Introduction to International Business is a comprehensive study of the various aspects of International Business. This presentation will provide better insights into the definition, nature, scope, characteristics, approaches, reasons, advantages and disadvantages.
3. Definition of International Business
• Business is defined as an economic system where goods and services are exchanged
in return for money.
• International business is the commercial activity which is not limited to boundaries
of domestic nation but extends beyond the borders into other foreign countries.
• To put it in simple words, it can be called as commercial transactions occurring
between two or more countries.
• These transactions could be between governments, private organisations or between
governments and private organisations.
4. Nature of International Business
• The organisations involved in International business, need precise information to
make informed and better decisions which can add value to the organisations
business objectives.
• This information should be provided in a timely manner, any delay can result in
loss of business opportunity and the information procured is rendered useless.
• Size of the organisation should be large enough to accommodate the demands of
the host nation or to meet the global objectives of the business organisation.
• In terms of Market Segmentation, more emphasis is given to Geographic
segmentation due to the fact that people of a particular region or area have
similar or identical needs which in turn is based on the weather, climate and
economic conditions of the region or area.
5. Scope of International Business
International Marketing
• International presence necessitates the need to promote business on a global level to
create reach on a large scale.
International Finance and Investments
• International business’ attracts investment from global corporations which aids in
sustaining the business overseas.
Global HR
• International business requires hiring local manpower, this requires the HR department
of the organization to assume greater role and globalizing their HR process.
Foreign Exchange
• Transactions which occur in the host country are done in the local currency, which is
obviously different from the domestic country. This entails the need for foreign exchange.
6. Characteristics of International Business
Large scale operations
• Production and Marketing activities are made on a very large scale in International Business.
The local markets are given first preference, the excess is then set aside for exports.
Integration of economies
• The operations of International business are spread over multiple countries. The use of
resources across multiple countries entails the organisations in global business to consider
the economies of different countries.
Dominated by developed countries
• MNC’s and developed nations dominate the International Business. Better financial
resources and technological advancements(R & D) give them the necessary edge to
capture and lead the International markets.
Benefits to participating countries
• Though maximum benefits are reaped by the domestic country, participating countries…(ctd)
7. Characteristics of International Business
…are also benefitted by International Business. Foreign capital, access to advanced technology,
Industrial development, employment opportunities and economic development are few of the
benefits.
Keen Competition
• Competition exists in International Business. The competition is among the organisations
from developed nations and those from developing nations. Considering the strong financial
backing and use of advanced technology, the developed nations do enjoy a better position
in the competition.
Special role of science and technology
• International business requires large scale production. This requires technological
advancements which help in producing huge quantity without any compromise on quality.
R & D is a crucial factor in procuring better technologies.
8. Approaches of International Business
Ethnocentric Approach
• Target market is the domestic country.
Only surplus products are exported.
Polycentric Approach
• Companies modify the marketing mix to
meet the taste, performance and needs of
the customers of each international market.
Regiocentric Approach
• A company operating successfully in a
foreign country thinks of exporting to other
neighbouring countries of the host country.
Geocentric Approach
• Company studies the tastes, preferences
and needs of the customers in all foreign
markets and then adopts a standardized
marketing mix for all the foreign markets.
9. Reasons of International Business
Saturation of Domestic Markets
• Continuous production of similar products over years leads to saturation of
domestic markets. Hence, the shift to newer markets.
Opportunities in Foreign Markets
• Saturation of domestic markets led organisations to look for prospective markets where the
demand is encouraging. Organisations can tap this demand and increase sales and thereby
increase profits.
Availability of Low Cost Labor
• The cost of labor is relatively cheaper in developing countries when compared to developed
countries. The scope of reduced cost of production encourages organisations to shift
production units into developing countries.
10. Reasons of International Business
Increased Demands
• Improved economic conditions result in increase in the purchasing power of the general
population of a country. This positive trend inspires companies to export the products
into such markets.
Consumer Pressure
• Thanks to technological advancements and seamless communication, the consumer is
more aware of products and developments. Consumer expects new and better products.
This demand from consumers has led companies to research, diversify and enter into
new markets.
11. Advantages of International Business
Growth
• The scope of expansion in international business is relatively higher when compared to
domestic markets. Apart from generating higher revenue, it helps businesses establish
diverse customer base in different markets instead of a limited customer base in domestic
market.
Product Mobility
• A product which is not performing well in terms of sales in one market could be sold in other
markets or a product which has saturated in domestic market can be presented in another
market where the scope of demand is higher. Surplus production could be exported to newer
markets.
Reduced Production Costs
• Developing countries offer cheaper resources (labour and raw materials) which results in
reduced production costs. Developed countries move their production units into developing
countries to benefit from this trend.
12. Problems of International Business
Political Factors
• Changes in the government policy make up the political factors. The change can be
economic, legal or social. It could also be a mix of these factors. The political environment
can impact business organizations in many ways. It could add a risk factor and lead to a
major loss.
Regulatory Issues
• Countries want to export their surplus natural resources, agricultural produce and
manufactured goods to the extent, they import only those goods and products which
are not produced or manufactured within the country. For this purpose regulatory measures
like tariff barriers (custom duties) non-tariff barriers, quota restrictions, foreign exchange
restrictions, technological and administrative regulations, consulter formalities, state trading
and preferential arrangements, trade agreements and joint commissions etc. All these
regulations come in the way of free trade and smooth flow of foreign business.
13. Problems of International Business
Cost and Pricing Strategy
• It is important to consider costs involved in doing International Business and making sure
that these costs remain lower to ensure better profits. Simultaneously, pricing should be
competitive to ensure better market share.
Universal Payment Methods
• The advent of E-commerce has enabled people to buy or sell across the globe. Payment
methods accepted in one country may not be accepted in another. Having uniform
payment methods which are globally accepted can help ease transactions in International
business. Examples include Paypal, Cryptocurrency and wire transfers.
Logistics
• International business involves back and forth movement of goods between international
borders. Each country has its own regulations related to shipping. So choosing the right
logistics supplier who is an expert in Regulations and Custom rules of Global Trade is very
crucial.
14. Problems of International Business
International restrictions
• International business faces many restrictions on the inflow and outflow of capital,
technology and goods. Many governments do not allow international businesses to enter
their countries. They have many trade blocks, tariff barriers, foreign exchange restrictions, etc.
All these are harmful to international business.
Sensitive nature
• The international business is very sensitive in nature. Changes in the economic policies,
technology, political environment, etc. have a huge impact on it. Therefore, international
business must conduct market research to find out and study these changes. They must
adjust their business activities and adapt accordingly and take necessary steps to
accommodate those changes.
