INTERNATIONAL

BUSINESS
For, III Semester BBM
 PAPER 3.1: INTERNATIONAL BUSINESS

Sl.N
CHAPTER NAME TOPICS
o
Introduction to International business—Meaning—Objectives and importance—Problems;
International
Factors affecting international business—Political factors—Socio-economic—Cultural —
1. Business
technological and legal; Modes of Entering International Business (meaning only); Stages
(16 Hours)
of International Business.
MNCs and Definitions: Distinction among Indian Companies; MNC, Global Companies and TNC;
International Organizational Structure of MNCs and their Merits and Demerits; MNCs in India;
2.
Business Globalization–methods and Essential conditions for Globalization— impact of globalization
(10 Hours) on India.

Information required; Sources of Information International Marketing Information System

International
and Marketing Research. International Marketing - nature compared with domestic
Marketing &
3. marketing. Benefits from international marketing. Major activities - market assessment,
Intelligence
product decisions, promotion decisions, pricing decisions, distribution decisions;
(14 Hours)
International product life cycle

International
Human IHRM and domestic HRM compared; Sources of global recruitment; Global selection
4. Resource approaches; Need of induction and orientation for international employees; International
Management adjustment stages. Need & importance of training for global jobs.
(10 Hours)
Regional Integration between countries—Levels of integration— Impact of Integration. Regional
Integration and trading blocks; WTO—Formation, Objectives, function, difference between GATT and
5.
Foreign trade. WTO; EU—Formation, Objectives, function; EXIM Trade— Process of imports and exports
(10 Hours) trade.

 Aswathappa. K. (2012). International Business. Tata McGraw Hill

 Subba Rao (2014). International Business. Himalaya Publishers
 NATURE OF
INTERNATIONAL
BUSINESS
Chapter 1
Basic Elements
Trade Business Commerce

• Trade refers to mere • The regular production • commerce refers not

exchange of goods. or purchase and sale of only buying and selling
goods undertaken with of goods, but also other
• Trade involves the
an objective of earning activities, such as
exchange of goods,
profit and acquiring transport, insurance,
services or currency.
wealth through the warehousing, banking
satisfaction of human and advertising, which
wants. helps buying and selling
of goods.
Making Sense of International Marketing
• No country in today’s era can be totally self-sufficient
• a country is said to be self-sufficient when it does not need to
trade with other countries and able to produce everything that
the people need inside the country.
• A common reason for a country not being self-sufficient is non-
availability of all favorable conditions needed to produce goods
and services.
• Thus it is very difficult for countries to aim achieving a greater self-
sufficiency and by not pursuing self-sufficiency, the country faces
the question of buying the requirement from other nations and
this result in International Trade.
Conceptual understanding of
INTERNATIONAL BUSINESS
• IB refers to all those business activities which involve cross border
transactions of goods, services, resources between two or more
nations.
• Transaction of economic resources include capital, skills, people etc.
for international production of physical goods and services such as
finance, banking, insurance, construction etc.

International Trade International Business International Marketing

International trade is a International business is a International marketing is a

narrow term which involves much broader concept and process of meeting the
exchange of goods or not only includes needs of global customers by
services across international international trade but also creating and delivering and
borders or territories. E.g. covers economic exchanging offerings that
Exports and imports of goods transactions across countries have values for global
and services. conducted for managing customers.
and carrying out business
operations. E.g. Outsourcing,
Licensing and technological
transfers.
Nature of International Marketing
1. Information & technology Driven
2. Bound by International restrictions
3. Highly prospective markets
4. Complexity in operations
5. Diversified Markets & Segmented
6. Supremacy of Big Corporation
7. Subject to Diplomatic relations
8. Severe competition
9. Large scale operations
10. Interconnectedness among countries
 International Vs. Domestic Business
• Area of Operation
• Degree of Competition
• Customer Characteristics
• Mobility Factors
• Economic Conditions
• Cultures
• Natural & Geographic conditions
• Political Circumstances
• Law & Regulations
 To summarize, doing business internationally is not the
• Benefits same as doing business at home on account of
• Costs variations in business practices, political systems,
varied business regulations and policies, use of
• Documentation different currencies.

 Risks also arise due to different market characteristics.

Therefore differences in between international and
domestic business are not just substance but also
procedural.
Forms of International Business

Inter-firm
Firms
Intra-firm
Trade

Bilateral

Goverment Unilateral

Multilateral
• International Trade
• Trade here refers to the exchange of goods
and services across international territories.
• Inter-firm trade: Inter firm trade is process of
Forms of
buying, selling or exchanging goods and services International
between two or firm more firms hailing from
different countries.
Business
• Intra-firm trade: Intra-firm trade is between International
affiliates of companies located in different businesses can take
countries, in other words it is the trade between on a variety of
two subsidiaries of a company. forms, firms and
countries use
• Inter-Governmental trade: Whenever a buyer and
several methods to
a seller come together, each expects to gain
conduct
something from the other. The same expectation
international
applies to nations that trade with each other.
business and these
a. Bilateral Trade: Exchange of resources between two methods can be
countries and also covers establishment of categorized into
commercial relationships to facilitate trade and
following types:
investment.
b. Unilateral Trade: Unilateral trade means that one
country reduces its trade restrictions without any
formal agreement for correspond from its trade
partners.
c. Multilateral Trade: A multilateral trade involves three
or more countries that allows them to trade with
each other without discrimination.
Major Trading Blocs
• A trade bloc is a type of intergovernmental agreement,
often part of a region.

Form of
Abbreviation Title Trade type Participating nations
Integration
North American
Free Trade Canada, Mexico and
NAFTA Free Trade Multilateral
Area the United States
Agreement
Brunei, Cambodia,
Association of Indonesia, Laos,
Free Trade
ASEAN Southeast Asian Multilateral Malaysia, Burma,
Area
Nations Philippines, Singapore,
Thailand and Vietnam
28 member countries
Economic&Po
EU European Union Multilateral that are located
litical Union
primarily in Europe
Argentina, Brazil,
Southern Customs
MERCOSUR Multilateral Paraguay, Uruguay,
Common Market union
Venezuela and Bolivia
• Global outsourcing is an arrangement in which
one company provides services related to any Forms of
business process for another company located International
in a different country rather than completing it
internally for a specified duration.
Business
 Advantages
1 Focus on core operation by outsourcing non-core activities
2 Helps in reducing overhead costs and increase profitability
3 Access to professional, expert and high-quality services Outsourcing
4 Help organizations save on capital expenditures
5 Shift certain responsibilities& Risk to the outsourced vendor

 Disadvantages
1 Loss of management control of business functions
2 Problems with quality due to undesirable results
3 Threat to security and confidentiality of client’s data
4 Lack of customer focus
5 Difficulties to manage the outsource provider
• Global outsourcing is an arrangement in which
one company provides services related to any Forms of
business process for another company located International
in a different country rather than completing it
internally for a specified duration.
Business
 Advantages
1 Focus on core operation by outsourcing non-core activities
2 Helps in reducing overhead costs and increase profitability
3 Access to professional, expert and high-quality services Outsourcing
4 Help organizations save on capital expenditures
5 Shift certain responsibilities& Risk to the outsourced vendor

 Disadvantages
1 Loss of management control of business functions
2 Problems with quality due to undesirable results
3 Threat to security and confidentiality of client’s data
4 Lack of customer focus
5 Difficulties to manage the outsource provider
 Why is India the world's favorite outsourcing destination?

According to NASSCOM, the major reasons behind India's success in ITES/

BPO industry are:
1. Abundant, skilled, English-speaking manpower, which is being harnessed
even by ITES hubs such as Singapore and Ireland.
2. High-end telecom facilities and infrastructure which are on par with global
standards.
3. Better focus on maintaining quality and performance standards.
4. Fast turnaround times, and the ability to offer 24x7 services based on the
country's unique geographic locations that allow for leveraging time zone
differences.
5. A friendly tax structure, which places the ITES/BPO industry on par with IT
services companies.
6. Proactive and positive policy environment which encourages ITES/BPO
investments and simplifies rules and procedure.

The growth story of India’s outsourcing industry has been rapid and exponential, and sees no sign of stopping, despite of
recent protectionism steps initiated by U.S.A Government. Indian outsourcing companies have grown incredibly large; all
the major international (mostly American) software houses have thousands of employees who are now based in India.
Outsourcing:
Quick Facts
• India is the leading country for outsourcing, IT and BPO export sector amounts to $47
billion and capture more than half the outsourcing industry.
• The Americas and Europe are the largest customers for the Indian outsourcing industry
and account for 60 percent and 31 percent respectively of IT and BPO exports.
• The largest vertical sectors are financial services (41 percent), high-tech/ telecom (20
percent), manufacturing (17 percent) and retail (8 percent).

Top 10 Outsourcing Destinations Rankings

According to Tholons 2013 Top 100 Outsourcing Destinations Report

Rank Region Country City

1 South Asia India Bangalore
2 South Asia India Mumbai
3 Southeast Asia Philippines Manila
4 South Asia India Delhi
5 South Asia India Chennai
6 South Asia India Hyderabad
7 South Asia India Pune
8 Southeast Asia Philippines Cebu City
9 Western Europe Ireland Dublin
10 Eastern Europe Poland Kraków
• Offshoring relocation of a company's business process
to a foreign country.
• Usually Offshoring is done by companies from Forms of
developed countries to less-developed countries, with International
an intention of reducing the cost of doing business.
Business
• The difference between outsourcing and Offshoring is
that Offshoring involves getting work done in a
different country; this means a business moves all or
some of its activities to another country.
• Whereas in outsourcing traditionally in-house business Offshoring
tasks are contracted to an external organization
outside the company's home country.
• Offshoring relocation of a company's business process
to a foreign country.
Forms of
Broad classification of Offshoring services International
Call/contact center Back-office services IT services
Business
services
Help desk Claims processing Software
development
Technical Accounts processing Application testing
support/advice
After-sales Transaction processing Content Offshoring
development
Employees enquires Query management Engineering and
design
Claims enquires Customer administration Product optimization
Processing
Customer HR/payroll processing
support/advice
Market research Data processing
Answering services IT outsourcing
Prospecting Logistics processing
Information services Quality assurance
Customer Supplier invoices
relationship
management
• All business activities are primarily focused on identifying
opportunities in markets and developing suitable Objectives of
strategies to take advantage of these. International
Business
1. Profit Maximization

2. Diversification
Why do
3. Saturated domestic market Companies
GO Global?
4. Intense competition in home market

5. Government Incentives

6. Expand market share

7. Exploit competitive advantage

8. Resources access and cost savings

9. Potential for Growth

 Saturated domestic market and International Exploration Exhibit: 1.5
Stage of Lifecyle in other
Product Current Stage in India Major Player
counrtries
Digital Cable Sky, Foxtel, Virgin,
Growth stage Maturity Stage in US
TV AT&T
Smart
Introduction Stage Growth stage in UK Samsung, Sony, LG
Television
Laptops Growth Stage Decline stage in Japan Lenovo, HP, Dell
Digital Cannon, Nikkon,
Introduction stage Growth Stage in Dubai
Cameras Sony
Benefits under STP Scheme:
 Income Tax benefits under Section 10 A& 10 B of the IT Act upto
31st March 2011.
IT Revolution
 Customs Duty Exemption in full on imports.
in India is an
outcome of
 Central Excise Duty Exemption in full on indigenous procurement.
Government
 Central Sales Tax Reimbursement on indigenous purchase against
from C.
incentives
 All relevant equipment / goods including second hand Software
equipment can be imported (except prohibited items). Technology Parks
(STPs)
 Equipment can also be imported on loan basis/lease.
For the promotion of
 100% FDI is permitted through automatic route. Software exports
 Sales in the DTA up to 50% of the FOB value of exports permissible. from the country,
the Software
 Use of computer imported for training permissible subject to Technology Parks of
certain conditions. India was set up
 Depreciation on computers at accelerated rates up to 100% over 1991 as an
5 years is permissible. Autonomous
Society under the
 Computers can be donated after two years of use to recognized Department of
non-commercial Educational Institutions/Hospitals without Electronics and
payment of duty. Information
 Export proceeds will be realized within 12 months. Technology.

 Units will be allowed to retain 100% of its export earning in the

EEFC account.
 Expansion and Market Leadership
Area
Company Segment Market Share Origin
Operated
Largest baby food
Nestlé Baby food Worldwide Switzerland
company in the world
Department Largest retailer in the
Wal-Mart Worldwide United States
al stores world
Largest global aircraft
Boeing Aerospace Worldwide United States
manufacturers
Automotive World's biggest car
Toyota Worldwide Japan
manufacture manufacturer
Comapines and their competitive advantage Exhibit: 1.6
Company Industry Type Competitive advantage
Superior product at an affordable
IKEA Furniture industry rate backed by a strong
customer support system.
Superior database management
Facebook Social networking service
and data processing capabilities
Uses brand name as leverage
Addidas Apparel, accessories to break into new markets in
completely new territories.
Providing convenience when
people need and want to eat
McDonald's Restaurants fast food at prices that are
competitive and provide best
value for the customer's money.
 Players in International Business
• Focal Firms
• A focal firm is the originator of an international business transaction,
they directly initiate and implement international business activities
such as designing and producing goods or services intended for
consumption.
I. MULTINATIONAL CORPORATIONS OR MNCs
MNCs are companies that manufacture and market products or services in
several countries.

II. SMALL AND MEDIUM ENTERPRISES (SMES) BUSINESSES

SME isacompanywith500orfeweremployees.The internationalization of SMEs not
only takes the form of export activity, but also involves importing, foreign direct
investment, international subcontracting and international technical
cooperation.

III. BORN-GLOBAL FIRM

It is a business enterprise that from inception attempts moving rapidly
into foreign markets to derive significant competitive advantage from
the use of resources.
 Players in International Business
• Distribution channel intermediary
• Intermediaries in business whether at local or global level make it possible for
a company to deliver its products to the end user without needing to own the
whole supply chain.

• Facilitator
• A facilitator is a firm or an individual that performs broad range of activities that
aim to streamline the movement of goods and services across national
borders. Facilitators make it possible for focal firms to use their strategies in
order to help them achieve their goals.

• Government
• A facilitator is a firm or an individual that performs broad range of activities that
aim to streamline the movement of goods and services across national
borders. Facilitators make it possible for focal firms to use their strategies in
order to help them achieve their goals.

• NGOs or Non-Governmental Organizations

• NGOs refers to organizations that are neither a part of a government nor
conventional for-profit businesses, they are voluntary citizens' group which is
organized on a local, national or international level.
 How various participants in IB create an International Value Chain?
Foreign Distributor
Export management
Export
company
management
Distribution Exhibitions Trading company Franchisor Trading company
company
Channel Innovation fests Broker Manufacturer's Sales representative Retailer
Sales
Intermediaries Government trade fairs Importer Representative Distributor
representative
Broker
Distributor
Importer
Retailer
Activities of Marketing
Product Development Procurement of Resources Production Marketing Distribution Post sale service
Focal Firm  Research
Lawyer
Tax accountant
Data Agencies Banks
In-house R&D Consultant Logistics service
Research Financial agencies
External Research Labs Marketresearch provider Call centers
Companies Custom Brokers Outsourcing
Facilitators Universities Firm Freight forwarder BPOs
Survey firms Logistics firms firms (Optional)
Specialized Institutions Government Insurance company
Government Business development
ministries Consolidator
research agencies agents
Carrier
Customs broker

1. Government Incentives their country’s companies to export and this often results
in many companies entering markets they would otherwise not have tackled,
further more governmental policy have a significant influence over the focal
companies’ activity.
2. Distribution Channel Intermediaries are specialist firm that provides a variety of
logistics and marketing services for focal firms as part of the international supply
chain, both in the home country and abroad.
3. Facilitators perform broad range of activities that aim to streamline the
movement of goods and services across national borders.
Modes of entry into international
business—Choices of market entry
• A mode of entry into an international business is the channel
which an organization employs to gain entry to a new
international market.

Factors influencing choice of entry mode

1. Size of the firm and volume of its operations
2. Multinational experience
3. Ability to develop differentiated products
4. Potential for sales and profit generation
5. Investment recovery duration
6. Cost factors
7. Exposure to risk
8. Industry Feasibility& Viability
9. Market Growth Rate
10. Socio – cultural gap between home & host
11. Degree of control
12. Speed achieving of market coverage
13. Financial support
 Joint Ventures

Turn key projects

Licensing
Classification of
methods or Alliances Franchising
strategies of
entering
international Exporting
Entry Modes
Marketing
Strategic alliance

Contracting

Wholly owned subsidy

Standalone
Foreign assembly
1. Joint Venture
• A Joint Venture (JV) is business arrangement
between two or more business entities from
different countries to carry a specific business or
a project by sharing share resources such as
management, right to control and profits and
losses.
Major Joint Venture in India
Industry
Company Description
Type
TATA DOCOMO, is an Indian cellular service provider on the GSM, CDMA and
Tata platform-arising out of the strategic joint venture between Tata Teleservices
Telecom
Docomo and NTT Docomo in November 2008. It is the country's sixth largest operator
in terms of subscribers (including both GSM and CDMA).
Aviva India is an Indian life assurance company, and a joint venture between
Aviva plc, a British assurance company, and Dabur Group, an Indian
Aviva conglomerate. Aviva began operations in July 2002 as a joint venture with
Insurance
India Dabur Group, one of India’s oldest business houses. As per the Indian
insurance sector regulations, Aviva plc has a 26% stake and Dabur has a
74% stake in the JV partnership.
 Priya Village Roadshow (PVR) Cinemas is one of the cinema chains in
Entertainm
India. The Company, which began as a joint venture agreement
PVR ent
between Priya Exhibitors Private Limited and Village Roadshow Limited
Cinemas (movie
in 1995 with 60:40 ratio, began its commercial operations in June 1997
theatres)
with the launch of PVR Anupam in Saket, India's first multiplex.

AirAsia India is a Indian-Malaysian low cost carrier. It is a subsidiary of

AirAsia, Asia's largest low-fare, no-frills airline. Announced on 19
February 2013, the airline would be operated as a joint venture
AirAsia
Aviation between Tata Sons and AirAsia, with AirAsia holding 49% of the airline,
India
Tata Sons holding 30% and Amit Bhatia taking up the remaining 21% in
the airline. The joint venture would also mark Tata's return to aviation
industry after 60 years.
Divorced Joint Ventures in India
Joint Venture Model Reason for break-up
Hero-BMW F650 Poor consumer response
Mahindra Car failed to take off after its length
Logan
Renault put it into a higher tax bracket
Fiero, Max 100,Shogun,
Suzuki-TVS Ownership issues
Shaolin
Yamaha-
RD 350, RX 100 and RX 135 Falling demand
Escorts
Kinetic-Honda Zoom, DX, Marvel Kinetic buys partner’s stake
Wal-Mart and Wholesale cash-and-carry Government's foreign investment
Bharti business regime
Evaluation of Joint Venture
Advantages: Disadvantages:

• Access to new markets and distribution • Difference in culture and

networks motivation behind the participation
lead to poor co-operation
• Leverage the local company’s facilities
in manufacturing, distribution and • Lack of communication between
retailing the partners may affect the
business
• Sharing of risks and costs with a partner
• Disagreement in managerial styles
• Access to greater resources, including
specialized staff, technology and • Imbalance in levels of expertise,
finance investment or assets brought into
the venture
• Increased capacity
• Selection of the right partner is a
• JV’s offer a creative way for companies challenging task
to exit from non-core businesses
• Joint ventures often enable growth
without having to borrow funds
2. Turnkey Projects
• Arrangement in which the focal firm or a consortium of
firms plans, finances, organizes, manages, and implements
all phases of a project abroad and then hands it over to a
foreign customer after training local workers.
Licensing agreement
• Arrangement in which the owner of intellectual
property grants a firm the right to use that
property for a specified period of time in
exchange for royalties or other compensation
Companies
Licensor licensee Property Descrption
Involved
Acer choice of associating with ferrari with established world leaders
Brandname
Acer Ferrari Ferrari Acer in their respective sectors has helped grow the brand perception of
or Trademark
Acer around the world.

The global IPL broadcasting rights are held by Sony Entertainment

Television network and Singapore’s World Sport Group. Sony and WSG
then sold these rights to other companies based on their geographical
locations.This tournament has gained a lot of popularity abroad which
Other TV came as a surprise to many. In the UK ITV4 of ITV network is showing
channels this tournament, while in USA, Eco star, Willow TV & Neo Sports are
Sony and Other IPL Broadcast
Sony & WSG though broadcasting this festival of cricket and Seven Network will run the
TV Channels Rights
out the coverage in Australia.
world Cricone of Arab Digital network was showcasing this event in UAE.
While the Caribean people watched their star players through Sports
Max. The viewers from New Zealand saw it courtesy Sky Television
Network. The African nations will watch this event through Super
Sports.
Tokyo Disneyland is a park constructed by Walt Disney Imagineering in
The the same style as Disneyland in California and Magic Kingdom in
Design of
Tokyo Walt Disney Oriental Florida. It is owned by The Oriental Land Company, which licenses the
park or
Disneyland Company Land theme from The Walt Disney Company. Tokyo Disneyland and its
Patent
Company companion park, Tokyo DisneySea, are the only Disney parks not wholly
or partially owned by the Walt Disney Company.
4. Franchaising
• The International Franchise Association defines
franchising as a "continuing relationship in which
the franchisor provides a licensed privilege to do
business, plus assistance in organizing training,
merchandising and management in return for a
consideration from the franchisee".
Major Top Global Franchisors in India Exhibit: 1.8

Franchisor Type of Business International Profile Major Markets

Canada, United
Domino's Pizza, pastas, beverages
Pizza and esserts.
10,000 stores in 70 countries. States, Japan,
and India.
Pizza, pasta, chicken China, Brazil,
Pizza Hut 13,500 outlets in 98 countries
wings Canada, Japan
Dunkin China, Japan,
Coffee and donuts 8,924 restaurants in 30 countries
Donuts Taiwan
Canada, France,
32,000 restaurants in 120
McDonald’s Fast-food restaurants UK, Australia,
countries
China and India
Canada, Australia,
Submarine, sandwiches &
Subway 32,239 shops in 90 countries UK, New Zealand,
salads
Germany
Internationalization of IMAX:
Though Licensing & Franchising
• Under the franchise and licensing system, IMAX provides the
technology manufactured in Canada.
• IMAX (an acronym for Image MAXimum) is a motion picture film
format and a set of cinema projection standards created by the
Canadian company IMAX Corporation.
• IMAX has the capacity to record and display images of far
greater size and resolution than conventional film systems.
• IMAX's 15/70 format, which is ten times larger than the
conventional 35mm format, and delivers the clearest, brightest
and steadiest images in the worldIMAX is the most widely used
system for special-venue film presentations
 Franchisee or Location
licensee
Prasads Hyderabad
BIG Cinemas& PVR Mumbai
Cinepolis Thane City
Palazzo&Luxe Chennai
PVR Bangalore
Contracting
• Contracting is an agreement between two or more parties for the
doing or not doing of something specified.
• Contracting agreements includes various categories such as
contract manufacturing, Management Contracts and international
leasing.
• A management contract is an arrangement under which
operational control of an enterprise is governed by a management
company hired for coordinating and overseeing the activities or
other facility in exchange for compensation.
• In international leasing, another contractual strategy, a focal firm
(the lessor) rents out machinery or equipment to corporate or
government clients abroad (lessees), often for several years at a
time. The lessor retains ownership of the property throughout the
lease period and receives regular payments from the lessee.
Contracting is emerging
Company Type of Contracting Contract given to whom? For what the contract is given?
Micromax is currently the third largest handset brand in India after Nokia
and Samsung. Micromax, however, does not have a manufacturing facility
in the country and is primarily dependent on contract manufacturing for
Contract
Micromax Foxconn, China supply of its handsets. Micromax has production tie ups with Chinese
manufacturing
companies such as Foxconn which also supplies iPhones and iPads to
Apple. Infact most of Indian phone vendors are not considering
manufacturing plants in India because of lack of ecosystem at present.

Infosys bagged Financial services System (FSI) Integration contract from

Management India Post, which is presently undergoing a modernization
India Post Infosys, India
Contracting programme.As rural system integration partner, company to help India
Post offer tech-enabled services in rural areas.

(GECAS) is a unit of GE Capital, itself part of the large conglomerate

General Electric.GECAS buys aircraft from manufacturers like Airbus and
Kingfisher International GE Commercial Aviation Boeing and then leases them to airlines, typically on three to five year
Airlines leasing Services, Ireland leases, usually on dry lease contracts.Kingfisher has nearly 50 A320-
family aircraft from a long list of lessors that includes GECAS, AerCap,
Aircastle, Aviation Capital Group, AWAS and ILFC.
Strategic alliance
• A strategic alliance involves a contractual agreement
between two or more companies stipulating that the
involved parties will cooperate in a certain way for a
certain time to achieve a common purpose.
 Companies
Purpose
Involved
On Nov 08, 2012, ICICI Bank, India’s largest private sector bank and Vodafone
ICICI Bank and India, one of India’s largest telecom service providers, announced a strategic
Vodafone India alliance to launch a unique mobile money transfer and payment service called
‘m-pesa’. ‘m-pesa’ is the trademark of Vodafone.

In the year 2005, Fiat Group and Tata Motors signed of an agreement to co-operate on
dealer network sharing, which encompasses the sale of Fiat-branded cars through selected
Tata outlets throughout India. Tata Motors will manage the marketing and distribution of
Fiat Group the Fiat-branded cats in India. Following the agreement, a targeted selection of Fiat cars
and Tata and the Tata product range along with sale and service of spare parts will be available from
Motors March 2006 through the Tata dealership network. Dealers will display the new Fiat logo
alongside the Tata logo at their outlets. In 2012 Six years after Fiat agreed to sell its cars
through Tata Motors dealers, the Italian auto maker has decided to call off its distribution
and commercial alliance and go solo in India.
Exporting
• In exporting goods produced in one country are marketed in
another country another country for future sale or trade through
marketing and distribution channels. It can be further categorized
into direct or indirect export.
• direct exporting, the firm becomes directly involved in marketing
its products in foreign markets, because the firm itself performs the
export operations.
• In Indirect Exporting products are exported through trading
companies, the firm is not engaging ininternational marketing
and no special activity is carried on within the firm.
Wholly Owned Subsidiary or
Direct investments
• A subsidiary is a separate company that is owned by the
mother company. Many organizations prefer to establish
their presence in foreign markets with 100% ownership
through wholly owned subsidiaries.
• wholly owned subsidiaries entry method: A subsidiary will
typically operate independently from the mother company,
but will receive guidance from it. A subsidiary may be eligible
to receive government benefits in some countries because it is,
in fact, a local company.
• Direct acquisition or merger in the host market: This is done by
acquiring the equity of the firm that previously owned the
facility.
• In some countries, governments prohibit 100% ownership by the
international firm and demand alliance instead.
Foreign Assembly
• The firm produces domestically all or most of the components or
ingredients of its product and ships them to foreign markets to be
put together as a finished product.
Alliances: Advantages

• Entry into numerous foreign markets can be accomplished quickly

and cost effectively
• Established brand name encourages early and ongoing sales
potential abroad
• Useful when trade barriers reduce the viability of exporting or
when governments restrict ownership of local operations by
foreign firms
• The firm can leverage partner’s knowledge to efficiently navigate
and develop local markets.
• Well selected partners bring financial investment as well as
managerial capabilities to the operation.
Disadvantages
• Conflicts with partner are likely, including legal disputes
• Foreign partner may take advantage of acquired knowledge
and become competitors in the future
• Maintaining control over partner maybe difficult
• Dilution of control
• Company viewed as an outsider
• Limits access to local information
• Wrong choice of market and partner may lead to inadequate
market feedback affecting the international success of the
company.
Standalone: +
• Allows simultaneous expansion into different regions of the world
• Can better apply specialized skills
• Minimizes knowledge spillover

Standalone: -
Higher start-up costs and higher risks as opposed to alliances
mode
Greater information requirements
Requires more resources and commitment
 Make in India: International Restrictions
Industry FDI Policy Restrictions
Automobile 100% allowed under the automatic route in the auto sector, subject to all the applicable regulations and laws.
Aviation 100% FDI is 100% FDI is permitted for Greenfield airport
allowed Up to 74% FDI is permitted for existing airport projects
Up to 49% FDI is permitted in domestic scheduled passenger airline
Up to 100% FDI is permitted in helicopter services and seaplanes
Up to 100% FDI is permitted in maintenance and repair organizations
Bio Technology 49-100% 100% is permitted through the automatic route
Chemicals 100% FDI is allowed under the automatic route
Certain products such as wax candles, laundry soaps, safety matches, fireworks and incense
sticks fall under items reserved for the MSME (24%)
Constructions 100% FDI through the automatic route
Defense Up to 49% under the government route
Electrical Machinery 100% allowed under the automatic route

IT and BPM 100% is permitted under the automatic route

Pharmaceuticals 100% is permitted under the automatic route
Tourism & Hospitality 100% is permitted under the automatic route
Broad casting carrier (49%), TV Channels & FM (24%), Print Media (26%)
Stages of Internationalization

International
Multinational
Global
Transnational
Stages of Internationalization
1. International Company
• International company is an enterprise which exists in one country but
sells products in more than one country.
2. Multinational Corporation (MNC)
• A Multinational Corporation (MNC) is an enterprise operating in
several countries but managed from one country.
3. Global Company
• A global firm pursues a unified strategy to coordinate various
international operations.
4. Transnational company
• A TNC corporations essentially shed their home nation identity and
act as stateless organizations, in other words they do not identify itself
with one national home like an MNC.
 Characteristics of different organizational models
Difference International Multinational
International company is an A Multinational Corporation (MNC) is
enterprise which exists in one an enterprise operating in several
Meaning country but sells products in countries but managed from one
more than one country. country.

Configuration of Sources core competencies Decentralized and nationally self-

assets and centralized and others sufficient.
capabilities decentralized.
Roles of overseas Adapting and leveraging parent Sensing and exploiting local
operations company strategies. opportunities.
Development and Knowledge developed at the Knowledge developed and retained
diffusion of center and transferred to the within each unit.
knowledge overseas units.
 Difference Global Transnational
A global firm pursues a A TNC corporations essentially
unified strategy to coordinate shed their home nation identity
various international and act as stateless organizations,
Meaning
operations. in other words they do not identify
itself with one national home like
an MNC.
Configuration of Centralized and globally Dispersed. Interdependent and
assets and scaled specialized.
capabilities
Implementing parent Differentiated contributions by
Roles of overseas
operations
company strategies national units to integrated
worldwide operations.
Development and Knowledge developed and Knowledge developed jointly and
diffusion of retained at the center. shared worldwide.
knowledge
 Political Environment
• Political environment consist of a set of political factors and
government activities in a foreign market that can either facilitate
or hinder a business' ability to conduct business activities in the
foreign market
• Therefore political trends can be prime motivators for many
business decisions.
• Governments and politics play a large role in international
business as it influences the legislation, rules and regulations under
which a foreign firm operates.
Political Environment
Components
• What should be studied in political trends?
• Political Risks
• Political System
• Style of governance
• Instability indicators
Instability indicators
• Attitude of Nationals
• Regulatory Quality
• Social Unrest
• Control of Corruption

Political Instability Index Exhibit: 4.1

Most Politically Stable Least Politically Stable
1. Zimbabwe, 2. Chad, 3.
1. Norway, 2. Denmark, 3. Canada, 4. Sweden, 5. Finland Congo, 4. Cambodia, 5.
Sudan
Peace and Conflict Instability Index
Most Peaceful (Top five) Most Conflicted (Top five)
Afghanistan, Congo,
Slovenia, Sweden, Finland, Ireland and Netherlands Burundi, Guinea and
Djibouti
Country Indicators for Foreign Policy: Failed and Fragile
Least Fragile Most Fragile
Somalia, Afghanistan,
Denmark, Sweden, Finland, Japan & Switzerland Chad, Congo and
Yemen
How to minimize political Risk?
• Simulation of Local Economy
• Employment of Nationals
• Sharing Ownership
• Being Civic Minded
• Political Neutrality
• Behind the Scene lobby
Bases for Legal Systems
• Three heritages form the bases for the majority of the legal
systems of the world.
• Common law
• Civil or code law
• Islamic law
Common and Code Law
• Common law seeks “interpretation through the past decisions of
higher courts which interpret the same statues or apply
established and customary principles of law to a similar set of
facts.”
• Under code law the legal system is generally divided into three
separate codes:
• Commercial
• Civil
• Criminal
• Common law is recognized as not being all-inclusive, whereas
code law is considered complete as a result of catchall provisions
found in most code-law systems.
• Under common law, ownership is established by use; under code
law, ownership is determined by registration.
Islamic Law
• The basis for the Islamic law is interpretations of the Koran.
• Islamic law defines a complete system that prescribes specific
patterns of social and economic behavior for all individuals.
• Property rights
• Economic decision making
• Types of economic freedom
• Among the unique aspects of Islamic law is the prohibition
against the payment of interest.
• The Islamic system places emphasis on the ethical, moral, social,
and religious dimensions to enhance equality and fairness for the
good of society.
Jurisdiction in International Legal
Disputes
• No judicial body exists to deal with legal commercial problems
arising between citizens of different countries.
• Legal disputes can arise in three situations:
• Between governments
• Between a company and a government
• Between two companies
• The most clear-cut decisions can be made when the contracts or
legal documents supporting a business transactions include a
jurisdictional clause.
International Dispute Resolution:
Arbitration
• Most arbitration is conducted under the auspices of one of the
more formal domestic and international arbitration groups
organized specifically to facilitate the resolution of commercial
disputes.
• The popularity of arbitration has led to a proliferation of arbitral
centers established by countries, organizations, and institutions.
• Contracts and other legal documents should include clauses
specifying the use of arbitration to settle disputes.
• Arbitration clauses require agreement on two counts:
• The parties agree to arbitrate in the case of a dispute according to the
rules and procedures of some arbitration tribunal.
• They agree to abide by the awards resulting from the arbitration.
U.S. Laws Apply in Host
Countries
• Foreign Corrupt Practices Act
• Makes it illegal for companies to pay bribes to foreign officials,
candidates, or political parties.
• National security laws
• Prohibit a U.S. company, its subsidiaries, joint ventures, or licenses to sell
controlled products without special permission from the U.S.
government.
• Antiboycott law
• U.S. companies are forbidden to participate in any unauthorized
foreign boycott.
• Required to report any request to cooperate with a boycott
Technological Environment
Technological Environment means the advancements in the field of
technology which influences business by new inventions of productions and
other innovations in techniques to perform the business operations and
product development.

• Degree of Automation & productivity

• Emerging Technologies
• R&D Activity
• Technology Transfer
• Use of IT & communication
Old Technology Old Technology

When was the last New technology has given us ATM cards, check cards and credit cards. We pay bills and
time you wrote a everything else on line or over the phone. Stores prefer the new technology that cuts
paper check? down on losses and lines. Consumers love the new convenience and speed. Those old
paper checks are just not as useful as the new technology.

The written word Already computer technology provides us with faster news, classifieds, coupons and such
will soon exist than the old morning newspaper. Even phone books are on line.
mainly on- line.
Travel Guide People find their way around using new GPS technology.
Newspaper Now new and information on your finger tips
readership is down. When did you last write a letter? : So much easier to pick up the cell phone or send an
Yellow Books are email.
old, paper wasteful Remember those old CB radios that gained popularity in the seventies? Those were new
and unnecessary. technology then but now they have been ousted by cell phones. Another old technology
bumped by cell phone is the good old land line.

The old technology The old technology of VCR's has been replaced by new DVD's. Now we have the new
of VCR's. the old TV, technology of Blue Ray that may overtake those as well. Video stores are disappearing as
Video stores. more people use the new technology of red box $1.00 rentals and on line video. Pretty
soon the old TV may be gone as new computer viewing options get better and better.

Cameras with film in them are a thing of the past as well. No fumbling with that old technology anymore. Just
develop what you want and if the picture turns out bad, delete it. New technology has even improved on
Edison's light bulb. Now we have new energy efficient bulbs that last for years. Turntables, eight track tapes, old
cassettes, a bygone era. New Cd's and I pods have taken care of that technology. Maybe Cd's are the next
technology to go as well. After all, don't see many old Walkman's around anymore.
E: Natural Environment

• Geographical Location
• Availability of resource
• Access to natural resources
• Concern for environment
• Increased energy cost
Problems in IB
• Inadequate infrastructure
• Rigid bureaucratic procedures
• Inconsistent industrial policy and rules
• Labor Regulations and Protections
• Foreign Exchange Control
• Regulations on Foreign Investment
• Stock Price Control
• Political dramas
Stages of Internationalization

International
Multinational
Global
Transnational
Stages of Internationalization
1. International Company
• International company is an enterprise which exists in one country but
sells products in more than one country.
2. Multinational Corporation (MNC)
• A Multinational Corporation (MNC) is an enterprise operating in
several countries but managed from one country.
3. Global Company
• A global firm pursues a unified strategy to coordinate various
international operations.
4. Transnational company
• A TNC corporations essentially shed their home nation identity and
act as stateless organizations, in other words they do not identify itself
with one national home like an MNC.
 Characteristics of different organizational models
Difference International Multinational
International company is an A Multinational Corporation (MNC) is
enterprise which exists in one an enterprise operating in several
Meaning country but sells products in countries but managed from one
more than one country. country.

Configuration of Sources core competencies Decentralized and nationally self-

assets and centralized and others sufficient.
capabilities decentralized.
Roles of overseas Adapting and leveraging parent Sensing and exploiting local
operations company strategies. opportunities.
Development and Knowledge developed at the Knowledge developed and retained
diffusion of center and transferred to the within each unit.
knowledge overseas units.
 Difference Global Transnational
A global firm pursues a A TNC corporations essentially
unified strategy to coordinate shed their home nation identity
various international and act as stateless organizations,
Meaning
operations. in other words they do not identify
itself with one national home like
an MNC.
Configuration of Centralized and globally Dispersed. Interdependent and
assets and scaled specialized.
capabilities
Implementing parent Differentiated contributions by
Roles of overseas
operations
company strategies national units to integrated
worldwide operations.
Development and Knowledge developed and Knowledge developed jointly and
diffusion of retained at the center. shared worldwide.
knowledge