1. UNIT 1: INTERNATIONAL
BUSINESS
• CONCEPT, OBJECTIVE, IMPORTANCE ,
CHALLENGES
• CONCEPT OF LIBERALIZATION AND
PRIVATIZATION
• DRIVERS OF INTERNATIONAL BUSINESS

2. WHAT IS INTERNATIONAL BUSINESS?
• Any business that involves operations in more
than one country can be called an
international business. International business
is related to the trade and investment
operations done by entities across national
borders.

3. • Firms may assemble, acquire, produce, market, and
perform other value-addition-operations on
international scale and scope.
• Companies and countries may exchange different
types of physical and intellectual assets. These
assets can be products, services, capital,
technology, knowledge, or labor.

4. 4
What is International Business?
International Business is all business
transactions that involve two or more
countries
International Business comprises a
large and growing portion of the world’s
total business.
International Business usually takes
place within a more diverse external
environment.

5. OBJECTIVE OF INTERNATIONAL BUSINESS
• First-mover Advantage
• Opportunity for Growth
• Small Local Markets
• Increase of Customers
• To acquire resources;

6. 6
OBJECTIVE OF INTERNATIONAL BUSINESS
1. To Expand Sales: companie’s sales are dependent on two factors: the
consumers’ interest in their product or services and the consumers’
ability and willingness to buy them.
2. Acquire Resources: Raw Materials, products, services, technology, and
information
3. Diversify Sources of Sales and Supplies
4. Minimize Competitive Risk: companies move internationally for defensive
reasons. Profits from one market can be used to expand operations in
other markets.

7. 7
Modes of International Business...
1. Merchandise Exports and Imports: visibles
and invisibles
2. Services Exports and Imports: Some form
of service exports and imports are:
• Tourism and Transportation: Bangladesh Parjotan
Corporation etc
• Performance of Services: Fees Taker- Banking,
insurance, engineering, management services etc.
• Use of Assets: licensing agreements; royalties;
franchising

8. 8
MODES OF INTERNATIONAL BUSINESS...
03. Investments:
a. Foreign Direct Investment: gives the investor
a controlling Interest in a foreign company. It
gives access to:
• foreign markets
• foreign resources
• higher profits than exporting
• partial ownership
b. Portfolio Investment: stock in a company or loans
to a company or country in the form of bonds, bills, or
notes that the investor purchases.
c. Strategic Alliances
d. MNCs, MNEs, TNCs, Global Company

9. INTERNATIONAL BUSINESS IMPORTANCE
# 1. NATIONAL ECONOMY:
• to meet raw material need of industries.
• For rapid economic growth.
• For profitable use of natural resources.
• To face competition successfully-better quality goods production
having lower or moderate prices. To improve the image of the
producer as well as of the country in the minds of foreign customers.
• Increase in employment opportunities.
• To increase national income.
• Increase in standard of living of the people.

10. INTERNATIONAL BUSINESS IMPORTANCE # 3. IMPORTANCE
FROM OTHER POINTS OF VIEW:
• International Collaboration: Developed countries fix their import quotas for
different countries and for different commodities.
• International Business Brings Various Countries Closer: Government and
non-government business representatives visit other countries from time to
time. The local representatives and other related persons came into contact
with foreign representatives and come to know their habits and customs.
• Helps in Maintaining Good Political Relations: Various countries having
different political ideologies import or export their products. To conclude it is
now undisputable that export business contributes to the national economy,
individual exporting firms and maintains international, economic cultural and
political relations among various countries. Countries have come closer on
account of international business.

11. INTERNATIONAL BUSINESS IMPORTANCE
# 2. IMPORTANCE TO EXPORTING FIRM:
• Insufficiency of Domestic Demand: If the domestic
demand for the product is not sufficient to consume the
production, the firm may take a decision to enter the
foreign market. In this way he can equalize the production
and demand.
• To Utilise Installed Capacity: If the installed capacity of
the firm is much more than the level of demand of the
product in the domestic market, it can enter the
international market and utilise its un-utilised installed
capacity. In this way it can export the surplus production.

12. • Relative Profitability: The export business is more
attractive for its higher rate of profitability. The higher
profitability rate also gives extra strength to the firm.
• Less Business Risk: A diversified export business helps the
exporting firm in mitigating the risk of sharp fluctuations
in the business activity of the firm.
• Increased Productivity: Due to certain social and
technological developments the industrial production has
increased to a great extent. The production will be higher
at cheaper rate. The surplus production can be exported.

13. • Technological Improvements: Technological
improvements also attract the business firm to
enter foreign markets. It introduces new products
with latest technological improvements and faces
the competition successfully in the international
markets.
• Product Obsolescence: If a product becomes
obsolete in domestic market it may be in demand in
International markets.

14. CHALLENGES OF INTERNATIONAL BUSINESS
1. International company structure
2. Foreign laws and regulations
3. International accounting
4. Cost calculation and global pricing strategy
5. Universal payment methods
6. Currency rates
7. Choosing the right global shipment methods
8. Communication difficulties and cultural differences
9. Political risks
10.Supply chain complexity and risks of labor exploitation
11.Worldwide environmental issues

15. 1. INTERNATIONAL COMPANY STRUCTURE
• If the aim is to be competitive globally, the first
consideration is the structure of the organization
and the location of the teams in place that’s up for
the challenge
• For instance, will your company be run from one
central headquarters? Or will you have offices and
representatives “on the ground” in key markets
abroad?

16. • Example:
• • Coca-Cola offers one example of effective
multinational business structure. The company is
organized into continental groups, each overseen by
a President. The central Presidents manage
Presidents of smaller, country-based or regional
sub-divisions. Despite its diverse global presence,
the Coca-Cola brand and product is controlled
centrally and consistent around the world

17. 2. FOREIGN LAWS AND REGULATIONS
• From tax implications to trading laws, navigating
legal requirements is a central function for any
successful international business.
• A good rule of thumb is to beware of engaging in
any questionable activities, which might be legal
but could have future reputational repercussions.

18. • Example:
• Employment and labor requirements differ by
country. For instance, European countries stipulate
that a minimum of 14 weeks maternity leave be
offered to employees, while on the other hand,
there is no such requirement for U.S. employers

19. 3. INTERNATIONAL ACCOUNTING
• Different tax systems, rates, and compliance requirements
can make the accounting function of a multinational
organization significantly challenging.
• Accounting can present a challenge to multinational
businesses who may be liable for corporation tax abroad.
• Accounting strategy is key to maximizing revenue, and the
location where your business is registered can impact tax
liability
• A focus on tax efficiency is often the aim of international
accounting efforts.

20. • Example:
• In the European Union, companies may benefit from the
• Common Consolidated Corporate Tax Base proposal,
whereby companies with operations around the EU can
limit tax liability to one corporate center.
• Since Tax Consolidation is a feature of several
multinationals decision to be head-quartered in Dublin, as
Ireland is known for it’s “business friendly” corporate tax
policy.
• Well known companies with operational headquarters in
the republic of Ireland include Google, Facebook and Intel.

21. 4. COST CALCULATION AND GLOBAL PRICING
STRATEGY
• One must consider costs to remain competitive,
while still ensuring profit
• Researching the price of direct, local-market
competitors can give a benchmark.
• Pricing may also come down to how one choose to
position their brand
•

22. • Example:
• Swedish furniture giant Ikea, known in Europe for
its low- cost value, struggled initially in China due to
local competitor costs of labor and production
being much cheaper
• By relocating production for the Chinese market
and using more locally sourced materials, the
company was able to successfully cut prices to
better reflect its brand and boosts sales among
target consumers

23. 5. UNIVERSAL PAYMENT METHODS
• The proliferation of international e-commerce websites
has made selling goods overseas easier and more
affordable for businesses and consumers.
• However, payment methods that are commonly accepted
in home market might be unavailable abroad.
• Determining acceptable payment methods and ensuring
secure processing must be a central consideration for
businesses who seeks to trade internationally.

24. • Accepting well-known global payment
methods through companies like World pay, as
well as accepting local payment methods, such
as JCB in Asia or Yandex Monkey in Russia, can
be a good option for large international
business.
• Accepting wire transfers. PayPal payments,
and Bit coin, are other possibilities

25. 6. CURRENCY RATES
• One of the most challenging international business
problems to navigate.
• One way to protect against fluctuations in currency is to
pay suppliers and production costs in the same currency
as the one we’re selling in.
• Another option for mitigating the risk of unpredictable
currency rates can be setting up a forward contract and
agreeing a price in advance for future sales

26. • Example:
• Henry from Washington D.C has returned from his trip to
Europe. He has 81€ that he want to exchange back to US-
Dollars. He goes back in to a bank in Washington
• Since at the time being the exchange rate of Euro is
137.51. he gets $ 111.38

27. 7. CHOOSING THE RIGHT GLOBAL SHIPMENT METHODS
• The choice of shipping method can be a major influence on the
revenue and may be a limiting factor to the products that one can
variably sell overseas
• Other considerations include customs fees, the need and cost of
storage, and local methods of distribution
• There are also country-specific regulations and shipping
requirements to take into account
• For a quick check of costs and compliance, UPS international has
created an online tool called Trade Ability to help businesses and
individuals manage the movement of good overseas

28. 8. COMMUNICATION DIFFICULTIES AND CULTURAL
DIFFERENCES
• Good communication is at the heart of the effective
international business
• Effective communication with colleagues, clients
and customers abroad is essential for success

29. • Non-verbal communication can make or break business
deals too
• Being aware of acceptable business etiquette abroad, and
how things like religious and cultural traditions will help to
navigate better potential communication problems in
international business

32. 9. POLITICAL RISKS
• An obvious risk for international business is political
uncertainty and instability
• Before considering expansion into a new or
unknown market, a risk assessment of the
economic and political landscape is critical
• Issues like ill-defined or unstable policies and
corrupt practices can be hugely problematic in
emerging markets

33. • Companies like Facebook are banned in China,
partially in preference for national social networks
and also due to government regulation over
internet content

34. 10.SUPPLY CHAIN COMPLEXITY AND RISKS OF LABOR
EXPLOITATION
• Managing suppliers and supply chains can also be a
tricky process
• Recent Research revealed that 77% of businesses believe
that modern slavery exists at some point in their supply
chains.

35. 11. WORLDWIDE ENVIRONMENTAL ISSUES
• Sustainability is high on the agenda of many major global
corporations
• Key considerations like how your production methods
might impact the local environment through waste and
pollution
• With a number of brands such as Dell, Renault and MUD
jeans leading a shift towards the circular economy, there is
an opportunity and demand for changing production
methods and consumer behavior to establish more
sustainable future for the environment and society as a
whole

36. LIBERALIZATION
• Liberalization refers to relaxation of government
restrictions usually in areas of social and economic
policies.
• Progressive elimination of government control over
economic activities is known as “liberalization”.
• Liberalization of the means to free it from controls
imposed by the government.

37. • Liberalization refers to freedom to business
enterprises from excessive government control and
they are given freedom to make their own decisions
regarding production, consumption, pricing,
marketing, borrowing, lending & investments.
• Liberalization according to John Black is a program
of changes in the direction of moving towards a free
market economy

38. • The major elements of Liberalisation in India includes the
followings :
1. De-licencing of industries :-
The Industrial Policy 1991 abolished (cancelled), licencing
for most industries which helped Indian companies to
concentrate on productive activities.
The 6 industries that required licencing are alcohol,
cigarattes, industrial explosives, defence product, drugs &
pharmaceuticals, hazardous chemicals, etc.
•

39. • 2. Liberalisation of foreign investment :-
The necessity to obtain approval for foreign
investment from various government authority
often caused delayed. At present FDI is 100 % in
certain sectors such as infrastructure, exports,
hotels, tourism, etc. The Liberalisation of FDI has
resulted in certain benefits such as increased in
inflow of foreign capital, Development of skills of
Indian personnels due to foreign MNCs training
transfer of technology by foreign partners to Indian
firms.

40. • 3. Liberalization of foreign technology imports :-
The liberalized import of foreign technology led to
technological improvement in Indian industries.
This helped in getting automatic permission for
foreign technology imports and no permission was
required for hiring foreign technicians & foreign
technology testing.

41. • 4. Liberalisation of industrial location :-
The Industrial Policy 1991 stated that, there is no
need to obtain approval from central government
for industrial location. This enabled the Indian firms
to set up industries at a right location of their
choice without much interference from
government authority.

42. • 5. Liberal taxation :-
The government of India has introduced liberal
reduction in taxation rates on direct tax & indirect
tax, customs, excise, service which has greatly
benefited the firms operating in

43. • Advantages of Liberalisation :-
1. Increase in foreign investment.
2. Increase in efficiency of domestic firms.
3. Rise in the rate of economic growth.
4. Control of price.

44. • Disadvantages of Liberalisation :-
1. Increase in unemployment.
2. Loss to domestic unit.
3. Increased dependence on foreign nation.
4. Unbalanced development of sectors.

45. • based on the assumption that market forces could
guide the economy in a more effective manner than
government control. Examples of one of other
undeveloped countries like Korea, Thailand,
Singapore, etc. that had achieved rapid economic
development as a result of liberalization were kept
in consideration.

46. PRIVATIZATION
• Privatization is most of the time associated with improved
efficiency due to the profit incentive. Private companies
will ensure they improve their operational efficiency in
order to reduce their costs and improve on profits.
• It reduces government intervention and their role will be
confined to produce only those which have high public
utility thus reduces their budget constraints

47. • World bank(1988):-is broadly defined as increased
private sector participation in the management and
ownership of activities and assets controlled and
owned by the government.
• privatization implies the policy meant to give the
greater role to the market mechanism and lessen
the government intervention in the economy
• The prime purpose of privatization is to make
industries competitive by transforming public sector
ownership and control to the private sector.

48. PRIVATIZATION IN NEPALESE ECONOMY
• With the formation of the first elected government in
1991 under the prime minister ship of G.P. Koirala in 1991,
privatization policy got encouraged in different forms
• three PEs i.e. “Bhrikuti Paper Mills”, “Harisiddhi Brick and
Tile Factory” and “Bansbari Leather and Shoe Factory”
were sold to private individuals

49. • The objectives of the phase wise program of privatization were
reducing financial and administrative burden of government,
improving operational efficiency and involving the participation of
general public and the private sector in the management of public
enterprises.
• privatization encourages industrialization, it also provides/
generates employment opportunities in private sectors

50. THE TWO ELEMENTS OF PRIVATISATION ARE AS FOLLOWS :
• 1. Dereservation of public sectors :-
The dereservation of public sectors has enabled the entry of private
sectors in those industries which were reserve only for public sectors.
This has led to improve customers service & efficiency of the firms. At
present, 3 industries has reserved for public sector are Railways,
Automatic energy, & Specified minerals.
• 2. Dis-investment of Public sector :-
Dis-investment is a process of selling government equity in PSUs (Public
Sector Undertaking) to private parties. The disinvestment is undertaken
to achieve good customers service, overcome political interference,
overcome corruption in PSUs, improve efficiency of PSUs.

51. MERITS OF PRIVATIZATION
• Increase in efficiency
• Professional management
• Increase in competition
• In line with international trends
• Reduction in economic burden of government
• Increase in industrial growth
• Increase in foreign investment
• Encourage to new innovation.

52. • L = Removing the restrictions for better economic
development.
• P= shift control to private sector for better services.
• G= Allowing foreign trade & investment.

53. DRIVERS OF INTERNATIONAL BUSINESS
• A. Globalization of Markets
• B. Globalization of Production:
• C. Falling Barriers to Trade and Investment
• D. Technological Innovation:

54. A. GLOBALIZATION OF MARKETS
• It refers to the merging of national markets into one
huge global marketplace. Now selling
internationally is easier due to falling barriers to
cross-border trade.
• A company doesn’t have to be the size of these
multinational giants to facilitate and benefit from
the globalization of markets. It is important to offer
a standard product to the worldwide.

55. • But very significant differences still exist between
national markets like consumer tastes, preferences,
legal regulations, cultural systems.
• These differences require that marketing strategies
in order to match the conditions in a country. To
illustrate, Wal-Mart may still need to vary their
product from country depending on local tastes and
preferences.

56. B. GLOBALIZATION OF PRODUCTION:
• It refers to the sourcing of goods and services
from locations around the world to take
advantage of national differences in the cost
and quality of factors of production.
• The idea is to compete more effectively
offering a product with good quality and
low cost.
•

57. • For example, Nike is considered one of the leading
marketers of athletic shoes and apparel on the
world. The company has some overseas factories
where has achieved a super production with low
cost. Unfortunately Nike has been a target of
protest and persistent accusations that its products
are made in sweatshops with poor working
conditions. The company has signaled a
commitment to improving working conditions, but
in spite of the fact, the attacks continue

58. C. FALLING BARRIERS TO TRADE AND INVESTMENT
• The falling of barriers to international trade enables firms
to view the world as their market.
• The lowering of barrier to trade and investments also
allows firms to base production at the optimal location for
that activity.
• Thus, a firm might design a product in one country,
produce a component parts in two other countries,
assemble the product in another country and then export
the finished product around the world.

59. • The lowering of trade barriers has facilitated the
globalization of production. The evidence also suggests
that foreign direct investment is playing an increasing role
in the global economy

60. D. TECHNOLOGICAL INNOVATION:
• Technological changes have achieved advances in
communication, information processing, and
transportation technology, including the Internet
and the World Wide Web (www)