Introduction to

International
Business
In pairs answer the following questions:
1. What is International Business?
2. Why should we study international business?
3. What affects the economic activities between two
countries?
4. What are the differences between domestic and
international business?
5. Why do companies go international?
Globalization
Widening and deepening of
interdependent relationships
among people from different
nations
The elimination of barriers to
international movements of
goods, services, capital,
technology and people that
influence the integration of
world economies
(Daniels, Radebaugh & Sullivan, 2019)
 Global competition
characterized by networks of
international linkages
comprising economic, financial,
political and social markets
that in turn bind countries,
institutions and people in an
interdependent economy
(Deresky, 2017)
Deglobalization

It is a retreat or inversion, from

political crisis, cyber-theft
protectionism and trade-
barriers  Global trade
slowdown

(Deresky, 2017)
First age

(Wild & Wild, 2019)

Second age

(Wild & Wild, 2019)

Global Trends

Differences toward emerging markets & developed countries

Productivity and consumption
Technological advances --- Interconnectivity
Gap between demand and supply of recourses
Economic and financial policies

(Deresky, 2017)
Globality and
Emerging markets

Are countries that are

investing in productive
capacity. They are moving
from traditional economies to
industrialization.

(Deresky, 2017)
Globalization of the markets
Reducing cost
Creates new market
opportunity
Leven uneven
income streams
Local buyer´s
needs
Global
sustainability

(Wild & Wild, 2019)

Globalization of production
Access lower-cost
workers
Access technical
expertise
Access production
inputs

(Wild & Wild, 2019)

Factors in increased globalization

• Rise and application of technology

• Liberalization of cross-borders trade and resource movement
• Development of services that support IB
• Growth of consumer pressures
• Increase in global competition
• Changes in political situation and governments policies
• Expansion of cross-national cooperation
 International
Business
“Transactions that are devised and carried
out across national borders to satisfy the
objectives of individuals, companies and
organizations”(Czincota, Ronkainen & Moffet,
2011)
 International
Business
“Internationalbusinessisallcommercial
transactions—privateandgovernmental
—between two or more countries. (phatak,
20xx)
The value of these companies is similar to the
GDP of 180 countries around the world
including Ireland, Israel, Greece, South Africa
&Vietnam
 Why should be study IB?
• A big portion of the world´s business
• Companies include it
• Government is include it
• As manager:
• Where you can get the best inputs
• Where you can best sell the product
 Why should be study IB?
• Most companies are international or compete with international
companies
• Modes of operations may differ from those used domestically
• It helps managers to decide where to find resources and to sell
• The best way of conducting business may differ by country an
understanding helps you make better career decisions
• An understanding helps you decide what government policies to
support
What affects
economic
activities Functionsandpeople

between two Regulations

countries? Culture

Economic
Social responsibility
Skils
Ethics
Mega environment
Host country environment Subsidiary HostCountry
Interdependence
Operating environment MNCHostCountryInterdependence
What affects
economic
activities
between two Price

Uncertainty
Promotion

Political /legal

Competitive
countries? Channelof distribution

Product Research

Foreign environment
Domestic environment Economic
Firms characteristics
Structureof distribution
• Economic slowdown
• Regulatory/legislative changes
• Increasing competition
• Damage to reputation/brand

Risk
• Business interruption
• Failure to attract or retain top talent
• Failure to innovate/meet customers needs
• Commodity price risk
• Technology failure
• Cash flow risk
International business vs domestic business

• Systems are different

• Issues are more complex
• Conversation of money into
different currencies
• Constraints and limitations from
foreign governments
Why do companies go
international?
Why do companies go international?
Sales Resource
expansion Acquisition

Diversify
Risk sources of
reduction sales and
supplies
 Risk reduction
• It´s a defensive reason
• Protection against domestic companies that might gain
advantages abroad
• That rival company can use those advantages to improve
the domestic operations later
• Prevent a competitor to gain advantages
 Acquire resources
• Products, services, and
components produced in foreign
countries
• Foreign capital, technologies,
and information they can use at
home
• Cost reduction --> sweatshops.
 Expand sales
• By reaching international
markets, companies increase
their sales faster than when they
focus on a single market.
• These sales depend on the
consumers’:
• interest in the producto
• their ability to purchase the
product.
 Diversify sources of sales and supplies
• Minimize fluctuations in sales and profits
• Sales increase in a country that is expanding
economically and decrease in another that is in
recession.
• Avoid the full impact of price fluctuations or
shortages in any one country.
 Additional factors
• Increase in Global Competition.
• Development and Expansion of
Technology.
• Liberalization of Cross-Border
Movements.
• Development of Supporting
Services.
• Consumer pressures.
• Increase in Global Competition.
New products quickly become known
globally.
Companies can produce in different
countries.
Suppliers
Competitors and customers of domestic
companies have become international
as well.
 Development and expansion of Liberalization of cross-borders
technology movements

Developing of supporting services Consumer pressures

Task
1.Which are the entry modes of IB?
2.Define: Home Country, Host
Country, Parent Company and
Foreign Affiliate or Subsidiary.
3.Which are the types of
International Companies.
 IB: related terms
• Home Country: AKA domestic market; the country where the
company was born.
• Host Country: Foreign market that welcomes a company from
another country.
• Parent Company: AKA HQ, usually located in the home country.
• Foreign Affiliate or Subsidiary: A separated organ controlled by a
higher entity known as Parent Company.
 Transnationality
• Of Countries:
– The amount of FDI.
– The number of International companies
working within its borders.
• Of Companies:
– Number of countries in which the company has
operations.
How do companies
go international?
Internationalization models

01
By process

02 Accelerated
Internationalization by process
Uppsala (Johanson y Vahlne,
1977) 01
Innovation (Bilkey y Tesar, 1977; Cavusgil,
1980; Reid, 1981; Czinkota, 1982). 02
Strategic planning (Miller 1993)
03
Product life cycle (Vernon 1966)
04
Accelerated Internationalization
Born Global Firms (Knight y Cavusgil,
1996; Madsen y Servais, 1997). 01
New Ventures (Oviatt, B. & mcdougall,
P., 1994). 02
Global start-ups (Oviattt B., mcdougall
P., Loper M., 1995)
03
Instant International (Fills, 2001)
04
 Export Sales
manager branches

Production
abroad
Export
department Assembly
abroad
Foreign inquiry

The evolutionary stages of

international business
 Foreign Inquiry
• When the company receives a inquiry
from a foreign businessperson.
• The company may or may not respond.
• Inquiries from foreign buyers are
received more enthusiastically.
• Businessperson: export merchant, export
commissioners, a resident buyer, a
broker, a manufacturer agent, etc.
 Export manager
Expansion continue…
It´s appropriate to take the export
management control.
Been more proactive and not
reactive
Small staff.
 Export department
and direct sales
• Export continue upward.
• Some problems operating with
just an export manager.
• A new division at the same level
as the domestic sales department.
• Drops export middleperson
• Begins selling directly.
 Sales branches and
subsidiary

It´s necessary to establish

sales and branches.
Directly responsible to the
home office
Sales branch  Subsidiary
Autonomy.
 Assembly abroad
Reasons: Cheaper shipping
costs, lower tariffs, cheaper
labor.
One or more foreign markets.
Transportation cost.
Less duties.
China, Singapore, Taiwan,
serve to a third country.
 Production abroad
• Well developed an export
program supported by country
markets studies.
• Identify new markets.
• Difficulties local governments.
• Managerial functions abroad.
• Learning from abroad.
• Several foreign affiliates.
Integration of foreign affiliates
Multinational enterprise system 
integrated network
HQ now makes the decisions.
Facilitate exchanges of ideas, innovation
and performance.
Strategic decision  Worldwide.
Changings the mind of the staff.
The evolutionary stages of international business
• Integration of Foreign Affiliates:
Integrated network of subsidiaries that
follow the decisions of the parent
company.
No control over the Full
marketing variables Control

Foreign Sales Assembly Product.

X Manager X Dpt Integrate
Inquiry Branches Abroad Abroad
 Polycentrism
Ethnocentrism
Geocentrism
International Corporation
Usually has operations in just
one country, generally the
company exports and sells in
a similar market.
Ethnocentric.
Reactive
Autocratic
Centralized.
MultinationalCorporation:
Operation in 2 or more
host countries, several entry
modes.
Multidomestic.
Adaptation.
Decentralized.
Polycentric.
Global Corporation:
Worldwide presence, several
entry modes and several entry
modes
Global.
Geocentric
Standardization.
High tech or industrial
products.
Centralized.
Transnational Corporation

• Presence all over thw

world. Little adaptation
and several entry
modes.
• Transnational  gain
effiency and local
market benefits.
• Descentralized