1. International trade involves cross-border transactions of goods, services, and resources between nations for commercial purposes. 2. There are several reasons why companies enter international markets, including accessing new markets and resources, reducing costs, and gaining competitive advantages. 3. While international trade provides benefits like increased specialization and access to cheaper goods, it also faces challenges such as political risks, trade barriers, and cultural differences between countries.

1. Unit I
:International Trade:
:An Introduction:

2. Chapter Outline
• Meaning & Concept of International
Trade/International Business/Globalization
• Importance of International Business, Reasons for
entering into international market/Objectives of
International Marketing/Advantages, gains from
International business/International trade
• Competitive advantage for going global to Country or
to the firm
• Problems or Disadvantage of going global or of
International trade
• International Approaches
• Regulations for international trade and its implications
• Trade agreements

3. Meaning & Concept of International
Business/International Trade/ Globalization
• International business is a term used to collectively
describe all commercial transactions that take place
between two or more regions, countries and nations
beyond their political boundary.
• Usually, private companies undertake such transactions
for profit; governments undertake them for profit and
for political reasons

4. • It refers to all those business activities which
involves cross border transactions of goods,
services, resources between two or more nations.
• Transaction of economic resources include capital,
skills, people etc. for international production of
physical goods and services such as finance,
banking, insurance, construction etc

5. • The economic system of exchanging goods and
services conducted between individuals and
business in multiple countries.

6. Globalization
• Globalization refers to the increasingly global relationships
of culture, people and economic activity.
• Most often, it refers to economics: the global distribution of
the production of goods and services, through reduction of
barriers to international trade such as tariffs, export fees,
and import quotas
• Globalization accompanied and allegedly contributed to
economic growth in developed and developing countries
through increased specialization and the principle of
comparative advantage.

7. Globalization Includes…
• Doing or planning to expand business globally
• Giving up the distinction between the domestic market and foreign
market and developing global outlook of business
• Locating the production and other physical facilities on a consideration
of the global business dynamics, irrespective of nation consideration.
• Basing product development and production planning on the global
market consideration
• Global sourcing of factors of production i.e raw materials, components,
machinery or technology, finance etc. are obtained from the best sources
anywhere in the world.
• Global orientation of organization structure and management culture.

8. Nature/Features of International
Trade/Business/Globalization
1. Accurate Information
2. Timely Information
3. Large Business
4. Segmentation
5. More Potential
6. Size of population and market
7. Wider scope
8. Inter country comparative study

9. Reasons for entering international
markets(from fc-264-268)
Or
Objectives of International
Business/International Marketing
Or
Importance of International Business
Or
Advantages/Gain from International
Trade

10. 1. To sell Out the Surplus
2. To Achieve sales and production stability
3. To Pay for Imports
4. To Contribute to National Goals
5. Achieve growth and development
6. To Lower cost of business
7. To Improve company Image
8. Nature of Business
9. Political reasons
10. Economic Incentives
11. Profit Advantage
12. Competition
13. Monopoly Power
14. Strategic Vision

11. Importance/Gains from International
Trade/Advantages( from pageFC53-54)
1. International trade leads to division of labour on
large scale.
2. International trade makes available to the people of a
country a galaxy of goods and services at the most
competitive prices.
3. It encourages the development of the most efficient
sources of supply.
4. It enables specialization on a large scale because of
the expanded market ,which enables economies of
scale-when the size of market is limited ,certain
investments are uneconomical.
5. International specialization and the economies in
production make goods available comparatively
cheaper.

12. 6. Trade Increases real income and
consumption.
7. Trade on a global scale makes available even
goods that can not be domestically
produced.
8. It leads employment and faster economic
growth.
9. Trade enables a country to conserve scarce
resources as commodities which embody
these scarce resources may be imported
from countries where they are abundant.

13. Competitive Advantage of Nations /Competitive
Advantage by Global
Marketing/Advantage/Importance
1. High living standards
2. Increased socio-economic welfare
3. Wider market
4. Reduced effect of business cycle
5. Reduced risk
6. Larger scale economies
7. Potential untapped market
8. Provide the opportunity for and challenge to domestic business
9. Division of labor and specialization
10. Economic growth of the world
11. Optimum and proper utilization of resources
12. Cultural Transformation
13. Knitting the world into closely interactive traditional village

14. Problems of International Business Or
Disadvantages
1. Political Factors
2. Huge foreign Indebtness
3. Exchange instability
4. Entry requirements
5. Trade Barriers
6. Corruption
7. Bureaucratic practices of government
8. Technological pirating
9. High Cost

15. 10.Host country’s monetary system
11.National security policies of the host
countries
12.Cultural factors
13.Language
14.Long distance
15.High risk and uncertainities
16.Custom formalities
17.Nationalism and business policy

16. International Business Approaches
• In a number of firms ,overseas business
initially starts with a low degree of
commitment or involvement ,but they
gradually develop a global outlook and
embark upon overseas business in a big way.
• The EPRG approach provided by WIND,
DOUGLAS,PERMUTTER indentifies 4 types of
attitude towards internationalization:-

17. 4 Approaches…
• Ethnocentrism (home country orientation)
• Polycentrism(Host country orientation)
• Regiocentrism(Regional orientation)
• Geocentrism (World orientation)
Above stages reflect the goal and philosophies of
the company in so far as international operations
are concerned and lead to different management
strategies and planning procedure for
international operations.

18. Ethnocentric Approach
• Overseas operations are viewed as secondary to domestic
operations
• It is primarily means for disposing of “surplus” domestic
production.
• The top management views domestic techniques and
personnel as superior to foreign and most effective.
• Plans for overseas market are developed in home office
• Implement policies and procedures identical to those
employed in domestic market
• Overseas marketing is most commonly administered by an
export department or international division
• Marketing personnel is composed primarily of home
country nationals.

19. • Strong reliance on export agents
• Tendency to employ the domestic product mix
without major modification s for overseas market
• It is normally characterized as extension strategy.
• It is generally suitable for small companies just
entering into international market as risk is less
and low commitment
• Less distribution cost and no foreign investment
is required
• This position may be inappropriate for a company
which wants to expand its international business
significantly.

20. Polycentric Approach
• As the company began to recognize the
importance of inherent difference in overseas
market, polycentric attitude emerges.
• Local personnel and techniques best meet local
markets
• Separate subsidiaries are established in overseas
market and operate independently and make its
own objectives and plans.
• Marketing is normally charecterised as
adaptation stratagy.

21. Regiocentric Approach
• Views different regions as different markets
• Strategic integration, organizational approach
and product policy tends to be implemented
at regional level.
• Operations are set by negotiation between
head quarters and regional HQ on the one
hand and between regional HQ and individual
subsidiaries on the other.

22. Geocentric Approach
• Views entire world as single market and
develops standardized marketing mix,
protecting a uniform image of the company
and its products for the global market.
• It entails high cost in collecting information
and administering policies on world wide.

23. Trade Barriers
• International trade is not totally free.There are
certain countries which do not allow or prefer
goods from other countries.
• As a result these countries impose certain
barriers in order to stop or restrict the flow of
goods from other countries.
• There are different ways to restrict goods
entering the country or leaving the country.
• They are known as trade barriers.

24. Objectives of Trade barriers
• To protect domestic market against dumping
• To protect domestic companies from competitors
• To Promote R & D
• To make balance of payment position more
favorable
• To conserve foreign exchange reserve of the
country
• To discriminate between countries
• To restrict unnecessary consumption
• To mobilize revenue for the government

25. Classification of Trade Barriers
• Tariff barriers
• Non-Tariff barriers
• Tariff barriers refer to duties or taxes imposed
on internationally traded commodities when
they cross country’s border.
• Non-tariff barriers indirectly discourage the
entry of foreign goods in the country.

26. Tariff Barriers-Classification of tariff on
different criteria as under:-
• On the basis of origin and destination of goods crossing
the national boundary:-
• Export duty: Tax imposed on a commodity originating
from duty levying country which is destined for some
other country.
• Import Duty: It is a tax imposed on a commodity
originating abroad on destined for the duty-levyed
country
• Transit duty: It is a tax imposed on a commodity
crossing a national frontier originating from another
countries and destined for some another countries.

27. On the basis of calculation of tariffs:-
• Specific duties: specific duty is a tax imposed per
unit of the commodity exported or imported eg.
specific import duty is fixed amount of duty
levied upon each unit of the commodity
imported.
• Ad-valorem duties: It levies a fixed percentage of
the total value of commodity imported or
exported.
• Compound duties: When a commodity is subject
to both specific and ad-valorem duties, the tariff
is referred to compound duty.

28. On the basis of discrimination
between different countries
• Single column Tariff: provides uniform rate of
duty without making any discrimination
between countries
• Double Column Tariff: There are two rules of
duty on same commodity and discriminates
between countries.
– General and conventional tariff
– Maximum and minimum tariff

29. With reference to the purpose they
serve
• Revenue tariff: Main intention of govt in
imposing tariff is to obtain revenue.
• Protective Tariff: To give protection to
domestic industries from foreign companies.
• Contravening and anti-dumping duties

30. Non-tariff Barriers
• Quotas
• Licensing
• Foreign exchange restrictions
• Consular formalities
• Environmental protection law
• Custom procedure
• Technical regulations

31. Impact and effect of trade barriers
• Protective effect
• Competitive effect
• Balance of payment effect
• Foreign exchange effect
• Consumption effect
• Discriminate effect
• Revenue
• Income and employment effect

32. Trade blocks
• Trading blocks means grouping of some of the
countries to conduct business with each other.
• Member countries will get all the benefits of tariff as
decided by trading block
• Non-member countries may not get preferential
treatment and may have to pay more tariff in order to
do business with member countries.
• Main characteristic is that trade barriers are used as a
measure to discriminate against goods of other country
that is not the member of trading block.
• Trading blocks also known as ECONOMIC INTEGRATION