IB Chapter 1 Globalization

International Business
International business refers to transactions between governments or companies cross-border

commerce and other business. We are concerned with international business here due to engaging in
international business requires an understanding of the legal requirements and business and trade
regulations of the country in which you are doing business.
"International business comprises of all transactions beyond political boarders of two or more regions
nations or countries."
International business refers to the trade of goods, services, technology, capital and/or knowledge
across national borders and at a global or transnational level. It involves cross-border transactions of
goods and services between two or more countries
Scope, Importance and Nature of International Business
1- Understanding International Business Formats
International business occurs in many different formats:

• The movement of goods from country to another (exporting, importing, trade)
• Contractual agreements that allow foreign firms to use products, services, and processes from
other nations (licensing, franchising)
• The formation and operations of sales, manufacturing, research and development, and
distribution facilities in foreign markets
2- International Business Relation
International business encompasses all commercial activities that take place to promote the transfer of
goods, services, resources, people, ideas, and technologies across national boundaries.
Here we understand which country buy or sell goods to other country. for example Saudi Arabia sell oil
to America and buy technology and equipment from it.
3- Policies and practices of International business
International business refers to the trade of goods, services, technology, capital etc. So understanding of
legal policies: domestic and international laws play a big role in determining how a company can operate
overseas nations;
4- Understanding of Global Business Environment
The people involved in international business must understand the difference of environment varies
from country to country. So we understand how variations in culture and traditions across nations affect
business practices.
5- Learning International Marketing Skills
I
Just as international markets are different from domestic markets, international marketing is a different
process from domestic marketing.
A student in this subject learn international marketing is the multinational process of planning and
executing the conception, pricing, promotion and distribution of ideas, goods, and services to create
exchanges that satisfy individual and organizational objectives.
6- Understanding International Politics
By focusing on these, students will gain a better understanding of Political economy. These are tools
that would help future business people bridge the economic and political gap between countries
The political environment of international business refers to the relationship between government and
business, as well as the political risk of a nation. In which a man of learning understand the dependency
of one country on the other. E.g. the view of America is continuously changing about China and India to
high growth rate of both of the economies.
7- Understanding of International Finance
Today, there are fewer and fewer restrictions on international trade and financial flows, therefore
understanding of rate of exchange of currencies and amount of currency received for another and
movement in exchange rate between currencies can have profound effects on sales, costs profits,
assets and liabilities.
8- Understanding of Common Markets
Students understand the concept of a group of countries imposing few or no duties on trade
with one another and a common tariff on trade with other countries.
A name for the European Economic Community or European Union, used especially in the
1960s and 1970s.
9- Understanding of Economic Union
Similarly students understand economic union which is an economic union or custom union is a
type of trade bloc which is composed of a common market. The member countries have both common
policies on product regulation, freedom of movement of goods, services and the factors of production
particularly capital and labour. Moreover they have a common external trade policy.
10- Practical Knowledge for Students
There is an increasing amount of demand for business people with an education in international
business. A study conducted by Thomas Patrick from University of Notre Dame and concluded that
completed their degree program in International Business felt that the training received through
education was very practical in the working environment.
11- Understanding of Behaviour Factors
Students understand the factors in a foreign environment; the related disciplines such as anthropology,
psychology, and sociology are helpful for managers to get a better understanding of values, attitudes,
and beliefs.
12- Increasing Job Opportunities in International Market
Increasingly, companies are sourcing their human resource requirement globally. For example, at Sony
Corporation, only fifty percent of its employees are Japanese remaining employees are from the globe.
Business people with an education in international business also had a significantly higher chance of
being sent abroad to work under the international operations of a firm.
Advantages and Scope of International Business for an Organization

Before you pass on expanding into foreign markets, consider some of these potential
advantages of international business to an organization.
1. Increased revenues
One of the leading advantages of international business to an organization is that it may be able
to increase its number of potential clients. Each country it adds to its list can open up a new
opportunity of business growth and increased revenues.
2. Decreased competition
Generally global business environment is complex and open to face stable and strong
competitors. But some companies successfully find out save heavens where it has to face less
competition in some countries.
3. Extend Product Life Cycle
Sales can decrease for certain products, domestically stop buying them or move to upgraded
versions over time. Organization involves in international business search demand for products
in the other countries which prolong the product life cycle and then extend business life.
4. Managing Cash-flow better
Getting paid open may be one of the hidden advantages of international trade.
When organization entered into international business, it may be a general practice to ask for
payment upfront, whereas at home you may have to be more creative in managing cash flow
while waiting to be paid. Expanding your business overseas could help you manage cash
flow better.
5. Minimize Risk
By international business an organization is becoming less dependent on one market alone,
may help it mitigate potential risks in its core market.
It is the one of the significant advantages of international business is market
diversification. Focusing only on the domestic market may expose you to increased risk from
downturns in the economy, political factors, environmental events and other risk factors.
6. Benefiting from currency exchange
If one currency is facing downturns then international business organization may be able to
export more as to foreign customers of those countries whose currency is favorable and at
upturn, like Japan, China, and India.
7. Access to export financing
Another one of the advantages of international business is that it may be able to leverage
export financing. It can get benefit from the services offered by Export Promotion Bank of
Pakistan.
8. Disposal of surplus goods
One of the advantages of international business is that organization may have an outlet to
dispose of surplus goods that you're unable to sell in your home market. In this way the prices
and image of brand is maintained in domestic market.
9. Enhanced reputation
Doing business in other countries can boost our company's reputation. Successes in one
country can influence success in other adjacent countries, which can raise your company's
profile in your market niche. It can also help increase your company's credibility, both abroad
and at home.
10. Opportunity to specialize
International markets can open up avenues for a new line of service or products. It can also give
you an opportunity to specialize in a different area to serve that market.
Driver of Globalization
Choice of entry mode in international business[edit]
Strategic variables affect the choice of entry mode for multinational o oration expansion
beyond their domestic markets. These variables are global concent I tion, global synergies, and
global strategic motivations of MNC.
• Global concentration: many MNEs share and overlap mfferkets with a limited number of
other corporations in the same industry.
• Global synergies: the reuse or sharing ofresources if a corporation and may include
~arketing departments o~ other inputs that can be_ 'ed in multiple markets. This
mcludes, among other thmgs, brand name reco n tion,
• Global strategic motivations: other factors beyo entry mode that are the basic reasons
for corporate expansion into an additional m~r~t. These are strategic reasons that may
include establishing a foreign outpost for exgfnsion, developing sourcing sites among
other strategic reasons.l'"
Means of businesses[edit]
• Entry modes: Export/import, wholly owned subsidiary, merger or acquisition, alliances

and joint ventures, licensing+"

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International Business

International business refers to transactions between governments or companies cross-border

Scope, Importance and Nature of International Business

1- Understanding International Business Formats

International business occurs in many different formats:

3- Policies and practices of International business

4- Understanding of Global Business Environment

5- Learning International Marketing Skills

6- Understanding International Politics

7- Understanding of International Finance

8- Understanding of Common Markets

9- Understanding of Economic Union

10- Practical Knowledge for Students

12- Increasing Job Opportunities in International Market

Advantages and Scope of International Business for an Organization

Choice of entry mode in international business[edit]

• Entry modes: Export/import, wholly owned subsidiary, merger or acquisition, alliances

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