International Business

(ECO-505)
PGDM IV (2012-14)
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
1-2

Introduction to International Business

International Business Business Transactions Crossing National Boundaries International Presence Internationalization capital Internationalization of Market Presence Internationalization of Material Movements Internationalization of Human Capital What is the motive of Internationalization of any kind?
Profitability? Opportunities? Glorification? Resource Constraints? Adventure?
1-3

Evolution of International Business

Evolution of International Business Motivation for Inter Country (State) Business 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

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 Orissa in International Business 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

The Silk Route

6-7

Colonial Trade Route

6-8

Growth in International Business

India in the Centre of International Business Silk Rout Indias Role is too Prominent Colonial Route India still assumes the Central Place
Why Indias Place is so prominent?

Trade Flows The Composition of Trade FDI and Trans-nationalization of Production Foreign Exchange Markets The Gigantic Scale of Foreign Exchange Trading Role of Technology
6-9

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

5-10

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

5-11

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?

1-12

Strategies of Going International

Trade Related Mode
Exporting International Sub Contracting Management Contract

Transfer Related Modes

International Leasing International Licencing International Franchaising Build-Operate-Transfer (BOT) or Turnkey Mode

1-13

Strategies of Going International

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
1-14

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 $80-100 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)

5-15

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)
5-16

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

5-17