MOBULE 1

International Business
When business activities are performed on an international level
(beyond the political boundary of the country) it can be termed as
international business.It is defined as the process of extending the
business activities from domestic to any foreign country with an
intention of targeting international customers.
Nature/Features of International Business
2. Large scale operations 3. Integration of economies of many countries
4. Dominated by developed countries and MNCs 5. Benefits to
participating countries 6. Keen competition7. Special role of science
and technology 8. International restrictions 9. Sensitive nature 10.
Exchange of goods and services between countries 11. Dealings in
foreign exchange involved 12. Accurate and timely information13. The
size of the international business should be large 14. Market
segmentation based on geographical area 15. International markets
have more potential than domestic markets
Scope of International Business
1. International Marketing strategy 2. International Finance and
Investments3. Global HR strategy4. International production strategy
Need for International Business
1. To achieve higher rate of profits2. Expanding the production capacity
beyond the demand of the domestic country 3. Severe competition in
the home country 4. Limited home market5. Political conditions 6.
Availability of technology and managerial competence 7. Cost of
manpower, transportation 8. Nearness to raw material 9.
Liberalisation, Privatisation and Globalisation (LPG)
Type of business
1. Local business:Local business: concerned with customers that
tend to be clus- tered tightly around the marketer.
2. Regional Business: cover a larger geographic area that may
Necessitate multiple production plants and a more complex
disTribution network. While regional marketers tend to serve ad-
Joining cities, parts of states, or entire states, or few states, dra-
Matic differences in demand may still exist, requiring
extensiveAdjustments in marketing strategy.
3. National Business:National Business: They distribute their
product throughout a country. This may involve multiple
manufacturing plants, a dis- tribution system including
warehouses and privately owned de- livery vehicles, and different
versions of the marketing mix or overall strategy. This type of
marketing offers tremendous profitPotential, but also exposes
the marketer to new, aggressive Competitors
4. International Business: It operates in more than one country.In
International Business, massive adjustments are normally made
in the marketing mix in various countries.Usually the products are
still manufactured in the home coun- try, sold by their people, and
the profits are taken back to thatCountry.
5. Global Business: Global Business differs from international
business in some very definite ways. Whereas international
Business means a company sells its goods or services in anoth- er
country, it does not necessarily mean that the company has made
any further commitments.But in the case of a global company, for
example Honda Motors, it has the commitments to building
manufacturing Plants in the US, hiring local employees, using local
distribution systems and advertising agencies, and reinvesting a
large per- centage of the profits back into the US.
Reasons for Recent International Business Growth
1. Expansion of technology
2. Business is becoming more global because•Transportation is
quicker•Communications enable control from afar
•Transportation and communications costs are become lowFor
international operations
3. . Liberalization of cross-border movements
4. Lower Governmental barriers to the movement of goods,
services, and resources enable companies to take bette
Advantage of international opportunities
Problems in International Business
Political factors,High foreign investments and high cost,Exchange
instabilityEntry requirements ,Tariffs, quota etc.Corruption and
bureaucracy Technology related
International Business Management, IBM
Definition: The management of business operations for an or-
Generation that conducts business in more than one country. IBM
requires knowledge and skills above and beyond Normal business
expertise, such as familiarity with the business regulations of the
nations in which the organization operates understanding of local
customs and laws and the capability- ty to conduct transactions that
may involve multiple currencies.
Stages in the evolution of companies / Process of Inter-Nationalization/
Level of globalization
1. Purely domestic 2. Domestic company also do export, licensing
franchising etc.Multi domestic company 3. International company
5. Multinational/Global company / transactional company 5. Truly
global company/milti national corporation
Globalization?
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. This process has effects onThe environment, on culture, on
political systems, on economic development and prosperity, and on
human physical well-beingIn societies around the world.
Main Drivers of Globalization [International Business]
1. Cost driver
2. Technology driver:
3. Government driver
4. Competition driver.

Major global companies. (Fortune 500 Top 10 global companies, 2018)

— WalMart Stores - $500bn— Exxon Mobil - $244bn— Berkshire
Hathaway - $242bn—Apple - $229bn—United health group - $ 201bn—
McKesson- $ 199bn—CVS health- $ 189bn—Amazon. Com- $ 178bn—
AT&T- $ 161bn—General Motors- $ 157bnCompanies were ranked by
total revenues for their Respective fiscal years ending on March 31,
2018.
Factors to remember before going international.
Get company-wide commitment,Define your business plan for
accessing global markets.Determine how much you can afford to invest
in your international expansion efforts.Plan at least a two-year lead-
time for world marketPenetration.Build a website and implement your
international plan sensibly. Pick a product or service to take overseas.
Conduct market research to identify your prime target markets.
“Orientation” towards international business/Approaches in
International Business/Approaches in globalisation/“EPRG” scheme
ETHNOCENTRIC MANAGEMENT ORIENTATION
“Home country is superior to any other country in The world” “since a
product or a service performed well at Home, it should also perform
well abroad. Since this Is so obvious, no further research is necessary
on Foreign markets and no adaptations need to be made To the
products or services to tailor them to global Customer preferences and
needs.”Ø Expatriates , ie, Parent Country Nationals ( PCN’s) Are sent
out from the headquarters to implement The central policy and to
facilitate the Communication.It assumes that home country and its
Culture is superior to the rest of the World—Management do the same
business Practices in the host countryØ Sometimes, also known as
international CompanyØProducts and processes used at home are Sold
in abroad without adaptation.—An ethnocentric company, overseas
Operations are viewed secondary to Domestic operations, as a means
of Disposing of surplus,eg : Indian clothes,dress food beverage
Disadvantages
Ineffective Planning due to poor feedback
Lack of flexibility
Fewer innovations
Inability to build an efficient local org.
Advantages
Benefits Simple organization
Good communications with HO
POLYCENTRIC MANAGEMENT ORIENTATION
—Management operates under the Assumption that every country is
Different; the company develops Country-specific strategies◦
Sometimes called a multinational company◦ Company operates
differently in each host Country based on the situation—Opposite of
ethnocentrismEach country is unique and therefore it allows its
Subsidiaries to have more control in developing Strategies that will
work in a particular country. “Since each country is so unique,
Complete control should be given to local Managers since they
obviously know what Is best for the company in that country.” As long
as these subsidiaries are Profitable, headquarters allow them to Have
more decision making power.Though an improvement over a purely
Ethnocentric view, a purely polycentric One has its limitation that
Headquarters and subsidiaries are Somewhat cut off from one
another.—Recruits HCN’s ( Host Country Nationals) as the MNC treats
each Subsidiary as a distinct national entity With some decision making
autonomy.eg, Starbucks, McDonald’s
Disadvantages
• Wasted to duplication
• Localization costs of”universal” products
• Inefficient use of home-country experience
• Excessive regard for local traditions at expense of global growth
Benefits
• Intense exploitation of local markets
• Better sales due to better-informed local management
• More initiative for local products
• More host government support
Good local managers with high moral
Regiocentric
—Under this approach, businesses divide the whole world into different
regions based on their common regional, social & cultural
environment, economic, and political factors.— For example, a
company, ASEAN, focuses on Indonesia, Thailand, Malaysia, Singapore,
Cambodia etc the 10 countries.In Regiocentric orientaiton, operations
are managed regionally.Communications and coordination within a
region are high but, less between regions.Usually, staffing for the
foreign operations are made from the countries of that particular
region. Regions are consistent with some natural boundaries, such as
the Europe, North America, South Asia etc
GEOCENTRIC MANAGEMENT ORIENTATION
Entire world is a potential market Managerial goal is to develop
integrated world market strate- gies Global companies serve world
markets from a single country and tend to retain association with a
headquarters country,Transnational companies serve global markets
and acquire resources globally; blurring of national identity Geocentric
orientation believes that the entire world is a po- tential market and
strives to develop strategies that will work in every market.
In geocentrically oriented companies, authority is not simply placed
with headquarters at home or with subsidiaries abroad, but rather a is
dispersed more equally between the two so that a collaboration is
formed.eg, apple,Coco cola,dell
Disadvantages High communication and travel costs, Training and
Educational costs at all levels ,Time spent decision-making is high
,International headquarters bureaucracy
Benefit Integrated global outlook,high gobal profit
Challenges of a multinational firm
Complex taxation systems,Divorce finance mediums,Political
risk,Risk of foreign exchange Diversity in physical
environment,Conflicts with host country environment Ethical
conflicts
Opportunities for a multinational firm
Multiplicity of tax system,Diversity of medium of financing,Diversity of
medium of financing,Divercity in currency and institutional
environments,Divercity of physical forces 6. Varied capital markets
Why firms engage in international business / Rason for in- ternational
business
1. To achieve growth/profit
2. To obtain resources
3. Due to domestic market constraints such as marketSaturation,
high cost, demographic trends, small size of theMarket, recession
etc.
4. Competition
5. To enhance the brand image/ reputation 6. Government policies
and regulations
6. Expansion of technologyBusiness is becoming more global
becauseTransportation is quicker Communications enable better
control Transportation and communications costs are more
Favorable for international operations 8. Liberalization of cross-
border movements Lower governmental barriers to the
movement of goods, services, and resources enable companies to
take better Advantage of international opportunities
9. Development of supporting institutional arrangements Institutional
arrangements Such as international trade promotions by and govt
Module 2
Theory of MERCANTILISM
¨ The theory of mercantilism ( 16th to 18th Century) Attributes and
measures the wealth of a nation by The size of its accumulated
treasures. Accumulated Wealth is traditionally measured in terms of
gold, as Earlier gold and silver were considered the Currency of
international trade. Nations should Accumulate financial wealth in the
form of gold By encouraging exports and discouraging
Imports.Mercantilism was implemented by active Government
interventions, which focused on Maintaining trade surplus. National
governments Imposed restrictions on imports through tariffs And
quotas and promoted exports by subsidizing Production.The major
limitation of the theory is that, If all countries follow restrictive policies
that promote exports and restrict imports, it would ultimately result in
a highly restrictive environment for international trade.
Theory of Absolute Advantage¨ Adam Smith (1776) criticized the theory
of Mercantilism, argued that the wealth of a nation does Not lie in
building huge stock of gold and silver in its Treasury, but the real wealth
of a nation is measured by The level of improvement in the quality of
living of its Citizens. Smith emphasized on productivity and Advocated
free trade as a means of increasing global Efficiency. ¨ Free Trade occurs
when a government does not attempt To influence the trade, through
quotas or duties.¨ According to Smith, country’s wealth can be
improved by international trade with other countries either by
importing goods not produced by it and by producing large quantities
of goods through specialization and exporting the surplus. ¨ He
illustrated “the tailor does not attempt to make his own shoes, but
buys them of the shoemaker. The shoemaker does not attempt to
make his own clothes, but use the service of a tailor”
Theory of Comparative Advantage
¨ David Ricardo (1817) put foreword the theory of Comparative
advantage, wherein a country benefits From international trade even
if it is less efficient Than other nations in the production of two
Commodities.¨ Comparative advantage may be defined as the Inability
of a nation to produce a good more Efficiently than other nation, but
its ability to Produce that good more efficiently compared to the other
goods produced the same country.Therefore, a country should
specialize in the Production and export of a commodity in which the
Absolute advantage is higher than that of another Commodity. ¨ See
the given example of maximum output for 2 Countries, producing only
two goods – motor cars And commercial trucks.¨ Using all its resources,
country A can produce 30m Cars or 6m trucks, and country B can
produce 35m Cars or 21m trucks. This is summarized in the table.¨ In
this case, country B has the absolute advantage in Producing both
products, but it has a comparative Advantage in trucks because it is
relatively better at Producing them. Country B is 3.5 times better at
Trucks, and only 1.17 times better at cars. So, Country B will produce
truck and country A will Produce Cars.
Comparative Advantage Vs Absolute Advantage
¨ Absolute advantage is anything a country does more Efficiently than other
countries. For example, Nations that Are blessed with an abundance of farmland,
fresh water, And oil reserves have an absolute advantage in agriculture, Gasoline,
and petrochemicals.
¨ Just because a country has an absolute advantage in an Industry doesn’t mean
that it will be its comparative Advantage. Say, its neighbor has no oil but lots of
farmland And fresh water. The neighbor is willing to trade a lot of Food in
exchange for oil. Now the first country has a Comparative advantage in oil. It can
get more food from its Neighbor by trading it for oil than it could produce on its
Own.
Factor Endowment Theory of International Trade
¨ The earlier theories of absolute and comparative advantage provided
little insight into the of products in which a country can have an
advantage. Heckscher (1919) and Bertil Ohlin (1933) developed a
theory to explain the reasons for differences in relative commodity
prices and competitive advantage between two ¨ According to this
theory, a nation will export the Commodity whose production requires
intensive use of The nation’s relatively abundant and cheap factors of
Production and import the commodity whose Production requires the
use of the nation’s scarce and Expensive factors.¨ Thus, a country with
an abundance of cheap labor Would export labor-intensive products
and import Capital-intensive goods. It suggests that the patterns of
Trade are determined by factor endowment rather than productivity..
Country Similarity Theory of International Trade:
¨ As per the Heckscher-Ohlin theory of factor Endowment, trade should
take place among Countries that have greater differences in their
Factor endowments. Therefore, developed countries Having
manufactured goods and developing Countries producing primary
products should be Natural trade partners. ¨ A Swedish economist,
Staffan B , observed that the majority of trade occurs between nations
that have similar characteristics. The major trading partners of most
developed countries are other developed industrialized countries.¨ It
was found that in natural resource-based industries, the relative costs
of production and factor endowments determined the trade. However,
in the case of manufactured goods, costs were determined by the
similarity in product demands across countries rather than by the
relative production costs or factor endowments.
New Trade Theory of International Trade
¨ International trade enables a firm to increase its Output due to its
specialization by providing a much Larger market which results in
enhancing its returns.¨ The theory helps explain the trade patterns
when The economies of scale are achieved by the Production of specific
products. Decrease in the unit Cost of a product resulting from large
scale Production is termed as economies of scale.¨ Since fixed costs are
shared over an increased Output, the economies of scale enable a firm
to Reduce it’s per unit average cost of production and Enhance its price
competitiveness.
Implications of International Trade Theories
¨ The trade theories provide a conceptual base for International trade
and shifts in trade patterns. This Point out the significance of
developing a Conceptual understanding of the trade theories as it Deals
with the fundamental issues, such as why International trade takes
place, trade partners, Shifts in trade patterns, and determinants of
Competitiveness.
Haberler’s theory of opportunity cost
¨ Opportunity cost refers to the cost of a commodity in terms of other
commodity which must be foregone in order to obtain the first.¨
According to Haberler, the unit cost of production of a commodity are
equal to the value of commodities whose production is forgone in order
to produce it.Let us see how opportunity costs can explain the basis of
and gains from trade,¨ According to Haberler, the ratio of prices in each
country in isolation is a reflection not only of the money costs of
production but more fundamentally of opportunity costs. ¨
Opportunity cost refers to the cost of a commodity in terms of other
commodity which must be foregone in order to obtain the first.
International Product Life-Cycle Theory Of International Trade
¨ International markets tend to follow a cyclical Pattern due to a variety
of factors over a period of Time, which explains the shifting of markets
as well As the location of production. The level of innovation And
technology, resources, size of market, and Competitive structure
influence trade patterns.¨ In addition, the gap in technology and
preference And the ability of the customer in international Markets
also determine the stage of international Product life cycle (IPLC).¨ In
the case of a country that has a large market size, as In case of the US,
India, China, etc., it can support mass Production for domestic sales.
This mass market also Facilitates the producers based in these
countries to Achieve cost-efficiency, which enables them to become
Internationally competitive.¨ However, in case the market size of a
country is too Small to achieve economies of scale from the domestic
Market, the companies from these countries can Alternatively achieve
economies of scale by setting up Their marketing and production
facilities in other cost- effective countri¨ The theory explains the
variations and reasons for change in production and consumption
patterns among various markets over a time period.
¨ (i) Introduction:Generally, it is in high-income or developed countries
that the majority of new product inventions take place
¨ (ii) Growth:As the market begins to develop in other developed
Countries, the innovating firm faces increased International
competition in the target market.
¨ (iii) Maturity:As the technical know-how of the innovative process
Becomes widely known, the firm begins to establish Its operations in
middle- and low-income countries in Order to take advantage of
resources available at Competitive prices.
J. S. Mill’s Reciprocal Demand Theory Of International Trade
¨ The term ‘reciprocal demand’ was introduced by Mill to explain the
determination of the equilibrium Terms of trade.¨ By reciprocal
demand, Mill meant the quantities of Exports that a country would
offer at different Terms of trade, in return of varying quantities of
Imports. In other words, reciprocal demand refers to The intensity of
demand for the product of one Country in the other country.¨
Equilibrium would be established at that ratio of Exchange between the
two commodities at which Quantities demanded by each country of
the Commodity which it imports from the other should be Exactly
sufficient to pay for another.¨ In other words, the actual ratio at which
Commodities are transacted between two countries Depends crucially
upon the strength and elasticity Of each country’s demand for the
product of the Other (reciprocal demand).
Hecksher ohlin theory
The H-0 Theory is also known as the Modern Theory or the General
Equilibrium Theory. This theory focused on factor endowments and
factor prices as the most important determinants of international
trade. The H – 0 is divided in two theorems: The H – 0 theorem, and the
Factor Price Equalization Theorem. The H – 0 theorem predicts the
pattern of trade while the factor-price equalization theorem deals with
the effect of international trade on factor prices. H – 0 theorem is
further divided in two parts: factor intensity and factor abundance.
Factor Abundance can be explained in terms of physical units and
relative factor prices. Physical units include capital and labor, whereas,
relative factor price includes the adjoining expenses like rent, labor
cost, etcetera. On the other hand, factor intensity means capital, labor
or technology, etcetera, any factor that a country has.
Tariff and Non Tariff Barriers
Tariff Barriers ¨ Tariff barriers are duties imposed on goods which
effectively create an obstacle to trade. These barriers are also
sometimes known as import restraints, because they limit the quantity
of goods which can be imported into a country.specfic duty,ad
valorem,combinindon , slide scale,anti dumping, revenue
Non-Tariff Barriers Non-tariff barriers to trade (NTBs) are trade barriers
that restrict imports.
Type of NTB’s (Non Tariff Barriers)
¨ • Quotas • Import Licensing requirements • Proportion Restrictions
of foreign to domestic goods (local content Requirements) •
Embargoes • Antidumping practices and Countervailing duties • Tariff
classifications • Documentation requirements • Fees • Standard
Disparities • testing methods and standards • Packaging, labeling, and
marking Government Participation in Trade •
Implication of trade theory
Comparative Advantage: The concept of comparative advantage,
introduced by David Ricardo, suggests that countries should specialize
in producing goods and services in which they have a lower opportunity
cost compared to other countries. Specialization: Trade theory
emphasizes the benefits of specialization. By focusing on producing
specific goods and services, countries can achieve economies of scale,
improve production efficiency, and drive technological advancements.
Gains from Trade: Trade theory demonstrates that trade allows
countries to benefit from access to a broader range of goods and
services than they could produce domesticallyFactor Endowments and
Factor Prices: Tariffs and Protectionism
Terms of trade (TOT)
¨ Terms of trade relates to international trade is a single Number that
represents the ratio of a particular Country’s exports and imports. ¨
Specifically, terms of trade represents the relationship Between the
price a country receives for its exported Goods and the price it pays for
imported items.¨ In general, terms of trade is considered to be more
Favorable when the price of exports exceeds the price Of imports.¨ In
international economics and international trade, TOT Is calculated by
dividing the value of exports by the Value of imports, then multiplying
the result by 100.¨ The terms of trade is influenced by the exchange
rate Because a rise in the value of a country’s currency Lowers the
domestic prices for its imports but does not Directly affect the
commodities it produces (i.e. its Exports). ¨ The terms of trade effect
equals capacity to import less Exports of goods and services in constant
prices. ¨ An improvement in a nations terms of trade (the Increase of
the ratio) is good for that country in the Sense that it can buy more
imports for any given level Of exports¨ An increase in TOT can mean
the overall welfare of the country has Improved, but not always. This
often depends on the reason for the Change in prices. ¨ The terms of
trade can also be affected by the value of a country’s Currency. When
interest rates rise, currency value generally also Increases.¨
Historically, developing countries were considered to be at a
Disadvantage regarding terms of trade. This is because exports are
More often raw goods or commodities with lower prices than the
Manufactured goods imported from more developed counties.¨ TOT is
also known as the terms of trade index. When commodity Export prices
are compared with manufactured goods import prices, The ratio is
called the commodity terms of trade.
Balance of payments (BOP)¨ Balance of payments (BOP) accounts are
an accounting Record of all monetary transactions between a country
And the rest of the world. These transactions include Payments for the
country’s exports and imports of Goods & services, financial capital,
and financial Transfers.¨ According to Kindle Berger, “The balance of
payments Of a country is a systematic record of all economic
Transactions between the residents of the reporting Country and
residents of foreign countries during a Given period of time“.
Features of BOP
¨ It is a systematic record of all economic transactions Between one
country and the rest of the world. ¨ It includes all transactions, visible
as well as invisible.¨ It relates to a period of time. Generally, it is an
annual Statement.¨ It adopts a double-entry book-keeping system. It
has Two sides: credit side and debit side. Receipts are Recorded on the
credit side and payments on the debit Side.
Components of BOP
1. Current Account Balance: BOP on current account is A statement
of actual receipts and payments in Short period. It includes the
value of export and Imports of both visible and invisible goods.
There Can be either surplus or deficit in current account.
2. Capital Account Balance : It is the difference Between the receipts
and payments on account of Capital account. It refers to all
financial transactions.
3. Overall BOP -: Total of a country’s current and capital account is
reflected in overall Balance of payments. It includes errors and
omissions and official reserve transactions. The errors may be due
to statistical discrepancies & omission may be due to certain
transactions may not be recorded
 An overview of India’s foreign Trade
The Direction of Trade is referred to describe the Statistical analysis of
the set of a country’s trading Partners and their significance in trade. In
short, the set Of countries where the goods are traded to their
Significance on a country’ trade is known as the Direction of Trade.
¨ 1. Direction of India’s Trade- Exports: It is the analysis Of group of
countries to which India exports its goods. There has been an ever-
expanding geographical Diversification of India’s exports since
independence. The number of countries purchasing India’s exports and
The quantity of exports to these countries are Continuously
increasing.¨ Group of Countries from which India imports its goods.
Formerly, there were many countries with whom we had No or
insignificant trade. But, at present we have trade Relations with most
of the countries in the world. There Has been rapid increase in the
imports from almost all The countries with more increase in case of a
few Countries. Prior to our independence our import trade Was
primarily with OECD countries particularly with U.K. ¨ At present,
India’s biggest suppliers are Germany,Belgium, UK, France, Italy,
Netherland, Spain. The Statistical analysis of a country’s product groups
in its International trade is referred to as Composition of Trade. The
analysis carried out for product groups exported is Known as the
Composition of Exports. As a result of Industrial progress during the
planning period, there has Been an increasing diversification of Indian
exports over the Years.¨ Before independence and during the initial
years of Planning, India’s major exports were tea, jute, cotton, textile.
As the economy progressed, a large number of finished Goods, like
capital goods & other engineering items, Chemical, leather, ready
made garments, handicrafts etc., services like IT, Tourism, Medical etc
have entered the Export list.
 Module 3
Components of international Business environment
Ø Economic environment
Ø Political and legal
Ø Cultural
Ø Social
Ø Demographic
Ø Technological and
Ø Natural environment
Economic environment- factors
¨ Nature and level of development of various sectors¨ Economic
resources¨ Size of the economy, Level of Unemployment¨ Economic
system and policies such as Fiscal & Monetary¨ Other policies such as
Industrial, EXIM, FDI, forex etc.¨ Economic conditions¨ Trends in GDP,
Inflation, BOP etc¨ Growth rate , PCI, PPP etc.¨ Nature and trends in
foreign trade¨ Domestic demand and supply conditions
Social Environment
Social classes such as low, middle and high class, Social stratification
based on characteristics such as Age distribution, gender, race, family
size, Education, occupation, wealth etc , Lifestyle Changes, Cultural
aspects, Fads, Diversity, Immigration, Health, Living Standards,
Housing, Attitudes to work and career, Leisure activities, role Of family
members, etc. all are the part of social Environment
Cultural environment
¨ As Mitchell observes, culture is a set of learned core Values, beliefs,
standards, knowledge, morals, and Behaviors shared by individuals and
societies that Determines how an individual acts, feels and views
Oneself and others. ¨ In short, culture is “Ways of Living “, built up by a
Group of human beings, which are transmitted from One generation to
another.¨ A country may be classified as either a high-Context culture
or a low-context culture. The Context of a culture is either high or low
in terms of In-depth background information. Refers to how
Communication is conveyed and perceived
Low-context cultures. Messages are Explicit and clear in the sense
that actual words are Used to convey the main part of information
in Communication
High-context culture¨. The communication may be indirect, And
expressive manner in which the message is Delivered becomes
critical. The verbal part (i.e. Words) does not carry most of the
information, much Of the information is contained in the non-verbal
Part of the message to be communicated.
Political environment
¨ The political environment include the characteristics and policies of
the political parties, the nature of the constitution and government,
political decisions encompassing the economic and business policies
and regulations are among most important factors.In fact, important
economic policies are indeed often political decisions. They include,Ø
Industrial policyØ Technology and FDIØ Fiscal policyØ Foreign trade
policy ( EXIM)Political risks ¨ The political environment of a country do
not remain static. While there is no radical differences in the
philosophies of major political parties in some countries, the situation
Legal/ Regulatory environment
¨ There are variations between countries in policies and Regulations
regarding the conduct of the business. A Foreign enterprise, therefore
has to ensure that it fully Abides by local laws and regulations.¨ Local
laws may determine product characteristics, Packaging and labeling,
guarantee terms, pricing and Promotion etc. Many governments
specify standards for Products to be marketed in the country.
Promotional Activities are subject to government controls in almost
Every country.¨ Eg: In Canada, labeling must be provided both in English
and French.
Regulations related International Business
¨ Disclosures: ingredients, shelf life, adverse effects ¨ Environmental
laws : Eg. In case of packing material¨ Product liability: Eg.
Compensation for damage¨ Product standards: Eg. Quality, safety, ISO
etc.¨ Packing and labeling: eg. Packing material, languages Used for the
labelling¨ Price regulation : eg regulation on M R P¨ Promotion
regulation: Eg. Regulations on Advrtg¨ Regulation on other trade
practices ETC.
Technology envt.
¨ Technology has a huge impact on lifestyles, demand And
consumption patterns and the economy as a whole. Technology is one
of the important factors considered By the world economic forum to
evaluate global Competitiveness of nations. ¨ These changes are driven
by globalization of business As well as by the revolution in information,
Communication, & transportation technology¨ Nations now have
powerful technology in their hands, Fundamentally transforming the
way in which business is Conducted around the globe
DEMOGRAPHIC ENVIRONMENT
¨ Demography: Is the study of human populations in Terms of size,
density, location, age, gender, race Occupation, and other statistics.¨
Demography is very important because it involves People, and people
make up business and markets¨ The world population is growing at an
explosive Rate. This population explosion has been of major Concern
to governments and business.¨ The less-developed regions of the world
currently Account for more than 70% of the world population.¨ The
explosive world population growth has major Implications for business
due to Growing human Needs to satisfy and Growing market
opportunities.It is good to keep close track of demographic trends And
developments in the international markets
NATURAL ENVIRONMENT
¨ Involves objects and conditions such as atmosphere, Weather, land,
water, vegetation, and other living Organisms that surround the
business.¨ Environmental concerns have grown steadily during The
past few decades. Many companies have Assumed a responsible
behavior towards the natural Environment because consumers are
demanding
Issues and concerns over natural Environment
¨ Water scarcity is a problem for many countries.¨ Renewable
resources, such as forests and food, have to be used wisely ¨ More of
the world’s limited farmable land is being developed for urban Areas.
Shortages of raw materials. ¨ Non-renewable resources, such as oil,
coal and various minerals, Increased Cost of energy cause a serious
problem¨ The price of the renewable resources is higher every day.¨
The search for other sources of energy is a priority nowadays.¨
Contamination is being battled, Caps on carbon emissions
Opportunities and threats for Indian Companies in foreign market
¨ Opportunities
Ø H R : low cost technical and scientific human resource Available in
IndiaØ Growing domestic markets : good position in the Indian Market
makes the company to go international, easily.Ø Improving image of
Indian products in international MarketØ N R I’s : They are resourceful
in terms of capital, skills And experienceØ Globalization, better
technology, and increasing world Trade
Threats to Indian companies in foreign Countries¨ Complexity in
government policies and procedures, Political and cultural problems¨
Indian products are perceived as low quality¨ Technological, lack of
capital investment¨ Raw material ¨ Lack of experience ( for small firms
)¨ R & D problems¨ Tough competition

Problems and prospects of foreign

Problems
Companies in India¨ Poor infrastructure¨ Government policies¨
Corruption¨ Weak intellectual Property rights ( IPR)¨ Trade barriers¨
Political and cultur
Prospect s
¨ Upgraded industrial Policies, large market¨ High quality H R¨ English
speaking People¨ Low wage/ salary¨ Removal of entry Barriers¨ Liberal
policy on FDI
Levels of economic integration( forms custom association)
¨ It refers to the agreements between groups of Countries in a
geographic region to reduce and Remove, tariff and non-tariff barriers
to the free Flow of goods, services and factors of production Between
each other.
Free Trade Areas
¨ A Free Trade Area (FTA), also known as Free Trade Zone (FTZ), is a
designated area that eliminates Traditional trade barriers, such as
tariffs, some kind Of taxes and fees and minimizes bureaucratic
Regulations.¨ The goal of a free trade area is to enhance global Market
presence of the country or location by Attracting new business and
foreign investments. Objectives of FTA¨ to attract foreign direct
investment¨ to decrease unemployment¨ to support economic reform
strategies by Developing and diversifying exports¨ to make available
more goods and services¨ to practice new approaches to foreign direct
Investment and to policies related to law, land, Labor, and the pricing
of goods
Customs union¨ A customs union abolishes most protectionism inside
the union And sets up a common external tariff system with regard to
Outside countries. ¨ Includes common non-tariffs policy as well. It is
fairly a higher level of economic integration, but does not go So far as
to harmonize the economic policy within the Negotiated region.
Prefreancal trading areaPreferential Trade Area (PTA) is a trading bloc
or regional trade agreement where member countries agree to reduce
or eliminate trade barriers (such as tariffs and quotas) for certain goods
and services traded among themselves. Unlike Free Trade Areas (FTAs)
or Customs Unions,
Common Market
• Like a customs union, the theoretically ideal common Market has no
barriers between the members, but Have a common external trade
policy for the non- members. But, a much closer union is expected in a
Common market than in a customs union.• Factors of production also
are allowed to move freely Between member-countries. • Thus labor
and capital are free to move, as there are No restrictions on
immigration, emigration, or cross- border flows of capital between
member-countries. • The European Economic Community (European
Union Before 1993) was a common market¨ Establishing a common
market demands a significant degree Of harmony and cooperation on
fiscal, monetary, and Employment policies. ¨ Achieving this degree of
cooperation has proven very difficult.¨ But, under certain crisis
situations, such as massive Unemployment or foreign exchange
shortages, an individual Nation may raise barriers to the free flow
between itself and The other members. Examples for common market
are: Central American Common Market ,CACM, (Costarica, Honduras,
etc.)
Economic union
• An economic union demands closer economic integration And
cooperation than a common market. • Involves the free flow of
products and factors of production Between member-countries and
the adoption of a common External trade policy. • A full economic
union also requires a common currency, Harmonization of the
member-countries tax rates, and a Common monetary and fiscal policy.
• such a high degree of integration demands a coordinating
Bureaucracy and those member-countries sacrifice
Significant amounts of their national identity to that Establishment. •
The present EU could be considered as an economic union.
Bilateral and Multilateral Trade Agreements

¨ Bilateral Trade Agreement : Bilateral (BTA) signed between Two

countries. BTA give preference to certain countries in Facilitating trade
and investments by reducing or eliminating Tariffs, import quotas,
export restraints and other barriers. Eg: China -Sri Lanka Rubber Rice
Agreement
¨ Multilateral Trade Agreements : A trade agreement signed Between
more than two countries They are usually intended To lower trade
barriers between participating countriesEg: North American Free Trade
Agreement (NAFTA), which has Now terminated and formed a new
one, United States Mexico Canada Agreement, (USMCA)
Merits of trade agreements
Removal of disputes ,Expanded Markets for Exports,Specialization of
Labour and Capital ,Foreign employment and economic
growth,Increased production efficiently & effectively,Consumer
satisfaction
Demerits of trade agreements
Removing a trade barrier on a particular good Hurts the shareholders
and employees of the Domestic industry who produces that good
Increased domestic economic instability from International trade
cycles, as economies become Dependent on global markets With the
removal of trade barriers, structural Unemployment may occur in the
short term Pollution and other environmental problems
What is the World Trade Organization ?
The World Trade Organization is ‘member-driven’, With decisions
taken by General agreement among All member of governments and it
deals with the Rules of trade between nations at a global or near-Global
level. ¨ The WTO agreements are lengthy and complex Because they
are legal texts covering a wide range Of activities.
WTO: The Beginnings/ History¨ The World Trade Organization (WTO)
came into Existence on January 1st 1995. Location Geneva, Switzerland¨
164 members since 29th July 2016 and 23 Observer members¨ It was
the outcome of the lengthy (1986-1994) Uruguay Round ( UR ) of GATT
( General Agreement on Tariffs and Trade) negotiations.¨ The WTO is
essentially an extension of GATT
Few important agreements of WTO¨ Agreement on Anti-Dumping¨
Agreement on Trade Related Investment Measures (TRIMs)¨
Agreement on Trade Related Aspects of Intellectual Property Rights
(TRIPS)¨ General Agreement on Trade in Services (GATS)¨
Understanding on Dispute Settlement (DSU)
Why WTO?( Objectives/ Functions)
§ To make rules and regulations for multilateral (involving three or
more participants) trade Agreements. § To arrange meetings for
negotiations for the Member nations in regard to their multilateral
trade Relations§ To provide a framework for implementation of the
Results arising out of the conference
Impact on India ( favorable )¨ Growth in merchandise exports: The
establishment Of the WTO has increased the exports of Developing
countries because of reduction in tariff And non-tariff trade barriers. ¨
Growth in service exports: The WTO introduced the GATS (general
Agreement on Trade in Services) That proved beneficial for countries
World Bank
¨ Formation: July 1944; President: Jim Yong Kim¨ Headquarters:
Washington, D.C., United States¨ Membership: 189 World Bank is an
international organization committed to providing financing, advice
and research to developing nations to aid their economic
advancement. These loans are for education, health, infrastructure,
communications and many other purposes. Unlike other financial
institutions, WB does not operate for profit
OBJECTIVES
1. To provide long-run capital to member countries for economic
Reconstruction and development.
2. To induce long-run capital investment for assuring Balance of
Payments (BoP) equilibrium and balanced development of
international Trade.
3. To provide guarantee for loans granted to small and large units
and Other projects of member countries.
4. To ensure the implementation of development projects so as to
bring About a smooth transference from a war-time to peace
economy.
FUNCTIONS
¨ Granting reconstruction loans to war devastated countries. ¨ Granting
developmental loans to underdeveloped countries.¨ Providing loans to
governments for agriculture, irrigation, power, transport, water
supply, educations, health, etc¨ Providing loans to private concerns for
specified projects.¨ Promoting foreign investment by guaranteeing
loans provided by other organizations.¨ Providing technical, economic
and monetary advice to member countries for specific project. ¨
Encouraging industrial development of underdevel
CRITISISM Of world bank
¨ Promoting Washington consensus and allow only big Corporations to
flourish¨ Ignore the environmental and social impact of Projects¨ Cause
high debt amongst the countries¨ Working with private sector will lead
to decrease inThe role of the state as primary provider.¨ Decisions are
made and policies implemented by Leading industrialized countries
The IMF (International Monetary Fund)
¨ The IMF promotes international monetary cooperation and provides
policy advice and capacity development support to help countries build
and maintain strong economies. ¨ The IMF also makes loans and helps
countries design policy programs to solve balance of payments
problems when sufficient financing on affordable terms cannot be
obtained to meet net international payments. ¨ IMF loans are short and
medium term and funded mainly by the pool of quota contributions
that its members provide.
Key IMF FunctionsThe IMF supports its membership by providing:¨
policy advice to governments and central banks based on Analysis of
economic trends and cross-country experiences; ¨ research, statistics,
forecasts, and analysis based on tracking Of global, regional, and
individual economies and markets; ¨ loans to help countries overcome
economic difficulties , fight Poverty in developing countries; and ¨
technical assistance and training to help countries improve The
management of their economies.
Objectives of IMF¨ To promote international monetary cooperation ¨
To facilitate the expansion and balanced growth of International Trade
¨ To promote exchange rate stability¨ To make its resources available
to its members who Are experiencing BOP problems
BRICS Bank (New Development Bank, NDB)
¨ The New Development Bank (NDB), formerly referred To as the BRICS
Development Bank, is a multilateral Development bank established by
the BRICS Countries.(Brazil Russia India China and South Africa )¨
According to the Agreement on the NDB, “the Bank shall Support public
or private projects through loans Guarantees, equity participation and
other financial Instruments. Moreover, the NDB “shall cooperate With
international organizations and other financial Entities, and provide
technical assistance for projects to Be supported by the Bank¨
Headquarters Shanghai, China, President: K V Kmath
Objectives¨ Help in development plans through projects that are
Socially, environmentally & economically sustainable. ¨ Promote
infrastructure and sustainable development Projects in member
countries.¨ Establish global partnerships with other multilateral
Development institutions, such as world bank ¨ Build a balanced
project portfolio giving a proper Respect to their geographic location,
financing Requirements and other factors,An alternative to financial
institutions like the International Monetary Fund and the World Bank
BRICS: Characteristics
¨ BRICS represent 3 billion people or approximately 46% of the world
population & 25% of the world’s Land coverage¨ Five Nations GDP of
US 16.039 trillion, Approximately 20% of the gross world product &
US$4 trillion reserves ¨ China and India-Suppliers of manufactured
goods And services ¨ Brazil, Russia, South Africa- Suppliers of Raw
Materials
Module 4
International business location
refers to the geographic area where a company chooses to establish
its operations, offices, production facilities, or distribution centers in
foreign countries. The choice of location can significantly impact a
company’s success in the international market. There are various
factors that influence the decision-making process for selecting an
international business location, as well as factors that may restrict or
limit certain locations
Factors Influencing International Business Location:Market Access: Companies
often choose locations close to their target markets to reduce transportation
costs, enhance supply chain efficiency, and ensure timely delivery of goods and
services to customers.★Political Stability: A stable political environment reduces
the risk of sudden policy changes, nationalization of assets, or other forms of
political instability that could negatively impact business operations.★Economic
Factors: Favorable economic conditions, such as low taxes, business-friendly
regulations, access to skilled labor, and robust infrastructure, attract companies
to specific locations.★Labor Force: ★Transportation and Logistics: ★Proximity to
Suppliers: Being close to suppliers can reduce lead times and inventory costs,
improving overall supply chain management.★Cultural and Language Factors:
Incentives and Subsidies:
Factors Restricting International Business Location:Legal and Regulatory Barriers:
Different countries have varying regulations, trade barriers, and legal
requirements that may limit or complicate a company’s ability to establish
operations in certain locations.Political Instability: Countries with political
turmoil, civil unrest, or high levels of corruption may be perceived as risky
locations for businesses.Economic Conditions: Economic downturns or uncertain
economic prospects in a particular country can discourage foreign
investment.Tariffs and Trade Barriers: High import tariffs and trade barriers can
make it challenging for companies to access certain markets or establish
operations in specific countries.Cultural Differences:
Strategy development in international business involves the formulation and
implementation of plans and actions to achieve organizational goals and
objectives in a global context. It requires a careful analysis of the external and
internal factors that can impact the company’s operations in different countries.
Here are the key steps involved in the
process:
Market Research: Conduct thorough market research to understand the target
markets, consumer preferences, cultural differences, regulatory frameworks, and
potential competitors in each country you plan to operate in.SWOT Analysis:
Perform a SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats) to
identify the company’s internal strengths and weaknesses as well as external
opportunities and threats in the global market.Define Objectives: Set clear and
specific objectives for the international expansion. These objectives should align
with the overall corporate goals and provide a clear direction for the international
strategy.Market Entry Strategy: Competitive Advantage: Identify and leverage
the company’s competitive advantages that can help differentiate it from
competitors in the global market.Risk Assessment and Mitigation: Evaluate
potential risks associated with international expansion, including political,
economic, legal, and cultural risks. Develop risk mitigation strategies to minimize
the impact of these risks.Organizational Structure: Determine the appropriate
organizational structure and resource allocation for managing international
operations effectively.Adaptation vs. Standardization: Decide on the level of
adaptation or standardization of products, services, and marketing strategies to
suit local market preferences and needs.Global Supply Chain Management:
Develop a robust global supply chain to ensure efficient and cost-effective
sourcing, production, and distribution of goods and services across
borders.Regulatory Compliance: Comply with international trade laws, customs
regulations, tax laws, and other legal requirements in each target country.Human
Resource Management: Develop strategies for managing a diverse international
workforce, including talent acquisition, training, and cross-cultural
management.Monitor and Evaluate: Continuously monitor the performance of
the international strategy and make necessary adjustments based on market
dynamics and changing conditions.
GLOBAL EXPANSION PLAN
A corporate global expansion strategy can be thought of as a corporation’s formal
plan for expanding the reach of its operations into multiple countries throughout
the world. To be “global” a company must extend its reach to all major continents
across the globe, not just one or two other countries. Corporations use a number
of tactics to achieve their global expansion plans, including exporting goods,
licensing, forming strategic partnerships, acquiring businesses and building new
facilities in multiple countries.( Strategis: international, multidomesticl,global,
tranceNational
International business risk

International business risk may be defined as the possibility of loss caused by

some unfavorable or undesirable event in international business operations.
Changes in international environment and difference in the economic systems,
Political environment and cultures of different countries are the main causes of
international business risks. The degree of such risk differs from one company
to another company and from one country to another country,Types risks
POLITICAL AND LEGAL RISKS,ECONOMIC RISK,EXCHANGE RISK,CREDIT
RISK,TRANSPORT RISK,MARKET RISK,CULTURAL RISK
Cost-Benefit Analysis
Before making a new foreign managers should conduct a cost-benefit analysis as
a means of evaluating all the potential costs and revenues.• The outcome of the
analysis will determine whether the project is financially feasible or if another
project should be selected.• A cost-benefit analysis is a process by which
businessDecisions are analyzed and the benefits are calculated”Cost-Benefit
Analysis”The first step in the process is to compile a comprehensive list of all the
costs and benefits associated with the project or decision. Costs should
include direct and indirect costs, intangiblecosts, opportunity costs and the cost
of potenInternationa
Firm as a value chain
• The value chain refers to management expert and author Michael Porter's
concept that shows the systematic process of products as they move through all
value generating activities from initial development through final sale and
service. Porter outlined the value chain in his book Competitive Advantage in
1985.Firm as a value chainValue: The value is the total amount (i.e. total revenue)
that buyers are willing to pay for a firm's products.
The difference between the total value (or revenue) and the total cost of
performing all of the firm's activities provides the margin (profit)The value chain
is a tool developed by Dr. Michael E Porter of Harvard business school

Business entry strategy

1. Exporting:Direct Exporting: Selling products directly to customers in foreign
markets or using agents or distributors. Indirect Exporting: Utilizing
intermediaries like trading companies or export management companies
to reach foreign markets.Advantages: Low financial risk, minimal
investment required, allows testing of foreign markets, and maintains
control over production and marketing.Disadvantages: Limited market
access, dependence on local distributors, higher transportation costs, and
potential trade barriers.
2. Licensing and Franchising:Licensing: Allowing a foreign entity to use the
company's intellectual property, technology, or brand for a fee or royalty.
Franchising: Granting a franchisee the right to operate a business under the
company's brand, following its established modelAdvantages: Low
financial risk, quick market entry, access to local market knowledge and
distribution channels, and reduced need for local resources,Disadvantages:
Limited control over operations, potential for brand dilution, reliance on
the licensee/franchisee for performance, and possible conflicts over
intellectual property rights.
3. Joint Ventures and Strategic Alliances:JoJoint Venture: Collaborating with
a local company to create a new entity and share resources, risks, and
profits.Strategic Alliance: Forming a partnership with a foreign company to
pursue mutual goals without creating a new entit Advantages: Shared
investment and risks, access to local expertise and resources, potential for
 faster market penetration, and easier adaptation to local
regulations.Disadvantages: Potential for conflicts between partners, lack of
full control over operations, and challenges in managing different
corporate cultures.
4. Acquisitions and Mergers:Advantages: Rapid market entry, immediate
access to existing customer base and distribution networks, and acquisition
of local knowledge and expertise.Disadvantages: High acquisition costs,
cultural integration challenges, potential resistance from existing
employees or customers, and difficulty in assessing the true value of the
target company.

5. Greenfield Investment:Building new facilities, production plants, or offices

from scratch in the target country.Advantages: Complete control over
operations and business model, ability to build operations from scratch
according to company standards, and long-term potential for high
returns.Disadvantages: High initial investment, time-consuming setup
process, exposure to market risks, and potential political or regulatory
challenges.

6. Global strategic partnership is a collaborative relationship between two or

more companies from different countries or regions that join forces to
achieve mutual strategic objectives. These partnerships are formed to
leverage each other’s strengths, resources, and expertise to create a
competitive advantage in the global market. Global strategic partnerships
can take various forms and can be established between companies in the
same industry or across different industries.

7. Strategic alliances are cooperative agreements between two or more

companies that come together to achieve common strategic objectives.
These partnerships are formed to leverage each other’s strengths,
resources, and capabilities while sharing risks and rewards. Strategic
alliances can take various forms and are typically based on mutual interests
and complementary goals. They can be short-term or long-term
collaborations and are often seen in various industries and sectors. Here
are some key features and benefits of strategic alliances:
International Finance Strategies:
Foreign Exchange Risk Management,imPlement hedging techniques and
financial instruments to mitigate currency exchange rate fluctuations, reducing
the impact on financial performance.Capital Budgeting and Investment Analysis:
Evaluate potential international projects using appropriate risk-adjusted metrics
and consider country-specific factors to make informed investment
decisions.Working Capital Management: Optimize the management of accounts
receivable, accounts payable, and inventory to ensure sufficient liquidity and
minimize currency exposure.Transfer Pricing: Set appropriate transfer prices for
intra-company transactions between subsidiaries in different countries,
complying with tax regulations and optimizing profitability.International Tax
Planning: Strategically structure international operations to optimize tax
efficiency while complying with relevant tax laws in different
jurisdictions.Financial Reporting Compliance: Adhere to international accounting
standards and reporting requirements in each country of operation to maintain
transparency and credibility.
International HR Strategies:
Cross-Cultural Training: Provide training and support for employees working in
different countries to enhance their cultural awareness and sensitivity, fostering
effective collaboration.Global Talent Acquisition: Recruit talent with diverse
cultural backgrounds and language skills, aligning with the company’s
international expansion and market entry strategies.International Assignment
Management: Develop comprehensive programs to support employees on
international assignments, addressing practical and cultural chStrategie
Succession Planning: Identify and groom potential leaders from different
countries to ensure continuity and effectiveness in global
operations.Performance Management: Implement performance evaluation
processes that consider the specific challenges and opportunities in each
international location.Diversity and Inclusion Initiatives: Promote a diverse and
inclusive work environment that respects and values differences, fostering a
sense of belonging among employees.
International Marketing Strategies
Market Research and Segmentation: Conduct extensive market research to
understand the unique characteristics and preferences of customers in different
international markets.
Product Localization: Adapt products and services to meet the specific needs and
preferences of consumers in different countries, accounting for cultural,
regulatory, and linguistic differences.
Distribution Channel Management: Establish effective distribution channels
tailored to the requirements of each international market, considering logistics
and local partnerships.
Integrated Global Marketing Communication: Develop consistent and cohesive
messaging that aligns with the brand’s identity while being sensitive to cultural
nuances.Country-Specific Promotions: Create marketing campaigns that resonate
with the local audience, incorporating elements that are relevant to each market.
Digital Marketing Strategies: Leverage digital platforms and social media to reach
target audiences across borders efficiently.
Foreign Direct Investment (FDI):
Foreign Direct Investment refers to investments made by individuals or entities
from one country into tangible assets, such as factories, facilities, real estate, or
businesses, located in another country. FDI involves a long-term interest and a
degree of management control over the invested assets, giving the investor a
significant say in the operations and strategic decisions of the foreign enterprise.
Foreign Financial Investment (FFI):
Foreign Financial Investment refers to investments made by individuals or
institutions from one country into financial assets of another country. These
financial assets can include stocks, bonds, government securities, mutual funds,
and other financial instruments. FFI involves the purchase of financial assets in
the foreign country’s financial markets, but it does not provide the investor with
direct control or management influence over the companies or assets in which
they invest.
Module 5

Organization Structure in International Business

Organization Structure
It’s the formal arrangement of roles, responsibilities and relationships
within an organization. It’s a powerful tool to implement strategy.
Centralization V/S Decentralization
Centralization is the degree to which high level managers, usually
above the country level, make decisions and pass them over to lower
levels for implementation.• Decisions made at foreign subsidiary level
are considered decentralized, and those made at HQ considered to be
centralized.
Centralization- characteristics
• Decisions made by senior level managers at HQ. • Facilitates
coordination of core values• Ensures decisions are consistent with
strategic objectives.• Senior executives have authority to direct major
change.• Avoids duplication of activities• Reduces the risk of making
wrong decisions at low level • Ensures consistent dealings with all
stakeholders
Decentralization- characteristics
• Decisions made by employees, who are very close to the
situationEmployees directly deal with customers, markets, etc •
Motivates employees to exercise major organizational changes
• Enables more flexible response to environmentalChanges • Permits
to fix better accountability
Types of Organizational Structures
1. Functional Structure
2. International Division Structure
3. Product Division Structure
4. Geographic (Area) Division Structure 5. Matrix Structure
Functional Structure, suitability and
• Specialized jobs are grouped according to traditional business
functions.• Ideal for companies having a narrow product line, sharing
similar technology.Helps maximize of scale Highly efficient.Group
specialized jobs according to traditional business function Popular
among companies with narrow product linedHelps managers to
maximize scale economies by arranging work Responsibilities and
relationship in most efficient format.Highly efficient
INTERNATIONAL DIVISION STRUCTURE
Groups units, product, customers or geographic regions. Groups each
international activity on its own• Creates a critical mass of
international expertise Quick response to environmental changes
Prevents duplication of function Often struggles to get resources from
domestic resources Frustrates ability to exploit economies of scale
PRODUCT DIVISION STRUCTURE
Popular among international companies with diverse products,Similar
products are grouped under one product Suited for global strategy•No
formal means by which one product division can leam from
anotherInternational expertise. There may be duplicate function
and activities among division
 MATRIX STRUCTURE
Tries simultaneously to Deal with pressures of global integration and
local responsiveness Institutes overlap among functional and divisional
forms It makes each group share responsibility for foreign operation
and enables each group exchange information and resources more
willingly
Divisional organisation structure
in which various departments are created on the basis of products,
territory or region, is called a divisional structure. Each unit has a
divisional manager, who is responsible for performance and has
authority over their division.
Global Business Planning System:
A global business planning system could be an integrated approach to
strategizing, setting goals, and making decisions for businesses that
operate on an international scale. Such a system would take into
account various factors, including market analysis, international
regulations, cultural considerations, supply chain management, and
financial planning across multiple countries and regions. This type of
planning system aims to ensure that businesses can effectively expand
and compete in the global market.
Global Business Organizing System:
A global business organizing system would likely refer to a structured
and efficient way of managing the resources, processes, and workforce
of a multinational organization. This system may encompass methods
for coordinating and optimizing operations across different countries
and time zones, fostering effective communication,
An embargo
is a government-imposed prohibition or restriction on trade, economic
transactions, or other forms of commercial activity with a particular
country, group of countries, or specific entities. It is a measure taken to
exert economic and political pressure on the targeted entities and
achieve specific objectives or policy goals.The primary purpose of an
embargo is to isolate the target country or entities by cutting off or
limiting their access to international markets, resources, and financial
systems. This can have significant economic consequences for the
affected entities, as it restricts their ability to import and export goods,
access foreign investments, or conduct financial transactions with the
imposing country or countries.

Green filed investment

Seems there might be a typo or misunderstanding in your question.
“Green filed investment” does not appear to be a recognized term or
concept in the context of investments or business activities.Based on
the context of your previous questions and our discussions, I believe
you may be referring to “greenfield investment,” which I explained
earlier in our conversation. Greenfield investment is a form of foreign
direct investment (FDI) where a company or investor establishes a new
business operation or facility from the ground up in a foreign country.
This involves building new facilities, plants, or branches rather than
acquiring existing businesses or assets in the foreign market.
If you meant something else or have a different term in mind, please
provide more context or clarify your question, and I’ll be happy to assist
further.
Domestic vs international business
Scope:Domestic: Refers to activities, events, or situations that occur
within the borders of a single country.International: Relates to
activities, events, or situations that involve interactions between two
or more countries.
Applicability:Domestic: Applies to matters that concern only the
internal affairs of a.single country and are governed by its laws and
regulations.International: Applies to matters that involve multiple
countries and may be subject to international laws, treaties, or
agreements.
Trade and Business:Domestic: Domestic trade and business activities
involve transactions and economic interactions that take place within
a country’s boundaries.International: International trade and business
activities involve the exchange of goods, services, and investments
across national borders.
Legal Jurisdiction:Domestic: Legal jurisdiction in domestic matters is
limited to the laws and courts of the individual country.International:
Legal matters involving multiple countries may fall under the
jurisdiction of international law, international courts, or arbitration
mechanisms.
Government Authority:Domestic: The government of a single country
has authority over domestic matters and can enact laws and
regulations that apply within its borders.International: International
matters often require coordination and cooperation between the
governments of multiple countries, and decisions may be made
through negotiations and treaties.
Language and Culture:Domestic: Within a single country, people
typically share the same language and cultural norms.International:
Different control mechanism adopt by global business
Standard Operating Procedures (SOPs): SOPs are detailed written
instructions that outline the steps and guidelines for performing
specific tasks and activities within the organization. They help ensure
consistency and uniformity in processes and operations across
different locations.
Performance Metrics and Key Performance Indicators (KPIs): Global
businesses use performance metrics and KPIs to measure and track the
performance of various business units, departments, and processes.
These metrics provide insights into the company’s performance,
identify areas for improvement, and facilitate data-driven decision-
making.
Budgeting and Financial Controls: Companies set budgets for different
business units and projects to allocate resources effectively and
monitor expenditures. Financial controls, such as expenditure
approvals and cost controls, are put in place to ensure that financial
resources are used efficiently and in line with the company’s financial
goals.
Management Information Systems (MIS): MIS is a system that collects,
processes, and presents relevant information to management for
decision-making. Global businesses use MIS to access real-time data on
various aspects of their operations, including sales, inventory, supply
chain, and financials.
Risk Management: Global businesses implement risk management
strategies to identify, assess, and mitigate potential risks associated
with international operations. This may include political, economic,
legal, and operational risks, among others.
optacls to globalization of indian companies
Market Research and Entry Strategy: Conduct comprehensive market
research to identify potential markets with demand for the company’s
products or services. Choose an appropriate entry strategy, considering
factors like cultural differences, regulatory requirements, and
competitive landscape.
Partnerships and Alliances: Consider forming strategic partnerships or
alliances with local companies in the target markets. Partnering with
established local entities can provide valuable insights, access to
distribution networks, and reduce entry barriers.
Acquisitions and Mergers: Acquisition of existing businesses in target
markets can provide immediate access to customer base, technology,
and market share. Mergers with compatible companies can create
synergies and strengthen competitive positioning
Exporting and Licensing: Begin global expansion through exporting
products or licensing intellectual property. This approach allows
companies to test international markets with lower upfront
investments.
Investing in R&D and Innovation: Invest in research and development
to develop products and services that cater to global needs. Innovation
can enhance the competitiveness of Indian companies in international
markets.
Cultural Understanding and Localization: Foster cultural understanding
within the organization to adapt products, marketing, and operations
to local preferences. Localization can enhance customer acceptance
and market penetration.
PIGGYBACKING
Piggyback is a form of distribution in foreign markets in which a SME
company (the “rider”), deals with a larger company (the “carrier”)
which already operates in certain foreign markets and is willing to act
on behalf of the rider that whishes to export to those markets. This
enables the carrier to utilize fully its estab- lished export facilities (sales
subsidiaries) and foreign distribu- tion. The carrier is either paid by
commission and so acts as an agent or, alternatively, as an independent
distributor buying the products. Piggyback marketing strategies are
typically used for products from unrelated companies that are non-
com- petitive (but related) and complementary (allied).
Mintzberg configuration
The Mintzberg configuration, also known as the Mintzberg
organizational configurations, is a management theory developed by
Henry Mintzberg, a renowned management scholar. The theory
categorizes organizations into various configurations based on their
design, structure, and key coordinating mechanisms. Mintzberg
identified five primary organizational configurations, each with its
unique characteristics and management approaches. These
configurations are:Simple Structure:Description: Simple structures are
small, entrepreneurial organizations with direct, informal
communication and minimal bureaucracy. Decision-making is
centralized, and the organization’s founder or top leader plays a
significant role in decision-making.Characteristics: Informal
communication, flat hierarchy, centralized decision-making, flexible,
and quick response to changes in the environment.