International Business: Bhubaneswar

International Business
(ECO-505)
PGDM – Term IV (2020-22)
Course Instructor:
Dr. Ramakrushna Panigrahi
IMI, Bhubaneswar
International Business
Main Topics for Discussion

 A brief of the course outline --Word
 Introduction to International Business
 Evolution of International Business
 Drivers of International Business
 A brief Introduction to Entry Strategies
 Globalization and International Business
 Covid-19 – Influence on International Business
1-2
Introduction to International Business
 International Business
 Business Transactions Crossing National Boundaries
 International Presence
 Internationalization capital
 Internationalization of Material Movements
 Internationalization of Human Capital
 What is the motive of Internationalization of any kind?
◦ Profitability? Opportunities? Glorification?
 International Markets for Finished Products – Final Resting Point
1-3
Evolution of International Business
 Evolution of International Business

 Motivation for Inter Country (State) Business (PPF)
 Constraints for Inter State Business
◦ Communication
◦ Transportation
◦ Perishability of Merchandise
◦ Value vs. Volume of Merchandise
◦ Security for Movement of Merchandise
◦ Multi Culture Multi Language Scenario
1-4
Evolution of International Business
Constraints in Inter State Business

◦Absence of Common Currency
◦Relative Values of Merchandise in Different Locations
◦Challenge of Price Discovery
◦High Uncertainty in Business Dealings
Risks vs. Rewards from International Business

India in International Business in Early Days
Culture, Science, Literature, Politics as well as ways of Life in the context of

Internationalization of Business
1-5
Advancement of International Business
 The Advancement of International Business

 Market Efficiency and Market Expansion
 Extensive and Intensive Expansion of International Business
◦ Extensive- Covering all countries/States under seemingly one (with Variations)
market
◦ Intensive – Deepening Phase; Larger Intensity of Internationalization; goods,

services inputs etc.
 Reduced Transaction Costs and the Pressures of International Business
 From Inter-country Trade along Silk Route to International Integration in
Nineteenth Century
1-6
Drivers of International Business
 Profitability Potential by Going Global

 Huge opportunities and Potential in markets of Developing Countries
 Advantage of Locating Subsidiaries in Low Wage countries
 Changing Demographics - Working Population Disparity ; Population Trap
◦ Europe vs. India; Limit to Increasing Retirement Age, Increase in Dependency Ratio
 Role of Trading Blocks adding pace of Globalization

 Declining Trade and Investment Barriers – Average Tariff falling from a whopping
30 per cent in 1913 to 20 per cent in 1950 to 5.2 per cent in 1990 to 3.9 per cent now
 Technology triggering Globalization – Communication, Transportation and Production

of Goods and Services were made extremely cheap with Technological innovations
1-7
Drivers of International Business
 Currents of Internationalization
◦ Growth of Rapidly Developing Countries
◦ Continuing Cost and Capital Advantages of RDCs
◦ Development of Talent and Capabilities in RDCs – MIT and IIT comparison
◦ Migration of Customers to RDCs
◦ Emergence of RDCs based Global Competitors
 Higher revenues and profitability in International Business

 Resource Seeking by Multinational Companies
◦ Physical Assets like Lands, Water, Minerals, metals, Forests etc.
◦ Capital and Cheap Labour in Less Developed countries
 World Bodies Promoting Internationalization – WTO and other Bodies
1-8
The Globalization Debate
 Has Globalization helped participating countries?

 The Globalists
 The Anti-Globalists
Globalization is creating Rich Countries with Poor People - Josph Stiglitz
 The Reality of Globalization
 Go with Globalists??
 Go with Anti Globalists??
 Indian Rhetoric on Globalization – Pro vs. Anti
 Indian Experience from Globalization – Comparison between Mid 80’s and 2021
1-9
Globalization and International Business
 Globalization and Growth in Business

 Globalization has ensured 20 per cent of foreign trade as percentage of
GDP now which was negligible earlier
 Dark Side of Globalization – $150-200 bn from Rich to Poor countries in FDI
◦ Illegal Transfer of funds from Rich to Poor countries
◦ Widening inequality among people and among and within nations
◦ Uncivil society and transnational flow of Social Dysfunction parameters
 Globalization and Management

◦ Change in Management Practices
◦ Ethical Issues in Management
◦ Westernization of Management of Companies (Loyalty of Employees ? Ex. Of Tata)
1-10
Globalization and International Business
 Globalization and Jobs

◦ Contrary to popular belief globalization per se need not enhance jobs
 Globalization and Wages – Disparity in wages (Ex. Software; Wal-Mart etc)

 Globalization and Child Labour – Positives due to rise in wages and
international pressure to adhere to norm of not employing child labour
 Globalization and Women – Positive and Negative Dimensions
◦ Positives – Employment Opportunities; Exposure to their Rights; Voices against
Discrimination
◦ Negatives – Inferior Working Conditions (Bus Conductor example); Shift Working; Violence
against Women due to mental Blockages; Commoditization of women; Usage of Women
Bodies in Promotions; Sex Tourism and Sex Trafficking; Destruction of Natural Resources and
Livelihoods affecting women most etc.(Tribal example)
1-11
International Business and Globalization
 International Relations and International Business

◦ Rich and Poor Divide Argument
 Globalization and Developing Countries – Lot of Positives

 Negatives –
◦ Wide Gap between achievements
◦ Large scale Brain-Drain from Under-Developed to Developed countries
◦ Per capita income of Rich Countries was 15 times the per capita Income of Developing
Countries in 1960; Now it is 30 times
◦ Large Scale Exploitation of Natural and Environmental Resources of Developing Countries;
Sub-human Living conditions; Example of waste water in water bodies
 Globalists???!!! Or Anti-Globalists???!!!!
1-12
Strategies of Going International
 Decision on Whether to go Global

◦ Why go Global? Little Choice so as to remain relevant?
 Market Destination
◦ Where to go? Sound Political and economic Environment?
 Timing of Entry
◦ when to go international? First Mover? Early Mover? Late Mover?
 Modes of Entry
◦ How to enter a new market?
◦ Trade Related Modes? Transfer Related Modes? FDI related Modes?
1-13
 Trade Related Mode

◦ Exporting
◦ International Sub Contracting
◦ Management Contract
 Transfer Related Modes
◦ International Leasing
◦ International Licensing
◦ International Franchising
◦ Build-Operate-Transfer (BOT) or Turnkey Mode
1-14
FDI Related Entry Mode

◦Entry with Equity Investments
◦Entry through Opening up Branch Offices
◦Cooperative Joint venture
◦Equity Joint Venture
◦Wholly Owned Subsidiaries
Choosing a mode of Entry
◦Country Specific Factors
◦Industry Specific Factors
◦Firm Specific Factor
◦Project Specific Factors
1-15
Globalization of Firms
Larger Market Share

Choosing a mode of Entry
◦Country Specific Factors
◦Industry Specific Factors
◦Firm Specific Factors
◦Project Specific Factors
Organic Growth
Inorganic Growth
Perks of Going Global
The Case of L’Oreal
1-16
Covid-19 – Influence on International
Business and Trade
Globalization – Role of Globalization in Pandemic

International Business – Impact of Covid-19 on volume and
Composition of International Business
Global Response to the Pandemic
Impact on Exports from China
Effects on Global Supply Chains
Impact on Free and Fair Trade – The Essence
Globalization Debate

1-17
Covid-19 – Influence on International
Business and Trade
New Tariffs on Essential Items
Restrictions on Exports of Medical Supplies-Limits on Medical Goods
Impact on Ports of Entry
Licensing Policies/Export Policies for Goods meant for combating Covid-19
Pandemic by US, China, Countries in WU, Japan and Major Economies
Global Mechanize Exports fell from US$19.01 trillion in 2019 to trillion to
US$17.52 trillion in 2020. A fall of 8 per cent
Global Merchandise Exports in 2021 – The Downward Scenario Continues –
Composition of Global Trade - Welfare
1-18

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International Business

Main Topics for Discussion

 International Markets for Finished Products – Final Resting Point

 Evolution of International Business

Constraints in Inter State Business

Risks vs. Rewards from International Business

Culture, Science, Literature, Politics as well as ways of Life in the context of

 The Advancement of International Business

◦ Intensive – Deepening Phase; Larger Intensity of Internationalization; goods,

 Profitability Potential by Going Global

 Role of Trading Blocks adding pace of Globalization

 Technology triggering Globalization – Communication, Transportation and Production

 Higher revenues and profitability in International Business

 World Bodies Promoting Internationalization – WTO and other Bodies

 Has Globalization helped participating countries?

 Globalization and Growth in Business

 Globalization and Management

 Globalization and Jobs

 Globalization and Wages – Disparity in wages (Ex. Software; Wal-Mart etc)

 International Relations and International Business

 Globalization and Developing Countries – Lot of Positives

 Decision on Whether to go Global

 Trade Related Mode

FDI Related Entry Mode

Larger Market Share

Globalization – Role of Globalization in Pandemic

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