- Managing international business requires dealing with various cultural, political, legal, economic, and technological differences across countries. International managers must continually monitor these environmental factors.
- Some challenges of international business include political and legal differences between countries, cultural differences, economic differences, language barriers, trade restrictions, and high transportation costs.
- However, international business also provides benefits like the flow of ideas and resources globally, offering new choices to consumers, and facilitating employment opportunities and technology sharing.
2. International Environment
• Managing a business in a foreign country requires managers to
deal with a large variety of cultural and environmental
differences.
• As a result, international managers must continually monitor the
political, legal, sociocultural, economic, and technological
environments.
3. Problems in International Business
• Political and Legal Differences
• Cultural Differences
• Economic Differences
• Differences in the Language
• Trade Restriction
• High Transportation Cost
4. Need for International Business
• It provides the flow of ideas, services, and capital across the
world.
• It offers consumers new choices.
• It permits the acquisition of a wider variety of products.
• It facilitates the mobility of labor, capital, and technology.
• It provides challenging employment opportunities, reallocates
resources, makes preferential choices, and shifts activities to a
global level
5. Meaning of Globalisation
• Globalisation is the integration of the world economy and
exchanging the ideas, products, technologies etc.
• The globalisation hit India late but had huge impact on the
nations economic policies and various other aspects.
• The essence of Globalisation is connectivity.
6. Globalization is grounded in the theory of comparative advantage
which states that countries that are good at producing a particular
goods are better off exporting it to countries that are less efficient
at producing that good.
7. Aspects of globalisation
• Trade and transactions
• Capital and investment movement
• Migration
• Dissemination of knowledge
9. Essential Condition for Globalisation
• Business Freedom (liberalisation in external sector)
• Infrastructural Facilities
• Government Support (policy and procedural reforms)
• Resources (finance, human resource, tech., R&D, brand image)
• Competitiveness ( cost, quality, tech., marketing, after sale
service)
10. Stages of Globalization
• Domestic Company
• International Company
• Multinational Company
• Global Company
• Transnational Company
11. Domestic Company
• Domestic company limits its operations, mission and vision to
the national political boundaries.
• These companies focus its view on the domestic market
opportunities, domestic suppliers, domestic financial
companies, domestic customers etc.
• These companies analyze the national environment of the
country, formulate the strategies to exploit the opportunities
offered by the environment.
21. Exporting
• Exporting is the most traditional and well established form of
operating in foreign markets.
• Exporting can be defined as the goods and services produced in
one country and purchased by citizens of another country. If it is
produced domestically and sold to someone from a foreign
country, it is an export.
• No direct manufacturing is required in an overseas country,
significant investments in marketing are required.
22. Reasons for selecting Export
• The volume of foreign business is not large enough to justify
production in the foreign market.
• Cost of Production in the foreign market is high.
• Foreign market is characterized by infrastructural problem or
availability of raw material.
• The company has no permanent interest in foreign market or that
there is no guarantee of the market available for a long period.
• Foreign Investment not favored by foreign country.
24. Advantages
• Manufacturing is home based thus, it is less risky than overseas
based.
• Gives an opportunity to "learn“ overseas markets before
investing.
• Reduces the potential risks of operating overseas.
• Easy to Entry and Exit.
25. Disadvantages
• Logistical difficulties
• Less suitable for service products.
• Not appropriate if other lower cost manufacturing locations
exist.
• High transport costs can make exporting
uneconomical.
26. Strategic InternationalAlliance
• A strategic international alliance (SIA) is a business relationship
established by two or more companies to cooperate out of
mutual need and to share risk in achieving a common objective.
• SIAs are sought as a way to shore up weaknesses and increase
competitive strengths.
27. StrategicAlliance
Firms enter SIAs for several reasons:
• Opportunities for rapid expansion into new markets.
• Access to new technology.
• More efficient production and innovation.
• Reduced marketing costs.
• Access to additional sources of products and capital.
29. Licensing
Licensing is defined as a business arrangement, wherein a
company authorizes another company by issuing a license to
temporarily access its intellectual property rights, i.e.
manufacturing process, brand name, copyright, trademark, patent,
technology, trade secret, etc. for adequate consideration and
under specified conditions.
30. Franchising
Franchising is an arrangement in which the franchisor
permits franchisee to use business model or brand name for
a fee, to conduct business, as an independent branch of the
parent company (franchisor).
E.g. Mc Donald’s, Domino’s etc.
31. Contract Manufacturing
• Under this method a company doing international marketing
contracts with firms in foreign countries to manufacture or
assemble the products while retaining the responsibility of
marketing the product.
• Contract manufacturing is a process that establish a working
agreement between two companies.
• As part of the agreement, one company will custom produce
parts or other materials on behalf of their client.
32. Countertrade
• Counter trade is an import / export relationship between nations
or large companies in which good and/or services are
exchanged for goods and services instead of money.
• In some cases monetary evaluations are made.
• It helps government reduce imbalances in trade between them
and other countries.
• It is often used by developing countries to control trade and as a
development technique.
33. Wholly Owned Manufacturing Facilities
The firm owns 100% of the stock
The firm can set up a Green-field venture.
35. Foreign Trade
• Any trade execution between two countries is called Foreign
trade or International trade.
• The foreign trade policy and regulation is a very important
determinant of the business environment.
36. The Foreign Trade (Development and
Regulation)Act, 1992
• This Act which replaced the Imports and Exports (Control) Act,
1947, came into force on 19th June 1992.
• Foreign trade policy for 5 years.
• Presently policy period 2015-20.
• This policy passed by Ministry of Commerce and Industries.
37. Objective of FTP
• The new foreign trade policy aims to double India’s exports to
$900 billion by 2020.
• To achieve this target, the exports need to grow at about 14%
every year.
• Too boost export government introduced “Make in India”
scheme.
38. Need of FTP
• Facilitate import and export of goods and services.
• Develop export potential.
• Improve efficiency and competitiveness of Indian Industries.
• Create favorable Balance of Payment.
39. Ease of doing International Business
• State/Union agencies will not seize/delay export consignment. If
there is any doubt they ask for undertaking.
• If export stock seized then it must release in 7 days.
• Single window 24/7 custom clearance at ports.
• Faster clearance to agro/ perishable product.
• Custom duty self assessment permitted.
40. • Indian trade portal: Provide information on foreign market tax
regimes, provisions of trade agreement.
• Digital Lockers provided to exporter/importer.
• Facility to pay taxes/ fees online.
42. • Every country requires capital for its economic growth and the
funds cannot be raised alone from its internal sources.
• Foreign Direct Investment (FDI) and Foreign Portfolio
Investment (FPI) are the two ways through which foreign
investors can invest in an economy.
43. Foreign Direct Investment (FDI)
Foreign direct investment (FDI) is when a foreign company or
individual makes an investment in India that involves either:
(i) Green Field Investment
(ii) Brown Field Investment
44. Foreign Portfolio Investment
• FPI’s investment is in the stock markets & securities & its approach
is always of short term whereas FDI’s investment is always of long
term.
45.
46. There are three main institutions that handle the FDI related issues
in India.
(i) Foreign Investment Facilitation Portal( FIFP).
(Foreign Investment Promotion Board)
(ii) Foreign Investment Implementation Authority ( FIIA ).
(iii) Secretariat for Industrial Assistance ( SIA ).
47. Prohibited Sectors of FDI
• Gambling and Betting
• Lottery business (including government/ private lottery, online
lotteries etc)
• Manufacturing of tobacco, cigars, cigarettes and tobacco or
tobacco substitutes.
• Atomic Energy
• Business of chit fund
• Real estate business or construction of farm houses.
48. FDI Routes
• Automatic Routes: By this route FDI is allowed without prior
approval by Government or Reserve Bank of India.
• Approved Route: By Foreign Investment Facilitation Portal.
