INTRODUCTION

TO
INTERNATIONAL
BUSINESS
What is International Business?
International business comprises all commercial transactions
(private & governmental, sales, investments, logistics &
transportation) that take place between two or more regions,
countries and nations beyond their political boundaries.
The term “international business” refers to all those business
activities which involve cross-border transactions of goods,
services, resources between two or more nations. Transactions
of economic resources include capital, skills, people etc. for
international production pf physical goods & services such as
finance, banking, insurance, construction etc.
Economic development of a nation is largely affected by a
number of economic & non-economic factors. Among the
economic determinants of growth, expansion of trade
occupies an important place. The historical experiences of a
few advanced nations (like U.S.A., France, U.K., etc.)has
clearly demonstrated how foreign trade can be an engine of
growth. Their economic progress is attributable to their
ever-expanding external trade. Trade, hence, has been
rightly termed as an engine of growth, an activator of
change & a barometer of economic progress.
Now, what is international trade?
It is an activity of strategic importance in the development
process of a developing economy. Trade among nations
takes place because the facilities for the production of
various goods are unequally distributed over the world.
A much wider concept i.e. international business
means carrying on business activities beyond national
boundaries. This definition is inclusive of both small
firms exporting or importing small quantities and
large global firms with integrated operations and
strategic alliances around the world. The business
activities mentioned above normally include the
transaction of economic resources such as goods,
capital, services & international production.
Thus, international business includes both
international trade of goods & services and also
foreign investment, especially foreign direct
investment
ITS GROWTH AND DEVELOPMENT
International business has grown dramatically in recent years
because of strategic imperatives and environmental changes.
Strategic imperatives include the need to leverage core
competencies, acquire resources, seek new markets, and
match the actions of rivals. Although strategic imperatives
indicate why firms wish to internationalize their operations,
significant changes in the political and technical
environment have no doubt facilitated the explosive growth
in international business activity that has since World War 2.
The growth of the internet and other information
technologies is likely to redefine global competition and ways
of doing international business once again.
There are many reasons why international business is growing at
such a rapid pace. Below are some of those reasons:

1) Saturation of Domestic Markets - In most of the countries

due to continuous production of similar products over the years
has led to the saturation of domestic markets. For example in Japan
95% of people have all types of electronic appliances and there is
no growth of organization there, as a result they have to look out
for new markets overseas.

2) Opportunities in Foreign Markets - As domestic markets in

some countries have saturated, there are many developing
countries where these markets are blooming. Organizations have
great opportunities to boost their sales and profits by selling their
products in these markets. Also countries that are attaining
economic growth are demanding new goods and services at
unprecedented levels.
3) Availability of Low Cost Labor - When we compare labor
cost in developed countries with respect to developing
countries they are very high as a result organizations find it
cheaper to shift production in these countries. This leads to
lower production cost for the organization and increased
profits.
4) Competitive Reasons - Either to stem the increased
presence of foreign companies in their own domestic markets
or to counter the expansion of their domestic markets more
and more organizations are expanding their operations
abroad. International companies are using overseas market
entry as a counter measure to increase competition.
5) Increased Demands - Consumers in counties that did not
have the purchasing power to acquire high-quality products
are now purchasing them due to improved economic
conditions
6) Diversification - To counter cyclical patterns of business in
different parts of the world, most of the companies expand and
diversify their business, to attain profitability and uncover new
markets. This is one of the reasons why international business is
developing at a rapid pace.
7) Reduction of Trade Barriers - Most of the developing economics
are now relaxing their trade barriers and opening doors to foreign
multinationals and allowing their companies to set-up their
organizations abroad. This has stimulated cross border trade
between countries and opened markets that were previously
unavailable for international companies.
8) Development of communications and Technology - Over last
few years there has been a tremendous development in
communication and technology, which has enabled people sitting at
their home at one part of the world to know about demands,
products and services offered in other part of the world. Adding to
this is the reducing cost of transport and improved efficiency has also
led to people expanding their business.
9) Consumer Pressure - Innovations in transport
and communication as led to development of more
aware consumer. This has led to consumers
demanding new and better goods and services. The
pressure has led to companies researching, merging or
entering into new zones.
10) Global Competition - More companies operate
internationally because:
– New products quickly become known globally
– Companies can produce in different countries
– Domestic companies, competitors, suppliers have
becomes international
International business development evolves through the normal
processes of trade, foreign direct investment, capital flows, migration, and
the advancement of technology in undeveloped nations. In order to achieve
sustainable global business development, business professionals often must
find ways of adapting to the cultures and societies within which they
operate and conduct business. With huge growth opportunities created by
the emerging middle class of nations such as Brazil, Russia, India, China
and South Africa (the BRICS countries), many companies in the developed
world are stepping in to provide goods and services to those countries'
consumers, and business development professionals provide the necessary
legal, financial, and cultural bridges between supplier and consumer.
As the globalization of economies, societies, and cultures continues, and
nations become more integrated through networks of exchange,
international business development and global strategic management
continues to evolve. Global firms that employ business development
professionals in multiple locations who share exactly the same body of
knowledge, ethics, practices, and standards benefit from a shared body of
knowledge and ethics. These companies are well positioned for growth, as
are the societies in which they operate.
Professionals who work in international business development (as
distinct from domestic, or intra-national efforts) must acquire
specific skills relating to the countries where they operate. This
includes understanding the economy, history, culture, laws, business
practices and trade patterns of the target country. It also includes a
broader understanding of issues common to any international work:
global travel, risk mitigation, international contracts and more. Most
companies new to international business development, or new to a
geography engage the help of third-party consulting firms who
specialize in either cross cultural work or in a particular country.
Some governments also offer support in this area to their companies
that seek to create jobs in their country, by promoting exports.
The international business development and global strategic
management industry is a specialized field of commerce that
penetrates existing markets, and often creates new ones, by
introducing new products and services to businesses, individuals,
non-profit organizations, and government agencies.
 Globalisation and its
impact on Indian economy
Globalisation can be defined simply as an expansion of economic
activities across political boundaries of nation states. More
importantly it refers to a process of deepening economic
integration, increasing economic openness and growing economic
interdependence between countries in the world economy. It is
associated not only with a phenomenal spread and volume of
cross-border economic transactions but also with an organization
of economic activities which straddle national boundaries of the
world. Globalization in India is generally taken as integrating the
economy of the country with the rest of the world. This in turn
implies that opening up the economy to foreign direct investment
by providing facilities to foreign companies to invest in different
fields of economic activities in India
 The real thrust to the globalization was provided by the economic
reforms of 1991 initiated by Government of India. The period 1980-81
was marked by severe balance of payment difficulties. The second oil
shock pushed up the import bill substantially while exports lagged
considerably Thus trade deficit rose to astronomical heights.
 Indian economy had experienced major policy changes in the early
1990s. The new economic reform popularly known as Liberalization,
Privatization, and Globalization (LPG), aimed at making the Indian
economy as fastest growing economy and globally competitive. This
period of economic transition has not only had tremendous impact on
the overall economic development but also on the mindset of Indian
people who could get rid from traditional, stubborn thinking,
superstition, and illiteracy.
 Major measures initiated as part of liberalization, privatization and
globalization in early nineties included the following: 1) Devaluation:.
2) Disinvestment: 3) Dismantling the Industrial licensing regime 4)
Allowing foreign direct investment 5) Non-resident Indian scheme 6)
Abolition of MRTP Act
 Advantages of Globalisation
 The growth rate of GDP of India has been on the increase from 5.6 percent
during1980- 90 to 7 percent in the period of 1993-2001. At present in 2016 GDP is
growing at 7.4 percent shown by union budget 2016-17.
 The foreign exchange reserves were $39 billion (2000-01), $107 billion (2003-04), $145
billion (2005-06), and $180 billion in 2007. According to reserve bank of India,
India’s foreign exchange reserves are $351.83 billion as on 19 Feb, 2016.
 The cumulative FDI inflows from 1991 to 2006 were Rs. 81566 crore ($43.29 billion).
The sectors attracting highest FDI inflows are electrical equipment including
computer software (18 percent), Service Sector (13 percent), Telecommunications (10
percent), and Transportation industry (9 percent) etc.
 In 2010 India’s share was 55 percent in Global Outsourcing market.
 India’s rank was fourth in market capitalization in 2005, it was preceded by USA,
Germany and China. But at present its rank is ninth, it means it is now preceded by
eight countries and India’s position has worsened but India was able to join trillion
dollar market by going through all ups and downs.
 As per the Forbes list 2015, India has 100 billionaires. There were only 40 billionaires
in India as per forbes 2007 list. The assets of these 100 billionaires are more than
cumulative investment in the 91 public sector undertakings by the central
government of India.
 Disadvantages of Globalisation
 Corporates work for mostly for profit motive. Post reform period has witnessed
drastic increase in child labour because due to LPG policy the role of public sector
was reduced. India is home to the largest number of child labourers in the world.
The census found an increase in the child labourers from 11.28 million in 1991 to
12.59 million in 2001. Poverty and lack of security are main causes of child labour.
 Globalization has generated problems like job and social insecurity. Public sector
provides jobs along with social as well as job security and other benefits also. But
in the modern era a person can get a job but neither he would get a secure job nor
social security. Therefore, increasing insecurity in society is perpetuating other
social evils like dowry system, crimes, unemployment etc.
 Globalization can ruin the environment. Moving things from one area to another
wastes oil, etc.
 Globalization can lead to hyper-specialization, which can be good, but also
negative. There is something great about being a generalist. Also what if
something goes wrong. To know things generally give an incredible perspective
that specialists do not have.
 Globalization can be driven by people with "know how" and power and they can
systematically fleece the world.
 Impact of Globalisation on India
Economic impact-

Greater Number of Jobs

More choice to consumers
Higher Disposable Incomes
Socio-cultural Impact-

Access to education
Growth of cities
Multi-Cultural Art forms
Nuclear Families
Pervasive Media
Psychological Impact-

Development of Bicultural Identity

Consumerism
Delayed Adulthood
 ADVANTAGES OF INTERNATIONAL
BUSINESS
1. A country can consume those goods which it cannot produce:
Commodities produced in India can be found in England and vice-versa. This helps England to enjoy those goods which
it cannot produce in its own country.

2. The productive resources of the world are utilized to the best advantage of the country:
Every country expects highest return from its resources and this lead to a fall in price and better goods for consumption.

3. Heavy price fluctuations are controlled:

If the price of any commodity goes up, the goods can be imported from abroad and its price can be brought down.

4. Shortages in times of famine and scarcity can be met from imports from other countries:
Surplus produce can be sent out to needy countries. Food scarcity in India and Europe is often met by surplus from the
U.S.A.

5. Countries economically backward but rich in resources may develop their industries:
Indians are opening industries with the idea of sending produced goods to foreign countries.

6. International Business promotes peace and friendship:

No country, however big it may be, can claim to be self-sufficient. It will have to depend on other countries for some of
the things. Free international business is essential for goodwill, peace and to meet any national requirements.
 DISADVANTAGS OF INTERNATIONAL
BUSINESS
1. The Worst Part of Foreign or International Business is the Destruction of
Cottage and Home Industries:
Indian industries need protection. If there is no protection from the government’s
side, Indian industries cannot prosper.

2. Dependence on Foreign Business Creates Difficulties in Times of Need:

In the past, India had to face great trouble and difficulty in getting ordinary and simple
articles like medicine and tools during need, especially during war.

3. The Extreme Specialization which makes a Country Depend on One or Two

Industries is Bad:
This is because if, at any time the industry suffers, the economic life of the people
would be endangered.
4. Countries which Sell Raw Materials and Buy Manufactured Goods in Return
are always losing and are unable to Improve the Country’s Economy:
The standard of living of people cannot improve. International business under
such conditions leads to more discontent and unrest, than to peace and goodwill.

5. International Business may Completely Exhaust a Country’s Natural

Resources like Coal and Oil which are Irreplaceable:
These goods are exported just for the sake of earning money and profit. But the
country will have to suffer in the long run when their sources will dry up completely.

6. Imports of Harmful Drugs and Luxurious Goods ruin the Health of the
Nation:
For this, people blame international business, which is incorrect.

7. International Business Rivalry Leads to War:

Example of this kind include the last two world wars. Commercial competition
often puts strain on relations between countries. But to our measure, advantages of
international business always outweigh the disadvantages. At any rate, it is
significant if it is helpful in improving the country’s economy.
PROBLEMS FACED IN INTERNATIONAL BUSINESS
1. Different Trade Patterns:
International business has to deal with the business patterns among the
various countries of the world.
It has to take into account these business policies of various countries
which govern their imports and exports. These policies and practices
impose certain constraints and restrictions on international business.

2. Regulatory Measures:
Every country wants to export its surplus natural resources, agricultural
produce and manufactured goods to the extent it can, and import only
those goods and products which are not produced or manufactured within
the country. For this purpose regulatory measures like tariff barriers
(custom duties), non-tariff barriers, quota restrictions, foreign exchange
restrictions, technological and administrative regulations, trade
agreements, etc. come in the way of free trade and disturb the flow of
foreign business.
.

3. Lopsided Development of Developing Countries:

Developed countries are equipped with sophisticated technologies
capable of transforming raw materials into finished goods, on a large
scale. While developing countries, on the other-hand, lack technological
knowledge and latest equipments. It leads to the lopsided development in
the international business.

4. Economic Unions:
There is an increasing tendency among nations to form small groups of
Economic Unions which help them to negotiate terms for the business
with other countries.

5. National Policy of Development:

The country’s desires of achieving self-sufficiency, follows a strategy of
importing capital goods equipped with latest and sophisticated
technology and restricting imports of less important consumer goods
with a view to lowering down its import bill.
.

6. Procedural Difficulties:
Different countries have evolved different procedures, practices and
documents in order to regulate the export trade.
 KEY DIFFERENCES BETWEEN DOMESTIC
AND INTERNATIONAL BUSINESS
 Domestic Business is defined as the business whose economic
transaction is conducted within the geographical limits of the
country. International Business refers to a business which is not
restricted to a single country, i.e. a business which is engaged in the
economic transaction with several countries in the world.
 The area of operation of the domestic business is limited, which is the
home country. On the other hand, the area of operation of an
international business is vast, i.e. it serves many countries at the same
time.
 The quality standards of products and services provided by a
domestic business is relatively low. Conversely, the quality standards
of international business are very high which are set according to
global standards.
.

Domestic business deals in the currency of the country

in which it operates. On the contrary, the international
business deals in the multiple currencies.
Domestic Business requires comparatively less capital
investment as compared to international business.
Domestic Business has few restrictions, as it is subject to
rules, law and taxation of a single country. As against
this, international business is subject to rules, law,
taxation, tariff and quotas of many countries and
therefore, it has to face many restrictions which are
barriers in the international business.
 Conclusion
International and Business Globalization has its own
negative as well as positive impacts in modern era. To be
precise, it has proven advantageous to professional and
skilled individuals, primarily from urban regions. The
unskilled population hasn’t gained enough out of
globalization. Nevertheless, globalization has fostered
the quality of the educational system in India, which
benefits the country. In fact, employment, education, and
ambitious entrepreneurs are essential for the economic
growth of a country. Globalization is simply a
phenomenon that permitted each of them to develop
rapidly and in parallel. It can be said that Globalisation
has sped up India's Economic Development