01 int biz.theories session 1, 2 & 3

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  • 1. INTERNATIONAL BUSINESS Prof Bharat Nadkarni
  • 2. Business Excellence(Getting the Big Picture of business ) Prof Bharat Nadkarni
  • 3. International BusinessFrom a very early age, we are taught to break apart problems,to fragment the world. This apparently makes complex tasksand subjects more manageable, but we pay a hidden,enormous price. We can no longer see the consequences ofour actions; we lose our intrinsic sense of connection to alarger whole. When we then try to “see the big picture”, we tryto reassemble the fragments in our minds, to list and organizeall the pieces. But the task is futile – similar to trying toreassemble the fragments of a broken mirror to see a truereflection. Thus, after a while we give up trying to see thewhole altogether.
  • 4. International BusinessWho are the Stakeholders of Business ?• Shareholders and Promoters• Customers• Employees• Suppliers and Partners (incl Contractors, Agents etc)• Government• Society
  • 5. International Business Most Admired Business“Balancing and Exceeding the Expectations of all it’s Stakeholders.”
  • 6. Reference Books : International Business By• Subba Rao• Francis Cherunilam• Dr Chandran• Sundaram and Black• Daniels & Radebough• Charles Hill & Jain• Roebuck & Simon
  • 7. International BusinessInternational Business1. Definition of IB, Domestic vs Int’I business, Adv & Disadv2. International trade theories3. Globalisation, Regional groups, Transnational economy.4. Market entry strategies5. International Trade Institutions, Policies6. International finance & Foreign Direct Investments7. International issues, G 20 issues, MFN status, Intellectual property rights, purchase power parity etc8. Ethical business, CSR, Millineum goals, HR policies etc9. Logistics, Information technology, cultural and social issues, Generalised topics etc10.Case studies
  • 8. 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 prices 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 GlobalOrganization
  • 9. International BusinessInternational Trade Policy• Laissez-faire approach (Free trade) Vs Interventionist approachIndependence, Dependence and InterdependenceTheories• 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• Factor Proportions Theory (ex India, Hong kong, Singapore, Dubai)
  • 10. International BusinessInternational BusinessInternational business can be defined as activities that buysand sells goods and services across two or more nationalboundaries, even if the management is located in a onecountry. It includes any type of business activity that crossesnational borders. International business is related withthose enterprises which have operating units outside theirown country. There are institutional arrangements whoprovide some managerial direction of economic activitytaking place abroad.Conducting international business is really not like playing awhole new ball game but it is like playing in a different ballpark, where the managers have to learn the factors unique to
  • 11. International Businessthe playing field. The guiding principles of a firm engaged ininternational business activities should incorporate a globalperspective. Incorporating an international outlook into thefirm’s basic statement will help focus the attention ofmanagement on the opportunities outside the domesticeconomy.
  • 12. International BusinessDifference between Domestic and International business1. Higher rate of profits (Absolute advantages, taxes, concessions and incentives)2. Expansion of production capacities3. Competition (pull & push effects)4. Wide market5. Political stability6. Technology7. High cost of transportation
  • 13. International BusinessGrowing 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
  • 14. International Business• Liberal trade policies and procedures• Revolution in communication and transportation
  • 15. International BusinessInternational Business Corporate Approaches1. Ethnocentric (Home country orientation)2. Polycentric (Host country orientation)3. Regiocentric (Regional orientation)4. Geocentric (World orientation)
  • 16. International BusinessTypes of International Organisation• Built-in Export Department• Separate Export Department• Export Sales Subsidiary• International Division• Global Organisational Structure
  • 17. International BusinessHome Country Economic Environment1. Domestic Markets & Size2. Economic Policies3. Promotional and Regulatory measures
  • 18. International BusinessHost Country Economic Environment1. Size of the Markets2. Gross Domestic Product3. Industrialisation4. Development of Banking Facilities5. Purchasing Power and Standard of Living6. Foreign Exchange Situation7. Income levels8. Economic diversity (urbanisation – Rural dev. Ex Johannesburg, Sao Paolo
  • 19. International BusinessGlobal Economic Environment1. International organisations2. Trading Blocs3. Strategic Locations4. Global Political Environments and Issues
  • 20. International BusinessSAARC (7):South Asian Association for Regional CooperationIndia, Pakistan, Sri Lanka, Nepal, Bhutan, Bangladesh,MaldivesNAFTA (3) : North American Free Trade AgreementUSA, Canada, MexicoLAFTA (9) : Latin American Free Trade AreaArgentina, Brazil, Mexico, Chile, Peru, Uruguay, Paraguay,Columbia, EcuadorASEAN (5) : The Association of South East Asian Nationswas formed by the Bangkok Declaration, 1967, by fivecountries, viz., Indonesia, Malaysia, Philippines, Singaporeand Thailand.
  • 21. International BusinessEU (15) : European UnionAustria, Belgium, Britain, Denmark, Finland, France,Germany, Greece, Ireland, Italy, Luxembourg, Netherlands,Portugal, Spain, Sweden.Euro : Common currency of the EU was launched by 11members on 1.1.1999, Britain, Denmark, Sweden did’nt join. Greece joinedin 1.1.2001Maastricht Treaty of 1991 set the stage for the monetoryunion.EU AdditionsWith effect from May 1, 2004 the total membership of EUincreased to 25. Following ten countries were inducted.Estonia, Latvia, Lithuania, Poland, Czech Republic, Hungary,Slovenia, Slovakia, Cyprus and Malta.Two more members, Bulgaria and Romania, were inducted in2007, taking the tally to 27 countries.
  • 22. International BusinessInternational Business Environment1. Internal Environment Org. Structure ( I P O) Production Marketing Finance HR R&D IT Business Development
  • 23. International BusinessInternational Business Environment2. External Environment a. External Micro Environment All Stakeholders and Competitors b. External Macro Environment STEPIN (Social, Technical, Economical, Political, International, and Natural)
  • 24. Thank you
  • 25. Foreign direct investment approvals will, however, besubject to sectoral caps: (as on 31.03.2010)• 20 percent (40per 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 preciousstones
  • 26. The Millennium Development Goals … as defined by UNEradicate extreme poverty and hungerAchieve universal primary educationPromote gender equality and empower womenReduce child mortalityImprove maternal healthCombat HIV/AIDS, malaria and other diseasesEnsure environmental sustainabilityDevelop a global partnership for developmentStop Child Labour
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