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Introduction to InternationalBusiness 

By Prof: Sham ChoughuleMaster of Foreign Trade –Pondicherry University EMIB -Indian Institute of Foreign Trade-New Delhi

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Globalization

• TATA Group of companies• Soap- Dove• Refrigerator –Samsung –South Korea• Washing Machine - L G• T V Onida –Japan

• Mobile –Nokia- Sweden• Bank a/c –SHBC Multi national bank from Hong Kong• Computer –Assemble –CPU –Intel –Monitor –Samsung• Fast food –Pizza in McDonald's • Car- from Hyundai

• Bus –Volvo A.B Swedish• Furniture from China• Ganesh Idol from China• Shoes –Nike• House –Millennium towers –constructed by French technology

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Globalization

• Personal –Camera in Italy while traveling in Europe 

• Organization -Deoo from Korea

• Land –Jubel Ali Free Trade zone• Labour –India -Pakistan –Bangladesh

• Capital –Through Newark stock exchange

• Technology –Germany• Marketing arrangement from UK

• Selling all over world

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International Business

due to globalization-Indian scenario 

• Volvo A.B –Swedish firm extensive network in world

• Eicher Motors Ltd –spare part maker UK for brandedproduct

• Joint venture between two companies for business

• Name of the new company Volvo-Eicher CommercialVehicles

• Business decision-Investment of Rs 288 crore in newengine plant at Pithampur-Indore by 2012

• This will become manufacturing hub of company for medium duty engine

• Global market-Africa-Indonesia –Middle east and Malaysia

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Globalization

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Reasons of globalization

• There has been growth in globalization in recent decades due to thefollowing factors

• Governments are removing international business restrictions.• Example-India’s import policy• Institutions provide services to ease the conduct of international

business. ESSAR in foreign oil field• Consumers know about and want foreign goods and services.

Electronic items• Competition has become more global.• Political relationships have improved among some major economic 

powers. China & USA

• Countries cooperate more on transnational issues.• Example-Communication or gas pipe line from Iron to India

• Cross-national cooperation and agreements. • Many FTA-Free Trade Agreements are taking place all over world

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Globalization in India

• Globalization in India has allowed companies toincrease their base of operations, expand their 

workforce with minimal investments, and provide

new services to a broad range of consumers

• Therefore, many companies are landed into

foreign countries –Exam L & T in China

• One of the major forces of globalization in India

has been in the growth of outsourced IT andbusiness process outsourcing (BPO) services

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Domestic Business

• Production only for local market• Limited Market –Only India is Market

• Heavy taxes –Excise duty –sale tax –service tax –corporate tax-Import duty etc

• Raw material –costly raw sugar 

• High Labour cost –old out dated machinery –production

cost is high 

• Interest rate is high 12- % PLR• Logistics problems-Rice from Punjab to Assam

• Therefore, domestic business is not economical viable

• Risk –Import is flooding into India –Foreign Goods available

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International business

• Whole world is market

• Production cost is low –China –Bangladesh

• Advantage of Free Trade Agreement - SAFTA• Exploration of natural resources

• Analyze & Focus on following issues –Risk

• Global-(WTO)-Social –Technical –Economic

• Political factors and other business environment

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Domestic V/s Int Business

• Top 500 companies in India mostly are IndianMNC

• Liberalization policy of Govt• Go to foreign country and expand your market.

If not then you will finish –JCT/Baroda rayon MIDC /GIDC

• Therefore, many companies become IndianMNC and venturing into foreign business

• L & T has set manufacturing base in China

• Indian Overseas bank has opened Branch inSingapore

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Domestic V/s Int Business

• Ethnocentric Approach 

• Operation –Limited

• Environment –local

• DTA –Many taxes• No impact on Foreign

Exchange

• Indian Culture –same

• Market size• Customers

•  

• Global approach

• Operation –Multi levels

• Global Business environment

• Tariff is different of each

country

• Impact of foreign exchange

• Various culture –Gulf Arab

• Huge market size

• Unknown various customers

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Characteristic of International

business

• International business is a term used to

collectively describe all commercial

transactions (private and governmental,

sales, investments, logistics, andtransportation) that take place between

two or more nations 

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Objectives of I.B

• To achieve higher rate of profit 

• Enhancement of capacity of production Renuka Sugar Ltd largest producer in the country with 8 mills

• Daily cane crushing capacity of 1.15 millions tonnes. After acquiringVDI-vale-do Ivai SA in Brazil including 2 Sugar & ethanol factories of 

combine cane crushing capacity will be 3.1 million tonnes -3 times

•  Expansion of Business 

•  All cargo movers –Logistics based company

• This company has acquired 34% equity share in Belgian ECU Hold

NV

• ECU hold owns and operate CFS in Antwerp-Dubai-Hong Kong Italy –brazil

 –France

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Objectives of I.B

• Reva –Electric car Manufacturing-Bangalore

• To grab world market and reduce transportation cost,

setting up plants in different part of the world

• UK-Norway-Spain-France –Germany Costa Rica•  Arvind mills manufacturing unit in Mauritius

• Business development 

• BOB in Africa –IOB in Singapore and bank of India in

China

• Liberalization –Foreign companies pushing to domestic

companies to go out from your market

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Objectives of I.B

• Save from domestic competition

• Garware Marine Industries

• Limited Home market push to world market • Availability of raw material –Coal field in

Indonesia -Adani Group

•  Achieve higher rate of Economic Dev• Example –India & China

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Mode of Entry

• Indirect export

• Deem export

• Physical export

• Service export

• Licensing arrangement with foreign company

• Franchising –Education field

• Manufacturing

• Turn Key projects

• FDI for green field projects

• Strategic alliance –shipping consortium

• Joint venture

• Merger & acquisitions

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Importance of I B

• Studying international business is important because

• Most companies are either international or compete with another international companies.

• Example-Apple V/s Computer 

• Modes of operation may differ from those used domestically.Example-ESSAR company

• The best way of conducting business may differ by country.Business in USA and in Sri Lanka is different

•  An understanding helps you make better career decisions. Are you

fit to work in MNC?•  An understanding helps you decide what governmental policies to

support

• Example- Indian’s Foreign trade policy FDI norms

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Stages of Internationalization

• Domestic company

Operation is limited with home country  

• International company

Extended arm of domestic company  

• Multi National company

• Different strategy for different market  

• Global company

• Global marketing strategy

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Domestic company

• Limits its operation –vision

• Ethnocentric approach

• Focus on domestic market opportunities•  Analyze national business environment

• Never thing of growing globally

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International company

• These companies select the strategy of 

locating a branch in the foreign market

and extending same domestic operation

• Example

• 1) Export of domestic product

• 2) Opening branch of bank in foreigncountry

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Multinational company

• Formulating different strategies for 

different market thus focus shift from

• Ethnocentric to polycentric

• Opening subsidiaries of a multi national

companies

• Example –Shipping company agencies

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Global company

• Global company produces in single

country and focuses on marketing these

product globally

• Example –Deoo from Korea

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Changing Scenario of I B

• 1)Globalization of various economics

• Example Asian countries follows by India in

1991 

• 2) Establishment of WTO

• 3)Free Trade agreement

• 4)Higher GDP growth of China-India and Latin

 American countries• 5)FDI inflows from develop countries to under 

develop countries

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Current trends

• ONGC has largest JV in Brazil-Colombia –

Sudan-Angola and Syria

• TATA steel has acquired Dutch steel maker 

Korus –national steel Singapore• JSW energy to buy majority stack in S.A coal

mining company

• Videocon made Dubai as its international exporthub

• LIC eyes Singapore as base for South Asia

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• Book for reference

• International Business-Subba Rao

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 Assignment

•  Assignment -1• Why India is attractive investment destination for 

foreign company ?• Economy• Politics• Govt Policies• Legal issues

• Social and cultural issues• Indian Market• Opportunities for Merger and takeover 

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• Thanks

• You have entered in to Global business• Think globally and not locally 

• Prof:Sham Choughule

• shamc2001@yahoo.co.in