IB PPT.pptx

Course Title:
International Business
Program :MBA
Course Code: MBA3303
School of Management, BBD University

Syllabus
Module I : Introduction to International Business
Meaning, nature and significance of international Business, Drivers of International Business, Players in
international business, MNC benefits and problems to host country and home country, Globalization, Strategies in
globalization, Challenges of international business.
Module II International Business Theories and Trade policy
Mercantilism, Absolute Advantage Theory, Comparative Cost Theory, Hecksher-Ohlin Theory, Product Cycle Theory,
Instruments of Trade Policy: Tariffs, Subsidies, Import Quotas, Voluntary Export Restraints, Administrative Policy,
Anti-dumping Policy.
Module III : International Institutions
UNCTAD, Its Basic Principles and Major Achievements, World Bank, IMF, Role of IMF for developing countries in
recent years and origin of AIIB,NDB.ADB, IBRD, Features of IBRD.GATT, WTO, Role and Advantages of WTO with
special focus on India.
Module IV : World Market Environment and Foreign Market Entry strategies
Definition of International Marketing, International Dimensions of Marketing, Domestic v/s International
Marketing, Process of Internationalization, Benefits of International Marketing and World Market Environment.
Political Environment: Political Systems, Political Risks, Indicators of Political Risk, Analysis and Measures to
minimize Political Risk. Legal Environment: Legal Systems, Legal Form of Organization, Multiplicity of Legal
Environment, Bribery, Branch v/s Subsidiary, Counterfeiting, Gray Market. Cultural Environment: Culture and its
Characteristics, Influence of Culture on Consumption, Thinking, Communication Process and Cultural Universals.
Exporting, Licensing, Joint Ventures, Strategic Alliances, Acquisitions, Franchising, Assembly Operations,
Management Contracts, Turnkey Operations, Free Trade Zones.
Suggested Readings:
1. Raj Agarwal - International Trade (Excel, 1st Ed.)
2. C.W. Hill - International Business (TMH, 5th Ed.)

MODULE I:Introduction to International
Business:
 Meaning of International Business,
 Nature of International Business
 Significance of International Business
 Drivers of International Business,
 Players in international business,
 MNC benefits and problems to host country and home country,
 Globalization, Strategies in globalization,
 Challenges of international business.

Meaning of International Business
 What is Business ? A business is simply an organized efforts and activities of
individuals or a group to produce and sell goods and services for profit.
 So simply when we perform this activity of business internationally outside
the boundary of the country it becomes International Business.

Meaning of International Business
 INTERNATIONAL BUSINESSS is
 All commercial activities like sales ,investment and transportation-that take
place between private entity or government bodies based in two or more
different countries.
 Mostly Private companies undertake commercial transactions for profit whereas the
Government body takes international business for political reasons or profits
reasons.
 For e.g The Indian Government PSU NTPC has setup plant in Bangladesh
 ONGC Videsh Limited (OVL) is having stake in Kazakistan,Mozambique etc

Nature of International Business
 Large Scale Operations
 Integration of Economies
 Benefits to Participating Countries
 Dominated by Developed Countries
 International Restrictions
 Market Segmentation
 Sensitive Nature

Large Scale Operations
 Internationally Operated
 Different countries have different set of HR, Marketing ,Finance rules. All
need to be taken into account.
 In case of goods the scale of operations involves design, manufacturing,
assembling, selling all at different places.
 Meeting the global demand.
 Global demand accompanied by customized requirements.

Integration of Economies
 Companies prefer to reduce their production cost.
 This lead to global hunt for raw material and talent.
 This leads to companies like Apple and Nike to source their raw material from Asian countries
,manufacture in China, have a marketing and finance manager from India.
 Win-Win for strong and medium/weak economy.
 One country is dependent on other for growth.
 This lead to Integration of Economies.

Benefits to Participating Countries
Integration of economies lead to benefits to participating nations.
 Sharing of Technology
 Foreign Investment
 Employment Opportunities
 Cheap Labour
 Low Cost Raw material
 Large Profits
 More Investment in R&D
so more competitive
Mainly for Developing
Countries like India
Mainly for Developed
Countries like US

Dominated by Developed Countries
 Large MNCs like
Adidas,Pfizer,Unilever,Mitsubushi etc
are based in US,UK,Japan etc
 Large Investment. Low Cost product.
 Huge Supply Chain network
 Use of techonology
 Easily capture world market.
 UNITED NATIONS CONFERENCE ON TRADE AND
DEVELOPMENT
 KEY STATISTICS AND TRENDS in International
Trade 2018

International Restrictions
 Trade blocks,
 tariff barriers,
 Non tariff barrier
 foreign exchange restrictions, etc.
 Cultural issues
 These things are harmful to international business.

High Risk-High Return
 New Culture
 Changes in Law
 Hostility between the Host and
Home Country Governments
 Huge Investment so huge stake.
 Technology can be copied by host
country companies through reverse
engineering etc.
 Large Sales means large turnover
and profits
 Economic recession at home can be
compensated by having good
business in other country.
 Globally powerful companies have
say in policy making by
governments.

Market Segmentation
 International business is based on market segmentation on the basis of the geographic
segmentation of the consumers.
 The market is divided into different groups according to the demand of the consumers in
different countries.
 It produces goods according to the demand of the consumers of the different market
segmentations.

Sensitive Nature
 International businesses are highly sensitive in nature
 Proper market research is very essential for carrying out these businesses effectively.
 If there is any economic, political or technological change will directly influence the
functioning of the business.
 Therefore, these businesses should change their activities from time to time to survive the
change.

Significance of International Business
 HOW IS THE STUDY OF IB
IMPORTANT ?
 HOW DOES IB BENEFIT THE
COMPANIES ?

 HOW IS THE STUDY
OF IB IMPORTANT ?
 Most companies either are international or
compete with international companies
 Modes of operation may differ from those used
domestically
 The best way of conducting business may differ
by country
 An understanding helps you make better career
decisions
 An understanding helps you decide what
governmental policies to support.

 HOW DOES IB
BENEFIT THE
COMPANIES ?
 Market expansion
 Non-availability of product in new market
 Cost advantage
 Product Differentiation
 Economic recession in one’s own country
 Loss of Domestic market share
 Growth in Demand in other markets
 Excess capacity of Production
 Economies of Scale
 Purchasing Power

 Market expansion - Everyone wants to expand their market share and to sell more and more
products. The importance of International business lies in the fact that you get a new market to
enter and to expand in.
 Non-availability of product in new market-A major advantage the company can have is that the
product it produces is not available in the international market which the company is targeting.
The firm, therefore, has a “production advantage” which it can use to maximum benefit.

 Cost advantage- Many times, there is a cost advantage of exporting products to a different
country. This cost advantage is apparent in the way China is operating in today’s business
environment. The benefits of International business are huge to Chinese companies because their
cost of production is very low.
 Product Differentiation-If your products are differentiated and the differentiation is possible only
in one’s own country, then a company should definitely expand to International markets.

 Economic recession in one’s own country - Just like diversification of products is important,
diversification of markets can also benefit the company. Hence, one reason International
business is considered important is because of the safety it provides to the company lest an
economic downturn happens.
 Loss of Domestic market share-There are 2 main reasons that such loss can happen in domestic
market share.
 Due to Competition increasing and market becoming saturated.
 Due to the product of the company becoming obsolete in current market but being attractive in a new
market (developed vs underdeveloped economy)

 Growth in Demand in other markets - As demand rises in new market like erstwhile cutoff
African countries, the growth in demand automatically attracts new companies. If your company
is the one to reach there on time, it will automatically grow its market share – which is what all
companies want.
 Excess capacity of Production - One reason for large companies to look towards international
business is to utilize the excess production capacity of their manufacturing plants.

 Economies of Scale
 when we are talking of
operations and growth, one
factor which helps the
profitability of the company
to a great extent is
Economies of scale.IB helps
in large scale export so
economies of scale come
into picture which further
reduces cost and increase
profit.
 Purchasing Power
 The best example of this is Dubai
which as a country has grown
exponentially in the last several
years and today is a huge tourist
market. The purchasing power in
Dubai is great and you will find
showrooms of all top brands
present in Dubai markets. Thus, if
there is purchasing power of
customers in a market, it makes
logical sense that the brands will
target that market as well.

Drivers of International Business
 Home market has its limits
 Growth in market share
 Higher Profits
 Political Stability
 Technology and Communication
 Transportation
 Emerging Markets
 Demographics
 LPG
 Excess of Production
 Emergence of Global Institutions
like WTO,IMF etc
 Cultural Exchanges

1.Home market has its limits
 YES.
Reasons
 Population size
 FINLAND (55.2 LAKH) [NOKIA]
 SOUTH KOREA (5.16 CRORE)
[SAMSUNG,HYUNDAI]
 Lower purchasing power
 Company is in mature or decline
stage of PLC
2.Growth in market share
 This may be strategy of company
to grow thru market share.
 Company expands internationally
and tries to capture more market.
 Coca Cola has bottling plant across
the globe.

3.Higher Profits
 Achieving the higher rate of profit
is aim of all companies. When IB
offers this opportunity the
companies try out this option. For
example IT companies like TCS
,Wipro earn more profit from
international operation than their
Indian Operation.
4.Political Stability
 It basically means continuation of
same business and economic policy
for long time period.
 Stability in political setup.
 Unstable polity like in
Afganistan,Syria, Egypt is not good
for International business.

5.Technology and Communication
 One of the principal drivers.
 New and fast changing technology
like ICT
 Bring information fast
 Financial transactions are much
faster.
 Growth in Services Industry and it
share in international trade.
6.Transportation
Road way corridors. European
countries are connected.
China building OBOR.
Budget flights have brought air fares
drastically down.
Sea transportation cost has come
down.

7.Emerging Markets
 Many emerging countries in Africa
like Kenya ,in Asia like Vietnam
 South Eat Asian countries.
 Less Trade Barriers
 Great Opportunity and higher
returns.
8.Demographics
Countries like India offer great English
speaking, tech savvy and young
population compared to developed
countries where population is ageing
fast.

9.LPG
 LIBERALISATION
 PRIVATISATION
 GLOBALISATION
10.Excess of Production
 E.g NOKIA

11.Emergence of Global Institutions
like WTO,IMF etc
 Easy Credit
 Smooth International Trade
 International Arbitration possible
 Easy and Smooth resolution of
conflicts
12.Cultural Exchanges
 People are travelling more than
before.
 They appreciate international
products
 Easy for companies to start
business in foreign land as their
products are already known.

Players in International Business
• Multinational Corporation
• International Corporation
• Transnational Corporation
• Global Corporation

Multinational Corporation
 A multinational corporation is a
company that operates in its home
country, as well as in other
countries around the world. It
maintains a central office located
in one country, which coordinates
the management of all its other
offices, such as administrative
branches or factories
 It isn’t enough to call a company
that exports its products to more
than one country a multinational
company. They need to maintain
actual business operations in other
countries and must make a foreign
direct investment there.

Characteristics of a Multinational
Corporation
 1. Very high assets and turnover
 To become a multinational
corporation, the business must be
large and must own a huge amount
of assets, both physical and
financial. The company’s targets
are high, and they are able to
generate substantial profits.

 2. Network of branches
 Multinational companies maintain
production and marketing
operations in different countries. In
each country, the business may
oversee multiple offices that
function through several branches
and subsidiaries.

Corporation
 3. Control
 In relation to the previous point, the
management of offices in other
countries is controlled by one head
office located in the home country.
Therefore, the source of command
is found in the home country.
 4. Continued growth
 Multinational corporations keep
growing. Even as they operate in
other countries, they strive to grow
their economic size by constantly
upgrading and by
conducting mergers and
acquisitions.

Corporation
 5. Sophisticated technology
 When a company goes global, they
need to make sure that their
investment will grow substantially.
In order to achieve substantial
growth, they need to make use of
capital-intensive technology,
especially in their production and
marketing activities.
 6. Right skills
 Multinational companies aim to
employ only the best managers,
those who are capable of handling
large amounts of funds, using
advanced technology, managing
workers, and running a huge
business entity.

Corporation
 7. Forceful marketing and
advertising
 One of the most effective survival
strategies of multinational
corporations is spending a great
deal of money on marketing and
advertising. This is how they are
able to sell every product or brand
they make.

 8. Good quality products
 Because they use capital-intensive
technology, they are able to
produce top-of-the-line products.

Reasons for Being a Multinational
Corporation
 1. Access to lower production costs
 Setting up production in other countries,
especially in developing economies, usually
translates to spending significantly less on
production costs. Though outsourcing is a way
of doing this, setting up manufacturing plants
in other countries may be even more cost-
efficient.
 2. Proximity to target international markets
 It is beneficial to set up business in countries
where the target consumer market of a
company is located. Doing so helps reduce
transport costs and gives multinational
corporations easier access to consumer
feedback and information, as well as to
consumer intelligence.

 3. Avoidance of tariffs
 When a company produces or manufactures
its products in another country where they
also sell their products, they are exempt from
import quotas and tariffs.

Economic Philosophy backing MNCs and
IB
 FREE MARKET ECONOMIC THEORY
 multinational corporations are
strongly supported by economic
liberalism and free market system
in a globalized international
society.
 Economic liberalism is
a political and economic
philosophy based on strong support
for a market economy and private
property in the means of production.
 Although economic liberals can also
be supportive of government
regulation to a certain degree, they
tend to oppose government
intervention in the free market when
it inhibits free trade and open
competition.
 They are the embodiment par
excellence of the liberal ideal of an
interdependent world economy.

International Corporation
 They export or import products
from the home country.
 They have offices only in home
country and no office in any other
foreign country.
 Operations mainly exist in home
country
 The functions and strategies are
mostly derived from the primary
market of the home country
 They make major investment only
in home country.
 Example : Spencer's Retail which is
a Indian chain of retail stores
headquartered in Kolkata, West
Bengal
 Parent company :RP-Sanjiv
Goenka Group

Transnational Corporation
 These companies operate in many
countries.
 Have FDI in all the countries where
they operate.
 They adapt and modify their
services and products as per local
requirements
 Have centralized office but
decision making is decentralized
 The subsidiary offices are
empowered to take decision and
launch products as per local needs
of the place of service.
 Example : FORD Motors,Nokia

Global Corporation
 They have offices and centers in
large number of countries even
more than that of MNCs
 Major decisions have centralized
like new product launch ,product
development decisions, M&A
decisions.
 They have many subsidiaries but
usually standard product in sold
across all the regions without much
flexibility with respect to adapting
to local consumers
 E.g.Kellog ,Microsoft ,IBM

MNC benefits and problems to host
country and home country
 In International Business a firm
which belongs to a
one country (called home
country) goes abroad and invests
in that country (called host
country) and employs the factor of
production of that country,
essentially with the help of
investment.

Benefits to Host Country
Employment is generated:
 MNCs bring FDI and with this they
create large scale employment
opportunities in host countries.
Inflow of Foreign Capital increases:
 MNCs bring in much needed capital for
the rapid development of developing
countries. In fact, with the entry of
MNCs, inflow of foreign capital is
automatic. FDI/FII in India is good
example.
Resources Utilisation improves:
 The untapped resources are better
utilised. e.g Unexplored Coal Mines
Balance of Payment improves:
 MNCs help the host countries to increase
their exports. As such, they help the host
country to improve upon its Balance of
Payment position.

Technical Development takes places:
 MNC bring new technology and due to
this new technology is transferred from
one country to another. Because of MNCs
poor host countries also begin to develop
technically.
Managerial Development takes place:
 MNCs employ latest management
techniques.
 Best practices across the globe are used
in the company.
 People employed by MNCs do a lot of
research in management.
 In a way, they help to professionalize
management along latest lines of
management theory and practice. This
leads to managerial development in host
countries.

End of Local Monopolies:
 When MNC sets up their centre in host
country the local company start facing
competition.
 Local monopolies of host countries
either start improving their products or
reduce their prices.
 Thus MNCs put an end to exploitative
practices of local monopolists. As a
matter of fact, MNCs compel domestic
companies to improve their efficiency
and quality.
Improvement in Standard of Living:
 New jobs rise income plus super quality
products and services, MNCs help to
improve the standard of living of people
of host countries.

Promotion of international brotherhood
and culture:
 MNCs brings integration of economies
which in turn reduces unnecessary
armed conflicts between nations and
promotes cultural unity and
integration.

Disadvantages for Host Country
Danger for Local Industries:
 MNCs have backed by huge economic
resource and technology
 This poses a danger to domestic
industries; which are still in the process
of development.
 Domestic industries cannot face
challenges posed by MNCs. Many
domestic industries have to wind up, as a
result of threat from MNCs. Thus MNCs
give a setback to the economic growth of
host countries.
Large Profit of MNC is shifted to Host
Country:
 MNCs earn huge profits. Repatriation of
profits by MNCs adversely affects the
foreign exchange reserves of the host
country; which means that a large
amount of foreign exchange goes out of
the host country.

Problems to Host Country
No Benefit to Poor People:
 MNCs usually come for profits
therefore they produce only those
things, which are used by the rich.
Therefore, poor people of host
countries do not get, generally, any
benefit, out of MNCs.
Danger to Independence of host country:
 Rising clout of MNC in host country
leads to interference in the internal
matters of the country by the company
management.

Disregard of the National Interests of the
Host Country:
 MNCs invest in most profitable sectors;
and disregard the national goals and
priorities of the host country.
 They do not care for the development
of backward regions; and never care to
solve chronic problems of the host
country like unemployment and
poverty.
Misuse of Mighty Status:
 MNCs are powerful economic entities.
They can afford to bear losses for a
long while, in the hope of earning huge
profits-once they have ended local
competition and achieved monopoly.

Careless Exploitation of Natural Resources:
 MNCs tend to use the natural
resources of the host country
carelessly.
 They cause rapid depletion of some of
the non-renewable natural resources
of the host country. In this way, MNCs
cause a permanent damage to the
economic development of the host
country.
Selfish Promotion of Alien Culture:
 MNCs tend to promote alien culture in
host country to sell their products.
They make people forget about their
own cultural heritage. In India, e.g.
MNCs have created a taste for
synthetic food, soft drinks etc. This
promotion of foreign culture by MNCs
is injurious to the health of people
also.

Exploitation of People, in a Systematic
Manner:
 MNCs join hands with big business
houses of host country and emerge as
powerful monopolies. This leads to
concentration of economic power only
in a few hands. Gradually these
monopolies make it their birth right to
exploit poor people and enrich
themselves at the cost of the poor
working class.

Advantages to the Home Country:
 MNCs usually get raw-materials and
labour supplies from host countries at
lower prices; specially when host
countries are backward or developing
economies.
 MNCs can widen their market for
goods by selling in host countries; and
increase their profits. They usually
have good earnings by way of
dividends earned from operations in
host countries.
 Through operating in many countries
and providing quality services, MNCs
add to their international goodwill on
which they can capitalize, in the long-
run.

Limitations of the Home Country:
 There may be loss of employment in
the home country, due to spreading
manufacturing and marketing
operations in other countries.
 Since MNCs work in different
geographies the MNCs face problems
of managing cultural diversity. This
might distract managements’ attention
from main business issues, causing loss
to the home country.
 MNCs may face severe competition
from bigger MNCs in international
markets. Their attention and finances
might be more devoted to wasteful
counter and competitive advertising;
resulting in higher marketing costs and
lesser profits for the home country.

Globalization
 IMF : Globalization—the process through
which an increasingly free flow of ideas,
people, goods, services, and capital leads to
the integration of economies and societies
 Globalisation is the process of interaction
and integration among people,
companies, and governments worldwide.
 Globalization is the spread of products,
technology, information, and jobs across
national borders and cultures. In economic
terms, it describes an interdependence of
nations around the globe fostered through
free trade.

Indus Valley Civilisation
 The Indus people were greatly
reliant on trade. They traded with
many different civilizations like
Persia, Mesopotamia and China.
They were also known to trade in
the Arabian Gulf region, central
parts of Asia, portions of
Afghanistan and northern and
western India. Some goods that
were traded were terracotta pots,
beads, gold, silver, colored gems
like turquoise and lapis lazuli,
metals, flints, seashells and pearls.

7th-13th Century
 From Nov-Feb almost entire Europe is
covered with snow and in this scenario
Europeans for their survival required
preservation, i.e spices and East is the
source of the spices.
 The story of the Modern world history
basically starts from the birth of Islam
in West Asia in 7th century AD.
 CRUSADE (Holy war between
Cross(Christians) and
Crescent(Muslims)).
 In 1453 AD. Turks occupied
Constantinople (present day Istanbul).

7th-13th Century
 Conquest of Constantinople became a
turning point for Europe. The conquest
of Constantinople blocked the trade
routes between the West and the East
creating the question mark on the
existence of the West.
 This became the important factor for the
beginning of Renaissance in Europe.
Renaissance played a very important
role in the beginning of Geographical
discoveries.
 In these 2 important developments were
:
i) Discovery of America by Columbus
1492 AD
ii) Discovery of Sea-Route to India by
Vasco-de-Gama via Cape of Good
Hope.


Trade has grown remarkably over the last
century
 From a historical perspective,
there have been two waves of
globalization. The first wave
started in the 19th century, and
came to an end with the beginning
of the First World War.
 The second wave started after the
Second World War, and is still
continuing.

 The Bretton Woods Institutions—the IMF
and World Bank—have an important role
to play in making globalization work
better. They were created in 1944 to help
restore and sustain the benefits of global
integration, by promoting international
economic cooperation. Today, they
pursue, within their respective mandates,
the common objective of broadly-shared
prosperity.
 This chart shows an extraordinary
growth in international trade over the
last couple of centuries: Exports
today are more than 40 times larger
than in 1913

Strategies in globalization
Chandler defined strategy as
 1) identifying the basic long term
goals and objectives of the
company,
 2) as well as the required action
and resources necessary to achieve
these goals and objectives.
To Drucker, strategy is an indication of
the organisation’s positioning for the
future.
 Strategy determines the selection
of a few key areas or aspects by
which the organisation seeks to
distinguish itself.
 Typically, strategy drives long-term
actions which are therefore difficult
to reverse.
 Global strategy is seen as the
process of identifying market
positions across national
boundaries, building on global
strengths as opposed to national
strengths.

Adopting a global strategy
Approach to internationalisation
 In this approach, they suggest four
steps:
 1) Plan -
 Anticipate needs of customer and
prepare to meet their future needs
better than competitors can
 Research markets thoroughly to
understand them fully
 Lead with own strengths
 Define success in broad terms and
set goals for the organisation
 2) Select the mode of investment
 Maintain majority of the decision
making power
 Quickly expand the base of
customers to beyond existing
customer base
 3) Deal with roadblocks
 Recognise challenges that are
likely to be faced in the new markets
and prepare to respond
 Take a long term view

Approach to internationalisation
 4) Make commitments based on a
global approach
 The new country becomes an
integral part of the global organisation
 Give the foreign venture sufficient
time to bear fruit
 Bring back technology from the
foreign firm into the domestic and
other markets
 Once an organisation sees the ability
of its business to address the global
market, it would need to address
questions such as the following.
 Strategic innovation: in order to
move from local to global, what kinds
of innovation would be required?
 Strategic position: can the company
establish and defend a global
strategy? What should it do in order
to do this effectively?
 Resources: What kinds of
resources, and over what period of
time, are required in order to make
the global strategy work effectively?

Regional strategies
Regional strategies
 companies look at building regional
strategies that would make their
offerings more relevant to the
consumers in local markets.
 Traditionally, the major regions, as
first identified by Ohmae, and
named the ‘Triad’, are the United
States, Europe and Japan.
 In addition, many of them now have
organisational units focused on
emerging markets as well.
 This thinking reflects the
assumption that countries which
form part of a region are similar,
and that the customers have similar
wants.

Cluster strategies
 Cluster strategies
 Clusters are geographically
concentrated groups of
interconnected companies and
institutions in a particular field.
 Clusters encompass linked
industries and other entities
important to competitiveness.
 A vibrant cluster can bring about
innovation. Where clusters
intersect, there is possibility of new
business ideas and models
emerging.
 In India, clusters developed in
several parts of the country.
Ludhiana in Punjab had a large
concentration of light engineering
goods, electrical goods, and warm
clothing.
 Tirupur in Tamil Nadu was where
hosiery ready-made garments,
especially for the export market,
were made.
 Around the manufacturing facility of
the automaker Maruti Suzuki, a
large number of auto ancillaries
sprang up.

Key strategies of companies from
developed economies
 1. Build barriers to competition
 2. Invest in technology
 3. Invest financial resources
 4. Marketing
 5. Build on national strengths
 6. Build on local strengths
 7. Enrich product and service
offerings
 8. Innovation
 9. Location advantage
 10. Effective global strategy
 11. Build strategic alliances

developed economies
1. Build barriers to competition
 Caterpillar Tractor Company built two such
barriers, by building a very strong global
distribution system and by building
worldwide production scale.
2. Invest in technology
 In the long run, only those products and
service that deliver true value and live up to
the product promises will survive. Therefore,
investment in the relevant technologies on
an on-going basis is very important.
 Its ability to foresee the future of the
technology curve and identify the elements
that would afford the most advantage in the
future, enabled it to make the right
investments and ultimately, in carving out a
niche but highly profitable market for itself.
3. Invest financial resources
 The global leader has to make these large
commitments ahead of any of its
competitors.
 Cisco has believed in building up a large
cash reserve as part of its strategy. This
reserve has helped it to gain a high degree
of staying power and prepare for the
upturn, even when the global economy is
going through extremely tough times. Over
the last 10 to 15 years, Cisco has made
over 130 acquisitions and has been able to
successfully integrate a very large
percentage.

developed economies
4. Marketing
 By successfully identifying the
markets that are of strategic
importance to the company, and
investing significantly in each of
these, it is possible to build the
market mix that is willing to pay a
premium for superior products and
services.
5.Build on national strengths
 It is important that the business
undertaken by the company be in line
with the national strengths of the
countries it is operating in;
specifically, the truly global company
may choose to build on strengths in
its various local units, for different
aspects of the business.
 Singapore, for example, has
consciously focused on building a
“national innovative capacity” in order
to address the needs of the
knowledge based economy.

developed economies
6. Build on local strengths
It is to be noted that any ideas or
technologies that can be accessed at a
distance (eg over the Internet) cannot
form the base for sustainable
competitive advantage, as they may be
easily replicated. In such a situation,
strength lies in building on local
competence, in each market addressed
by the company
e.g. health tourism, centred around
Ayurveda in Kerala.
7.Enrich product and service offerings
In order to provide better products and
services to their customers, successful
global companies are able to adopt the
best practices and ideas from across
the world.

developed economies
8. Innovation
 Prahalad has said, as have many
other authorities in management, that
continuous innovation is the only
source of sustainable advantage.
 While companies such as 3M are very
well known for their innovativeness,
several recent examples of innovation
in the Indian market can be cited such
as Amul, Aravind Hospital and others.
Such innovations can be applied, not
just in India where the concept arose,
but can be extended to other parts of
the world
9.Location advantage
By strategically using geographical
spread, global organisations are able to
build scale as well as advantage that is
difficult for competitors to copy or
replicate. Typically, this strategy seems to
work for larger organisations
In 2006, Cisco decided to rework its
global strategy. Recognizing that the
markets of the future are in the emerging
economies, it realized the need for a
higher presence closer to these markets.
After examining its various options, the
decision was taken to establish a
“globalisation centre” in Bangalore

developed economies
10.Effective global strategy
 An effective global strategy would
be created keeping the global
potential and core competencies of
the organisation in mind. However,
for this to sustain, it will require
constant review of the strategies
and outcomes and modification as
required by the changing market
dynamics.
 11. Build strategic alliances
 Entry into a new market is not often
easy, esp when it happens to be in
a different country. Alliances may be
used to gain entry to the market,
gain access to a strong existing
distribution network, local agencies,
research and development,
manufacturing, packaging, etc

Strategies used by emerging economy
companies
There are three ways in which the
emerging giants are able to grow
1) find customers in advanced markets
who can be serviced from their own
home bases
 as the factor markets in their home
base becomes more expensive, they
seek to find other developing
economies from where they can
source similar resources
 in the final step, they move up the
value chain, selling value added
products and services, many a time
under their own brands.
 competitiveness in the home market
is very important for building
capability for the global markets.
 In the course of their research, they
found that if there is a strong rivalry
amongst domestic firms, they would
be forced to innovate more as well as
evolve processes and strategies that
would enable them to learn better and
build up defences and strategies that
will help them compete effectively in
foreign markets

Challenges of international business.
1. Foreign laws and regulations
2. International company structure
3. International accounting
4. Cost calculation and global pricing
strategy
5. Universal payment methods
6. Currency rates
7. Choosing the right global shipment
methods
8. Communication difficulties and
cultural differences
9. Political risks
10. Supply chain complexity and risks
of labor exploitation
11. Worldwide environmental issues

Foreign laws and regulations
 From tax implications through
to trading laws, navigating legal
requirements is a central function
for any successful international
business. Eligibility to trade is a
significant consideration, as are
potential tariffs and the legal costs
associated with entering new
markets.
International company structure
For instance, will your company be run
from one central headquarters? Or
will you have offices and
representatives “on the ground” in
key markets abroad?

International accounting
 Accounting strategy is key to
maximizing revenue, and the
location where your business is
registered can impact your tax
liability. Mitigating the risk of
multiple layers of taxation makes
good business sense for any
organization trading abroad. Being
aware of tax treaties between
countries where your business is
trading will help to ensure you’re not
paying double taxes unnecessarily.
Cost calculation and global pricing
strategy
 Setting the price for your
products and services can present
challenges when doing business
overseas and should be another
major consideration of your
strategy.

Universal payment methods
 Determining acceptable payment
methods and ensuring secure
processing must be a central
consideration for businesses who
seeks to trade internationally.
 Multi-channel payment support means
businesses can let their customers choose
to pay however they want, whenever they
want. Businesses can accept in-person,
telephone and online payments. ... That's
the philosophy of Universal
Payment Gateway:
 Accepting well-known global payment
methods through companies like Worldpay,
as well as accepting local payment
methods, such as JCB in Asia or Yandex
Money in Russia, can be a good option for
large international businesses.
Currency rates
 While price setting and payment methods
are major considerations, currency rate
fluctuation is one of the most
challenging international business
problems to navigate. Monitoring
exchange rates must therefore be a central
part of the strategy for all international
businesses.

Choosing the right global shipment
methods
 The potential of online sales
presents a huge international
business opportunity for
retailers in the 21st century, but
finding reliable, fast, and cost-
effective shipment and distribution
methods can be a difficult balance
in some markets. Depending on the
volume and destination of your
shipments, will you send by land,
sea, air, or a combination?
Communication difficulties and
cultural differences
 Good communication is at the
heart of effective international
business strategy. However,
communicating across cultures can
be a very real challenge.

Political risks
 An obvious risk for international
business is political uncertainty
and instability. Countries and
emerging markets that may offer
considerable opportunities for
expanding global businesses may
also pose challenges, which more
established markets do not. Before
considering expansion into a new or
unknown market, a risk
assessment of the economic and
political landscape is critical.
Supply chain complexity and risks of
labor exploitation
 When it comes to sourcing products
and services from
overseas, managing suppliers
and supply chains can also be a
tricky process. Unfortunately, the
length and complexity of supply
chains increases the chance of
working with suppliers who have
unethical — and even illegal —
business practices

Worldwide environmental issues
 As the environmental risks and
effects of climate change are
becoming better
understood, sustainability is high
on the agenda of many major
global corporations. Recent
international legislations and
proposals, such as the UN’s
Sustainable Development Goals,
have put environmental issues at
the forefront of international
business development.

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