Export Promotion Councils Commodity Boards Autonomous Bodies
Total Page:16
File Type:pdf, Size:1020Kb
Sri Chandrasekharendra Saraswathi Viswa Maha Vidyalaya Department of Management Studies International Business Environment SWARAJ Assistant Professor UNIT I Characteristics of Business Change Govern Large ment Size Control Characteris Competi tics Diversifi of tion Business cation Informa Globaliz tion ation Technol ogy International Business International Business • Activities that buys and sells goods and services across two or more national boundaries • International business is related with those enterprises which have operating units outside their own country • Conducting international business is really not like playing a whole new ball game but it is like playing in a different ball park, where the managers have to learn the factors unique to Business Excellence (Getting the Big Picture of business) Who are the Stakeholders of Business ? • Shareholders and Promoters • Customers • Employees • Suppliers and Partners (incl Contractors, Agents etc) • Government • Society Most Admired Business “Balancing and Exceeding the Expectations of all it’s Stakeholders.” Most Admired Business “Balancing and Exceeding the Expectations of all it’s Stakeholders.” Effectiveness of Business Achievement of Objectives. Efficiency in Business Achievement of Results with the least amount of Resources. Innovation Emerging Waves Factor Yesterday Today Market Sellers Buyers Players Few Several Kind of Players National Global Price Level High Dropping Consumer No choice Multiple Choice Technology Low High Quality Average High Delivery Weeks/Months/Years Off the shelf Needs Limited Enhanced Response Sluggish Quick Relation Curt Respect Approach Mass Personalised International Business Scope : “World is turning into a Global village”. “SMOOTH” 1. Source raw materials wherever they are cheapest. 2. Manufacture anywhere in the world where it is most cost effective. 3. Obtain and Sell in those global markets where prices are highest. 4. Organize and Raise finances globally. 5. Try and Forge international strategic alliances. 6. Hire the best talent from all over the world. To manage all the above points. And you will have achieved the stature of a true Global Organization International Business Difference between Domestic and International business 1. Higher rate of profits (Absolute advantages, taxes, concessions and incentives) 2. Expansion of production capacities 3. Competition (pull & push effects) 4. Wide market 5. Political stability 6. Technology 7. High cost of transportation International Business Growing importance of International Business Current trends are towards the increasing globalisation and interdependence of firms, markets and countries. Intense competition at global level Exchange rate developments – shift from –ve to +ve growth Global capital flows to LDCs Differences in Price and Cost Restructuring the economy to integrate with global economy Increased importance of CSR The growing importance on enhancing standard of living in LDCs Liberal trade policies and procedures Revolution in communication and transportation International Business International Business Corporate Approaches 1. Ethnocentric (Home country orientation) 2. Polycentric (Host country orientation) 3. Regiocentric (Regional orientation) 4. Geocentric (World orientation) Types of International Organisation • Built-in Export Department • Separate Export Department • Export Sales Subsidiary • International Division • Global Organisational Structure International Business Home Country Economic Environment 1. Domestic Markets & Size 2. Economic Policies 3. Promotional and Regulatory measures International Business Host Country Economic Environment 1. Size of the Markets 2. Gross Domestic Product 3. Industrialisation 4. Development of Banking Facilities 5. Purchasing Power and Standard of Living 6. Foreign Exchange Situation 7. Income levels 8. Economic diversity (urbanisation – Rural dev. Ex Johannesburg, Sao Paolo International Business Global Economic Environment 1. International organisations 2. Trading Blocs 3. Strategic Locations 4. Global Political Environments and Issues International Business SAARC (7): South Asian Association for Regional Cooperation India, Pakistan, Sri Lanka, Nepal, Bhutan, Bangladesh, Maldives NAFTA (3) : North American Free Trade Agreement USA, Canada, Mexico LAFTA (9) : Latin American Free Trade Area Argentina, Brazil, Mexico, Chile, Peru, Uruguay, Paraguay, Columbia, Ecuador ASEAN (5) : The Association of South East Asian Nations was formed by the Bangkok Declaration, 1967, by five countries, viz., Indonesia, Malaysia, Philippines, Singapore and Thailand. International Business EU (15) : European Union Austria, Belgium, Britain, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden. Euro : Common currency of the EU was launched by 11 members on 1.1.1999, Britain, Denmark, Sweden did’nt join. Greece joined in 1.1.2001 Maastricht Treaty of 1991 set the stage for the monetory union. EU Additions With effect from May 1, 2004 the total membership of EU increased to 25. Following ten countries were inducted. Estonia, Latvia, Lithuania, Poland, Czech Republic, Hungary, Slovenia, Slovakia, Cyprus and Malta. Two more members, Bulgaria and Romania, were inducted in 2007, taking the tally to 27 countries. International Business International Business Environment 1. Internal Environment Org. Structure ( I P O ) Production Marketing Finance H R R & D I T Business Development International Business International Business Environment 2. External Environment a. External Micro Environment All Stakeholders and Competitors b. External Macro Environment S T E P I N (Social, Technical, Economical, Political, International, and Natural) Eradicate extreme poverty and hunger Achieve universal primary education Promote gender equality and empower women Reduce child mortality Improve maternal health Combat HIV/AIDS, malaria and other diseases Ensure environmental sustainability Develop a global partnership for development Stop Child Labour Importance of International Business If you are not thinking international, you are not thinking business management 23 Global Environment and Chapter 4 International Managers Topics Difficulties Operating in Borderless World Challenges Economic Legal-political Socio-cultural Multinational Corporations Foreign Markets - Entrance Managers’ Challenge: Wal-Mart Managers 24 A Borderless World Business is becoming a unified, global field Companies that think globally have a competitive edge Domestic markets are saturated for many companies Consumers can no longer tell from which country they are buying 25 Four Stages of Globalization Domestic stage: market potential is limited to the home country production and marketing facilities located at home International stage: exports increase company usually adopts a multi-domestic approach Multinational stage: marketing and production facilities located in many countries more than 1/3 of its sales outside the home country Global (or stateless) stage: making sales and acquiring resources in whatever country offers the best opportunities and lowest cost ownership, control, and top management tend to be dispersed 26 4 Stages of Globalization 1. Domestic 2. International 3. Multinational 4. Global Strategic Orientation Domestically Export- Oriented Multinational Global Oriented multi-domestic Stage of Development Initial foreign Competitive Explosion of Global involvement positioning international operations Cultural Sensitivity Of little Very important Somewhat Critically importance important important Manager Assumptions “One best “Many good “The least-cost “Many good way” ways” way” ways” SOURCE: Based on Nancy J. Adler, International Dimensions of Organizational Behavior, 4th ed. (Cincinnati, Ohio: South-Western, 2002), 8- 9. 27 Global (stateless) Corporations Number is increasing Awareness of national borders decreasing Rising managers expected to know a 2nd or 3rd language Corporate Example – Nestle (Swiss) CEO Peter Brabeck–Letmathe (Austrian) Half of general managers (non-Swiss) Strong faith in regional managers who are native to the region 28 The International Business Environment International management is management of business operations conducted in more than one country Fundamental tasks do not change Basic management functions are the same - domestic or international Greater difficulties and risks when performing on an international scale 29 International Environment Factors Economic Legal-Political •Economic •Political risk development •Infrastructure •Government •Resource and takeovers product markets •Tariffs, quotas, taxes Organization •Per capita •Terrorism, political Income instability •Exchange rates •Laws, regulations •Economic conditions Sociocultural •Socio values, beliefs •Language •Religion (objects, taboos, holidays) •Kinship patterns •Formal education, literary •Time orientation 30 Types of Businesses Forms of Business Ownership Forms of business ownership and types of businesses describe how they are organized and run. The four main forms of business ownership are listed below. • sole proprietorship • partnership A franchise is a • corporation • co-operatives combination, or hybrid, of the four forms of ownership. Sole Proprietorships A sole proprietorship is a business owned by one person who is known as the proprietor. The proprietor has a wide range of responsibilities including arranging displays and selling to customers to name a few. Funds to run the business usually