Introduction, DEFINITION OF INTERNATIONAL BUSINESS, Important, Why Companies Engage in International Business, Scope of International Business, Modes of entry into International Business, SPECIAL DIFFICULTIES IN INTERNATIONAL BUSINESS, BENEFITS OF INTERNATIONAL BUSINESS and Internationalization process and managerial implications.

1. 1-1
Dr. Gopal Krishna Rathore
Associate Professor
Mandsaur University
Mandsaur (M.P.)

2. 1-2
Globalization is the ongoing
process that deepens and
broadens the relationships and
interdependence among
countries. International Business
is a mechanism to bring about
globalization.

3. International business includes any type of business
activity that crosses national borders. Though a number of
definitions in the business literature can be found but no
simple or universally accepted definition exists for the
term international business.
At one end of the definitional spectrum, “international
business is defined as organization that buys and/or sells
goods and services across two or more national
boundaries, even if management is located in a single
country”.
1-3

4.  “International business consists of all
commercial transactions—including sales,
investments, and transportation — that take
place between two or more countries.”
Copyright © 2011 Pearson Education 1-4

5.  Most companies are either international or domestics
are competing with international companies.
 Modes of operations may differ from those used
domestically.
 The best way of conducting business may differ by
country.
 An understanding helps you make better career
decisions.
 An understanding helps you decide what government
policies to support.
Copyright © 2011 Pearson Education 1-5
1-5

6. 1. Increase in and expansion of technology -
2. Liberalization of cross-border trade and resource
movements-
3. Development of services that support
international business -
4. Growing consumer pressures -
5. Increased global competition -
6. Changing political situations -
7. Expanded cross-national cooperation -
1-6

7.  To Expand Sales: pursuing international sales increases
the potential market and potential profits.
 To Acquire Resources: may give companies lower costs,
new and better products, additional operating
knowledge.
 To Diversify or Reduce Risks: international operations
may reduce operating risk by smoothing sales and
profits, preventing competitors from gaining advantage.
1-7
1

8.  Merchandise exports and imports
 Service exports and imports
◦ Tourism and Transportation
◦ Service Performance
◦ Asset Use
 Investments
◦ Foreign Direct Investment (FDI)
◦ Portfolio Investment
1-8

9. Type of Entry Advantages Disadvantages
Exporting Fast entry, low risk
Low control, low local knowledge,
potential negative environmental
impact of transportation
Licensing and Franchising Fast entry, low cost, low risk
Less control, licensee may become
a competitor, legal and regulatory
environment (IP and contract law)
must be sound
Partnering and Strategic Alliance
Shared costs reduce investment
needed, reduced risk, seen as
local entity
Higher cost than exporting,
licensing, or franchising;
integration problems between
two corporate cultures
Acquisition
Fast entry; known, established
operations
High cost, integration issues with
home office
Greenfield Venture (Launch of a
new, wholly owned subsidiary)
Gain local market knowledge; can
be seen as insider who employs
locals; maximum control
High cost, high risk due to
unknowns, slow entry due to
setup time
1-9

10. 1. POLITICAL AND LEGAL DIFFERENCES
2. CULTURAL DIFFERENCES
3. ECONOMIC DIFFERENCES
4. DIFFERENCES IN THE CURRENCY UNIT
5. DIFFERENCES IN THE LANGUAGE
6. DIFFERENCES IN THE MARKETING INFRASTRUCTURE
7. TRADE RESTRICTIONS
8. HIGH COSTS OF DISTANCE
9. DIFFERENCES IN TRADE PRACTICES
1-
10

11.  SURVIVAL
 GROWTH OF OVERSEAS MARKETS
 SALES AND PROFIT
 DIVERSIFICATION
 INFLATION AND PRICE MODERATION
 EMPLOYMENT
 STANDARDS OF LIVING
1-
11

12. Copyright © 2011 Pearson Education
1-
12

13. 1-
13