INTERNATIONAL BUSINESS PROJECT

MITA PARYANI T.Y.B.B.I ROLL NO. 44

INDEX
Sr. No. Topic What is International Business? Discuss its Need and Importance in the current global scenario. Discuss the various environmental factors affecting international business. Discuss the impact of technology on international business.

Discuss the impact of technology on international business.

Write a note on EU (European Union).

Acknowledgement

Bibliography

Q1) What is International Business? Discuss its Need and Importance in the current global scenario. Answer: Today, business is acknowledged to be international and there is a general expectation that this will continue for the foreseeable future. International business may be defined simply as business transactions that take place across national borders. This broad definition includes the very small firm that exports (or imports) a small quantity to only one country, as well as the very large global firm with integrated operations and strategic alliances around the world. Within this broad array, distinctions are often made among different types of international firms, and these distinctions are helpful in understanding a firm's strategy, organization, and functional decisions (for example, its financial, administrative, marketing, human resource, or operations decisions). One distinction that can be helpful is the distinction between multi-domestic operations, with independent subsidiaries which act essentially as domestic firms, and global operations, with integrated subsidiaries which are closely related and interconnected. These may be thought of as the two ends of a continuum, with many possibilities in between. Firms are unlikely to be at one end of the continuum, though, as they often combine aspects of multi-domestic operations with aspects of global operations. International business grew over the last half of the twentieth century partly because of liberalization of both trade and investment, and partly because doing business internationally had become easier. In terms of liberalization, the General Agreement on Tariffs and Trade (GATT) negotiation rounds resulted in trade liberalization, and this was continued with the formation of the World Trade Organization (WTO) in 1995. At the same time, worldwide capital movements were liberalized by most governments, particularly with the advent of electronic funds transfers. In addition, the introduction of a new European monetary unit, the euro, into circulation in January 2002 has impacted international business economically. The euro is the currency of the European Union, membership in March 2005 of 25 countries, and the euro replaced each country's previous currency. As of early 2005, the United States dollar continues to struggle against the euro and the impacts are being felt across industries worldwide. In terms of ease of doing business internationally, two major forces are important: 1. technological developments which make global communication and transportation relatively quick and convenient; and 2. the disappearance of a substantial part of the communist world, opening many of the world's economies to private business.

Importance of International Business International business is all business transactions-private and governmental-that involve two or more countries. Why should one be interested in studying international business? The simplest answer is that international business comprises a large and growing portion of the world's total business. Today, almost all companies, large or small, are affected by global events and competition because most sell output to and/or secure suppliers from foreign countries and/or compete against products and services that come from abroad. More companies that engage in some form of international business are involved in exporting and importing than in any other type of business transaction. Many of the international business experts argue that exporting is a logical process with a natural structure, which can be viewed primarily as a method of understanding the target country's environment, using the appropriate marketing mix, developing a marketing plan based upon the use of the mix, implementing a plan through a strategy and finally, using a control method to ensure the strategy is adhered to. This exporting process is reviewed and evaluated regularly and modifications are made to the use of the mix, to take account of market changes impacting upon competitiveness. This view seems to suggest that much of the international business theory related to enterprises, which are internationally based and have global ambitions, does often change depending on the special requirements of each country. Another core issue is the company's growth and the importance of networking and interaction. This view looks at the way in which companies and organisations interact and consequently network with each other to gain commercial advantage in world markets. The network can be using similar subcontractors or components, sharing research and development costs or operating within the same governmental framework. Clearly, when businesses formulate a trading block with no internal barriers they are actually creating their own networks. Collaborations in aerospace, vehicle manufactures and engineering have all sponsored the development of a country's or a group of countries' outlook based on their own internal market network. This network and interaction approach to internationalisation shows the substance of being able to influence decisions when knowing how the global network players work or interact. For example, a crucial market network is that of the Middle East. Middle East countries are rich, diverse markets, with a vibrant and varied cultural heritage. This means that although there has been a harmonisation process during the past few years, differences still exist. Rather than business being simpler as a result, it should be recognised that because of regulations and the need those countries have to restructure as they enter the global market, performing any kind of business can be highly complex. It should be remembered though that the Middle-Eastern countries have a low-income average and like to have their cultural differences recognised. Those firms that will or have recognised these facts have a good chance of developing a successful marketing strategy to meet their needs. Fortunately some firms have realised these important differences and reacted adequately when strategic decisions had to be made regarding their penetration to this kind of markets.

Q2) Discuss the various environmental factors affecting international business. Answer: Environmental factors for international business comprise the external relations a firm will face in going global. These include, most importantly, the economic, political and legal environments, each of these always entangled with the others. Basic Issues 1. The central issues for the decision to go global are concerned with minimizing risk. A company, when considering the environment that it will deal with when entering a new market, has to deal with certain variables. These concern, for example, the cultural barriers to investment, the ability to reach a competitive edge with new investments and the strategic use of new technologies and natural resources that international investment might bring. The Economic Environment 2. This element comprises the nature of the economic system and institutions of a particular country or region. It also takes into account the nature of human and natural resources within the target market. A firm will function very differently in a libertarian environment than within a highly statist one. Here, the activities and functions of local economic elites are also very important. The Political Environment 3. Closely tied to the economic environment is the political one, itself also dealing with the nature of systems and institutions. Many variables to consider here are the stability of the political system, the existence of local or international conflict, the role of state enterprises and the nature of the bureaucracy. The Legal Environment 4. The existence of bureaucratic systems and cultures is central in making the decision to invest globally. The nature of corruption, local values and assumptions that are built into national ideologies are major variables in this field. A great concern is the extent to which there is a culture of law or a culture of personal patronage, where negotiations are done on a personal rather than a legal basis. The impact of international lending agencies such as the International Monetary Fund or the World Bank is also important in creating a legal culture that a business will have to take seriously.

Social Structure 5. Experts such as Robert Brown and Alan Gutterman hold that social structure comprises the basic values of a people and transcends the institutions mentioned above. Issues such as the relation between the individual and the collective, religion, family life and even time concepts and gender roles are all significant in terms of dealing with a new population. Being sensitive to these might be the difference between success and failure.

Q3) Discuss the impact of technology on international business. Answer: Technology has revolutionized the lives of consumers and businesses alike. The increased array of products on the shelves, the lowered cost of goods and services, and the ease of accessing information are just a few of the ways technology has enhanced society. The field of international business is particularly sensitive to technological innovations. History 1. In the early 1700s, international trade was impeded by economic forces that included wildly fluctuating currency exchange rates, handwritten correspondence via an unreliable postal service, and common supply-chain disruptions such as theft and vandalism of passing ships. Furthermore, as Douglas Irwin explains in a "Library of Economics and Liberty" article, imports used to be highly regulated and taxed to discourage countries from running trade deficits. Improvements in the legal system allowed for contracts with greater transparency and enforceability, and improvements in the mode of transportation allowed goods to be transported in less time. Identification 2. The most important modes of technology in international business include electronic communication such as emails, texts, faxes and virtual conferences. Tracking methods for shipping and purchasing is another huge technological innovation, as it allows businesses to verify the delivery of goods and the quantity of inventory purchased. Electronic spreadsheets and databases are other inventions that allow international companies to manage and store their information with greater ease. Considerations: Communication 3. The improvement in technology regarding communication is a linchpin of international business. The ability to instantaneously communicate with a manager in China or a factory in Singapore, for example, allows companies to expand overseas. Though multinational companies existed before the Internet, the ease of communication allows companies to outsource their operations with greater assurance: Video monitoring of factory and working conditions, inexpensive conference calls to consultants working in different countries, emailed reports to foreign vendors, and cheap long-distance phone calls are just a few of the ways technology has facilitated international business trade and operations.

Considerations: Logistics 4. Multinational corporations have much more complex supply chains than local brick-andmortar businesses. International companies often have vendors, factories, customers and consultants in different parts of the globe. Keeping track of how a product is developed, manufactured, shipped and purchased can involve hundreds of steps in several countries. Technological innovations streamline the supply chain by allowing up-to-the-minute results on the assembly of a product, and global tracking technology highlights where the product is moving. RFID technology assists companies such as Wal-Mart Stores with inventory control. Jack Plunkett, author of "Plunkett's Transportation, Supply Chain and Logistics Almanac," states that Wal-Mart mandated 600 of its suppliers to implement RFID technology to track and monitor deliveries and shipments. Benefits 5. Technology allows companies to produce products for less money. As Sudalaimuthu and Anthony Raj explain in the textbook "Logistics Management for International Business," the cost of shipping goods can account for 25 percent of production costs; thus, the reduction in the cost of shipping significantly decreases the cost of producing goods. Furthermore, companies have a wider selection of vendors from which to choose which lowers the cost as well. For instance, technological innovations enable a clothing company to choose from textile plants in Vietnam, Singapore, Taiwan and several other locations. The increased selection lowers the cost as these foreign companies bid against the others for contracts.

Q4) Discuss the role of history in the development of International Banking in the 21st century. Answer: International business commands center stage in today's global economy. The international business standards focus on: Raising awareness of the interrelatedness of one country's political policies and economic practices on another; Learning to improve international business relations through appropriate communication strategies; Understanding the global business environment--that is, the interconnected-ness of cultural, political, legal, economic, and ethical systems; Exploring basic concepts underlying international finance, management, marketing, and trade relations; and Identifying forms of business ownership and international business opportunities. The International Bank for Reconstruction and Development (IBRD) is one of five institutions that comprise the World Bank Group. The IBRD is an international organization whose original mission was to finance the reconstruction of nations devastated by World War II. Now, its mission has expanded to fight poverty by means of financing states. Its operation is maintained through payments as regulated by member states. It came into existence on December 27, 1945 following international ratification of the agreements reached at the United Nations Monetary and Financial Conference of July 1 to July 22, 1944 inBretton Woods, New Hampshire. The IBRD provides loans to governments, and public enterprises, always with a government (or "sovereign") guarantee of repayment subject to general conditions. The funds for this lending come primarily from the issuing of World Bank bonds on the global capital marketstypically $1215 billion per year. These bonds are rated AAA (the highest possible) because they are backed by member states' share capital, as well as by borrowers' sovereign guarantees. (In addition, loans that are repaid are recycled, or relent.) Because of the IBRD's credit rating, it is able to borrow at relatively low interest rates. As most developing countries have considerably lower credit ratings, the IBRD can lend to countries at interest rates that are usually quite attractive to them, even after adding a small margin (about 1%) to cover administrative overheads.

Q5) Write a note on EU (European Union). Answer: The evolution of the European Union (EU) from a regional economic agreement among six neighboring states in 1951 to today's supranational organization of 27 countries across the European continent stands as an unprecedented phenomenon in the annals of history. Dynastic unions for territorial consolidation were long the norm in Europe. On a few occasions even country-level unions were arranged - the Polish-Lithuanian Commonwealth and the AustroHungarian Empire were examples - but for such a large number of nation-states to cede some of their sovereignty to an overarching entity is truly unique. Although the EU is not a federation in the strict sense, it is far more than a free-trade association such as ASEAN, NAFTA, or Mercosur, and it has many of the attributes associated with independent nations: its own flag, anthem, founding date, and currency, as well as an incipient common foreign and security policy in its dealings with other nations. In the future, many of these nation-like characteristics are likely to be expanded. Thus, inclusion of basic intelligence on the EU has been deemed appropriate as a new, separate entity in The World Factbook. However, because of the EU's special status, this description is placed after the regular country entries. Background: Following the two devastating World Wars in the first half of the 20th century, a number of European leaders in the late 1940s became convinced that the only way to establish a lasting peace was to unite the two chief belligerent nations - France and Germany - both economically and politically. In 1950, the French Foreign Minister Robert SCHUMAN proposed an eventual union of all Europe, the first step of which would be the integration of the coal and steel industries of Western Europe. The following year the European Coal and Steel Community (ECSC) was set up when six members, Belgium, France, West Germany, Italy, Luxembourg, and the Netherlands, signed the Treaty of Paris. The ECSC was so successful that within a few years the decision was made to integrate other parts of the countries' economies. In 1957, the Treaties of Rome created the European Economic Community (EEC) and the European Atomic Energy Community (Euratom), and the six member states undertook to eliminate trade barriers among themselves by forming a common market. In 1967, the institutions of all three communities were formally merged into the European Community (EC), creating a single Commission, a single Council of Ministers, and the European Parliament. Members of the European Parliament were initially selected by national parliaments, but in 1979 the first direct elections were undertaken and they have been held every five years since.

In 1973, the first enlargement of the EC took place with the addition of Denmark, Ireland, and the United Kingdom. The 1980s saw further membership expansion with Greece joining in 1981 and Spain and Portugal in 1986. The 1992 Treaty of Maastricht laid the basis for further forms of cooperation in foreign and defense policy, in judicial and internal affairs, and in the creation of an economic and monetary union - including a common currency. This further integration created the European Union (EU). In 1995, Austria, Finland, and Sweden joined the EU, raising the membership total to 15. A new currency, the euro, was launched in world money markets on 1 January 1999; it became the unit of exchange for all of the EU states except the United Kingdom, Sweden, and Denmark. In 2002, citizens of the 12 euro-area countries (the European Monetary Union or EMU) began using the euro banknotes and coins. Ten new countries joined the EU in 2004 - Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia and in 2007 Bulgaria and Romania joined, bringing the current membership to 27. In order to ensure that the EU can continue to function efficiently with an expanded membership, the Treaty of Nice (in force as of 1 February 2003) set forth rules streamlining the size and procedures of EU institutions. An effort to establish an EU constitution, begun in October 2004, failed to attain unanimous ratification. A new effort, undertaken in June 2007, created an Intergovernmental Conference to formulate a political agreement - initially known as the Reform Treaty but subsequently referred to as the Treaty of Lisbon - which would serve as a constitution. Unlike the constitution, however, the Treaty of Lisbon sought to amend existing treaties rather than replace them. In October 2009, an Irish referendum approved the Treaty (overturning a previous rejection) and cleared the way for an ultimate unanimous endorsement - the Czech Republic signed on soon after. Treaty implementation began on 1 December 2009. In 2010, the prospect of a Greek default on its euro-denominated debt created severe strains within the EMU and raised the question of whether a member country might be removed.

ACKNOWLEDGEMENT
I would like to thank Prof. Lalita Khurana for giving me an opportunity to work on a project which was a complete great learning experience. It has helped me learn a lot more about various concepts and terms which are essential and associated with International Business.

BIBLIOGRAPHY
http://www.referenceforbusiness.com/management/Gr-Int/International-Business.html http://ezinearticles.com/?Understanding-the-Importance-of-International-Business&id=290035 http://www.ehow.com/about_5626186_environmental-factors-international-business.html http://www.ehow.com/about_7542416_importance-technology-international-business.html https://www.cia.gov/library/publications/the-world-factbook/geos/ee.html