economic Forces Cultural Forces Competitive Forces Geography & Infrastructure Level of Technology Structure of Distribution

INTERNATIONAL BUSINESSInternational Business DecisionsCo. Objectives Vision Co.s Decision Present & Future Opportunities in Domestic and International Market Resources of the Company Skills / Technology Finance Experience Production Capabilities Marketing Capabilities

INTERNATIONAL BUSINESSCorporate Mission Objectives Strategy Major Operating Objectives Profit Motives Growth Opportunities For the Company For the Country Expand Sales Capacity Utilisation

INTERNATIONAL BUSINESSSpin-off Benefits Duty-free Imports Capital Goods Imports Improved Domestic Production Non-profit Motives Philanthropic NGOs Education, Health, Wild Life Political Spread of Ideologies, New base

INTERNATIONAL BUSINESSOperating ModeExport and Import Merchandise Exports and Imports Visible Exports and Imports Tangible Goods Less Complicated Need Not Be Manufacturer or Actual User Good Growth Opportunities

INTERNATIONAL BUSINESSOperating ModeExport and Import Service Exports and Imports Invisible Exports and Imports Intangible Goods More Complicated Mostly Manufacturer or Actual User Good Growth Opportunities

INTERNATIONAL BUSINESSOperating ModeExport and Import Service Exports and Imports Entertainment, Travel, Tourism Performance of Services Banking, Insurance, Rental, Management, Engineering, Software, Turnkey Projects, Construction, Manpower

INTERNATIONAL BUSINESSOperating Mode

Export and Import Service Exports and Imports Use of Assets Licensing Agreements Trademarks, Patents, Copyrights Franchising Agreements Royalties and Fees Use of Capital Assets

INTERNATIONAL BUSINESSOperating ModeInvestments FDI JV, Strategic Alliances Portfolio Investment Stocks Short-term Loans

INTERNATIONAL BUSINESSInternational OrientationsEthnocentrism Polycentrism Regiocentrism Geocentrism Home Country Orientation Host Country Orientation Regional Orientation World Orientation

INTERNATIONAL BUSINESSInternational Business has been present throughout much of history Silk Route, Amber Route Sun never sets on British Empire Migrations, Immigrations, Manpower Exports No Passport, No Visa, No Forex Different complexities in each era

INTERNATIONAL BUSINESSExternal InfluencesPolitical Science Law Anthropology Sociology Psychology Economics Geography Competition Political Policies Legal Practices Values Attitudes Beliefs Economic Forces Geographical Influences Competitive Strategies

INTERNATIONAL BUSINESSExternal InfluencesPolitical Environment Political Systems Types of GovernmentParliamentary (Open) Absolutist (Closed) Two Party USA, UK Monarchy Saudi, UAE Multiparty India, France, Israel Dictatorship Saddam in Iraq Single Party Egypt, Syria, Mexico Dominated one party USSR, Cuba, Libya Parliamentary with Monarchy UK, Japan

INTERNATIONAL BUSINESSExternal InfluencesEconomic Systems CommunismAll resources owned and shared by people for the benefit of the society Government Controls Productive Resources Determines Jobs Production Prices Education And Everything Centrally Planned Economy USSR, North Korea, Vietnam, Easten Europe, China Non -market Economy, Weak Economy, Large Foreign Debt

INTERNATIONAL BUSINESSExternal InfluencesEconomic Systems SocialismPoland and France, two ends of socialism spectrum Sweden in the middle Sweden gave generous benefits to employees which were misused Govt. control less than communism Govt. owns & operates large enterprises Small business to private ownership

INTERNATIONAL BUSINESSExternal InfluencesEconomic Systems Capitalism Free Market System Allows Competition Freedom To Customers As Well As Manufacturers USA Managerial Capitalism UK Personal Capitalism Germany Cooperative Capitalism Ideal Free Trade Market Is Hongkong. Worlds Freest Economy

INTERNATIONAL BUSINESSExternal InfluencesPolitical RisksConfiscation Expropriation Nationalisation Domestication General Instability Risk Ownership / Control Risk Operation risk Transfer Risk Privatisation

INTERNATIONAL BUSINESSExternal InfluencesPolitical RisksIndicators Of Political Instability Social Unrest Attitudes of Nationals Policies of Host Government War Management of Political Risk Avoidance Insurance

INTERNATIONAL BUSINESSExternal InfluencesPolitical Risks

Measures To Minimize Political Risk

Stimulation of Local Economy Local Sourcing Exports FDI Employment Of Nationals Sharing Ownership Jobs, Contracts Cathay Pacific in China

INTERNATIONAL BUSINESSExternal InfluencesPolitical Risks

Measures To Minimize Political RiskBeing Civic Minded

Political Neutrality Behind the Scenes Lobby Observation of Political Mood and Reduction in Exposure Other Measures Adapting Culture McDonalds No Beef

Microsoft Singapore Airlines

INTERNATIONAL BUSINESSExternal InfluencesEconomic SystemsMarket Economy Resources Allocated & Controlled by Consumers Mechanism Involves Interrelationship of Price, Quality, Supply & Demand Economic Freedom From Govt Restrains. Legal & Inst. Framework

INTERNATIONAL BUSINESSExternal InfluencesEconomic SystemsCPE Govt. Control Govt. Sets Goals and Decides Price and Quantity to be Produced Mixed Economy Mix of Mkt. & C P E Different Mixtures of Market and Central Planning Control. Public and Private Ownership of Recourses. Classified as Free and Not Free with Categories as Partly Free and Mostly Not Free

INTERNATIONAL BUSINESSExternal InfluencesCountry Classifications Factor Conditions / Production Factors Physical Resources Human Recourses Knowledge Resources Capital Resources Infrastructure Demand Conditions Composition of Home Demand Size and Growth Pattern of Home Demand Internationalisation of Demand

INTERNATIONAL BUSINESSCountry ClassificationsEconomic Indicators GNP The Market Value of Final Goods and Services Newly Produced by Domestic Factor of Production at Home or Abroad GDP The Value of Production That Occurs Within Country's Borders, Whether Done by Domestic or Foreign Factors of Production GNP & GDP are Similar GDP is More Accurate to Reflect Economic Activity World Bank Considers GNP Low Income, Lower Middle Income, Higher Middle Income, High Income

INTERNATIONAL BUSINESSDistribution of Wealth Low Income USD 875 and less Lower Middle USD 876 3465 Higher Middle USD 3466 10725 Higher Income USD 10726 and more (54) (58) (40)

(56)

As classified in 2005 of 208 countries with population of more than 30,000. Includes 184 member countries of World Bank

Low and Middle Income are Grouped as Developing Countries Except East European Non-Market Economies CEIT (Countries with Economies in Transition) Moving from CPE to Market Economy Israel, Hong Kong, Kuwait, Singapore and UAE Termed as Developing Countries by UN, Though in High Income

INTERNATIONAL BUSINESSDistribution of Wealth High Income 21% of Economies 15.2% of Population 79.5% of GNP 48.3% of Economies 28.1% of Population 15.6% of GNP 30.6% of Economies 56.7% of Population 4.9% of GNP

Middle Income

Low Income

INTERNATIONAL BUSINESSMacroeconomic Issues Economic Growth 9 / 11 1997 Asian Financial Crisis Dot Com Burst Global Terrorism Emerging Economies May Have a Higher Growth With Dangers of Political Instability

INTERNATIONAL BUSINESSMacroeconomic IssuesMacroeconomic Issues Inflation CPI (Consumer Price Index) PPP (Purchasing Power Parity)

INTERNATIONAL BUSINESSWhat is culture? What its characteristics are? How culture affects consumer behaviour? Culture plays significant role in influencing consume perception, influences preference and purchase. Marketing Mix can be effective as long as it is relevant to given culture Culture Set of traditional beliefs and values, transmitted and shared in a given Society. Culture is a total way of life and thinking pattern that is passed on from generation to generation

Culture

INTERNATIONAL BUSINESSCulture Its Characteristics

Culture- Purchase Decisions That Are Socially Acceptable - Based On Social Interaction & Creation - Advertising & Communication - Not Genetically Passed on, Learned & Acquired

Prescriptive Socially Shared Facilitates Communication Learned

INTERNATIONAL BUSINESSCultureSubjective Enduring Cumulative Dynamic

Culture Its Characteristics- Different Ideas About Same Object. Unique & Arbitrary - Shared & Passed From Generations To Generations - Broader Based, Adapts New Ideas, Discards Old - Adapts To New Situations And Knowledge

INTERNATIONAL BUSINESSCultureInfluence On Consumption Consumption Of Beef In US And In India, Cold Cuts In Russia Chinese Eat Reptiles, Raw Beef In Ethiopia French Eat Snails, Americans Prefer Fried Chicken, Indian Food - Tandoori Halal For Muslims Pork For Non Muslims, Fish Head In Bengal

INTERNATIONAL BUSINESSCultureInfluence On Consumption Non Alcoholic Beer In Saudi Arabia Parsis & Sikhs Do Not Smoke Concept Of Vegetarian Food Dressing Styles In Different Countries Bindi, Mangalsutra In India, Wedding Rings In West

INTERNATIONAL BUSINESSInfluence On Thinking Process SRC

Culture

- Self Reference Criterion

Influence On Communication Process Low-context Culture High-context Culture - North America, North Europe - Japan, France, Spain, Italy, Asia, ME Asia, Africa

INTERNATIONAL BUSINESSCulture Verbal Communication Same language in different markets dialects American Vs. UK English Chinese, Japanese Vs. English 02.06.02 Vs. 06.02.02, Addresses 6000

INTERNATIONAL BUSINESSCultureNon-verbal Communication Body language - Movements, appearance, dress, facial expression, gestures, postures, touch, silence, timing, distance etc. - Normal in US, rude in Japan - Rude in Japan, Avoidance considered rude in US - OK in USA, Money in Japan, Rudeness in Brazil, Vulgar in Latin America

Waving hand Eye contact Gesture

INTERNATIONAL BUSINESSCulture Language Language Language Language Language Language Language Language Language of Space of Time Of Agreement of Friendship of Negotiations of Religion of Superstition of Colour of Gift

INTERNATIONAL BUSINESSExternal InfluencesTechnologyTechnological Advance Impact on Manufacturing Process, Inventories Marketing Promotion - Distribution, Logistics - Pricing Suitability of environment for use of the product Impact of Technology on Infrastructure

INTERNATIONAL BUSINESSLegal Environment Legal Systems

External Influences

Legal Systems in Different Countries Multiplicity of Legal Environments Civil Law Civil law is the most widespread system of law in the world, also known as European Continental law, codified law Codifications in a constitution or statute passed by legislature Civil law systems mainly derive from the Roman Empire Civil law partly influenced by religious laws such as Canon law and Islamic law

INTERNATIONAL BUSINESSLegal Environment Legal Systems

External Influences

Legal Systems in Different Countries Multiplicity of Legal Environments Civil Law Only legislative enactments, rather than judicial precedents are considered legally binding. However, in reality courts do pay attention to previous decisions, especially from higher courts French Civil Law German Civil Law Scandinavian Civil Law Chinese Law is a mixture of civil law & socialist law

INTERNATIONAL BUSINESSLegal Systems Legal Systems in Different Countries Multiplicity of Legal Environments Common Law Common law based on tradition , precedent, customs and usage Common law developed in England Common law inherited by the Commonwealth of Nations and almost every former colony of the British Empire The doctrine of stare decisis or precedent by courts is the major difference to codified civil law systems

INTERNATIONAL BUSINESSLegal Systems Legal Systems in Different Countries Multiplicity of Legal Environments Common law is currently in practice in Ireland, most of the United Kingdom, Australia, India, South Africa, Canada*, Hong Kong and the United States** etc In addition several others have adapted the common law system into a mixed system Pakistan and Nigeria operate largely on a common law system, but incorporate religious law In the European Union the Court of Justice takes an approach mixing civil law*excluding Quebec, **excluding Louisiana

INTERNATIONAL BUSINESSLegal Systems Legal Systems in Different Countries Multiplicity of Legal Environments Theocratic Law The main kinds of religious law are Sharia in Islam, Halakha in Judaism and Canon law in some Christian groups Sharia Law governs a number of Islamic countries, including Saudi Arabia, Malaysia and Iran, though most countries use Sharia Law only as a supplement to national law It can relate to all aspects of civil law, including property rights, contracts or public law Islamic Law

INTERNATIONAL BUSINESSLegal Systems Legal Systems in Different Countries Multiplicity of Legal Environments Legal Systems divided into Civil Criminal Pluralistic systems Civil law and common law Civil law and religious law Common law and religious law

INTERNATIONAL BUSINESSLegal Systems Legal Systems in Different Countries Multiplicity of Legal Environments International Law Public Law or Law of Nations International Commercial Law International Court of Justice International Conventions, Rules of States International Customs for Acceptance of Law General Principles of Law Recognised by Civilised Nations Judicial Decisions of Most Highly Qualified

INTERNATIONAL BUSINESSIndia India has a written Constitution and codified Central and State law. Its Judiciary is of the highest integrity The official language is English in the High Courts and the Supreme Court The Indian Legislature and Judiciary make constant efforts to bring about improvements in Courts and dispense justice speedily On the recommendation of the General Assembly of the United Nations to consolidate and amend the law relating to domestic arbitration, international arbitration and enforcement of the foreign arbitral awards a new Arbitration and Conciliation Act has been enacted

INTERNATIONAL BUSINESSIndia To expedite the disposals of cases concerning the transactions related to Banks a special tribunal is being established To facilitate foreign investment, foreign joint venture and globalization of Indian Trade & Industry, various amendments have been thought of in the existing Companies Act, 1956 and a proposal of enacting a new Take-over Code is under consideration The Income-Tax Act, 1961, which at present is lengthy and complicated, is thought of being revised and in its place a simple Tax Law is proposed to be enacted

INTERNATIONAL BUSINESS

INTERNATIONAL BUSINESSExternal InfluencesForm of the Company Pvt., Ltd, Inc, France S.A.(societe anonyme), Germany GmbH, AG, KK in Japan EC is Encouraging PLC Branch, Subsidiary, JV

INTERNATIONAL BUSINESSImpact of Laws on BusinessNational Laws Affect All Local Business Activities Including Elements of Management Law is not appropriate for everything. What is unethical may not be illegal Law is slow to emerge in developing areas Law is often based on morality and values can change Law needs testing by courts

INTERNATIONAL BUSINESSImpact of Laws on BusinessLaw embodies many of a countrys moral beliefs and is a guide for governance Law provides clearly defined set of rules, helps develop precedent. Makes people follow the law for the fear of penalty Law contains enforceable rules. All are on level playfield. FCPA, USA Law is outcome of experiences, deliberations and precedents

INTERNATIONAL BUSINESSImpact of Laws on BusinessNational Laws Affect All Cross Border Activities National Laws Govern Contractual Relationships Health, Environment, Defence, Labour Laws Needs Special Attention International Treaties and Conventions Govern Cross Border Transactions

INTERNATIONAL BUSINESSExternal InfluencesKey Legal Issues HR, Contracts, Fees IPR Trademark, Copyright, Patents Infringement, Unfair competition Counterfeiting Gray Market

INTERNATIONAL BUSINESSKey Legal Issues Trade and Investment Regulations Financial Flow Regulations Taxation Reporting Requirements Ownership Regulations Dispute Resolutions

INTERNATIONAL BUSINESSExternal InfluencesVisa Bribery Banned by US Govt., FCPA Bribing To Speed Up The Work To Get Contract To Prevent Competition Cooperation Money In Indonesia

INTERNATIONAL BUSINESSReconciliation of International Differences Cultural Awareness No Foolproof Method Awareness and Sensitivity Samsung Junior Executives Grouping Countries Language, Ethnicity, Geographical Location Group Countries by Attitudes and Values Seemingly Similar Countries May Not Be Similar As In ME Asia

INTERNATIONAL BUSINESSFormulating & Implementing Political Strategies More Complicated Than Formulating Competitive Marketing Strategy Marketing Issues Agreements Resolved by Voluntary

Political Issues Resolved by Power Center and by Those Who Structure the Conditions Under Which Market Participants Operate Many of the Components Implemented in Public View

INTERNATIONAL BUSINESSFormulating & Implementing Political StrategiesWatch For Identify Issue - Protectionism, Environment, Workers Rights Define Nature of Politics of the Issue Assess Possible Action of Other Companies and Interest Groups Identify Important Individuals and Key Institutions Formulate Strategies Objectives, Major Alternatives Determine Impact of Implementation Public Reaction Select Appropriate Strategy and Implement

INTERNATIONAL BUSINESSLG Case Study 40% weightage Divide class in two groups, odd roll nos. and even roll nos. Form serially group of six students from above 20 minutes presentation with participation of each group member 10 minutes for Q&A All students to be present for all the presentations Presentation to cover Vision of LG SLEPT Analysis Lessons for emerging Indian MNCs