PROJECT OF

INTERNATIONAL BUSINESS
TOPICS PRESENTED BY

Concept and scope of IB GAGAN DEEP SINGH

01124001715

Trends in IB ASHISH ARYA

00624001715

Opportunities and role of IB ADITI GUPTA

00124001715

Challenges before IB KUNAL KUMAR

01624001715

IB environment R. VEGNESH
02124001715
Concept and scope of
International
business
Definition
• International business refers to business across countries. It
includes any type of business activity that crosses national
boundaries.
• International business involves transfer of goods, services,
capital, labour, knowledge and information across national
boundaries with a view to satisfy the needs of individuals,
organisations and government.
Features
• International business relates to transactions involving more
than one country.
• As in any business, the purpose of international business is to
satisfy the needs of the customers who may be individuals,
organisations and governments.
• Multinational corporations have emerged as the major player
in international business
• International business has become massive in scale. It now
exercises a significant influence over economic, social and political
life throughout the world.
• The scope of international business is very vast. It includes not only
exchange of goods and service but also transfer of knowledge,
skills, people, technology capital, information and other resources.
Scope of IB
1. Export business
2. International firm
3. Multinational firm
4. Global firm
5. Transnational firm
Trends in IB
1. World trade has been growing faster than world output.
2. Exchange rates are now being determined more by market
forces than by governments or central banks.
3. Global trade and investment have been trying economies
together.
4. International financial markets have expanded enormously. Majority
of the international financial transactions are not related to trade.
Most of these transactions take place outside the country whose
currency is used.
5. Production is being globalised by powerful transnational
corporations with the help of technological developments.
6. International trade in services has been increasing fast.
7. Countries are increasingly competing with each other for foreign
investment and capital flows.
8. Tariff and non-tariff barriers are being gradually dismantled.
9. Global capital flow are shaping international trade and the world
economy.
Opportunities and role of IB
Advantages
and
Disadvantages
Advantages
• A Country can Consume those Goods which it cannot
Produce : Commodities produced in India can be found in
England and vice-versa. This helps England to enjoy those
goods which he cannot produce in his country.
• Heavy Price Fluctuations are Controlled : If the price
of any commodity goes up, the goods can be
imported from abroad and its price can be brought
down.
• Countries Economically Backward but Rich in
Resources may Develop their Industries : Indian
people are opening industries with the idea of
sending produced goods to foreign countries.
• International Business Promotes Peace and
Friendship : No country however big it may be can
claim to be self-sufficient. It will have to depend on
other country for something.
• The Productive Resources of the World are Utilised
to the Best Advantage of the Country : Every
country expects highest return from its resources
and this lead to fall in price and better goods for
consumption.
Disadvantages
• Imports of Harmful Drugs and Luxuries Goods ruin
the Health of the Nation.
• International Business may Completely Exhaust a
Country’s Natural Resources like Coal and Oil which
are Irreplaceable.
• Countries which Sell Raw Materials and Buy
Manufactured Goods in Return are always Loser and
cannot Improve the Country Economy.
• The Worst Part of Foreign or International
Business is the Destruction of Cottage and Home
Industries.
Opportunities of
International
Business
Opportunities
• Licensing and Franchising : A company that wants to get
into an international market quickly while taking only
limited financial and legal risks might consider licensing
agreements with foreign company. Another popular way
to expand overseas is to sell franchises.
• Contract Manufacturing and Outsourcing : Because of
high domestic labor costs, many U.S. companies
manufacture their products in countries where labor
costs are lower. This arrangement is called international
contract manufacturing or outsourcing.
• Strategic Alliances and Joint Ventures : If a company wants
to do business in a foreign country but lacks the expertise or
resources. In these cases, a firm might enter into a strategic
alliance with a local company or even with the government
itself.
• Foreign Direct Investment and Subsidiaries : Many of the
approaches to global expansion that we’ve discussed so far
allow companies to participate in international markets
without investing in foreign plants and facilities. As markets
expand, however, a firm might decide to enhance its
competitive advantage by making a direct investment in
operations conducted in another country.
Challenges faced by international
business
Challenges faced by
international business
1. International company structure
2. Foreign laws and regulations
3. International accounting
4. Universal payment methods
6. Currency rates
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
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.
• Example: • Employment and labor requirements differ by
country. For instance, European countries .
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.
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.
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
INTERNATIONAL
BUSINESS
ENVIRONMENT
CLASSIFICATION OF INTERNATIONAL BUSINESS
ENVIRONMENT

• MICRO AND MACRO ENVIRONMENT

• DOMESTIC FOREIGN AND GLOBAL ENVIRONMENT

MICRO ENVIRONMENT

• Micro environment can be defined as the forces in the firm’s

immediate environment which directly influence the firm’s
decisions and operations. These include suppliers, various
market intermediaries and service organisations such as
middlemen, transporters, advertising and marketing research
agencies, competitors customers and general public.
MACRO ENVIRONMENT
• Macro environment consists of broader forces which affect
the firm as well as the other forces in the firm’s micro
environment. These include factors such as political, legal,
economic, social etc. Firms need to continuously monitor
changes in these environmental forces and devise strategies to
cope with them.
DOMESTIC FOREIGN AND GLOBAL
ENVIRONMENT
• This classification is based on the location at which environmental
forces exist and operate.
• Domestic environment consists of factors such as competitive
structure, economic climate, political and legal factors which are
essentially uncontrollable by a firm. These factors operate at the
national level and the firms are generally familiar with them.
Contd…
• Foreign environment consists of factors like social,
political, economic, legal and cultural prevailing in a
foreign country. The firm can neglect them only at
the cost of losing business in the foreign markets
• Global environment transcends national boundaries
and is not confined in its impact to just one country.
Global environment exerts influence over domestic
as well as foreign countries. It comprises of forces
like world economic conditions, international
financial systems, international agreements and
treaties and regional economic groupings.
COMPONENTS OF INTERNATIONAL BUSINESS
ENVIRONMENT

• POLITICAL ENVIRONMENT
• LEGAL ENVIRONMENT
• ECONOMIC ENVIRONMENT
• SOCIO-CULTURAL ENVIRONMENT
• TECHNOLOGICAL ENVIRONMENT
• NATURAL ENVIRONMENT
• DEMOGRAPHIC ENVIRONMENT
POLITICAL ENVIRONMENT
• At the basis of international law and international relations:
sovereignty (self determination and independence from
external interference, authority over all nationals)
• International trade limits sovereignty.
• Governments can invoke sovereignty and jeopardize firm’s
operations
Political Risk

• Risks Related to Government Trade policies:

• Tariffs,
• exchange-rate controls,
• quotas,
• export/import license requirements,
• other trade barriers (embargos, sanctions)
International Legal Environment

• International Laws
• Host Country Laws
• Home Country Laws
• Legal Systems:
• Common law
• Code (Civil) law
• Islamic law
Intellectual Property Rights

• Violation of intellectual property rights is a significant

threat to the competitiveness of international
corporations.
• Losses attributed to the violation of intellectual property
rights are estimated to be $60 billion a year. (e.g.
Software $11 billion, entertainment $8, pharmaceuticals
$1 billon)
• There is a saying in Shanghai: “We can copy anything
except your mother” (even fake blood plasma)
Intellectual Property Protection

• Patent
• Protection of the rights of the inventor or of the firm to use and sell the
invention for a specified period of time.
• Copyright
• Rights of owner of original work of art (literature, music, film, design) to
reproduce, sell, perform, or film the work.
Intellectual Property Protection

• Trademark
• Brand name, mark, symbol, motto, or slogan that identifies a brand and
distinguishes it from competitors’ brands. (E.g. Rolex, Gucci, Fendi/
Design copying without the trademark is legal)
• Trade Secret
• Know-how, formulas, and special blends that are not registered and are
thus not protected by law.
 Factors Influencing Intellectual Property
Violations
• Lack of appropriate legislation
• Lax enforcement
• Unavailability of authentic products
• High prices for authentic products that limit their
accessibility to local consumers
• Cultural Factors:
• Values that perceive imitation as a form of flattery
• Feelings of interpersonal distrust and not getting fair deal
• Emphasis on material wealth
• Belief that technology is common domain
Protecting Intellectual Property

• TRIPS Agreement (Trade-Related Aspects of Intellectual Property

Rights,): member countries of the World Trade Organization, must
sign the TRIPS agreement: minimum standards for the legal
protection of property rights
• Bilateral and multilateral conventions
• Enlisting home and host-country government support
ECONOMIC ENVIRONMENT
• Per capita income and size of population
• Stages of economic development
• Consumption pattern
• Economic system
• Product demand analysis
• Competition analysis
SOCIO-CULTURAL
ENVIRONMENT
• International business means operating in a cross cultural
environment. This makes the business more complex because
the business firm must appreciate how different the foreign
culture is from their own and how this difference is to be
reflected in their business strategies.
Culture
• Culture is defined as a continuously changing totality of
learned and shared meanings, rituals, norms, and
traditions among the members of an organization or
society.
• Culture is also defined as a society’s personality.
• Culture
• Has a general influence on consumption
• Has an influence on the stakeholders
• Determines the manner in which individuals respond to
Marketing strategies
TECHNOLOGICAL ENVIRONMENT

• New product development

• New organisational styles
• New management techniques
• New marketing techniques
• New production techniques
• Networks, warehouse management, electronic data interchange
(EDI)
• Web/Internet
Technological Environment as an
influencing factor for IM
• Threats Web/Internet
The payment mechanism is sometimes difficult
• Different currencies
• Different method of payments (credit cards, debit cards)
• Accepting credit cards from unknown buyers
NATURAL ENVIRONMENT
• Geology and natural resources (access to resources, e.g. oil)
• Topographies and access to Markets
• Hydrology
• Climate
• Population/ Human Capital
• Environmental Quality (regulations on the natural
environment, e.g. hormones, pesticides, CO2-Levels
DEMOGRAPHIC
ENVIRONMENT
• Size, growth rate, age composition, sex composition etc. of the
population
• Family size
• Economic stratification of population
• Education level
• Caste, religion etc..
MICRO ENVIRONMENT
FACTORS
• Shareholders-Shareholders are the owners of a business and are the
ultimate decision-makers on the direction of a company. While the
management of a company has the day-to-day decision-making
power, shareholders guide the strategy, financing and selection of
management of the firm
• Competitors-Governments will be unwilling to protect domestic
companies because they have realized that they will be doing a great
disservice to their economies and people by limiting competition in
their countries. Most governments are going overboard in making
their countries attractive destinations for foreign capital,
technologies and companies. The game is clear. Only the best
companies will survive. The nationalities of companies will not
matter and country markets will become intensely competitive.
• Customers- Customer needs are changing because their
economic status and their views about themselves and the
world are changing. Customers are reinventing themselves
more frequently these days and hence their whole being and
their rationale of existence is changing.
THANK YOU