International Business Unit-1

International Business Unit – I
Business activities done across national borders is International

Business.
The International business is the purchasing and selling of the

goods, commodities and services outside its national borders.
International business covers trading goods, services, and

technology across countries, offering businesses access to
bigger markets and new growth opportunities.
It includes not only the international movement of goods and

services but also the capital, personnel, technology, and
intellectual property such as patents, trademarks, technical
knowledge, and copyrights.
It comes in three types:

Export Trade: It is the sale of goods and services to foreign
countries.
Import trade: Purchase goods and services from other countries.
Entrepot Trade: Import of goods and services for re-export to
other countries.
Features of International Business:

It includes two countries
Use of currencies
Legal obligations
High risk
Heavy document
Time consumption
Lack of personal contact
Factors of International Business

Culture
Economic system
Economic situation
Exchange rate
Political risks and regulations
Language and Cross-Cultural Communication
Reason for International Business

Uneven Distribution of Natural Resources
Availability of Productivity Factors
Specialization
Cost Advantages
Benefits to countries
Foreign Exchange
More Efficient Resource Utilization
Growth Possibilities and Job Opportunities
Improved Standard of Living
Benefits to firms
Profit Opportunities
Increased Resource Utilization
Growth Prospects
Decrease Competition
Improved Business Vision
Importance of International business

Global Opportunities
Increased Revenue
Market Expansion
Quality Product
Global Image
Economies of Scale
Earning Foreign Money
Cost Advantage
Networking
Economic Development
Government Support
Employment Opportunities
Nature of International Business

International Restrictions
Benefits to Participating Countries
Large Scale Operations
Integration of Economies
Dominated by Developed Countries
Market Segmentation
Sensitive Nature
Characteristics of International business

Large scale operations
Earns foreign exchange
Integrates economies
Large number of middlemen
High risk
Intense competition
International restrictions
Highly sensitive nature
Features of International Business

Separates Producers From Buyers
Immobility Of Factors
Heterogeneous Markets
Large Operations
Foreign Currency Payments
International Rules And Regulations
Large Middlemen
Multiplicity Of Documents
Internationalisation is the process of a company branching out

to foreign markets to capture a greater market share.
Internationalization describes the process of designing products

to meet the needs of users in many countries or designing them
so they can be easily modified, to achieve this goal.
Uppsala model is the internationalisation model of successive

market entry where firms use past learning and experience in
established markets to intensify their commitment to the new
market.
The transaction cost approach states that firms should

internationalize in a way that incurs the least foreign trade
costs.
Dunning electric approach is an approach for entry mode

selection that takes into account the ownership advantage,
location advantage and internationalisation advantage.
The network theory is drawn on the fact an international

company should not act separately but must form a network of
connections with other firms in the industry. This way, it can
gain valuable insights and resources to advance its move to
foreign markets.
Internationalization Process
Identify the motives for internationalisation
Conduct SWOT analysis
Decide on the product to sell in the foreign market
Choose the market to penetrate
Decide on entry mode
Determine the point of entry
Modes of Entry
Exporting
Piggybacking
Countertrade
Licensing
Joint ventures
Company ownership
Franchising
Outsourcing
Greenfield investments
Turnkey projects
MNC
A multinational corporation (MNC) is a company that has
business operations in at least one country other than its home
country. By some definitions, it also generates at least 25% of
its revenue outside of its home country.
Characteristics of a Multinational Corporation

 A worldwide business presence
 Typically, large and powerful organizations
 Business conducted in various languages
 A complicated business model and structure
 Direct investments in foreign countries
 Jobs created in foreign countries, potentially with higher
wages than found locally
 Seeks improved efficiencies, lower production costs, larger
market share
 Has substantial expenses associated with navigating the
rules and regulations of foreign countries
 Pays taxes in countries in which it operates
 Reports financial information according to International
Financial Reporting Standards (IFRS)
 Sometimes accused of negative economic and/or
environmental impacts in foreign markets
 Sometimes accused of negative economic impacts in
home country due to outsourcing jobs
Types of Multinational Corporations

A Decentralized Corporation
A decentralized corporation maintains a presence in its home
country and has autonomous offices and other facilities in
locations around the world.
A Centralized Global Corporation

A centralized global corporation has a central headquarters in
the home country. Executive officers and management located
there oversee the global offices and operations as well as
domestic operations.
An International Division Within a Corporation

An international division is that part of the multinational
corporation that has been made responsible for all international
operations. This structure facilitates business decision-making
and general activities in local, foreign markets.
A Transnational Corporation
A transnational corporation involves a parent-subsidiary
structure whereby the parent company oversees the operations
of subsidiaries in foreign countries as well as in the home
country.
Advantages of MNC
Employment
Lower Labor Costs
Inflow of Capital
They support other companies.
Technical Development
Access to consumers
Promotes Competitions
MNCs make diversification possible.
Innovations
Enhance Living Standards
Disadvantages of MNC
Threat to Domestic Industries
Natural Resource Loss
No Advantage for the Poor
Inadequate technology
Laws
Loss of sovereignty
Misapplication of Mighty Status
Promotion of Foreign Culture Selfishly
Local cultural evil merge.
Pollution of the environment
Uncertainty
Abuse of human rights
Micro-Multinationals

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International Business Unit – I

Business activities done across national borders is International

The International business is the purchasing and selling of the

International business covers trading goods, services, and

It includes not only the international movement of goods and

It comes in three types:

Features of International Business:

Factors of International Business

Reason for International Business

Importance of International business

Nature of International Business

Characteristics of International business

Features of International Business

Internationalisation is the process of a company branching out

Internationalization describes the process of designing products

Uppsala model is the internationalisation model of successive

The transaction cost approach states that firms should

Dunning electric approach is an approach for entry mode

The network theory is drawn on the fact an international

Characteristics of a Multinational Corporation

Types of Multinational Corporations

A Centralized Global Corporation

An International Division Within a Corporation

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