INTERNATIONAL

BUSINESS
By- Dr. Prof .Darshana Palwankar
[Link], L.L.B, L.L.M, PHD.
Module I: Globalization
 Introduction to International Business

 In simple words,

 Business activities done across national borders is

International Business.

 The International business is the purchasing and selling of

the goods, commodities and services outside its national
borders.
 Such trade modes might be owned by the state or privately
owned organization.

 The organization explores trade opportunities outside its domestic

national borders to extend their own particular business activities,

 for example:

 manufacturing, mining, construction, banking, insurance, health,

education, transportation, communication and so on.
 What is International Business?

 International business encompasses all commercial activities that take place

to promote the transfer of-

 goods,

 services,

 resources,

 people,

 ideas, and

 technologies across national boundaries.

 International business occurs in many different formats:

 The movement of goods from one country to another (exporting,

importing, trade)

 Contractual agreements that allow foreign firms to use products,

services, and processes from other nations (licensing,
franchising)

 The formation and operations of sales, manufacturing, research

and development, and distribution facilities in foreign markets.
 Nations that were away from each other, because of their geological
separations and financial and social contrasts are now connecting with
each other.

 World Trade Organization (WTO)(1995)established by the administration of

various nations is one of the major contributory factors to the expanded
connections and the business relationship among the countries.

 The national economies are dynamically getting borderless and fused into
the world economy as it is clear that the world has today come to be known
as a ‘global village’
 Need to do study of international business

 The study of international business involves understanding the effects that the activities
have on

 domestic and foreign markets,

 countries,

 governments,

 companies, and

 individuals.

 Successful international businesses are able to recognize the diversity of the world
marketplace and are able to cope with the uncertainties and risks of doing business in a
continually changing global market.
 The Growth of International Business

 The prevalence of international business has increased

significantly during the last part of the twentieth century, i.e
thanks to the liberalization of trade and investment and the
development of technology.
 The Growth of International Business

 Some of the significant elements that have advanced international business

include:

 The formation of the World Trade Organization (WTO) in 1995

 The inception of electronic funds transfers

 The introduction of the euro to the European Union

 Technological innovation that facilitates global communication and

transportation.
 Benefits of International Business

 International Business is important to both Nation and Business organizations.

 It offers them various benefits.

 cont…..
 Benefits to Nation
 It encourages a nation to obtain foreign exchange that can be utilized to import
merchandise from the global market.

 It prompts specialization of a country in the production of merchandise which it

creates in the best and affordable way.

 Also, it helps a country in enhancing its development prospects and furthermore

make opportunity for employment.
 Benefits to Firms
 Increased revenues: International business can increase revenues by
providing access to new markets and customers.

 Reduced risks: International business can reduce risk by providing

access to markets with greater potential.

 Cost savings: International business can reduce costs by relocating

closer to suppliers or expanding operations to another country.

 Access to skilled labor: International business can provide access to

high-skilled foreign labor.
 Improved profitability: International business can improve profitability by
providing access to new markets and customers.

 Better cash flow management: International business can improve cash

flow management.

 Enhanced reputation: International business can enhance a firm's

reputation.

 Opportunity to specialize: International business can provide an

opportunity to specialize.

 Cultural transformation: International business can lead to improved

productivity, increased profitability, and enhanced employee satisfaction.
 OTHER BENEFITS
 Competitive advantage

 Expanding into new markets can give your business a competitive edge against
rivals. You can access markets where competitors don't operate, and you can also
learn from best practices and experiences.

 Brand reputation

 Expanding into new markets can improve your brand's credibility and recognition
with a global audience.

 Cultural development

 Understanding people from other countries can help you develop a new perspective
on customer relations and work better with domestic customers and business
partners.
 Diversification

 Conducting business in different countries can diversify your income streams, reducing
your dependence on a single market. This can protect your company from economic
downturns or industry-specific setbacks.

 Extended product lifecycle

 Global expansion can extend the profitability of your product line by breathing new life
into products that are nearing the end of their lifecycle in established markets.

 Access to global talent

 International markets can give you access to top talent to collaborate with and
develop better products and services.

 Financial incentives

 You can leverage financial incentives for entering new foreign markets.
 Barriers to International Business

 Despite difficult distances, high cost of transportation,

diverse languages, customs, traditions and national level
laws, risk and uncertainties, exchange control etc., one of
the basic factors that must be taken into account in
international business is the Exporting Country’s foreign
trade regulations.

 These may block or hinder exports to all or some countries.

 Trade restrictions also have direct adverse effects on the exporting country.

 (a) Tariff Barriers:

 Tariff in international trade refers to the duties or taxes imposed on international traded
commodities when they cross the national boundaries which makes the product costlier
than the product available in local market. These include export duties, import duties,
transit duties, countervailing (subsidies) duties, and anti-dumping.

 (b) Non-tariff Barriers:

 A non-tariff barrier is any measure other than a tariff that raises an attack to the free flow
of goods in the overseas market. Non-tariff barriers are normally erected in the form of
prior import deposits, import quota/licensing, foreign exchange regulations, exchange
formalities, Government procurements, health and safety measures, preferential
arrangements, trading blocks, technical and administrative regulations and economic and
political wars.
International Business in 21st
century:
World’s Top Economies
Top 10 largest economies/ richest countries
in the world in 2023, sourced from IMF data:

Rank & Country GDP (USD billion) GDP Per Capita (USD thousand)

#1 United States Of America (U.S.A) 26,854 80.03

#2 China 19,374 13.72

#3 Japan 4,410 35.39

#4 Germany 4,309 51.38

#5 India 3,740 2.6

#6 United Kingdom (U.K.) 3,160 46.31

#7 France 2,924 44.41

#8 Italy 2,170 36.81

#9 Canada 2,090 52.72

#10 Brazil 2,080 9.67

 *Data is last updated on August 23, 2023

What are the Next 10 Economies

Rank & Country GDP (USD billion)

#11 Russia 2,060
#12 South Korea 1,720
#13 Australia 1,710
#14 Mexico 1,660
#15 Spain 1,490
#16 Indonesia 1,390
#17 Netherlands 1,080
#18 Saudi Arabia 1,060
#19 Turkiye 1,030
#20 Switzerland 869.6
 GLOBALIZATION
 A Simple Globalization Definition

 Globalization means the speedup of movements and exchanges (of

human beings, goods, and services, capital, technologies or cultural
practices) all over the planet.

 One of the effects of globalization is that it promotes and increases

interactions between different regions and populations around the
globe.

 Globalization is the expansion of businesses all over the

world due to advances in technology and transportation
 An Official Definition of Globalization by the World Health
Organization (WHO)

 According to WHO, globalization can be defined as ” the increased

interconnectedness and interdependence of peoples and countries.

 It is generally understood to include two inter-related elements:

 the opening of international borders to increasingly fast flows of

goods, services, finance, people and ideas;

 and the changes in institutions and policies at national and

international levels that facilitate or promote such flows.”
 What Is Globalization in the Economy?

 According to the Committee for Development Policy (a subsidiary

body of the United Nations), from an economic point of view,
globalization can be defined as:

 “(…) the increasing interdependence of world economies as a

result of the growing scale of cross-border trade of commodities
and services, the flow of international capital and the wide and
rapid spread of technologies.
 History of globalization

 Globalization rich history began long before giant conglomerates

such as Amazon and Google existed.

 There is a timeline of discovery, protectionism, liberalization,

financial crisis, and economic development that can all be traced
back to the BC era as the phenomenon of international trade
developed
 The Silk Road
 The Silk Road was the cultural phenomenon that made luxury
goods accessible across countries in the first century BC through
the fourteenth century AD.

 Silk was exported from China to Rome, meaning that many other
countries were involved along the route.

 However, with an abundance of wars and conquerings and fallen

empires changing accessibility of routes, the Silk Road could no
longer sustain the turmoil or trade barriers, and ultimately
collapsed despite its export efforts.
 The spice routes
 The spice routes flourished because they were tied to the spread of
the Islamic religion.

 The prophet Mohammed was not only the founder of Islam but also
a merchant who traded his spices as he preached across countries.

 This spread lasted from the seventh to the 15th century, beginning
in the Arabian heartland and expanding to places like Spain, India,
Indonesia, and Europe
 The age of discovery
 From the 15th to the 18th century, explorers ventured out to new
lands and began integrating resources of those new lands into
their economies through trade.

 Countries began to establish global trade supply chains from the

new land to their country to other countries, thus expanding the
world's economy.
 The first wave

 At the turn of the 19th century, the most advanced form of

globalization began.

 The British Empire continued to expand its range, and the Industrial

Revolution (1760 to 1840) was in full swing.

 With technological advancement, the U.K. could manufacture goods in

demand all over new parts of the world, including textiles and iron.

 Globalization grew exponentially over the next century and continued

rapid expansion until the world wars.

 The World Wars

 World War I (1914–1918) and World War II(1939–1945)

brought globalization to a halt.

 While war boosted the economy, it destroyed the cycle of a

trade.

 By the end of the second world war, the gross domestic

product fell to five percent, the lowest percentage in one
hundred years.
 The second wave

 The end of World War II brought more peace and more trade.

 During the second wave of the Industrial Revolution, cars and

planes were manufactured more than ever.

 Because of the increased access to transportation and the new

free trade agreement, economic globalization boomed bigger
than ever.
 The third wave

 The third wave of globalization occurred on the heels of the

Soviet Union collapse and the creation of the World Trade
Organization (WTO)( 1 January 1995) but its trading system is
half a century older. Since 1948, the General Agreement on
Tariffs and Trade (GATT) had provided the rules for the system.

 The Internet began to take shape, transportation and

communication technology became more manageable and
accessible, and globalization seemed to make the world much
smaller.
 The tech age

 America and China lead globalization in the cyber age.

 Ecommerce has grown significantly year after year and shows

no sign of slowing down.

 As operations become more extensive and streamlined,

manufacturing happens faster and faster.

 Deliveries can be made overnight, and trade seems to have no

boundaries.
 Examples of Globalization

 Because of trade developments and financial exchanges, we

often think of globalization as an economic and financial
phenomenon.

 Nonetheless, it includes a much wider field than just flowing of

goods, services or capital.

 Often referred to as the globalization concept map, some

examples of globalization are:
 Financial globalization: can be linked with the rise of a global
financial system with international financial exchanges and
monetary exchanges.

 Stock markets, for instance, are a great example of the financially

connected global world since when one stock market has a decline,
it affects other markets negatively as well as the economy as a
whole.
 Cultural globalization: refers to the interpenetration of cultures
which, as a consequence, means nations adopt principles,
beliefs, and costumes of other nations, losing their unique
culture to a unique, globalized supra-culture;
 Political globalization: the development and growing influence of
international organizations such as the UN or WHO means nations
governmental action takes place at an international level.

 There are other bodies operating at global level such as

 NGOs like Doctors without borders(international humanitarian group

dedicated to providing medical care to people in distress, including
victims of political violence and natural disasters) or

 Oxfam( Oxford Committee for Famine Relief, founded in Britain in

1942).
 Sociological globalization: information moves almost in real-
time, together with the interconnection and interdependence of
events and their consequences.

 People move all the time too, mixing and integrating different
societies;
 Technological globalization: the phenomenon by which millions of
people are interconnected thanks to the power of the digital world
via platforms such as Facebook, Instagram, Skype or Youtube.

 Ecological globalization: accounts for the idea of considering planet

Earth as a single global entity – a common good all societies should
protect since the weather affects everyone and we are all protected
by the same atmosphere
 Geographic globalization: is the new organization and
hierarchy of different regions of the world that is constantly
changing.

 Moreover, with transportation and flying made so easy and

affordable, apart from a few countries with demanding visas,
it is possible to travel the world without barely any
restrictions;
 Types of global businesses

 An international business operates by selling or producing

goods or services in more than one country.

 There are a few different types of global business, each with a

unique form of operation.
 Import and export

 Selling products or services from one country to another. These are often the first
international business activities for a company.

 Foreign direct investment (FDI)

 When a company owns a business in another country, contributing money and

participating in the business operations.

 Franchising

 A worldwide international business activity.

 Eg- McDonald's, KFC,

 Strategic alliances

 Businesses from different regions of the world form alliances to learn new skills and
capabilities from each other.

 Example-Uber and Spotify

 Users can log in to Spotify while waiting for their Uber ride to start, and choose a
playlist to listen to

 Apple and Mastercard

 Apple's mobile payment expertise and technology was combined with Mastercard's
trustworthiness to create a user-friendly payment system

 Joint venture

 When companies from different countries work together to achieve a goal by pooling
their resources. Eg- Sony and Ericsson
 Outsourcing

 When a company sends jobs like customer service and IT offshore to save costs.

 Export

 A major component of global business that helps secure a country's economic

condition
 Pros and cons of business globalization

 Pros of business globalization:

 The pros for a business and its economy include the following:

 Increased economic growth: Technological advances, international

exchange of goods, and other valuable information can improve a
country's income, living standards, and overall financial health.

 More affordable production: A broader price range is available

when more goods are available, making products more accessible
to consumers.
 Promotes international cooperation: Countries that trade goods
and services form relationships and rely on each other for
business ventures.

 Promotes job opportunity: When businesses move into new

countries, it means new jobs.

 Often companies move into countries where they can find

cheaper labor, which can help the poorer country's workforce to
strengthen.
 Cons of business globalization
 The negative effects of globalization on a business and its
economy include:

 Inequality in economic growth and labor exploitation: The old

adage "the rich get richer and the poor stay poor" applies to
business globalization, as rich countries and multinational
corporations often move into developing countries for cheap labor
and lax workplace regulations, reaping the profits while paying
incredibly low wages and offering dangerous workplace
conditions.
 A diminished number of local businesses: Businesses that can
move into other countries likely have vast financial power,
resources, and a well-known name attached.

 This means that when these companies move in, they fiercely
compete for local businesses and often put smaller
establishments in the industry out of business.
 Increased potential for global recession: When countries start
to form partnerships, it can cause interdependence on certain
goods and services.

 If one country's economy or labour force begins to decline, it

can negatively affect the global market.
 Potential for job displacement: When a business decides to move
its production to another country, every worker who had a job at
that location is suddenly out of work.

 If the company is large enough, it can negatively affect the

country's whole economy.
 Drivers of Globalization

 In the 1990s, various countries around the world opened their

markets to the world.

 After that, the process of globalization accelerated all over the

world.

 Many internal and external factors and forces play a major role in
this.
 The main drivers of Globalisation are the

 establishment of WTO,

 increase in FDI,

 regional integration,

 reduction of trade barriers,

 reduction of investment barriers,

 technological change and growth of multinational companies

 5 key Driving forces & factors of Globalisation
in International Business

 1. Technological drivers
 Technological Changes: Advances in technology

 The dramatic and unprecedented change in technology after the 1980s

played a major role in this transformation of globalization.

 Fast spread of latest technology globally

 Development in Information Technology

 Spread of internet worldwide

 Transportation & logistics technologies

 Rapid advancements in technology, especially in communication
and transportation, have made it easier and faster for people,
goods, and information to move across borders.

 This has led to an increase in international trade, investment, and

cultural exchange.

 The internet and digital communication have made it easier for

people and businesses to connect with each other across borders,
leading to increased trade, investment, and the transfer of
knowledge and ideas.

 These are the technological drivers of globalisation.

 [Link] Drivers
 Political factors significantly drive globalization by
shaping the framework within which countries interact,
trade, and cooperate.
 These factors ensure the reduction of barriers, the
establishment of international norms and agreements,
and the promotion of stability and cooperation globally
• Global Governance: International organizations and agreements, such as the
United Nations (UN), the World Trade Organization (WTO), and various regional
bodies, help establish norms and regulations that facilitate international
cooperation and stability.

• End of the Cold War: The dissolution of the Soviet Union and the end of the Cold
War created new opportunities for political and economic integration, especially in
Eastern Europe and former Soviet states.

• Political Stability and Security: Countries with stable political environments

attract foreign investment and trade, fostering economic integration.

• Political stability assures investors and businesses of a predictable and secure

operating environment. International efforts to maintain peace and security, such
as those by the United Nations (UN) and regional organizations, create a conducive
environment for global cooperation and economic activities.
 Regional Integration

 Regional integration is a process in which neighboring countries agree to

improve cooperation through shared institutions and rules.
 Examples: European Union (EU),

 South Asian Association for Regional Cooperation (SAARC )

 North American Free Trade Agreement (NAFTA)

 Association of Southeast Asian Nations(ASEAN)

 European Free Trade Association(EFTA) etc.

 Government policies

 Governments around the world have played a role in driving globalization by

adopting policies that promote free trade, foreign investment, and economic
liberalization.

 Reduced Trade Barriers

 This is an another important driver of globalisation. Many countries have reduced

tariffs and other trade barriers, making it easier for businesses to sell goods and
services across borders.

 Advanced countries after world war II reduced tariffs to encourage free flow of
goods & services.

 Example: General Agreement on Tariffs and Trade (GATT)

 These reduced trade barriers & tariffs contributed a lot in Globalisation.
cont……
 Declining Investment Barriers

 After 1990s various countries started removing foreign

investment barriers in order to encourage the growth of
international business.

 Companies can invest in other countries or set up operations

there, and investors can buy stocks or bonds from companies
located in different countries.
 3. Economic Drivers
 Economic liberalization

 Many countries have adopted policies that promote free markets and open
economies, which has encouraged foreign investment and trade.

 Globalization of financial markets

 The globalization of financial markets has made it easier for businesses to

access capital from around the world and has facilitated the flow of investment
across borders.
 4. Market drivers
 Changing consumer preferences

 Consumers are becoming more global in their tastes and preferences, and businesses
are responding by developing products and services that can be sold in multiple
markets.

 Access to new markets

 Globalization has provided businesses with access to new markets, which has helped
them to grow and expand their operations.

 Global supply chains

 Companies can now source raw materials, components, and labor from different
countries to create a final product, leading to increased efficiency and cost savings.
 5. Competitive Drivers
 Increased competition

 Globalization has led to increased competition, which has driven businesses to

innovate and become more efficient in order to remain competitive.

 Growth of Multinational Companies (MNCs)

 MNC is a company or organization doing business in more than one country. Growth of
MNCs contributed to internationalization of businesses.
 Overall, these drivers of globalization have transformed the world
economy, making it more interconnected and creating new opportunities
for businesses and consumers alike.

 However, globalization has also created challenges, such as increased

inequality and environmental degradation, that must be addressed in order
to ensure a sustainable and equitable future for all.

 This is all about various important Drivers of Globalisation or

internationalisation.
 DIFFERENCE BETWEEN GLOBALISATION
AND INTERNATIONAL TRADE
 Globalization is the process of increasing the interconnectedness of people,
institutions, markets, and nations, while international trade is the exchange of
goods and services between countries:

 Scope

 Globalization is a worldwide process, while international trade is limited to two or

more countries.

 Process

 Globalization is a process that includes international trade and finance, but is not
limited to them.
 Benefits

 Globalization allows companies to find cheaper ways to produce goods, and international

trade allows countries to access goods and services that might not be available domestically.

 Impact

 Globalization has led to increased international trade, and international trade is a driving
force behind globalization.

 Economic growth

 International trade can stimulate economic growth in countries that are interconnected, and
globalization has led to a wider range of products and services for consumers and
companies.

 Risk

 International markets can help businesses spread risk by allowing them to operate in
multiple markets, where one market might be doing well while another is struggling.
THANK YOU