What is international businessInternational business consists of

transactions that are devised and carried out across national borders to satisfy the objectives of individuals, companies, and organizations.

History and Evolution of International Business19th Century: Broader concept of the

integration of economies and societies1870: Began first phase of Globalization1919: World War II: End of first phase of Globalization, Industrial

revolution in UK, Germany and the USASharp increase in the trade with import and

export by colonial empires1913: GDP 22.1After 1913: Increased Trade Barriers to Protect

Domestic Production1930’s: Declined Trade Ratio, GDP 9.1

After 1930’s: World Nations felt the need for International Co-operation in global trade and balance of payments affairs

Establishment of IMF and IBRD (World Bank)IMF: International Monetary FundIBRD: International Bank for Reconstruction

and Development1947: 23 countries conducted negotiations in

order to prevent the protectionist policies and to revive the economies from recession aiming at establishment of World Trade organization

1947: Establishment of GATT (General Agreement on Trade and Tariffs)

1980s: efforts to convert GATT into WTO

1st Jan 1995: GATT was replaced by WTO (World Trade Organization)

Trade Liberalization1990 – 2000: The Term IB (International

Business) has emerged from the term International Marketing.

There are two Phases of the evolution of the term International Business

1. International Trade to International Marketing 2. International Marketing to International

BusinessAfter 1990: Rapid Internationalization ad

globalization

International trade to international marketing•  Originally, the producers used to export their products to

the nearby countries and gradually extended the exports to far-off countries. Gradually, the companies extended the operations beyond trade. For example, India used to export raw cotton, raw jute and iron ore during the early 1900s. The massive industrialization in the country enabled us to export jute products, cotton garments and steel during 1960s.

• India, during 1980s could create markets for its products, in addition to mere exporting. The export marketing efforts include creation of demand for Indian products like textiles, electronics, leather products, tea, coffee etc., arranging for appropriate distribution channels, attractive package, product development, pricing etc. This process is true not only with India, but also with almost all developed and developing economies.

International marketing to international business• The multinational companies which were producing

the products in their home countries and marketing them in various foreign countries before 1980s, started locating their plants and other manufacturing facilities in foreign/host countries. Later, they started producing in one foreign country and marketing in other foreign countries. For example, Uni Lever established its subsidiary company in India, i.e., Hindustan Liver Limited(HLL), HLL produces its products in India and markets them in Bangladesh, Sri Lanka, Nepal etc. Thus, the scope of the international trade is expanded into international marketing and international marketing is expanded into international business.

Stages in evolution of international business

How a company can engage in international businessExportLicensingJoint ventureDirect investmentMNC’sFDI

Reasons for Recent Evolution or Growth in International Business

Expansion of technology Business is becoming more global because

Transportation is quicker Communications enable control from afar Transportation and communications costs are more

conducive for international operations

Liberalization of cross-border movements Lower governmental barriers to the movement of

goods, services, and resources enable companies to take better advantage of international opportunities

– Development of supporting institutional arrangements• Institutional arrangements

– Are made by business and government– Ease flow of goods– Reduce risk

– Increase in global competition• More companies operate internationally because

– New products quickly become global– Companies can produce in different countries– Domestic companies’ competitors, suppliers, and

customers become international

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