2. What is international business
International business consists of transactions
that are devised and carried out across national
borders to satisfy the objectives of individuals,
companies, and organizations.
3. History and Evolution of
International Business
19th Century: Broader concept of the integration of
economies and societies
1870: Began first phase of Globalization
1919: World War II:
End of first phase of Globalization, Industrial revolution in
UK, Germany and the USA
Sharp increase in the trade with import and export by
colonial empires
1913: GDP 22.1
After 1913: Increased Trade Barriers to Protect Domestic
Production
1930’s: Declined Trade Ratio, GDP 9.1
4. After 1930’s: World Nations felt the need for
International Co-operation in global trade and
balance of payments affairs
Establishment of IMF and IBRD (World Bank)
IMF: International Monetary Fund
IBRD: International Bank for Reconstruction and
Development
1947: 23 countries conducted negotiations in order to
prevent the protectionist policies and to revive the
economies from recession aiming at establishment of
World Trade organization
1947: Establishment of GATT (General Agreement on
Trade and Tariffs)
1980s: efforts to convert GATT into WTO
5. 1st Jan 1995: GATT was replaced by WTO (World
Trade Organization)
Trade Liberalization
1990 – 2000: The Term IB (International Business)
has emerged from the term International Marketing.
There are two Phases of the evolution of the term
International Business
1. International Trade to International Marketing
2. International Marketing to International Business
After 1990: Rapid Internationalization ad
globalization
6. International trade to international
marketing
• Originally, the producers used to export their products to the
nearby countries and gradually extended the exports to far-off
countries. Gradually, the companies extended the operations
beyond trade. For example, India used to export raw cotton, raw
jute and iron ore during the early 1900s. The massive
industrialization in the country enabled us to export jute
products, cotton garments and steel during 1960s.
• India, during 1980s could create markets for its products, in
addition to mere exporting. The export marketing efforts
include creation of demand for Indian products like textiles,
electronics, leather products, tea, coffee etc., arranging for
appropriate distribution channels, attractive package, product
development, pricing etc. This process is true not only with
India, but also with almost all developed and developing
economies.
7. International marketing to
international business
• The multinational companies which were producing the
products in their home countries and marketing them in
various foreign countries before 1980s, started locating
their plants and other manufacturing facilities in
foreign/host countries. Later, they started producing in
one foreign country and marketing in other foreign
countries. For example, Uni Lever established its
subsidiary company in India, i.e., Hindustan Liver
Limited(HLL), HLL produces its products in India and
markets them in Bangladesh, Sri Lanka, Nepal etc. Thus,
the scope of the international trade is expanded into
international marketing and international marketing is
expanded into international business.
9. How a company can engage in
international business
Export
Licensing
Joint venture
Direct investment
MNC’s
FDI
10. Reasons for Recent Evolution or
Growth in International Business
Expansion of technology
Business is becoming more global because
Transportation is quicker
Communications enable control from afar
Transportation and communications costs are more
conducive for international operations
Liberalization of cross-border movements
Lower governmental barriers to the movement of goods,
services, and resources enable companies to take better
advantage of international opportunities
11. – Development of supporting institutional arrangements
•
Institutional arrangements
– Are made by business and government
– Ease flow of goods
– Reduce risk
– Increase in global competition
•
More companies operate internationally because
– New products quickly become global
– Companies can produce in different countries
– Domestic companies’ competitors, suppliers, and customers
become international
