International Business Environment(1)

7/31/2019 International Business Environment(1)

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International BusinessEnvironment

An Overview

Presented By:

Jatin Vaid



International Business

IB is all commercial transactions – privateand governmental, between two or morecountries.

These transactions include sales,investments and transportation.

The conditions within a Co.’s external

environment affect the way businessfunctions.



OPERATIONS

OBJECTIVES

SALES EXPANSION

RESOURCE ACQUISITION

RISK MINIMIZATION

STRATEGY

EXTERNAL

INFLUENCES

1. PHYSICAL AND

SOCIETAL FACTORS

POL & LEGAL

POLICIES CULTURAL

FACTORS

ECONOMIC

FORCES

GEOGRAPHICAL

INFLUENCES

2. COMPETITIVE

ENVIRONMENT

ADVANTAGE IN

PRICE,

MARKETING NO. AND

COMPARATIVE

CAPABILITIES OF

COMPTITORS.

COMPETITIVE

DIFFERENCES BY

COUNTRY

MEANS

MODES FUNCTIONS OVERLAYING

ALTERNATIVES

IMPORT/EXPORT MARKETING CHOICE OF

COUNTRIES

TOURISM &TRANSPORTATION

GLOBALMFG

ORG & CTRLMECHANISMS

LICENCING FINANCE

MGT CONTRACTS

DIRECT &

PORTFOLIO

INVESTMENT

HR



Objectives to engage inInternational Business

1. To expand sales

2. To acquire resources

3. To minimize risk



1. To expand sales

Higher sales mean higher profits.

The Co.’s may increase the potential market

for their sales by pursuing internationalmarkets.

Increased sales – a major motive for Co.’s.



2. To acquire resources

To reduce costs, manufacturers seek outproducts, services & components producedabroad.

They also seek foreign capital, technology &information.

Helps Co.’s to improve its product quality and

differentiate itself, thus inc market share andprofits.



Reasons for recent internationalgrowth

1. Rapid increase in and expansion oftechnology.

2. Liberalization of Govt. policies on crossborder movement of trade & resources.

3. Dev. Of instt. That support & facilitateinternational trade.

4. Increased global competition.



Modes of InternationalBusiness

1. Merchandise Exports and Imports.

2. Service Exports and Imports.

a) Tourism & Transportation

b) Performance of services

c) Use of assets (TM, patents, ©)

3. Investments

a) Direct investment (gives investor ctrl int)b) Portfolio investment (non-ctrlng int in co – stocks)



1. Merchandise Exports & Imports

ME are tangible prdts – goods- send out of acountry.

MI are goods brought in to a country.

Called visible exports & imports.

Country’s most common international

economic transactions.



2. Service Exports & Imports

Generate non-prdt internt’l earnings. Co. or individual receiving payment is making a service export & the

one paying is making a service import.Forms:1) Tourism & Transportation:

- airlines, shipping co., travel agencies & hotels.- Foreign tourism2) Performance of services:

- banking, insurance, rentals, engg., management : earnings in form offee.

- Management contracts – fee for spl contracts.

3) Use of assets : -co. allows others to use assets like TM, patents,under contracts called licensing agrmt rec royalities

- Franchising.



3. Investments

1) Direct:

- gives investor controlling int. in a foreign co.

- FDI

2) Portfolio:

- non controlling int. in a co. or loans to a co.

- Co. use them for short term financial gain.



External influences on IB

1. Understanding a Co.’s Physical & Societal

environments.

a) Political policies and legal practice.

b) Cultural factors.

c) Economic forcesd) Geographical influences.



2. The competitive environment

a) Major advantage in price, marketing,

innovation, etc.b) Number of comparative capabilities of

competitors.

c) Competitive differences by country.



USUAL PATTERN OFINTERNATIONALIZATION

HIGH

MEDIUM

LOW

DOMESTIC BUSINESS

A

B

CD

E

International Business Environment(1)

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