International Business

-Introduction
International Business

Learning objectives

The students after attending will be apprised with the

Reasons to enter International business and the probable
ways to make a mark in international business
The global practices and their origin ie
Theories of International
The students will also be apprised of the other business
categories in the Global economic context and perspective
The objectives of business operating beyond national
boundaries ,the Multi national corporations
/companies .their operational formulation and legal
framework applicable in the Host countries
 International Business

Chapter Topics

-Trade volume and direction of trade

- FDI & Flow of FDI
- Reasons to enter in International business
- Ways to enter to international business

- Introduction
- World business A brief overview
- Government & Trade Regulations
 International Business
Reasons for Choosing International
Business
Deep market research and analytics’ exploration
are mandatory exercise for the new entrants to the
Global market ,or business Entering can prove
handy
Based on such data, suitable business and market
initiatives planning provide a roadmap to wards a
global presence in the selected domain of business
During the market research and analysis, the
competitors . factor should not and cannot be
ignored
 International Business
The forms of international business
The market entry types.
Direct Exports,
Joint ventures,
Foreign Direct investment,
Licensing,
Franchising, and
other forms of an alliance is duly considered as
market entry types.
Stages in Internationalization
Direct Exportation. ...
Indirect Exportation. ...
Foreign Presence. ...
Home Manufacture and Foreign Assembly.
.
 International Business
‘Trade volume ;and ‘Direction ‘of trade

What refers to ‘volume ‘of trade

Trade volume is the
-Total number of shares or contracts
exchanged between buyers and sellers of
a security during trading hours on a
given day.,time

The volume of trade is a “measure of the market's activity “and

liquidity during a set “period of time”.
.
 International Business

Why To Choose International Business

The other important reasons /factors

are/could be
- Acquire a Bigger Customer Base
. Avail Government Incentives
. Higher Growth Rate
. Higher Profits.
. Optimum Utilization Of expertise &
other Resources
 International Business
Reasons for Choosing International
Business?
1. New Market
New markets always come up with some new opportunities. . It can
help in connecting with the new audience and build some beneficial
connections.
2. Sales Boost
Keeping the products and services sale high . to increase sales,
you have to target new markets and a big audience base. possible
with a broad expansion.
3. Easy To Deal With Home Market
It is not easy for everyone to deal with all types of conditions of a
single market. In a market, the companies have to face different
types of situations,
 International Business

‘Trade volume ;and ‘Direction ‘of trade.

Trading volume also refers to :-
A measure of how much a given financial asset has
traded in a period of time.
For company stocks, volume is measured in the
‘number of shares traded’.
For futures and options, volume is based on how many
contracts have changed hands.
 International Business

‘Trade volume ;and ‘Direction ‘of trade

Trading Stock
Stocks can be categorized as high volume or low
volume, based on their trading activity.

High volume stocks trade more often.

low volume stocks are more thinly traded.

There's no specific dividing line between the two.

However, high volume stocks typically trade at a volume of 5
M or more shares per day.
 International Business
‘Foreign Direct Investment’ F.D.I
Nature and Flow of FDI
A foreign direct investment (FDI) is a purchase of an
interest in another company by a company or an
investor located outside its borders.
Generally, the term is used to describe a business
decision to acquire a substantial stake in a foreign
business or to buy it outright in order to expand its
operations to a new region.
A foreign direct investment is an investment in the
form of a controlling ownership in a business in one
country by an entity based in another country.
International Business

F.D.I The advantages/benefits

FDI allows the transfer of technology—

particularly in the form of new varieties of
capital inputs—
The said objective cannot be achieved
through financial investments or trade in
goods and services.
FDI can also promote competition in the
domestic input market.
 International Business
F.D.I .The Types
Three following common components of FDI are
usually identified:
 Equity capital,
 Reinvested earnings, and
 Intra company loans.
 Other than having an equity stake in an enterprise,
foreign investors may acquire a substantial influence
in related areas of enterprise
The foreign investors may intend to acquire
influence in many ways Other than having an equity
stake in an enterprise,
 International Business

.
 International Business

Government and Trade Regulations

A Governments primary means to restrict trade
are through the enforcement of ;
-Quota systems;
-Tariffs; and
-Subsidies.
A quota system imposes restrictions on the specific
number of goods imported into a country.
Quota systems allow governments to control the
quantity of imports to help protect domestic
industries.
 International Business
“ Tarif”
A tariff is a “tax “imposed by the government of
a country or by a supranational union on
imports or exports of goods.
It is a major source of revenue for the government,
The “import duties” levied also serve the purpose ,or
a system to “regulate” monitor “foreign trade
“and policy that taxes foreign products to
encourage or protect /safeguard domestic industry.
 International Business

“ Tarif”
What is tariff,
Tarif collectively refers to
Customs duty, :
This is the tax levied upon goods as they cross national
boundaries, usually by the government of the Host
/importing country.
The words tariff, duty, and customs are be used
interchangeably. And are mainly aimed to protect
domestic industry, protect domestic jobs, national
security, and in retaliation to other nations tariffs.
 International Business

Theories of “international Trade”

Many theories relating to the international trade were
presented by various authors between 1630 and
1990.-
. International trade theories are simply based on
practice and different logics which explain
international trade.
The international trade theories based on practiced
norms and practices also encompasses
The concept of exchanging goods and services
between two independent countries

.
 International Business
Theories of international Trade.-
The following theories relating to the
International trade presented by various authors
between 1630 and 1990.moderate the norms of
international business-
-Mercantilism.

The theory was popular in the16th & 18th Century

- Absolute Cost Advantage. ...
- Comparative Cost Advantage
Theory. Of absolute advantage) ...
- Hecksher 0hlin Theory (H-0 Theory) ...
- National Competitive .
-Theory or Porter's diamond.
The Product Life Cycle Theory.
 International Business
Theories of international Trade.-
-Mercantilism.

This theory was popular in the 16th and 18th Century. ...
The Mercantilism economic theory emphasizes
-Self-sufficiency through a favorable balance of
trade.
-Mercantilist policies focus on the accumulation of
wealth and resources
The policies also emphasize the importance of
maintaining a positive trade balance with other
countries.
 International Business

Theory of Absolute Cost Advantage

 In economics, the principle of” absolute advantage “is the
ability of a party An individual, or firm, or country)
- To produce a good or service more efficiently than its
competitors.
 The principle of absolute cost advantage also refers to the
ability of a business to produce more, sell more of a good or
service than competitors,
using the same amount of resources. absolute
advantage, economic concept that is used to refer to a
party's superior production capability. Specifically, it
refers to the ability to produce a certain good or service at
lower cost (i.e., more efficiently) than another party..
 International Business

Quota system’/context of International trade

A quota is a government-imposed trade restriction
that limits the number or ‘monetary value of goods
‘that a country can import or export during a
particular period.
Countries use quotas in international trade to help
regulate the volume of trade between them and other
countries.
 International Business
Theories of international Trade.-
- Comparative Cost Advantage (Theory. Of absolute
advantage) ...
- Comparative advantage The law of comparative advantage
is attributed to David Ricardo, who described the theory in
"On the Principles of Political Economy and Taxation,"
published in 1817.
The idea of comparative advantage may have originated
with Ricardo's mentor, James Mill, who also wrote on the
subject.is an economy's ability to produce a particular good
or service at a lower opportunity cost than its trading ...
 International Business
Theories of international Trade.-
- Hecksher 0hlin Theory (H-0 Theory) ...
Heckscher-Ohlin theory, in economics, a theory of
comparative advantage in international trade according to
which countries in which capital is relatively plentiful and
labour relatively scarce will tend to export capital-intensive
products and import labour-intensive products, while
countries in which labour is plentiful
Ohlin theory assumes the same production function for all
countries. This implies that all firms are identical.
The theoretical consequence is that there is no room for
firms in the H–O model. By contrast, the New Trade
Theory emphasizes that firms are heterogeneous.
 International Business
“ Subsidies”
International trade context
What refers to ‘Subsidy,’
A “Subsidy,” is a
-Direct or indirect payment,
-Economic concession, or - Privilege

Granted by a government to private firms,

households, or other governmental units in
order to promote a public objective.
Identification of a subsidy is often complicated
because of the variety of subsidy instruments,
the multiplicity of the objectives they are designed
to serve, and the complexity of their effects.
 International Business
“ Subsidies”
International trade context
 subsidy, a direct or indirect payment, economic concession, or privilege
granted by a government to private firms, households, or other
governmental units in order to promote a public objective. Identification
of a subsidy is often complicated because of the variety of subsidy
instruments, the multiplicity of the objectives they are designed to serve,
and the complexity of their effects.
 Subsidies to transportation, housing, agriculture, mining, and other
industries have been instituted on the grounds that preservation or
expansion of these industries, even at a cost to the general public, is in
the public interest. Subsidies to the arts, sciences, humanities, and
religion have also been instituted in many nations because of the
inability of the private economy to support these functions at a level
consistent with public policy.
 International Business
What is “Globalization “
Globalization is the word used to describe the growing
interdependence of the
World's economies,
Cultures, and Populations,
As a consequence of cross-border trade in goods and
services, Technology, besides flows of investment, the
FDI ,expertise ,Human Capital people, and information.
It is about the interconnectedness of people and businesses
across the world that eventually leads to global cultural,
political and economic integration.
It is the ability to move and
communicate easily with others all over the world in order to
conduct business internationally.
 International Business
Globalization elaborated
Globalization refers to the speedup of movements and
exchanges (of human beings, goods, and services,
capital, technologies or cultural practices) all over the
planet.
An important outcome of globalization is that it promotes
and increases interactions between different regions and
populations around the globe.
The three manifestations.
Economic globalization.
The focus is on the integration of international financial
markets and the coordination of financial exchange. ...
Political globalization. ...
Cultural globalization.
 International Business

Management .The Logic/ Philosophy

“Management can be explained as getting things done through
(other) people. In order to achieve this, one has to know the
“things” to be done,
One has to “know the people” who have to do them.
Understanding people means understanding their background,
from which present and future behavior can be predicted.
Their background has provided them with a certain culture.
The word “culture” is used in the sense of “the collective
programming of the mind which distinguishes the
members of one category of people from another”.
 International Business
“Management” .
The Logic Philosophy
The “category of people” can be.-;
A nation, region, or

Ethnic group (national etc. culture),

Gender culture women versus men
Age group and generation culture old versus young
Occupational culture, a social class, a profession or
occupation ,
A type of business, a work organization or part of it
(organizational culture), or even a family.