International business involves commercial transactions that occur between two or more countries. It includes exports and imports of goods, services, technology, capital, and managerial knowledge. Companies that conduct international business, known as multinational corporations, have several options for doing business abroad, such as exporting, licensing, joint ventures, foreign direct investment through branches or subsidiaries, and providing services. International business integrates the economies of many countries and allows companies to take advantage of resources and markets globally. However, it also faces challenges such as restrictions, competition, and sensitivity to changes in political and economic conditions.

1. International Business
- Meaning and Concept

2. Meaning of Business
• A Business is any legally approved
economic activity carried out on a regular
basis with the motive of earning profit by
satisfying customers needs.

3. Types of
Business
Industry Commerce
Trade Service

4. • National or domestic business can e defined
as a transaction taking place within the
geographical boundaries of a nation. It is
also called as internal business or home
trade.
• Manufacturing and commerce outside the
boundaries of one’s own country is referred
to as international business.

5. • International business comprises of all
commercial transactions that take place
between two or more countries beyond their
political boundaries. These transactions may
take place between private companies or
governments of different countries.
• International Business
conducts business transactions all over the
world. These transactions include the transfer
of goods, services, technology, managerial
knowledge, and capital to other countries.
International business involves exports and
imports.
• International Business is also known, called or
referred as a Global Business or an International
Marketing.

6. • An international business has many options
for doing business, it includes,
i. Exporting goods and services.
ii. Giving license to produce goods in the host
country.
iii. Starting a joint venture with a company.
iv. Opening a branch for producing & distributing
goods in the host country.
v. Providing managerial services to companies
in the host country.

8. i. Large scale operations :
In international business, all the operations are conducted
on a very huge scale. Production and marketing activities
are conducted on a large scale. It first sells its goods in the
local market. Then the surplus goods are exported.
ii. Integration of economies
International business integrates (combines) the
economies of many countries. This is because it uses
finance from one country, labor from another country, and
infrastructure from another country. It designs the product
in one country, produces its parts in many different
countries and assembles the product in another country. It
sells the product in many countries, i.e. in the international
market.

9. iii. Dominated by developed countries and MNCs :
International business is dominated by developed countries and their
multinational corporations (MNCs). At present, MNCs from USA, Europe
and Japan dominate (fully control) foreign trade. This is because they have
large financial and other resources. They also have the best technology and
research and development (R & D). They have highly skilled employees and
managers because they give very high salaries and other benefits.
Therefore, they produce good quality goods and services at low prices.
This helps them to capture and dominate the world market.
iv. Benefits to participating countries :
International business gives benefits to all participating countries.
However, the developed (rich) countries get the maximum benefits. The
developing (poor) countries also get benefits. They get foreign capital and
technology. They get rapid industrial development. They get more
employment opportunities. All this results in economic development of the
developing countries. Therefore, developing countries open up their
economies through liberal economic policies.

10. V. Keen competition :
International business has to face keen (too much) competition in
the world market. The competition is between unequal partners i.e.
developed and developing countries. In this keen competition,
developed countries and their MNCs are in a favorable position
because they produce superior quality goods and services at very
low prices. Developed countries also have many contacts in the
world market. So, developing countries find it very difficult to face
competition from developed countries.
vi. Special role of science and technology :
International business gives a lot of importance to science and
technology. Science and Technology (S & T) help the business to
have large-scale production. Developed countries use high
technologies. Therefore, they dominate global business.
International business helps them to transfer such top high-end
technologies to the developing countries.

11. vii. 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 this is harmful to
international business.
viii. Sensitive nature :
The international business is very sensitive in nature. Any
changes in the economic policies, technology, political
environment, etc. has a huge impact on it. Therefore,
international business must conduct marketing research to
find out and study these changes. They must adjust their
business activities and adapt accordingly to survive
changes.

12. STAGES OF INTERNATIONALIZATION
• Domestic Company
– Limits operation, Vision, Mission to National political
boundaries
• International Company
– Focus on domestic practices but extend wings to foreign
countries (Mere export-import)
• Multinational Company
– Different strategy for different market
• Global Company
– Either produce in one country and market globally or
produce globally and market domestically
• Transnational Company
– Produces, markets, invests and operates across the world
Versatile Business School, Egmore, Chennai - 600 008

13. APPROACHES TO INTL. BUSINESS
Ethnocentric
Domestic companies
view foreign markets
as an extension to
domestic markets
Polycentric
Companies establish
foreign subsidiaries
and empowers its
executives
Regiocentric
Subsidiaries consider
regional environment
for policy/strategy
formulation
Geocentric
Companies view the
entire world as a single
unit

14. Approaches of international Business
Ethnocentric Approach:
 It focuses on the values and ethnics of the home
country. The strategies are devised and formulated for
domestic operations first and the overseas operations
are secondary. The foreign activities are conducted
mainly to distribute surplus.
 This approach is suitable for small companies as less
investment is required and less risk is involved. The
activities are managed by an export department or a
separate international division.

15. Approaches of international Business cont…
Polycentric approach:
• Under such approach a company’s policies
and procedures are based on host country.
The local market needs and requirements are
met by a team of local employees and various
foreign subsidiaries are established to work
independently to achieve the objectives and
plans of the organization.
• Such an approach is generally used by
multinational corporations.

16. Approaches of international Business cont…
Regiocentric approach:
• It is applicable when the company caters to
different regions of different markets.
• Each region has special or distinctive feature
depending upon regional factors, political
factors, economic factors etc. the regions are
categorized and strategies are formulated
accordingly having national and regional
headquarters.

17. Approaches of international Business cont…
Geocentric approach:
• It applies for the entire globe or world. A
company following this approach uses
common practices and strategies throughout
the world i.e. Common HR and marketing
practices, it helps in building a common brand
image and goodwill.
• Such an approach is used by large scale
enterprises.

18. Domestic Vs. International Business
Trade refers to the exchange of goods and services for money,
which can be undertaken locally or globally. The trade which
takes place within the geographical boundaries of the country
is called domestic business, whereas trade which occurs
among countries internationally, is international business.
Entities engaged in international business often face more
difficulties than the entities which conduct domestic business.
Although international business enjoys large customer base as
they operate in multiple countries.

19. Domestic Business
• The business transaction that occurs within the
geographical limits of the country is known as
domestic business. It is a business entity whose
commercial activities are performed within a
nation. Alternately known as internal business or
sometimes as home trade. The producer and
customers of the firm both reside in the country.
• There are many privileges which a domestic
business enjoys like low transaction cost, less
period between production and sale of goods, low
transportation cost, encourages small-scale
enterprises, etc.

20. International Business
• International Business is one whose manufacturing and
trade occur beyond the borders of the home country. All
the economic activities indulged in cross-border
transactions comes under international or external
business. It includes all the commercial activities like
sales, investment, logistics, etc., in which two or more
countries are involved.
• The company conducting international business is
known as a multinational or transnational company.
These companies enjoy a large customer base from
different countries, and it does not have to depend on a
single country for resources. Further, the international
business expands the trade and investment amongst
countries. However, there are several drawbacks which
act as a barrier to entry in the international market like
tariffs and quota, political, socio-cultural, economic and
other factors that affect the international business.

21. BASIS FOR COMPARISON DOMESTIC BUSINESS INTERNATIONAL BUSINESS
Meaning A business is said to be domestic,
when its economic transactions are
conducted within the geographical
boundaries of the country.
International business is one
which is engaged in economic
transaction with several countries
in the world.
Area of operation Within the country Whole world
Quality standards Quite low Very high
Deals in Single currency Multiple currencies
Capital investment Less Huge
Restrictions Few Many
Nature of customers Homogeneous Heterogeneous
Business research It can be conducted easily. It is difficult to conduct research.
Mobility of factors of
production
Free Restricted

22. Why Companies Engage in
International Business ???

23. Reasons for international business expansion
 Companies are expanding internationally more than ever
before. International Business
Expansion (Internationalization) is the process of
expanding a business from the domestic or local market
into international markets across the globe. There are
several reasons an organization may want to
internationalize.
 In general, the reasons for internationalization fall into three
primary categories:
i. Market Seeking: Looking for markets to expand into and
sell products throughout the year and opportunities to sell
products in a region which would not typically have access.
ii. Economic: Increasing profits and saving on expenses.
iii. Strategic: Expanding the size of the company and working
to reduce the potential risks of staying in only one market.

24. Reasons for international business expansion
To Expand Sales
• The first and foremost reason is that western
multinationals would like to expand their sales and
acquire newer markets so that they can record
impressive growth rates.
• Considering the fact that the developing countries are
peopled with consumers who have aspirations to
western lifestyles, it is, but natural that the western
companies would like to target this need and hence,
expand into these markets.
• Moreover, with declining sales in one region, the
western companies hope to recoup the losses by
expanding into other markets. Further, the attractive
rates of return in the emerging markets are another
reason as well.

25. Reasons for international business expansion
Acquire Resources
• This is one of the most important reasons for companies to expand
internationally. Because the developing and emerging countries
have large deposits of minerals, metals and land for agricultural
production, the western multinationals eye these markets in order
to get access to the resources.
• This is the reason why many international businesses operate in
Africa and South Asia where the humungous deposits of minerals
and metals are attractive for the profits that these multinationals
can make.
• Many emerging markets and developing countries do not have the
expertise or the resources needed to tap their reserves of these
minerals and metals. Hence, they welcome the multinationals with
open arms as it gives them royalties and other payments to grow
their economies. As can be seen from the expansion of Vedanta and
the South Korean steel company (POSCO) into India, the eagerness
to tap the resources is one of the most important reasons for
expansion.

26. Reasons for international business expansion
Minimize Risk
• Often, businesses expand internationally to offset the risk of
stagnating growth in their home country as well as in other
countries where they are operating. For instance, ever since the
Western countries saw their growth rates slip to below 3% (in cases
recording negative growth i.e. depression), the Western
multinationals have made a beeline to the emerging markets that
are growing in excess of 5%. Since firms exist to make profits and
grow their bottom lines, it is but natural for them to expand
internationally into countries that have better growth rates than
their home country.
• Further, by operating in a basket of countries as opposed to a few,
they are able to manage political, economic, and societal risks better.
Because they vary from country to country, it makes sense to spread
risk across countries and diversify the portfolio rather than placing
all eggs in one basket.

27. Reasons for international business expansion
Closing Thoughts
• It is the fact that many Chinese companies are
aggressively expanding into African and Asian
markets. In the same way in which Japanese
companies conquered Western markets with
superior quality, low cost, and exemplary
customer service, the Chinese companies hope
to target the emerging and developed markets
with the same vigor and passion that has made
China the factory of the world.

28. Globalization

29. Concept;
• The label on the sweater says "Made in Sri Lanka.
"but it's quite possible that the yarn came from a
Korean producer, was woven and dyed in Taiwan,
then cut, sewn, and assembled in Sri Lanka (with
zippers and buttons from Japanese factories in
China),and finished, inspected, and packed in Sri
Lanka by an Indian inspecting company for a
Thailand buyer to ship to Wal-Mart

30. Meaning;
• Globalization is a process of interaction and integration among the
people, companies, and governments of different nations, a process
driven by international trade and investment and aided
by information technology.
• It refers to the shift towards a more integrated and interdependent
world economy.
• This process has effects on the environment, on culture, on political
systems, on economic development and prosperity, and on human
physical well-being in societies around the world.
• Globalization has two main components; globalization of markets
and the globalization of production

31. Globalization of markets
• Globalization of markets refers to the merging of
historically distinct and separate national markets into
one huge global marketplace as a result of reductions in
trade barriers and advances in information and
transportation technologies. As a result, small firms can
now participate in international trade right from
inception.
• The tastes and preferences of consumers in different
nations are beginning to converge on some global
norm, thereby helping to create a global market.
• The global acceptance of consumer products such as
visa card, Coca-Cola, Levi's jeans, Sony, McDonald's
hamburgers are all frequently held up as prototypical
examples in this rend.
• They all are a standardized product worldwide, they are
helping to create a global market

32. Globalization of production
• The globalization of production refers to the
tendency among firms to source goods and
services form locations around the globe to
take advantage of national differences in the
cost and quality of factors of production(such
as labor, energy, land, capital).
• By doing so, companies hope to lower their
overall cost structure and improve the quality
or functionality of their product offering,
thereby allowing them to compete more
effectively.

33. • Globalization have various prospective:
Cultural prospective
Economic prospective
Economic prospective
Technological prospective

34. Cultural prospective
• From a cultural perspective, it is the growth
of cross-cultural understanding made
possible by the increasing two-way flow of
entertainment and news, and the
development of human values that
transcend those of any one culture.
• At the same time, it is also the erosion of
local traditions and standards and their
replacement by foreign ones.

35. Economic prospective
• From an business/economic perspective,
globalization is perceived as the creation of
high-tech jobs in wealthy nations and the
lifting from poverty of some three billion
people or half the world’s population. At the
same time, it is also perceived as the loss of
jobs in wealthy nations and the exploitation
of workers in poor nations.

36. Technological prospective
• From a technological perspective, globalization
is the spread of knowledge and the dramatic
leaps in world communications and travel that
has resulted in eradication of deadly diseases,
saving of endangered species, the reduction of
famine and the increase in world productivity
to the benefit of all humankind. At the same
time, it has also unleashed destructive forces
leading to loss of species, spread of disease,
environmental degradation, war, and terrorism.

37. Political prospective

38. Drivers of Globalization
1. Technological drivers
• Technology shaped and set the foundation for modern
globalization.
• Innovations in the transportation technology
revolutionized the industry. The most important
developments among these are the commercial jet
aircraft and the concept of containerization in the late
1970s and 1980s.
• Inventions in the area of microprocessors and
telecommunications enabled highly effective
computing and communication at a low-cost level.
Finally the rapid growth of the Internet is the latest
technological driver that created global e-business
and e-commerce.

39. Drivers of Globalization
2. Political drivers
• Liberalized trading rules and deregulated
markets lead to lowered tariffs and allowed
foreign direct investments in almost all over
the world.
• The institution of GATT (General Agreement
on Tariffs and Trade) 1947 and the WTO
(World Trade Organization) 1995 as well as
the ongoing opening and privatization in
Eastern Europe are only some examples of
latest developments.

40. Drivers of Globalization
3. Market drivers
• As domestic markets become more and more
saturated, the opportunities for growth are
limited and global expanding is a way most
organizations choose to overcome this
situation.
• Common customer needs and the
opportunity to use global marketing channels
and transfer marketing to some extent are
also incentives to choose internationalization.

41. Drivers of Globalization
4. Cost drivers
• Sourcing efficiency and costs vary from
country to country and global firms can take
advantage of this fact.
• Other cost drivers to globalization are the
opportunity to build global scale economies
and the high product development costs
nowadays.

42. Drivers of Globalization
5. Competitive drivers
• With the global market, global inter-firm
competition increases and organizations are
forced to “play” international.
• Strong interdependences among countries
and high two-way trades and FDI actions also
support this driver.