8/8/2019 I B VS DOMESTIC

1/10

INTERNATIONALINTERNATIONAL

BUSINESSBUSINESS

Vs.Vs.

DOMESTIC BUSINESSDOMESTIC BUSINESS

Presented By:-

Prashant Pandia

8/8/2019 I B VS DOMESTIC

2/10

8/8/2019 I B VS DOMESTIC

3/10

International Business (IB) is all about commercialtransactions-private and governmental-between two or more

countries. These transactions include sales, investments, and

transportation.

Why to study IB?

Continuously increasing portion of international

trade and investments

Wider impact of global events and competition

Globalization is a process of interaction and integrationamong the people, companies, and governments of different

nations, a process driven by international trade and investment

and aided by information technology. This process has effects onthe environment, on culture, on political systems, on economic

development.

IT IS EXTENSION OF DOMESTIC BUSINESS

8/8/2019 I B VS DOMESTIC

4/10

Why Companies Engage in IB

To expand sales:A countrys market size always have a limit and

reduction ofAFC (average fixed cost) require increased production volume

To acquire resources: Natural resources and locations, products,

services, components, technologies, information from another country can

not be usable without IBTo minimize risk: Taking the advantage of business cycle situations-

recessions to expansions-in different countries

8/8/2019 I B VS DOMESTIC

5/10

Reasons for recent international growth

Expansion of technology

Liberalization of cross-border movements

Development of institutions that support

and facilitate international trade

Consumer pressures

Increase in global competition

8/8/2019 I B VS DOMESTIC

6/10

General Influences

Physical and Social

Factors

Political policies and legal

practices

Cultural factors

Economic factors

Geographical Influences

Competitive Environments

Major advantages in price,

marketing, innovation, orother factors

Number and comparative

capabilities of competitors

Competitive differences by

country

Operations

Objectives

Sales Expansion

Resource acquisition

Risk minimization

Strategy

ModesModes

Importing and Exporting

Tourism and

transportation

Licensing and

Franchising

Turnkey operations

Management contracts

Direct and portfolioinvestment

FunctionsFunctions

Marketing

Global

manufacturing

and supply-chain

management

Accounting

Finance

Human resources

OverlayingOverlaying

AlternativesAlternatives

Choice of

countries

Organization

and control

mechanisms

MeansMeans

8/8/2019 I B VS DOMESTIC

7/10

Terms to Describe International Companies

Multinational Enterprise (MNE) and Multinational

Corporation (MNC) are used synonymously to express their

international involvement, all the internationally involved

companies are not organized as corporations. Thus MNE is more

preferred term.

Another interchangeable term Transnational Company (TNC),

mostly used by UN, can be explained as, an organization in

which capabilities and contributions are may differ by country

but are developed and integrated into its worldwide operations

Companies international operations can be globally

integrated or multidomestic/ locally responsive.

International operations through joint venture, licensing

agreements, management contracts, minority ownership in

each others company, long term contractual agreements are

been followed by MNEs as collaborative arrangements, in

addition to wholly owned subsidiaries.

8/8/2019 I B VS DOMESTIC

8/10

PPolitical and Societal Factorsolitical and Societal Factors

Political policies and legal practices: Decisions related to

IB are taken by politicians. Domestic and international lawsare shaping up the dos and donts for businesses.

Cultural factors: Culture explains peoples social and

mental development, behavior and interpersonal activities.

Economic forces:

Economics explains the need forexchanging goods & services, economic opportunity and

capital flow, changes in currency value, cost of production

etc.

Geographical influences: Geographical attributes affect

on communication and distribution channels. Probability ofnatural disasters and reserves of minerals have international

considerations for trade and investment.

8/8/2019 I B VS DOMESTIC

9/10

TThe Usual Pattern of Internationalizationhe Usual Pattern of Internationalization

Domestic

business

Low

Medium

HighActive search

foropportunities

Passive

response to

proposals

Degree of

similarity

Number of foreigncountries to operate

Mode of

operations

Internal Vs

external

handling of

foreign

operations

AB

C

D

E

8/8/2019 I B VS DOMESTIC

10/10

/kU;okn