INTERNATIONAL BUSINESS

Prof Bharat Nadkarni

Reference Books : International Business By

Subba Rao

Francis Cherunilam

Dr Chandran

Sundaram and Black

Daniels & Radebough

Charles Hill & Jain

Roebuck & Simon

International Business : Prof Bharat Nadkarni

Focus on following areas :

Intl trade theories

Corporate approaches

Environmental challenges

Biz entry strategies

Globalisation driving & restraining forces

WTO/ IMF/ IBRD and other entities impacting IB

FDI merits & demerits

Transnational economy & MNCs contribution

Intl Trade Barriers

Intl Ethics, CSR & HR

Intl logistics

International Business

Independence, Dependence and Interdependence

International Trade Policy

Laissez-faire approach (Free trade)

Vs Interventionist approach
Theories

Mercantilism (ex Colonial rule)

Absolute advantage and Comparative advantage (ex

India tea, US- wheat)

Theory of Country size (ex India, China, Brazil, USA)

The Product Life Cycle Theory (Raymond Vernons

Theory)

Factor Proportions Theory (ex India, USA, Hongkong,

Singapore, Dubai)

International Business : Prof Bharat Nadkarni

Components of Balance of Payments
Item
A)Current Account
I Merchandise
II Non Monetary Gold Movement
III Invisibles
(B) Capital Account
I Private
II Banking
III Official (Govt)
(C ) IMF
(D) SDR Allocation
(E) Errors & Omissions
(F ) Reserves and Monetary Gold

Credit

Debit

Net

International Business

Objectives of International Business

1. To integrate economies.
2.

To offer new markets.

3.

To facilitate transfer of ideas, services/ products and

capital across the world.

4.

To facilitate mobility of factors of production.

International Business

Difference between Domestic and International business

1. Higher rate of profits (Absolute advantages, taxes,
concessions and incentives)
2. Expansion of production capacities
3. Competition (pull & push effects)
4. Wide market
5. Political stability
6. Technology
7. High cost of transportation

International Business

Growing importance of International Business

Current trends are towards the increasing globalisation

and interdependence of firms, markets and countries.

Intense competition at global level

Exchange rate developments shift from ve to +ve

growth

Global capital flows to LDCs

Differences in Price and Cost

Restructuring the economy to integrate with global

economy

Increased importance of CSR

The growing importance on enhancing standard of living

in LDCs

International Business

Liberal trade policies and procedures

Revolution in communication and transportation

International Business

International Business Corporate Approaches

1.

Ethnocentric (Home country orientation)

2.

Regiocentric (Regional orientation)

3.

Polycentric (Host country orientation)

4.

Geocentric (World orientation)

International Business

Home Country Economic Environment

1.

Domestic Markets & Size

2.

Economic Policies

3.

Promotional and Regulatory measures

International Business

Host Country Economic Environment

1. Size of the Markets
2. Gross Domestic Product
3. Industrialisation
4. Development of Banking Facilities
5. Purchasing Power and Standard of Living
6. Foreign Exchange Situation
7. Income levels
8. Economic diversity (urbanisation Rural dev. Ex
Johannesburg, Sao Paolo

International Business

Global Economic Environment

1. International organisations
2.

Trading Blocs

3.

Strategic Locations

4.

Global Political Environments and Issues

International Business

SAARC (7): + Afghanistan (Total 8)

South Asian Association for Regional Cooperation
India, Pakistan, Sri Lanka, Nepal, Bhutan, Bangladesh,
Maldives (SAPTA SAARC preferential trading agreement)
NAFTA (3) : North American Free Trade Agreement
USA, Canada, Mexico
LAFTA (9) : Latin American Free Trade Area
Argentina, Brazil, Mexico, Chile, Peru, Uruguay, Paraguay,
Columbia, Ecuador
ASEAN (5) : The Association of South East Asian Nations
was formed by the Bangkok Declaration, 1967, by five
countries, viz., Indonesia, Malaysia, Philippines, Singapore
and Thailand.

International Business

EU (15) : European Union

Austria, Belgium, Britain, Denmark, Finland, France,
Germany, Greece, Ireland, Italy, Luxembourg, Netherlands,
Portugal, Spain, Sweden.
Euro : Common currency of the EU was launched by 11
members on 1.1.1999, Britain, Denmark, Sweden didnt join. Greece joined
in 1.1.2001

Maastricht Treaty of 1991 set the stage for the monetory

union.
EU Additions
With effect from May 1, 2004 the total membership of EU
increased to 25. Following ten countries were inducted.
Estonia, Latvia, Lithuania, Poland, Czech Republic, Hungary,
Slovenia, Slovakia, Cyprus and Malta.
Two more members, Bulgaria and Romania, were inducted in
2007, taking the tally to 27 countries.

International Business
MERCOSUR : Mercado Comun del Sur Brazil, Argentina,
Paraguay and Uruguay.
In the post World War II period, the erstwhile Soviet Union
and East European countries sought to foster economic
development via the integration scheme of Council for Mutual
EconomicAssistance (CMEA or COMECON). With the
dissolution of the CMEA in 1991 following political changes,
the regional trade of the eastern bloc also collapsed.
ASEAN China free trade zone is under process. AFTA
with more members like Cambodia, Laos, Myanmar and
Vietnam also joining the group.

Survival Rate for Global Corporations

Age in Years

Percentage
surviving

Percentage
Perishing

38

62

10

21

79

15

14

86

20

10

90

25

93

50

95

75

99

100

0.50

99.50

Thank you

International Business

International Business Environment

1. Internal Environment
Org. Structure ( I
P
O)
Production
Marketing
Finance
HR
R&D
IT
Business Development

International Business

International Business Environment

2. External Environment
a. External Micro Environment
All Stakeholders and Competitors

b. External Macro Environment

STEPIN
(Social, Technical, Economical, Political, International,
and Natural)

Foreign direct investment approvals will, however, be

subject to sectoral caps: (as on 31.03.2010)
20 percent (40'per cent for NRIs} in the banking sector;
51 per cent in non-banking financial companies;
100 per cent in power, roads, ports, tourism and venture capital funds;
49 per cent in telecommunications;
40 per cent (100 per cent for NRIs) in domestic air taxi operations/airlines;

24 per cent in small-scale industries;

51 per cent in drugs/pharma industry for bulk drugs;
100 per cent in petroleum; and
50 per cent in mining ~ except for gold. silver, diamonds and precious
stones

The Millennium Development Goals

as defined by UN
Eradicate extreme poverty and hunger
Achieve universal primary education
Promote gender equality and empower women
Reduce child mortality
Improve maternal health
Combat HIV/AIDS, malaria and other diseases
Ensure environmental sustainability
Develop a global partnership for development
Stop Child Labour