Ib 1 - 2023
Ib 1 - 2023
Ib 1 - 2023
Knowledge Services
Transactions
of:
Capital Technology
What is International Business?
International business occurs in many different formats:
◦ The movement of goods from country to another (exporting, importing, trade)
◦ Contractual agreements that allow foreign firms to use products, services, and
processes from other nations (licensing, franchising)
◦ The formation and operations of sales, manufacturing, research and development, and
distribution facilities in foreign markets
How could a business be present on the
international market?
An international business is any firm that engages in international trade or
investment.
A firm does not have to become a multinational enterprise, investing directly in
operations in other countries, to engage in international business, although
multinational enterprises are international businesses.
All a firm has to do is export or import products from other countries. As the
world shifts toward a truly integrated global economy, more firms, both large
and small, are becoming international businesses.
What does this shift toward a global economy mean for managers within an
international business?
Implications for the managers of international
businesses
Managing an international business is different from managing a domestic
business for at least four reasons:
◦ countries are different;
◦ the range of problems confronted by a manager in an international business is wider and the
problems themselves more complex than those confronted by a manager in a domestic
business;
◦ managers in an international business must find ways to work within the limits imposed by
governments‘ intervention in the international trade and investment system;
◦ international transactions involve converting money into different currencies.
Discussions
Christopher Columbus:
The world is round.
Pankaj Ghemawat (IB professor):
We live in a multidomestic world.
(the CAGE framework)
- Cultural
- Administrative distance
- Geographic
- Economic
Thomas L. Friedman:
The world is flat.
The challenges of International Business
Nation-states have unique government systems, laws and regulations, taxes, duties,
currencies, cultures, practices, etc., therefore international business is decidedly more
complex that business that operates exclusively in domestic markets.
There are currently more than 200 national markets and more than 10,000
linguistic/cultural groups in the world.
Therefore, some of the challenges considered by companies and professionals involved
in international business include:
◦ Economic Environment:
◦ The economy of countries may be industrialized (developed), emerging (newly industrializing), or less developed
(third world).
◦ A nation’s economic structure as a free market, centrally planned market, or mixed market also plays a distinct role
in the ease at which international business efforts can take place.
The challenges of International Business
◦ Political Environment: refers to the relationship between government and business, as well
as the political risk of a nation.
◦ Some governments may view foreign businesses as positive, while other governments may view them as
exploitative.
◦ Cultural Environment: commonly shared beliefs and values, formed by factors such as
language, religion, geographic location, government, history, and education.
◦ Competitive Environment:
◦ The competitive environment is constantly changing according to the economic, political, and cultural
environments.
◦ Competition may exist from a variety of sources, and the nature of competition may change from place to place. It
may be encouraged or discouraged in favor of cooperation, and the relationship between buyers and sellers may be
friendly or hostile.
Further readings
Kotler, P., Caslione, J. A. (2009). Chaotics: The Business of Managing and
Marketing in the Age of Turbulence, AMACOM, 2009.
Pankaj Ghemawat, Differences and the CAGE Distance Framework,
https://www.ghemawat.com/wordpress/wp-content/uploads/2016/10/DifferencesAndTheCAGE
Framework.pdf