International Business

MGN-101
Unit-II
International Business
P. B. NARENDRA KIRAN
ASSISTANT PROFESSOR
At the end of this lecture, you will be able to-
1. Importance of International Business
2. Why do firms become multinational
3. Recent trends in Multinational corporation
4. Issues and Controversies regarding multinational
corporation
5. Indian Perspectives of Multinational corporation
Introduction
How do firms go International?
– Foreign market entry strategies vary in degree of risk
they present, the control and commitment of
resources they require and the return on investment
they promise.
– The firm can sell a physical product abroad, i.e., can
export. A firm can locate a production facility abroad
i.e., engage in foreign direct investment.
– There is a range of forms of international business that
can allocate a firm to get international returns on its
unique advantages.
• International business is a cross border
transaction between individuals, businesses, or
government entities.
• The transaction can be of anything that has
value, examples include –
– Physical Goods
– Services such as banking, insurance, construction,
etc.
– Technology such as software, arms and ammunition,
etc.
• All commercial transactions carried out beyond the
boundary of the country.
• The transactions may be in terms of investments,
production, trade, management, etc. between two or
more countries.
• The transactions related to services and other aids to
trade between two or more countries.
• It can be defined as the expansion of business functions
from domestic to any foreign country with an objective
of fulfilling the needs and wants of international
customers.
Definitions of International Business
• According to Daniels, Radenbough and Sullivan (2008),
“International business is all commercial transactions.
private and governmental; sales, investments, and
transportation that take place between two or more
countries’’.
• According to Ball Mc Culloch Jr, Geringer, Minor and

McNett (2009), “International business is business
whose activities are carried out across national
borders.”
Definitions of International Business
• According to International Business Journal,
“International business is a commercial enterprise that
performs economical activity beyond the bounds of its
location, has branches in two or more foreign countries
and makes use of economic, cultural, political, legal and
other differences between countries.”
Reasons of International Business
• Uneven distribution of Natural Resources
• Availability of Productivity factors
• Specialization
• Cost Advantage
Evolution of International Business
• East India Company
• Effect of World wars
• Milton Friedman’s neoliberal globalization
• Glocal
• Rise of emerging markets like BRICS
Stages in evolution of Business
Factors contributing to rapid growth of
1. Increase in and expansion of technology
2. Liberalization of cross-border trade and resource
movements
3. Development of services that support international
business
4. Growing consumer pressures
5. Increased global competition
6. Changing political situations
7. Expanded cross-national cooperation
8. Stagnation in some of the developed markets
Features of International Business
Importance of International Business
1. Awareness about different countries of the world
2. Facilities the process of globalization
3. Diffusion of technology
4. Competitive environment
5. Harmonious relationship
6. Better use of country’s resources
7. High rate of economic development
8. Stability of prices
9. Greater availability of goods
10. Greater employment opportunities
11. Reduction in cost of production
12. Contribution to government revenue
Need for International Business
1. Causes the flow of ideas, services and capital across the
world.
2. Offer consumer new choices
3. Permits the acquisition of a wider variety of products
4. Facilitate the mobility of labour, capital and technology
5. Provide the challenging employment opportunities
6. Reallocate resources makes preferential choices and
shifts activities to global level.
FORMS OF INTERNATIONAL BUSINESSES
Factors to Consider Before Starting International Business
• GEOGRAPHICAL FACTORS
• SOCIO-POLITICAL FACTORS
• LEGAL POLICIES
• ECONOMIC FORCES
ENTRY MODES IN INTERNATIONAL BUSINESS
BENEFITS OF INTERNATIONAL BUSINESS
CHALLENGES OF INTERNATIONAL BUSINESS
• Language barriers
• Cultural differences
• Managing global teams
• Currency exchange and inflation rates
• Foreign politics, policies and regulations
1
In which of the following modes of entry, does the
domestic manufacturer give the right to use intellectual
property such as patent and copyright to a
manufacturer in a foreign country for a fee?
– Licensing
– FDI
– Joint venture
– None of these
MNC
• A multinational company is one which is
incorporated in one country (called the home
country); but whose operations extend
beyond the home country.
• https://www.youtube.com/watch?v=txuvc6ZO
BrA
Multinational Corporation (MNCs) /
Transnational Corporation (TNCs)
A Multinational Corporation or Transnational corporation
is defined as an organization that owns productive assets
in different countries, and has common strategy
formulation and implementation across border.
• Factors of production move among units located in different
countries.
• Multinational corporation are primarily large enterprises.
• They operate in many countries
• They are primarily managed by their headquarter
• The headquarter is based in one country
• Other operating facilities are based in other countries.
Indian companies operating overseas
• ONGC • Mahindra & Mahindra
• Reliance • Bharat Forge
• WIPRO • Asian paints
• Tatas
• Ranbaxy
• Dr. Reddy’s laboratories
• Infosys
• Aditya Birla
Why do firms become Multinational?
• To take the benefits of economies of scale
• To protect themselves
• To tap the growing world market
• Response to increased foreign competition
• To reduce costs
• To reduce impact of tariff
• To take advantages of technological expertise
Features of Multinational Corporations
• Huge Assets and Turnover

• International Operations Through a Network
of Branches
• Advanced and sophisticated technology
• Professional Management
• Better quality products
Recent trends in Multinational
Corporations
Advantages of MNCs
• Employment generation
• Proper use of idle resources
• Inflow of foreign capital in the host country
• Technical development
• Managerial development
• Promotion of international brotherhood
Disadvantages of MNCs
• Danger for Domestic Industries
• Repatriation of Profits
• No Benefit to Poor People
• Danger to Independence
• Careless use of Natural Resources
Issues and Controversies of MNCs
• MNCs interest and the interest of host countries
specially developing ones, in many areas, conflict
with each other.
• MNCs generally dominate high profit oriented
consumer sectors monopolizing profit in these
sectors.
• MNCs are extremely reluctant to transfer latest
technology to the host country.
Quiz
Which of the following is a definition of
multinational enterprises?
• A company employing foreign nationals.
• A company operating in emerging economies.
• A company headquartered in one country but
having operations in other countries.
• None of the above
THANK YOU

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MGN-101

• According to Ball Mc Culloch Jr, Geringer, Minor and

• Huge Assets and Turnover

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