INTERNATIONAL BUSINESS

Prof Bharat Nadkarni

Reference Books : International Business By

Subba Rao

Francis Cherunilam

Dr Chandran

Sundaram and Black

Daniels & Radebough

Charles Hill & Jain

Roebuck & Simon

Topics covered by Prof Bharat Nadkarni

Objectives of IB, Diff between Domestic Biz Vs IB, Growing importance of IB
Approaches and Theories of IB
E P R G Model
Environmental challenges (S T E P I N )
Market Entry Strategies
Strategies of Co-operation M & A, JV, SA
Globalisation Driving and Restraining forces
Mike Porters Diamond National competitiveness Model
MNCs and F D I Policies and Theories
W T O / IMF/ IBRD
Regional Integration Trade Blocs, 6 Levels
Trade Barriers , Anti Dumping policy
Transnational Economy, GDR, Offshore Banking, Letter of Credit, G 20
International HR, CSR, Ethics, Logistics

International Business
Independence, Dependence and Interdependence
International Trade Policy

Laissez-faire approach (Free trade)

Vs Interventionist approach
Theories

Mercantilism (ex Colonial rule)

Absolute advantage and Comparative advantage (ex

India tea, US- wheat)

Theory of Country size (ex India, China, Brazil, USA)

The Product Life Cycle Theory (Raymond Vernons

Theory)

Factor Proportions Theory (ex India, Hong kong,

Singapore, Dubai)

International Business
World Monetary and Exchange rate System

Gold Specie Standard, Gold Bullion standard, Gold

Exchange Standard
Bretton Woods System 1944
1 Troy Ounce of Gold = 31.1 gms = Us $ 35

Developed exchange rate amongst currencies.

Todays system based on Purchasing Power Parity
(PPP) how inflation and other factors impact
fluctuations in exchange rate.
Created IMF, World Bank and GATT
IMF developed a system for Balance of Payment and
allocation of SDR.
Role of World Bank and GATT (eventual WTO)

International Business : Prof Bharat Nadkarni

Components of Balance of Payments
Item
A)Current Account
I Merchandise
II Non Monetary Gold
Movement
III Invisibles
(B) Capital Account
I Private
II Banking
III Official (Govt)
(C ) IMF
(D) SDR Allocation
(E) Errors & Omissions
(F ) Reserves and Monetary Gold

Credit

Debit

Net

International Business

Scope : World is turning into a Global village.

SMOOTH
1. Source raw materials wherever they are cheapest.
2. Manufacture anywhere in the world where it is most
cost effective.

3. Obtain and Sell in those global markets where the

returns are highest.

4. Organize and Raise finances globally.

5. Try and Forge international strategic alliances.
6. Hire the best talent from all over the world. To

manage all the above points.

And you will have achieved the stature of a true Global
Organization

International Business

International Business
International business can be defined as activities that buys
and sells goods and services across two or more national
boundaries, even if the management is located in a one
country. It includes any type of business activity that crosses
national borders. International business is related with
those enterprises which have operating units outside their
own country. There are institutional arrangements who
provide some managerial direction of economic activity
taking place abroad.
Conducting international business is really not like playing a
whole new ball game but it is like playing in a different ball
park, where the managers have to learn the factors unique to

International Business

the playing field. The guiding principles of a firm engaged in

international business activities should incorporate a global
perspective. Incorporating an international outlook into the
firms basic statement will help focus the attention of
management on the opportunities outside the domestic
economy.

International Business

Objectives of International Business

1. To integrate economies.
2.

To offer new markets.

3.

To facilitate transfer of ideas, services and capital across

the world.

4.

To facilitate mobility of factors of production.

International Business

Difference between Domestic and International business

1. Higher rate of profits (Absolute advantages, taxes,
concessions and incentives)
2. Expansion of production capacities
3. Competition (pull & push effects)
4. Wide market
5. Political stability
6. Technology
7. High cost of transportation

International Business

Growing importance of International Business

Current trends are towards the increasing globalisation

and interdependence of firms, markets and countries.

Intense competition at global level

Exchange rate developments shift from ve to +ve

growth

Global capital flows to LDCs

Differences in Price and Cost

Restructuring the economy to integrate with global

economy

Increased importance of CSR

The growing importance on enhancing standard of living

in LDCs

International Business

Liberal trade policies and procedures

Revolution in communication and transportation

International Business

E P R G Model
International Business Corporate Approaches
1.

Ethnocentric (Home country orientation)

2.

Polycentric (Host country orientation)

3.

Regiocentric (Regional orientation)

4.

Geocentric (World orientation)

International Business

Home Country Economic Environment

1.

Domestic Markets & Size

2.

Economic Policies

3.

Promotional and Regulatory measures

International Business

Host Country Economic Environment

1. Size of the Markets
2. Gross Domestic Product
3. Industrialisation
4. Development of Banking Facilities
5. Purchasing Power and Standard of Living
6. Foreign Exchange Situation
7. Income levels
8. Economic diversity (urbanisation Rural dev. Ex
Johannesburg, Sao Paolo)
9. Market Segmentation

International Business

Global Economic Environment

1. International organisations
2.

Trading Blocs

3.

Strategic Locations

4.

Global Political Environments and Issues

International Business

Motives of Internationalisation of Corporates

A. Pull Factors
1. Growth
2. Profitability
3. Achieving economies of scale
4. Risk spread
5. Accesses to inputs
6. Economic integration and free markets
7. Emergence of WTO
8. Unifying effect and peace

International Business

B.
1.
2.
3.
4.
5.
6.
7.

Push Factors
Uniqueness of product or service
Marketing opportunities due to life cycles
Spreading R & D costs
Resource utilisation
Competition and costs
Quality improvement
Government policies and Regulations

International Business
Types of International Organisation
Built-in Export Department
Separate Export Department
Export Sales Subsidiary
International Division
Global Organisational Structure

Thank you

Foreign direct investment approvals will, however, be

subject to sectoral caps: (as on 31.03.2010)
20 percent (40'per cent for NRIs} in the banking sector;
51 per cent in non-banking financial companies;
100 per cent in power, roads, ports, tourism and venture capital funds;
49 per cent in telecommunications;
40 per cent (100 per cent for NRIs) in domestic air taxi operations/airlines;
24 per cent in small-scale industries;
51 per cent in drugs/pharma industry for bulk drugs;
100 per cent in petroleum; and
50 per cent in mining ~ except for gold. silver, diamonds and precious
stones

The Millennium Development Goals

as defined by UN
Eradicate extreme poverty and hunger
Achieve universal primary education
Promote gender equality and empower women
Reduce child mortality
Improve maternal health
Combat HIV/AIDS, malaria and other diseases
Ensure environmental sustainability
Develop a global partnership for development
Stop Child Labour

Survival Rate for Global Corporations

Age in Years

Percentage
surviving

Percentage
Perishing

38

62

10

21

79

15

14

86

20

10

90

25

93

50

95

75

99

100

0.50

99.50

International Business
International Business
1. Definition of IB, Domestic vs IntI business, Adv & Disadv
2. International trade theories
3. Environmental challenges
4. Globalisation, Regional groups, Transnational economy.
5. Market entry strategies and Country selection processes
6. International Trade Institutions, IMF, IBRD, WTO and Policies
7. International finance & Foreign Direct Investments, GDR, ADR etc
8. International issues, G 20 issues, MFN status, Intellectual property
rights, purchase power parity, ISO and world quality standards etc
9. Trade Barriers, Anti Dumping etc
10.Ethical business, CSR, Millineum goals, HR policies etc
11.Logistics, Information technology, cultural and social issues,
Generalised topics etc
12.Case studies