INTRODUCTION

International business involves connecting people and resources across the globe,
allowing us to enjoy products made in different countries.
Interconnected nature of global trade and commerce is shown where products might be
produced in one country with help from companies in another.
International business is the process of linking the global resources with global
people.

Evolution:
The origin of IB trace back to ancient civilizations - Sindh civilization had many traces of
having a trade relationship with the Eastern civilization.

The concept grew in the 19th century:

 after World War I (1919) when trade increased – The import of raw materials by
colonial countries emperor from colonies and exporting them finished goods again
to the colonies. There is an increase in the level of international business.
 Faced challenges after World War II (1945) when many countries (the most of the
colonial governments refused to export the raw materials and import finished
goods) limited trade to protect local industries. There is a decrease in international
business.
- This situation highlighted the need for international cooperation, leading to
the creation of organizations like the IMF and the IBRD (now as World Bank).

Globalization reflects a mindset that sees the world as a single market, influencing how
companies operate.

International Trade -> international marketing -> international business

Initially, producers exported goods to nearby countries (trade), but over time, they
expanded their reach to distant markets (marketing), which encouraged further
development beyond simple trade.
Today, multinational corporations produce goods in one country and sell them in others,
viewing the entire world as a potential market. (business)
A true global companies views the entire world as a single market.

Arvindh Mills (illustrates how to be successful globally):

 Source raw material wherever they are cheapest.
 Manufacture wherever in the world is most cost effective.
 Sell in those markets where the prices are highest.
 Raise finance globally.
 ‘forge international strategy alliance.
 To manage all these, take the best talent from all over the world.
 And you will have achieved the stature of a true multinational.

MEANING:
International Business
 refers to the exchange of goods and services between two parties of different
countries.
 may be understood as those business transactions involve crossing of national
boundaries
  process of focusing on the resources of the globe and objectives of the
organization on the global business opportunities and threats in order to
produce/buy/sell or exchange of goods and services worldwide.

Features:
1. Large Scale Operations: (all operations are conducted on a very huge scale such as
conducting Production and marketing activities)
- It first sell its goods in the local market and then the surplus goods are
exported.
2. Integration of Economies: Integrates (combines) the economies of many countries.
 This is because it uses finance from one country, labor from other country and
infrastructure from another country.
 It designs the product in one country, produces its parts in many different
countries and assembles in another country and sells in many countries.
3. Dominated by developed countries and MNC’s: (multinational companies) Europe and
Japan dominate the foreign trade, this is because they have high financial and other
resources,
4. Benefits to Participating countries: Developed countries get the maximum benefits.
The developing countries also get benefits.
 Foreign capital and technology.
 Rapid industrial development.
 More employment opportunities.
5. Keen Competition: (face competition in the world market) The competition is between
unequal partners. In this situation, the developed countries are in favorable position
as they produce the superior quality goods and services, but developing countries find
difficulty to face competition.
6. Special role of science and technology: (gives a lot of importance to SandT.)
- SandT: helps the business to have a large scale production.
- Developed countries use high technology.
- IB helps them to transfer top-end technology to the developing countries.
7. International Restrictions: (faces many restrictions on the inflow and outflow of
capital, technology and goods)
 Many government do not allow international business to enter their countries.
 They have many trade blocks, tariff barriers, foreign exchange restrictions, etc.
 All this is harmful to international business.
8. Sensitive Nature: Any changes in the economic policies, technology, political
environment has a huge impact.
 Therefore it must conduct marketing research to find out and study these
changes.
 They must adjust their business activities and adopt accordingly to survive
changes.
9. International Business need accurate information to make appropriate decision.
10. International Business house need not only accurate but also timely information.
11. International Business house segments their markets based on the geographic
market segment.

Learnings: it explains the complexity of international business, showing that large-scale

operations can extend across many countries. It emphasizes how economies are
integrated through shared resources, labor, and technology, which can benefit both
developed and developing nations. However, competition remains fierce and often
unequal, with developed countries holding a significant advantage in quality and
resources.
Conclusion: international business is important for shaping global economies, but it
also faces numerous challenges, including competition and restrictions. Adapting to
changes and ensuring timely information is vital for success in this dynamic
environment. Understanding these aspects can help nations and businesses navigate the
complexities of global trade more effectively.

Reasons for the emergence of international business:

➤ To achieve higher rate of profits
The basic objective of the business firm is to earn profit.
The domestic markets do not promise a higher rate of profits.
Business firms search for foreign market which hold promise for higher rate of profits.
Thus the objective of profits affects and motivates the business to expand its
operations to foreign countries.
➤ Expanding the production capacity
Domestic companies expanded their production capacities more than the demand for
product in domestic countries.
In such cases, these companies are forced to sell their excessive production in foreign
developed market.
➤ Severe competition in home country
The countries oriented towards market economies since 1960’s, experience severe
competition from other business firm in the home country.
The weak companies which could not meet the domestic countries started entering the
markets of developing countries.
➤ Limited home market
When the size of the home market is limited either due to the smaller size of the
population or due to lower purchasing power of the people or both, the companies
internationalize their operations.
➤ Political Stability v/s Political Instability
Business firms prefer to enter the politically stable countries and are restrained from
locating their business operations in politically instable countries. In fact, business firms
shift the operations from politically instable countries to the politically stable countries.
➤ Availability of Technology and Managerial Competency
Availability of advanced technology and competent human resource in some countries
acts as pulling factors for business firms from the home country. The developed countries
due to these reasons attract companies from developing world. In fact, American and
European countries depend on Indian Companies for software products and services
through their BPO’s.
➤ High cost of transportation
Initially companies enter foreign countries trough their marketing operations. At this
stage, the companies realize the challenge from the domestic companies. Added to this,
the home companies enjoy higher rate of profit margins where as the foreign firms suffer
from lower profit margins. The major factor for this situation is the cost of transportation,
Under such conditions, the foreign companies are inclined to increase their profit margin
by locating their manufacturing unit in foreign countries where there is enough demand
either in one country or in a group of neighboring countries.
➤ Nearness to Raw materials.
The source of highly qualitative raw materials and bulk raw materials is a major factor for
attracting the companies from the various foreign countries. Most of the US based
companies open their manufacturing unit in Middle East countries due to the availability
of petroleum. These companies, thus, reduces the cost of transportation.
➤Availability of Quality HR at less cost
This is the major factor, in recent times, for software, high technology and tele-
communication companies to locate their operations in India. India is a major source for
high quality and low cost human resources unlike USA and other developed countries.
➤Liberalization and Globalization
Most of the countries in the globe liberalized their economies and opened their countries
to the rest of the globe. These changed policies attracted the multinational companies to
extend their operations to these countries.
➤To increase market share
Some of the large-scale business firms would like to enhance their market share in the
global market by expanding and intensifying their operations in various foreign countries.
➤ To achieve higher rate of economic development
International Business helps the governments to achieve higher growth rate of the
economy, increases the total and per-capita income, GDP, industrial growth, employment
and income levels.

Learnings: The reasons for the emergence of international business reflect a quest for
higher profits and the need to expand production capacity beyond domestic markets.
Companies often seek foreign markets due to intense competition at home and limited
market size, pushing them to explore new opportunities. Furthermore, political stability,
access to advanced technology, and the availability of quality labor at lower costs
greatly influence their decisions to operate internationally.
Conclusion: What drives international business lies on by various factors, including
profit potential, resource availability, and market expansion. As firms navigate these
opportunities, they contribute to economic growth not only for themselves but also for
the countries they engage with. Understanding these motivations can help businesses
strategize more effectively in the global marketplace.
STAGES OF INTERNATIONALISATION:
Stage-1: Domestic Company
 Limits its operations, mission and vision to the national boundaries.
 Focus its view on the domestic market opportunities, supplies and customers.
 Analyze the national environment of the country, formulate the strategies to
exploit the opportunities offered by environment.
 Does not think of growing globally. They believe in saying, "if it is not happening in
home country, it is not happening".
Stage-2: International Company
 Domestic companies which grows beyond their production capacities, think of
internationalizing their operation.
 Decide to exploit the opportunities outside the domestic country are stage-2
companies.
 Believe that the practices the people and products of domestic business are
superior to those of other countries.
 The focus is domestic but extends the wings to the foreign countries.
 Select the strategy of locating a branch in foreign markets and extend same
domestic operations into foreign markets.
Stage-3: Multi-National Company (Multi-Domestic companies)
 International companies turn into the Multi-National companies when they start
responding to the specific needs of different country market regarding product,
price and promotion.
  Formulate different strategies for different markets.
 Operate like a domestic market of country concerned in each of their market.
Stage-4: Global Company
 The one which has either global strategy.
 Either produces in home country or in a single country and focuses on marketing
these products globally or produces globally and focuses on marketing these
products domestically.
Stage-5: Transnational Company
 It produces, markets, invests and operates across the world.
 An integrated global enterprise that links global resources with global markets at
profits.
 There is no pure Transnational.

Learnings: These stages show how companies evolve from focusing only on their home
market to becoming global players. Initially, domestic companies limit themselves to
local opportunities, but as they grow, they seek international markets, believing in the
superiority of their products. As they expand, they adapt to different country needs and
eventually become transnational, integrating operations worldwide for better efficiency.
Conclusion: understanding these stages is crucial for businesses aiming to expand
globally. Each stage represents different strategies and mindsets that reflect how
companies can grow and adapt to a larger world. This progression highlights the
importance of flexibility and responsiveness in a competitive global market.