International Business Analysis

Lecture - 2

By
Izza Shahzad

What is International
Business ?
Theexchangeofgoods
and
servicesamongindividualsand
businesses in multiplecountries.
A
specificentity,
such
as
amultinational
corporationorinternational business
companythat
engages
inbusinessamong multiple countries.
(Business Dictionary.com :2011)

What is International
Business ?
International Business involves
Commercial
activities
that
cross
international frontiers.
Deals with international movement of
goods, capital, services, employees ,
technology, importing and exporting,
cross-border transactions in intellectual
property.

Why Study International

Business?

Importance for International Firms .

Importance for Managers of MNCs.
Help to Individuals.
Awareness
Understanding of Cultures
How companies operate in such
cultures?

International Business
Environment

Why Firms Engage in

International Business?
Firms Take international operations to
Increase sales .
Acquire Resources.
Diversify activities.

Other reasons include

Saturation of Domestic markets.
Discovery of lucrative Opportunities abroad.
Technologies and Products not available in
Home country.
Desire to obtain economies of scale
contd.

Why Firms Engage in

International Business?
Commercial risk can spread across
several countries.
Experience Curve facilitation
Economies of Scope
Compulsion due to higher costs of
production in domestic market.
Intense competition in domestic market.
Easier cross border trade.

Urbanization

Dubai 1991.

2006 ..
(Carter and Lee: 2011)

Worlds Mega Cities

By 2015, the top 5 largest cities will be:
Tokyo -Japan26.4 million
Mumbai -India 26.1 million
Lagos -Nigeria23.2 million
Dhaka-Bangladesh21.1 million
So Paulo -Brazil20.4 million

By 2010, 50% of people will live in urban

areas
What are the implications for
international business?

The World Economy:

1970 and 1995

GDP Projections

International Operations of
Small Businesses
Benefits
Expanded Trading Via e.g. The Internet.
Internationalization of Banking
Systems.

Problems
can be lack of resources, Limited Time,
Restricted Knowledge of the
International Market.

International Operations of
Small Businesses
Characteristics of Operations of Small
Firms
Area and Scope of Operation.
Mostly Low intensity with Operations limited to
Franchising and Exporting.

Limited Products and Services.

No Special Products for International Markets.
Lack of Strategic Vision and Direction.
Poor knowledge of International Markets as
compared to domestic ones.

Process of
Internationalization
Export/Import Department is the first
step towards internationalization of
business.
Employment of Skilled staff.
Their Competencies include financing
international transactions, shipping and
other transport documents etc.
Should
know international marketing
operations and bilingual capabilities would
always be an added advantage.

Process of
Internationalization
Expansion of scope and operation of
exports department :
Now is the time to go international .
Better knowledge of the international market.
Setup of subsidiaries, branches and possibly
production operations.
Own international marketing research
Buying of international media directly
Above all raising finance from foreign
sources..

Process of
Internationalization
Next stage can be international joint
venture with foreign partners
A permanent local production base is
sometimes necessary because of size
of production and length of distribution.
As profits become generally dependent
upon international operations the firm
becomes an MNC.

Theories of
Internationalization
(Market Estimation)

Why firms export ?

Regional Trading BLOCS

The Triad
Consists of NAFTA , EU and Pacific Rim
USA, EU and Japan
Lucrative markets exist between all three
regions
Ignoring one means ignoring an opportunity
The triad includes such characteristics as

Aging Population
Common tastes and Buying habits
High Consumer incomes
Rapid rate of technological development within firms

Regional Trading BLOCS

Advantages for companies becoming
TRIAD Powers :
Constant Interaction with the worlds most
important markets
The ability to develop a universal product
attractive to customers throughout the triad.
The capacity to penetrate very quickly into
new markets within the triad
Capacity to respond to competitors
threatening behaviour.

International Organisations
OECD (the organisation for economic
cooperation and development)
Established in 1961
Forum for Governments
Economic and Social Policy
Seeks to expand international trade
Seeks international assistance for
developing or underdeveloped countries .
Publishes statistical data on member states

International Organisations
G-10
Established in 1962
10 leading OECD Members
Acts as a forum for international
monetary arrangements.
Followed by the G-7
Heads of states meet each year to
discuss political economic situations

G-10

WTO
Known as GATT (General Agreement
for Tariffs and trade) prior to 1994.
Was founded in 1947 in Geneva
Was their to minimize tariff levels
and non tariff barriers
Members include 116 countries
including Industrial Economies and
Eastern Europe states

CONTD.
WTO Rules 90 percent of world trade
and is based on following principles:
Non-discrimination
Resolution of Disputes via consultation
Non-legality of quantitative restrictions
on imports

The Uruguay Settlement

It is termed as the most significant
agreement so far
Tariffs would fall by 40 percent by 2000
50 percent reduction in tariffs of each
others products by EU and USA.
Measures related to Intellectual property rights
and counterfeiter goods were included
The reform of national and agricultural
subsidies
Trade in services

The Uruguay Settlement

20 years patent protection
Limitations on use of compulsory licensing
Copyright protection for at least 50 years
(include
compiled
data
bases
and
software's)
Laws to prevent disclosure of trade secrets
Equal treatment for foreign and domestic
intellectual property rights
Developed countries have one year were
as developing countries 5 years to
introduce legislation.

Group Discussion
UN (United Nations)
IMF (International Monetary Fund)
ILO (International Labour
Organisation)

Lecture 2