DR SHWETA BHATNAGAR.

1ST JULY 2024

INTERNATIONAL BUSINESS
Class 1: Concept and Background
WHAT IS TRADE ?

Trade is the voluntary exchange of

goods or services between
different economic entities.
 International Trade

GLOBALISATION &……..
MEANING……….
- Globalisation refers to the
growing interconnection of
nations' economies.
- It is a social, cultural, political,
and legal phenomenon
- Corporations gain a competitive
advantage on multiple fronts
- Globalisation is driven by two
main factors viz., Public Policy
and Information /
Communication Technology
innovations
WATCH ……..
The documentary:
Globalization: Winners and losers in world trade (1/2) | DW Documentary

Part 1: Who Profits from Globalisation?

Part 2: Where do we stand?

Task 1: Write a comprehensive report on ‘Impact of Globalisation’ based

on the Documentary.
DR SHWETA BHATNAGAR. 2ND JULY 2024

INTERNATIONAL BUSINESS
Class 2: Concept of International Business
INTERNATIONAL BUSINESS INTRODUCTION
International Business refers to the exchange of goods and services between two
parties of different countries.

Does it sounds similar to International Trade

OK ….. THEN LET US LOOK IT THIS WAY……..
International Business is the process of focusing on the resources of the
globe and objectives of the organisation on the global business
opportunities and threats in order to produce/buy/sell or exchange of
goods and services worldwide.
KEYWORDS
- Involves exchanges capital, products,
and services across international
borders or territories,

- includes all commercial transactions—

private or public,

- deals with the movement of business

activities along with products and
services, and

- carried out internationally through

export, import, and entrepot trade.
 Features & Significance
- Large Scale Production & Operations - Expansion and Diversification
- Economic Integration - Improve Organisation’s Efficiency
- Dominance of Developed Economies - Spreads Business Risk

-
and MNC’s
- Optimum Utilisation of Resources
Growth & Expansion for Under
Developed & Developing Economies/ - Enhancing Foreign Exchange Earnings
Countries - Improved Competitive Capacity
- Counter Domestic Competition
- Rapid Expansion in Technological
Innovations
- Political & Legal Interference/
Restrictions
- Higher Risk due to Uncertainties
- Benefits the Countries in trade
DR SHWETA BHATNAGAR. 3RD JULY 2024

INTERNATIONAL BUSINESS
Class 3: Features, Significance & Need of International Business
 Features & Significance
- Large Scale Production & Operations - Expansion and Diversification
- Economic Integration - Improve Organisation’s Efficiency
- Dominance of Developed Economies - Spreads Business Risk

-
and MNC’s
- Optimum Utilisation of Resources
Growth & Expansion for Under
Developed & Developing Economies/ - Enhancing Foreign Exchange Earnings
Countries - Improved Competitive Capacity
- Counter Domestic Competition
- Rapid Expansion in Technological
Innovations
- Political & Legal Interference/
Restrictions
- Higher Risk due to Uncertainties
- Benefits the Countries in trade
WHY DO NATIONS GO ABROAD ?………
(NEED FOR IB)
- Increase Profit and Sales
Create New Market
- Protect Markets, Profits and Sales
Domestic Market

Seek Preferential Trading Foreign Market

Arrangement

Companies
Taking benefits of Faster Growing
Market

Overcoming the Limitations of

Domestic Market
 (a)Find out an
example under
each type of
International
Business
Strategy.

(b) List factors

that you
consider could
influence
India’s need to
go for
International

TASK 2 Business.
 DR SHWETA BHATNAGAR. 4TH JULY 2024

INTERNATIONAL BUSINESS
Topic:
Stages, Reasons, Advantages & Disadvantages of
International Business
Why do Nations Trade
Domestic Vs International Trade/ Business
STAGES & STRATEGIES OF INTERNATIONALISATION
Local/ Domestic
International
Mutinational
Global
Transnational
 ADVANTAGES & DISADVANTAGES
- NATION
Forex Earnings
- RISK
Economic & Political
Better Utilisation of Resources Operational
Enhanced Economic Growth through Market Related
Increased Employment
Other Environmental

-
Improves Standard of Living
FIRM / BUSINESS
- Additional Cost due to Geographical
Distancing of Markets
Higher Sales & Profits
Optimum Utilisation of Capacity
Growth & Diversification
Tackle Intense Domestic Market
Competition
EVEN AFTER ALL THIS…….
WHY DO NATIONS TRADE ?
Unequal distribution of Natural Resources.
Unequal availability of Factors of Production
Comparative Cost Advantage
Geographical Specialisation
DOMESTIC VS. INTERNATIONAL BUSINESS
 Basis Domestic Business International Business

Location &
Nationality of Same Different
Buyers & Sellers

Risk Low High

Mobility of
Factors of More Less
Production

Currency of Trade Same Different

 Basis Domestic Business International Business

Consumers’
Preferences & Homogeneous Heterogenous
Behaviours

Complex, Multiple & Less

Regulations Simple, Similar & Familiar
Familiar

Business Systems
Homogeneous Haterogeneous
& Practices
THEREFORE WE CAN CONCLUDE THAT INTERNATIONAL BUSINESS IS A BROADER TERM
THAN INTERNATIONAL TRADE
 Study thoroughly
and draw a brief
profile Indian
Mobile Brands and
categorise them
under different
stages of
Internationalisation
/ Globalisation

TASK 3
 DR SHWETA BHATNAGAR. 8TH JULY 2024

INTERNATIONAL BUSINESS
Topic: INTERNATIONAL BUSINESS ENVIRONMENT : Components

Cultural Environment
Economic Environment
Political & Legal Environment
WHAT IS BUSINESS ENVIRONMENT
A Business Environment is a sum or collection of all internal and
external factors such as employees, customers needs and expectations,
supply and demand, management, clients, suppliers, owners, activities
by government, innovation in technology, social trends, market trends,
economic changes, etc. These factors affect the function of the
company and how a company works directly or indirectly.
NATIONAL & FOREIGN ENVIRONMENT
The national business environment limits transactions to the domestic
country. The international business environment allows for a variety of
international transactions, import and export regulations, tariffs, and
foreign exchange, among other factors.
COMPONENTS OF ……………. ENVIRONMENT.
CULTURAL (Social) ENVIRONMENT

ECONOMIC ENVIRONMENT

POLITICAL & LEGAL ENVIRONMENT

 People, Demographics, Culture, Subculture, Pressure Groups,
=> Interest Groups, Cultural life of people, rites, rituals, festivals,
Cultural heritage invasion of aliem culture, business culture, roles, etc.
Values, beliefs, language, religion, education, literacy, time,
orientation.
GDP Growth, Agri Output-Growth, Size & Productivity, Level of
Inflation, Per Capita Income, Disposable Incomes, Taxes, Exchange
Rates, Financial Architecture, Current Account Deficit, Size of the
Economic
economy, Composition of the economy, economic health,
economic policies- fiscal inventory and entrepreneurial, foreign
capital ,etc.
Political system, Political Installation, Political ideologies of parties,
political stability, political culture etc. System of government,
Political distribution of power between national and local government
culture of civil servants, government policy on business, etc. Risk,
Instability, Attitudes Towards “Foreigners”.

Business related laws governing competition, consumer protection,

Legal contractual obligations, regulation of foreign participation; respect for
judiciary, efficiency of the same, etc.
CULTURL ENVIRONMEMT
MEANING

- Culture is referred to as a
set of thought and
behaviour patterns that
member of a society
learns and share through
language and other forms
of symbolic interaction,
such as, customs, habits,
beliefs and values. the
common view points
which bind them together
as a social entity.
Hofstede mechanism
CULTURAL FACTORS
1. Communication
2 Workplace Etiquette
3 Organisational Hierarchy
FACTORS
Communication:
- Effective communication is essential to the success of any business but at the
same time it Involves a real risk of business message getting “lost in
translation”.
- It requires an in-depth research in advance of professional interactions with
individuals from a different culture. While navigating cross-cultural
communication can be a challenge, approaching cultural differences with
sensitivity, openness, and curiosity can help in building effective
communication.
 DR SHWETA BHATNAGAR. 9TH JULY 2024

INTERNATIONAL BUSINESS
Topic: INTERNATIONAL BUSINESS ENVIRONMENT : Components

Cultural Environment
FACTORS
Workplace Etiquette:

- The formality of address is a big consideration when dealing with

colleagues and business partners from different countries

- The concept of punctuality can also differ between cultures in an

international business environment

- Along with differences in etiquette, come differences in attitude

FACTORS
Organisational Hierarchy:
- Organizational hierarchy and attitudes towards management roles can also vary widely
between cultures (Could be vertical/ more formal or horizontal/ less formal)

- Often these hierarchical attitudes can be a reflection of a country’s societal values or

level of social equality

- This hierarchy helps in defining roles and responsibilities across the organisation at the
same time it poses challenges of defining roles in multinational teams with diverse
attitudes and expectations.
TACTICS TO BUILD STRONG CULTURE BY COMPANIES
1. Defining the company culture
2. Communicating culture to all employees
3. Training managers to foster the culture
4. Encouraging employee feedback
5. Making culture a priority
IMPACT OF CULTURE
Positive

- Providing opportunities for companies to tap into new markets

- Helping companies to understand their customers and employees

better

- Fostering creativity and innovation within organisations

IMPACT OF CULTURE
Negative

- Creating misunderstandings and communication difficulties

- Leading to conflicts between employees or between employees and

customers

- Limiting cooperation and collaboration between different cultural

groups
CONCLUSION
Building strong work culture in international business is essential for its
success because it ensures aligning of workforce with the its culture on
which the business thrives.
 DR SHWETA BHATNAGAR. 10TH JULY 2024

INTERNATIONAL BUSINESS
Topic: INTERNATIONAL BUSINESS ENVIRONMENT : Components

Economic Environment: GNI

ECONOMIC ENVIRONMEMT
- The economic environment refers to the factors contributing to
the country’s attractiveness to foreign businesses

- Infrastructure, education, healthcare, technology, etc. are

indicative of economic development of the country.

- Three types of economic systems are there;

Market Based Economy
Centrally Planned Economy
Mixed Economy
FACTORS TO BE CONSIDERED WHILE DECIDING NATURE OF BUSINESS
- Economic system to enter the business sector
- Stage and pace of economic growth
- Level of national GDP and per capita income
- Incidents of taxes, direct and indirect tax
- Available infrastructure facilities and the difficulties
- Availability of components, raw materials and their cost
- Sources of financial resources and their costs
- Availability of workforce, managerial and technical workers, their salary and
wage structures
ECONOMIC ENVIRONMENT FACTORS
1. GROSS NATIONAL INCOME (GNI)
- It Measures Income Generated by both TDP (total domestic production)
as well as IP (international production) of National Companies Abroad.

- GNI is the market value of final goods and services newly produced
by domestically owned factors of production . .

- GNI is the broadest measure of economic activity for a country.

- A widely used method of classification of the economics is on the basis

of per capita income or Gross National Income (GNI) per capita,
recommended by the World Bank
 DR SHWETA BHATNAGAR. 11TH JULY 2024

INTERNATIONAL BUSINESS
Topic: INTERNATIONAL BUSINESS ENVIRONMENT : Components

Economic Environment :HDI

2. HUMAN DEVELOPMENT INDEX (HDI)
- The United Nation’s has translated the Human Development Index (HDI) as a
principal indicator of the level of economic achievements of a country.

- HDI measures the average achievements of a country on three dimensions:

Longevity, as measured by life expectancy at birth
Knowledge, as measured by the adult literacy rate and the combined
primary, secondary and tertiary gross enrollment ratio.
Standard of Living: as measured by GNI per captia expressed in PPP
for US dollars.
WHAT ARE THE HIGHLIGHTS OF HUMAN DEVELOPMENT
REPORT 2023-24 ?
STUDY :
TASK 4:
AMARTYS SEN’S CAPABILITY APPROACH
&
PIONEERING A DEVELOPMENT PHILOSOPHY FOR PEOPLE
3. PURCHASING POWER PARITY (PPP)
- A theory which states that exchange rates between currencies
are in equilibrium when their purchasing power is the same in
each of the two countries.

- In short, what this means is that a bundle of goods should cost

the same taking into account the exchange rate system
 DR SHWETA BHATNAGAR. 12TH JULY 2024

INTERNATIONAL BUSINESS
Topic: INTERNATIONAL BUSINESS ENVIRONMENT : Components

Economic Environment : Inflation

ECONOMIC STABILITY & INFLATION
- Inflation is a key indicator of Economic Stability

- Monetary Policy measures by the government are meant to control

Rate of Inflation.

- Effect of inflation can be seen in terms of exchange rate of one

currency for other.
DEMAND ( INCREASES) => PRICE (INCREASES) =>
EXPORT (DECREASE) & IMPORTS (INCREASES)

DEMAND ( DECREASES) => PRICE (DECREASES) =>

EXPORT (INCREASE) & IMPORTS (DECREASES)
INFRASTRUCTURE
- Availability of physical facilities that support economic activities -
transport, energy and power, communication.

- The quick diffusion of ideas to create a market for goods and

services is dependent on adequate communications. Also, the
physical distribution of products depends upon infrastructure.
EDUCATION
- Availability of qualified workforce is an important consideration for
operational efficiency / productivity.

- This is a differential factor between quality workers in the richer

countries versus those in emerging economies.
TASK 5: WRITE AN ARTICLE ON ECONOMIC
RISK MITIGATION FOR INTERNATIONAL
BUSINESS
POLITICAL & LEGAL ENVIRONMENT
- Political & Legal Systems at a
Glance
WHY GOVERNMENTS INTERVENE IN TRADE?
Because of political, economic, social, and cultural reasons.

Politically, a country’s government may seek to protect jobs or specific

industries as may be considered essential.

National security issues can impact both the import and exports of a
country, as some governments may not want advanced technological
information to be sold to unfriendly foreign interests.
WHY GOVERNMENTS INTERVENE IN TRADE?
Sometimes government use it as retaliatory or supportive measure with
other country(ies).

Culturally and socially government intervene to establish the dominance

or to restrict the dominance of another country.
HOW DO GOVERNMENTS INTERVENE IN TRADE?
Through Key Policy Measures government create rules and regulations
to control and manage trade;
Tariffs: specific tariffs and ad valorem tariffs
Subsidies: tax breaks, low-interest loans, cash grants and
government-equity participation
Import quotas and VER
Currency controls
HOW DO GOVERNMENTS INTERVENE IN TRADE?
Local content requirements
Antidumping rules
Export financing
Free-trade zone
Administrative policies.
WHAT IS LEGAL ENVIRONMENT OF BUSINESS?
- The code of conduct which decides the legal boundaries of business.

- Business is regulated in a country by government as per well defined priorities

- Subject to continuous change as per need

- It includes various laws which are passed by the government in a country to

regulate the business operations

- It is important for an international business firm to have a thorough knowledge

of laws and legislations of the government as non implementation of policies
may lead to heavy fine and penalties.
IMPACT OF THE LEGAL ENVIRONMENT
Success of business depends heavily on a stable legal environment,
which is a key factor that determines the rules and regulations that
govern its operations. Impact of the legal environment on business are
as;

- Government-imposed taxation and regulations can foster

development while safeguarding consumer rights.

- Higher tax rates can limit profitability, while lower rates create better
conditions for increased earnings.
IMPACT OF THE LEGAL ENVIRONMENT
- It encompasses regulatory activities such as controlling
environmental pollution, enforcing employment and minimum wage
laws, and ensuring food and drug safety.

- Provides a framework to prevent exploitation, unfair practices, and

fraud thereby prioritising consumers rights by the businesses.

- Legal framework contributes to sustained business prosperity and

benefits both consumers and entrepreneurs
“FOR INTERNATIONAL BUSINESS LEADERS AND PROFESSIONALS,
A COMPREHENSIVE KNOWLEDGE OF THE LAW IS VITAL TO
MAKING INFORMED DECISIONS, MINIMIZING RISKS, AND
ENSURING ADHERENCE TO REGULATIONS.”
CONCLUSION
A clear understanding to the business environment plays a critical role
in shaping the business landscape in foreign markets. A stable
economic, political environment with compliance to the legal
requirements and in-depth understanding of socio-cultural behaviours
are critical for international business to be successful.
UNIT 1 COMPLETED
NEXT WEEK

UNIT 2