International Business – Objectives (an overview) To define International Business and describe how it differs from Domestic Business To define & discuss basic terms relating to International Business To explain the major motives of companies for engaging in international Business & why its growth has accelerated

International Business – Objectives(an overview) (Contd…) To introduce different means a company can use to accomplish it global objectives To illustrate the role social sciences disciplines play in understanding the environment of International Business To provide an overview of the primary patterns for companies’ international expansion.

International Business – Objectives(an overview)(Contd…) To describe the major countervailing forces that affects the performance of International Business

What is a Business?

What is a Business? It is any activity that seeks profit in providing needed goods and services to others

Q1-What is International Business? A question for you?

International Business - Definition It is any business transaction which involves a cross border transaction

Q1-What is International Business? It is all business transactions – Private & Government! – that involve two or more countries. Private companies undertake such transactions for profit; Government may or may not do it for profit.

Q3-What is the goal of a private Business and why it is different to Government ?

It is to make profit for the owners This is different to government Q3-What is the goal of a private Business and why it is different to Government ? It is to make profit for the owners This is different to government as they may may not do those transactions for profit

What are the transactions involved in international Business A question for you?

What are the transactions involved in international Business Buying raw materials and inputs Shipping of inputs and outputs Building a plant in another country Borrowing money etc

Who are the parties involved in international business A question for you?

Who are the parties involved in international business Private individuals Individual Companies groups companies Non profit organizations Public sector organizations Multinational organizations

What is a organization?

What is a organization? It is a system of consciously coordinated activities of two or more people

What is a Non Profit organization?

What is a Non Profit organization? It is an organization whose goals do not include making a personal profit for its owners

Why people Trade with other nations ?

Why people Trade with other nations ? No country is self sufficient Other countries need products that prosperous countries produce There is a world imbalance of natural resources and technological skills

What are the modes of international Business?

What are the modes of international Business? When operating internationally a business should consider its modes of operations which are not the same for domestic businesses They should consider how to export and import as well as the diversity and complexity of the environment

Why should you study International Business?

Why should you study International Business? International Business comprises large, and a growing portion, of the world’s total business. Today almost all companies – large or small are affected by Global Events and Global competition.

Q-4When operating internationally a business should consider its Global competition and Global Events,modes of engagement such as importing and exporting and physical social and competitive environment and some of the complexities involved.

Why should you study International Business? (Contd...) Most companies sell outputs and secure supplies from foreign countries and/or compete against product and services that come from abroad.

Why should you study International Business? (Contd...) Because all companies engage in International Business; may be engaged in either importing or exporting and Differ from those done at domestic level which they are accustomed to.

Why should you study International Business? (Contd...) To operate effectively managers must understand these different modes. International Business takes place in a more diverse external environment than is found domestically. The physical, societal and competitive environment affect the way business functions such as marketing is carried out.

International Business affects… Company profits Employment security and wages Consumer prices and National security ( Company’s international operations and Governmental regulation of International Business has a bearing on these factors)

A better understanding of International Business will help To make more informed decisions such as Where you want to work What Governmental policies you want to support To understand some of the complexities involved.

How does international business differ from domestic business A question for you?

How does international business differ from domestic business The countries involved may use different currencies The legal systems may differ The cultures may differ Te availability of resources may differ

Why companies engage in International Business

Why companies engage in International Business Four major operating objectives To expand sales To acquire resources To diversify sources of sales & supplies To minimize competitive risk.

Q5- What is meant by “Expand sales”

Q5- What is meant by “Expand sales” Companies sales are dependent on customers interest in their products or services and the consumer’s willingness and ability to buy them The number of people and the amount of their purchasing power is higher for the world as a whole than for a single country,so companies may increase sales by defining markets in international arena

What is meant by “acquire resources” Manufacturers and distributors seek out products services and components produced in foreign countries They also look for foreign capital,technologies and information they can use at home Sometimes they do this to reduce their costs so as to increase profits or to pass the benefit to consumers Some times they do this to improve quality or to have access to something that is not available

What is meant by “diversify sources of sales and supplies” Diversifying is done to help avoid wild swings in sales and profits and many companies seek out to foreign markets to take advantage of the timing of business cycles, recessions and expansions which takes place at different times Also to avoid the full impact of price swings or shortages in any one country

What is meant by “minimize competitive risk” Many companies move internationally for defensive reasons They seek to counter advantages their competitors gain from operating in foreign markets and in turn could use those against others in their markets

International Business – operations & influences External influences Objectives Physical & societal functions Strategy Competitive Environment Means Modes Functions Tactical Alternatives

Q6- Reasons for recent International Business Growth .

Q6- Reasons for recent International Business Growth Rapid increase in and expansion of technology Liberalization of governmental policies regarding cross border movement of trade and resources. Development of the institutions needed to support and facilitate international trade. Increased global competition.

Q-7 Reasons why there is a global government trend in lowering trade restrictions

Q-7 Reasons why there is a global government trend in lowering trade restrictions Citizens have expressed their desire for better access to a greater variety of goods and services at lower prices They reason that their domestic producers will become more efficient as a result of foreign competition. They hope to induce other countries to reduce their barriers to international movements. With the enactment of world trade organization in 1995 their has been optimism that restrictions will continue to diminish

Modes of International Business Importing & exporting Tourism & transportation Licensing & franchising Turnkey operations Management contracts Direct and portfolio investments.

What are International Companies Multinational Enterprise Multinational Corporation

What are Multi national and transnational corporations Multinational Enterprises takes a global approach to markets and production. They are sometimes referred to as multi national corporations (MNCs) or Transnational corporations (TNCs)

External Influences on International Business Political policies + legal practices Values, attitudes and beliefs Economic forces Geographic influences

External Influences on International Business To operate within a company’s external environment its managers must have not only knowledge of business operations but also a working knowledge of the basic social sciences , history,political science , law, anthropology, sociology, psychology, economics, and geography

Competitive Environment Advantages in Pricing, Marketing, Innovation or other factors Number and relative capabilities of competitors. Competitive differences by country

Evolution of strategy in Internationalization Process Pattern of expansion Passive to active expansion External to internal handling of operation Deepening modes of commitment Geographic diversification Leapfrogging of expansion

Countervailing forces Globally Vs Nationally standardized responsive practices Country Vs Company competitiveness Sovereign Vs Cross National Relationships

Countervailing forces Countervailing forces influence the conditions in which companies operate and their options for operating internationally. A company’s quest for maximum global profits is inhibited by different conditions in foreign countries, rivalry among countries, cross national treaties and agreements, and ethical dilemmas

What is meant by globalization Globalization is defined as the process towards the integration of national economies in to one global economy through the free movement between national frontiers of goods and services , factors of production such as capital labour and technology The heart of globalization lies in the rapid reduction in transportation cost and the revolution in information technology

q8-What are the supporting services that may be required in a country for a business to successfully engage in international business

q8-What are the supporting services that may be required in a country for a business to successfully engage in international business Communications Manufacturing Financing Packaging Banking Labour supplies Importing Marketing Clearing Documentation Handling Airlines Warehousing Shipping Transporting Docking Registration Merchandising

q9-What is the difference between merchandise exports and imports and service exports and imports

q9-What is the difference between merchandise exports and imports and service exports and imports Merchandise exports and imports usually are a country’s key international economic transactions . They are tangible goods sent out or brought in and are visible Service exports and imports are international earnings other than those derived from the exporting and importing of tangible goods They cannot be seen and are termed invisible

Service exports and Imports Service exports and imports are international earnings other than those derived from the exporting and importing of tangible goods Earnings received are called service exports and earnings paid are service imports They are also referred to as invisibles Examples are Tourism and Transportation Performance of services and Use of assets

q 10-What is meant by Tourism and Transportation

q 10-What is meant by Tourism and Transportation Tourism is about travel and transportation is about movement of goods and people It requires involvement of many organizations International tourism and transportation are important sources of revenue for airlines shipping companies travel agencies and hotels Some countries economies depend heavily on these sectors – e.g. Greece and Norway

What is meant by Performance of services Performance of services are judged by the customers and it could be gauged by the fees they are willing to pay for the services they receive Some services such as banking insurance engineering and management services net companies earnings in the form of fees that is payments for te performance of those services At international level Fees are paid for engineering services that are handled through Turn key operations and fees for management services that often result from management contracts

What is meant by use of assets The use of assets such as trademarks, patents, copyrights or expertise under contracts are known as licensing agreements which generate earnings called royalties Royalties are also paid for franchise contracts