International Business

Chapter:1
1. Introduction
2. International Marketing
3. Trends in International Trade
4. Reasons for going International
5. Global Sourcing and Production Sharing
6. International Orientations
7. Internationalization Stages and Orientations
8. Growing Economic Power of Developing Countries
9. International Decision
10.Case Studies
Introduction:
International Business:
It can be defined as
- the process of acquiring global resources and

- utilizing these resources to achieve the objectives of an

organization

- by exploring the opportunities and challenges of a

globalized economy.
It refers to
- business activities,
- performance of trade and investment activities of companies
across national borders between two or more nations.
- It is also referred to as cross- border business.

International Business can be explained simply as

- business transactions that take place across national political
boundaries.

- The concept of International business stems from the business

processes and transactions that take place across national borders.
National borders:
It includes the
- interactions and dealings between people and companies
- possessing a distinctive character according to their social, legal,
cultural, economic and technological environment.

International business describes all types of

- commercial transactions and activities that take place beyond
national boundaries.
- It refers to all business activities that involve cross border
transactions of goods, services, resources, and processes between two
or more nations.
 Transactions: It includes Cross country movements of
1. goods,
2. services,
3. capital,
4. skills employees,
5. technology for international production of goods and services
such as
- finance, - banking, - insurance, - construction,
- manufacturing, - transportation, - exporting and importing.
B. Cross border transactions in intellectual property through
licensing or franchising
(e.g patents, know-how, trademarks, copyright)

C. Joint ventures, investment in physical and financial assets in

foreign countries

D. Contract manufacturing or assembly of goods abroad for local sale

or for export to other nations.

E. Third country locations, buying and selling in foreign countries,

establishment of foreign warehousing and distribution systems.
Why there is a Need to Study International Business?:
1.To explore job and business opportunities:
It helps youngsters to explore job and business opportunities
in the competitive world of multinational and transnational
corporations as these companies source their human resources
globally.
Eg. Most global companies want to hire skilled employees for
their BPO operations from India.

2. To identify the quality of a brand:

Most products of our daily life are an outcome of cross
border business.
Knowledge of international business enables customers to
identify the quality of brand and to know other information
such as where it is manufactured and its customers.

Eg. Nokia.
Nokia cell phone is a MNC that is engaged in the
manufacturing of mobile devices and in converging Internet
and communication industries, with over 1,32,000employees
in 120 countries, sales in more than 150 countries.
3. To understand the environment and culture of other
countries and to initiate strategies to get a competitive edge
over the rivals.
Eg: 1. Russia and China apply a lot of control in business
operations.
2. Coco- Cola makes available different flavors in different
countries because of varied customer preferences.

4. To understand the different political and legal

circumstances of various economies.
Eg: as defined by European Commission directive issued in
1973, chocolate can only contain cocoa butter, cocoa solids
But, Britain, Ireland and Denmark as well as new EU
members, Austria, Finland and Sweden are exempted from the
directive and allow manufacturers to use cocoa –butter
equivalents (CBEs) such as palm oil in making chocolate.

5. Helps to know how global players work or interact to

increase competitive advantages and how they influence
decisions of their rivals.
Eg: Japanese firms follow a competitive strategy to exploit
international market opportunities by using a penetration
strategy, which is to broaden the market share and establish a
long term dominating market position.
 Features of International Business
1. International business related to different Environments:
Conducting international operations is a crucial task as it is related to
different dynamic environments.
It includes variations in the cultural, political, legal, social, economic
and technological environments of different countries.
Example:
If an Indian company wants to operate in the EU market, it might face
numerous cultural, economic and legal problems in the initial stages.
In 1996, when McDonalds fast food chain entered India, the company
had to ensure that it did not offer pork and beef products as per Indian
culture and introduced many dishes that were not available at any Mc
Donald’s outlet anywhere in the world.
2. Operates in Highly Uncertain Conditions.
International firms operate in highly uncertain business conditions
and where the rules of the game are often ambiguous, contradictory
and subject to rapid change as compared to domestic business
conditions. Governments might also restrict access to markets.

Example: while import of non-hazardous agricultural products into

Germany is legal, the EU imposes quotas on the import of
agricultural goods by its member states.

It implies that import of items like fresh meat, fruits, vegetables,

cereals, rice, sugar and oils to Germany requires an import license to
monitor quotas and to ensure that limits are not exceeded.
3. Based on Global Perspective:
A company that engaged in international business activities
must incorporate a global perspective and try to get
competitive advantage by exploring global opportunities.

For example:
Japanese firm Canon shifted most of its production to China
for increased profits by using inexpensive, productive and
skilled workforce.
4. Affected by Dynamic Factors:
IB is influenced by the dynamic factors related to marketing,
sourcing, labour, management, human resources, finance, law
government control etc.

For example :
The entry of MNCs such as LG and Samsung pose a serious
challenge to various other companies who were forced to
change their marketing and sourcing strategies.
5. Potential of Markets:
International players must design all their strategies and policies
keeping in view the potentials of different markets.

For example:
Toyota and Dell depend on the demand of customers from
different countries as they have a significant market share in
several countries.
Objectives of International Business:
1. To achieve higher rate of profits
2. Expansion of sales
3.Specialisation by resources
4.Diversification to reduce risk in foreign market
[ex: Carrefour was compelled to launch international
operations in the 1970s, because of the introduction of the
Royer law, which restricted to open new supermarkets in
France. So Carrefour started expanding internationally and
first moves to neighboring European countries, South
America, Asia and Middle East countries.]
5.Gaining competitive advantage over competitors.
Entering international market gives a company competitive edge
over its competitors because of various factors such as cost
reduction, quality products and new features.
To get competitive advantage companies established their
manufacturing facilities in several countries to reduce costs.

For example:
Exxon –Mobil, previously known as Socony –Vaccum Oil
company, a major American oil company that supplies petroleum
products to Ethiopia, Kenya, ad Sudan from its refineries in Saudi
Arabia, established its refinery in Eritrea to get competitive
advantage in transportation costs.
 The International Business Framework

Drivers of International Business

1. Micro Drivers or Internal Drivers 2. Macro Drivers or External Drivers

a. Expansion of market and Sales a. Technology

b. Diversification of risk b. Regulatory framework
C. Acquire competent resources c. Global competition

Internationalization

Proactive Motives Reactive Motives

 Motives of Internationalization:
1. Proactive motives:
- Goal of higher profit and growth
- technological competence for unique product
- foreign market opportunities and information
- Economies of scale
- tax benefits

2. Reactive motives:
- Competitive pressures
- limited domestic market, - Excess capacity of production
- unsolicited foreign orders, - proximity to international customers
 Stages of Internationalization
Internationalization occurs when a company expands its horizons for new
avenues of research and development, production, selling and other business
activities into new markets.

Stage 5- Transnational company

Stage 4- Global company

Stage 3- Multinational company

Stage -2 International Company

Stage -1 Domestic Company

1. Domestic company:
A. A domestic company limits its vision, mission, focus, operations and
strategy to the national boundaries of a single country.
B. its orientation is ethnocentric.
C. it focuses only on domestic market, domestic suppliers and domestic
competitors.

2. International Company:
A. When a company extends marketing, manufacturing and other activities
beyond boundaries of a single country, it enters the second stage of
internationalization and becomes an international company.
B. The company explores opportunities outside the home country but
remains ethnocentric in its basic orientation.
 3. Multinational Company:
•An MNC is a corporation that has its headquarters in one country
which is known as the home country and operates in several other
countries known as host countries.
•MNCs make investments in several countries but do not have
coordinated product or service offerings in each country.
•MNCs are more focused on adapting their products and services to
each individual local market.

4. Global Company:
- Global companies have global strategies for business activities
like product design, financing, purchasing, manufacturing and
marketing.
 - They market their products through the use of the same
coordinated image or brand in all markets. Generally one corporate
office is responsible for global strategy.
- A global company will either have a global marketing strategy or a
global sourcing strategy but not both.
- A global company is a multinational venture centrally managed
from a specific country.

For example:
Even though Coca Cola earns most of its profit outside United
States, it is viewed as a US company because it is run from its
powerful headquarters in Atlanta, Georgia. The same logic applies to
McDonalds, Ford, IBM AND Wal -Mart.
5.Transnational Companies:
- A transnational company is global network of productive units that
have a decentralized authority structure and no distinct national
identity.

- Transnational companies rely on a blend of global and local

strategies as circumstances dictate.
- They adopt local values and practices whenever possible.
- Ideally, managers of transnational organisations “think globally, but
act locally”.
Modes of entry into the International Market:
1. Exporting
2. Licensing
3. Franchising
4. Joint ventures
5. Wholly owned subsidiaries
6. Contract manufacturing
7. Turnkey projects
8. Direct Investments
9. Joint Ventures
10. Mergers and Acquisitions.
 International Marketing:
International Marketing refers to
- the process of identifying the goods and services that customers outside the
home country want and
- then providing them at the right price and place.

Domestic Marketing Vs International Marketing

1. Marketing Strategies:
International marketing is much more complex because the marketer faces
several uncontrollable forces originating from different countries. A firms
marketing mix needs to be modified to conform to different countries and
uniform marketing strategies are ruled out across countries.
Eg. Mc Donald’s - it is flexible in overseas and customizes its menu by region.
2.Pricing:
Pricing is more complicated in foreign markets because of additional problems associated
with
- tariffs,
- laws,
- inflation and
- currency conversion.

3. Advertising:
Most firms face the problem of language translation while advertising in overseas markets.
There are also problems in selecting media in foreign markets.
Often the media used in the domestic market may not be available in foreign markets. In
domestic marketing, language translation may not pose a problem. Also many multinational
advertising have also come up.
The issue is whether to use a local agency or a multinational agency. A domestic marketing
manager is free from these hassles.

Benefits of International Marketing:

1. Survival (Nestle)
2. Growth of Overseas Markets ( Philips –electronics, Royal Dutch/Shell (petrol), Uniliver
(consumer products,) Japanese firms like Sony, Panasonic, etc.
3. Sales and Profits ( Coca- Colas 80% from foreign sales)
4. Diversification ( Soft drink consumption- cold weather)
5. Inflation and Price Moderation
6. Standard of Living
Major activities in International Marketing:
1. International Market assessment
2. Product decisions
3. Promotion strategies
4. Pricing decisions
5. Place or distribution strategies

4 Ps of Marketing and they constitute the heart of International Marketing:

1. Product
2. Promotion
3. Price
4. Place

Marketing Mix:
The mix of these 4Ps is called the marketing mix.
The International Marketing Mix:
1. Product:
Product that includes
- physical goods, services, experiences, events persons, places, properties information, and
ideas.
2. Price:
International business can follow either
- Standard policy, Two –tiered pricing or Market pricing.
3. Promotion:
Promotion includes all efforts undertaken to enhance acceptability of the product by the
potential buyers. Branding is a part of promotion.
4. Place:
Place refers to distribution. It involves two issues: decision on channels and selecting modes
of shipping.
International Market Assessment:
International marketing starts with the identification of markets where goods and services can
be profitably sold.
Check list for assessing competitive forces:
1. The number and size and financial strength of the competitors
2. Their market shares
3. Their marketing strategies
4. The apparent effectiveness of their promotional programs
5. The quality levels of their product lines
6. The source of their products- imported or locally produced.
7. Their pricing policies
8. The levels of their after –sales services
9. Their distribution channels
10. Their coverage of the market
International Product Strategies:
Products that are marketed include physical goods, services, experience, events persons, places,
properties, organizations, information and ideas.
Product should be
- ideally designed,
- produced satisfying strict quality specifications,
- priced reasonably,
- packaged attractively,
- positioned intelligently and
- branded attractively.

Example:
Red Bull, an energy drink is a
- need fulfilling,
- want satisfying and
- demand meeting product.
This energy drink “tonic drink” is a rage all over the world. The energy drink is present in
over 160 countries and in 2010 a total of 4204 billion cans were sold worldwide.
Sales figures are zooming across countries as for example, Turkey 86%, Japan 80%, Brazil
32%, Germany 13% and the US 11% .

Brand Decisions:
Firms often like to standardize the brand name of the product. A firm that succeeds in this
attempt can reduce its packaging, design and advertising costs.
Brand is understood as a name, term, design symbol and design .

Brand equity:
It can be viewed as the set of assets ( liabilities) linked to the brand that add value. Brand
equity is determined by the consumer and is the result of the consumer’s assessment of the
product, the firm and all other variables that impact on the product.
Issues relating to Brand Name:
One of the issue is Whether or not to use uniform brands internationally.
Example : Nestle associate many of its products under the same family of brands such as
Nestea and Nescafe to broaden the good will the company name has developed.

Language issues: Rolls Royce avoided the name Silver Mist in German markets, where mist
means ‘manure’ .

Image of a Brand: firms should consider the image they wish to create for their products –
local or foreign.
For example: a variety of Korean brands were sold under private brands, or under contract,
with well known company brand names for many years.
Some of these companies are now emphasizing their own trade names and the quality of
Korean products, such as Samsung.
Example: Coco –Cola calls its low calorie soft drink, Diet Coke in weight –conscious
Australia and North America but Coca-Cola in other markets.
Brand is used to promote a product within the political boundaries of a country it becomes a
national brand. Some MNCs use both global as well as national brands.
Nestle for example is a global brand. At the same time the firm has 7000 local brands in its
brand kitty. In markets where local brands are not popular, Nestle uses its global brand name.
the company is described as preferring brands to be local, people to be regional and
technology to be global.
It does, however own some of the worlds largest global brands e.g Nescafe.
Country of Origin effect:
A country of origin effect refers to the perception –positive or negative on a product that
comes from a country where it was manufactured or assembled.
‘Made in India’ image for a long time had a negative impact on Indian made goods and
services. But over a period of time, this negative image has been broken and several brands
like Tata Motors, Mahindra, Reddy Labs, TCS, WIPRO and Infosys etc. are accepted all over
the world.

Pricing Issues and Decisions:

Pricing decisions must be given careful consideration when an MNC is introducing a new
product or planning a short or long term price change.
Differences in transportation charges and tariffs cause the landed price of goods to vary by
country.
For example: Intense competition between some distributors of processed foods in Australia
minimizes the margin between retail prices manufacturers prices.
If an exporters home currency rises in value, the exporter must choose between maintaining
its prices in the home country and maintaining its prices in the host country.
Varying degrees of governmental intervention and greater diversity of markets add to the
complexity of international pricing.

Rigidity in price structures found in many foreign markets.

Many foreign intermediates are not aggressive in their pricing policies. They often prefer to
maintain high unit margins with low sales volume, rather than develop large sales volume by
means of lower prices and smaller margins per unit.

Pricing policies:
1. Standard price policy
2. Two tiered pricing
3. Market pricing
1. Standard price policy
An MNC is said to follow standard price policy when it charges the same price for its
products and services regardless of where they are sold. The firms that adopt this policy are
of two types:
1. A firm whose products or services are highly visible and allow price comparisons to be
readily made.
Example: Boeing sells commercial aircraft for approximately the same price to airlines
worldwide, regardless of whether the customer is Qantas, Japan Airlines, or Lufthansa.

2. A firm which sells commodity goods in competitive markets.

Example: Producers of crude oil such as Ampol, Kuwait oil, and Pemex, sell their produce at
prices determined by supply and demand in the world crude oil market.
Amazon.com the retail bookstore, follows global pricing of the books it sells, except in cases
where cheaper reprints are available for developing countries.
2. Two tiered pricing
This type of pricing is often used by domestic firms that are just beginning to internationalise.
This policy can be a short term strategy.
The strong ethnocentric bias of two tiered pricing suggests that it is not a suitable long term
pricing strategy.
A firm that views foreign customers as marginal to its business rather than as integral to it-
will never develop the international skills, expertise, and outlook necessary to compete
successfully in the global arena.

3. Market Pricing :
An MNC that follows a polycentric approach to international marketing will use a market
pricing policy.
A firm utilizing market pricing customizes its prices on a market –by –market basis to
maximize its profits in each market.
Example:
Market pricing policy is desirable in the car industry. Companies such as Ford and GM are
realizing that their Indian customers are willing to pay 8-9 lakhs for the same models that cost
Rs.70 lakhs plus in the US and Western Europe.
This is putting pressure on them to look for ways to cut costs, indigenize and offer cheap
models.
Pricing in international business is connected with two issues:
A. Pricing Discriminatory
B. Dumping.

Price Discrimination: Also called going rate pricing, price discrimination involves charging
different prices for consumers in different countries for the same product.
Price discrimination involves charging whatever the market will bear. In a competitive
market, price may have to be lower than that of in a market where the firm has a monopoly.
Dumping:
One approach classifies international shipments as dumped if the products are sold below
their cost of production. The other approach characteristics dumping as selling goods in a
foreign market below the price of the same good in the home market. Even rate cutting on
cargo shipping has been called dumping.
As per WTO definitions, dumping occurs when imports cause injury to domestic industry as a
result of a specific unfair trade practice by an MNC.

Types of Dumping:
1. Sporadic Dumbing:
This occurs when a manufacturer with unsold inventories desires to get rid of distressed and
excess merchandise. Goods are sold at any price that can be realized. The excess supply is
dumped abroad in a market where the product is normally not sold.

2. Predatory Dumping: This involves selling at a loss to gain access to a market and perhaps
to drive out competition. Once the competition is destroyed or the market is established, the
firm uses its monopoly position to increase price.
3.Persistant Dumping:
This involves selling at a lower price in one market than in others.
Japan is able to keep prices high at home, especially for consumer electronics because it has
no foreign competition there. But it is willing to lower its prices in the US market in order to
maintain market share.

4.Reverse Dumping:
The above dumbing involves charging lower prices abroad that at home. It is also possible to
have the opposite tactics. – reverse dumping.
In order for this to happen, the overseas, demand must be less elastic, and the market will
tolerate a higher price. Any dumping will thus be done in the manufacturer's home market by
selling locally at a lower price.
Promotional Issues and Policies:
Promotion involves communication with the audiences in the host country.
Promotion Mix:
1. Advertising
2. Personal selling
3. Sales promotion

1. Advertising
Government regulations can affect the media, the message, the budget and the agency
ownership. Following are specific constraints:
A. Tobacco, alcohol and drugs ae special targets, and cigarette advertising is partially or
totally banned in most Western European counties and even in India and Argentina.
B. Due to Government regulation some media are not available or are limited for commercial
use.
2. Personal Selling:
Personal selling is making sales on the basis of personal contacts. Personal selling more commonly
known as salesmanship, is used at every distribution level.
The cost of personal selling can be very high. One extreme case is the German software maker SAP,
the worlds leader in applications packages for client –server networks. In the US, SAP America has
removed the $140,000 annual limit on sales commission, making it possible for a salesperson to earn
as much as $2 million a year –more than what the company’s German executives make.

3. Sales promotion:
Sales promotion consists of a diverse collection of incentive tools, mostly short term, designed to
stimulate quicker purchase of a product or service. Whereas advertising offers a reason to buy, sale
promotion offers an incentive to buy. Sales promotion includes samples, coupons, price offs, premium
prices, warranties, money refund etc.
Unique Forms of International Promotion:
1. Government Role
2. International trade fairs
3. Barter
1. Government Role:
Export promotion measures cover several areas such as
•production,
•quality control,
•packaging, export credit and finance and
•export incentives and assistance.

2. Trade Fairs: Several thousand international trade fairs take place annually in over 70
nations. In some countries, companies spend huge sums on trade fairs.
In UK, the manufacturing firms spend about one fourth of their promotion budget on trade
fairs, and US spends 18%.
The annual Hanover Fair in Germany is the largest of the general fairs, with over 5000
exhibiters in 20 major categories, and 500,000 visitors.
Because so many buyers and sellers from different nations gather at a big fair, contacts can be
made quickly which otherwise might take several years.
3. Barter and Countertrade:
A system of transaction where
- an exporter accepts, in part or full payment of his exports, products of an importer is called
barter, countertrade or counter purchase.
Basically countertrade is a non – monetary transaction . More than 100 countries practice
countertrade, and over 90 governments have mandated countertrade.
Eg:
NEC, which assembles TVs in Egypt has a 50% share of the market there.
To keep business, NEC agreed to transport Japanese tourists to Egypt on Egypt Air (3000
yearly).
Half of the airfare and all local spending by the tourists is used to buy parts from NEC.

Eg: Coca –Cola operated a tomato paste factory in Turkey, sold Polish beer in the US and
marketed Yugoslav wine in Japan – all to sell Coke in eastern and southern Europe.
Distribution Issues and Decisions:
The international marketing mix ‘Place’ – more commonly referred to as distribution .
Distribution involves moving products and services from the firm to its customers.
International business should address two issues related to distribution:
1.Selecting channels of distribution
2. Selecting the modes of transportation for shipping goods from their point of origin to their
destination.

Channels of distribution:
1.Indirect selling
2. Direct selling.
1. Indirect selling:
It is also known as local or domestic channel, is employed when a manufacturer markets its
products through another firm from the same country that acts as intermediary.
As such the sales intermediary is just another local or domestic channel because the
manufacturer has no dealings with a foreign firm.
By exporting through local intermediary the manufacturer avoids setting up of an international
department.
The intermediary acting as the manufacturers external export organization, assumes the
responsibility for moving the product overseas.

2. Direct Selling:
Direct selling is employed when a manufacturer develops an overseas channel.
Here the firm deals directly with a foreign party without going through an intermediary in the
home country.
Direct selling involves selection of distributors in foreign markets. A distributor is a foreign
firm that has exclusive rights to carry out distribution for a manufacturer in a foreign market.
The distributor purchases merchandise from the manufacturer at a discount and then resells or
distributes the merchandise to retailers and sometimes to final users.
The length of association between the manufacturer and its foreign distributor is established
by a contract that is renewable provided the continued arrangement is satisfactory to both.
 Trends in International Trade
International trade refers to the exchange of goods, services, and capital across
national borders. It plays a crucial role in the global economy, driving economic
growth, creating jobs, and facilitating the flow of goods and services between
countries.

1.Globalization:
Globalization has been a significant trend in international trade. It has led to
increased interconnectedness and integration of economies worldwide.
Advancements in technology, transportation, and communication have made it
easier for businesses to engage in cross-border trade.
Example: A multinational company based in the United States outsources its
manufacturing operations to China to take advantage of lower production costs
and gain access to a large consumer market.
2.Regional Integration:
Countries are increasingly forming regional trade agreements and economic
alliances to promote trade and economic cooperation among member nations.
These agreements aim to
- reduce trade barriers,
- harmonize regulations, and
- promote regional economic integration.

Example:
The European Union (EU) is a prime example of regional integration. EU
member countries have eliminated trade barriers, established a single market,
and adopted a common currency (the euro) to facilitate trade and economic
growth within the region.
3.Trade in Services:
Trade in services, such as
•banking,
•tourism,
•telecommunications, and
•software development,
has been growing rapidly. Services now play a crucial role in international trade,
driven by advancements in technology and the digital economy.

Example: An Indian software company provides IT services to clients in the

United States by offering software development, maintenance, and customer
support remotely, without the need for physical presence.
4.E-commerce and Digital Trade:
The rise of e-commerce and digital platforms has revolutionized international
trade. Businesses can now reach global markets through online platforms,
allowing small and medium-sized enterprises (SMEs) to participate more
actively in international trade.
Example: A fashion retailer in South Korea sells its products globally through
its online store and utilizes international logistics partners to deliver goods to
customers worldwide.

5.Sustainable and Ethical Trade:

There is an increasing focus on sustainable and ethical trade practices.
Consumers and businesses are becoming more conscious of environmental,
social, and labor issues associated with the production and trade of goods.
Example:
Fairtrade is an initiative that promotes fair prices and better working conditions
for producers in developing countries.
Fairtrade-certified products, such as coffee or chocolate, guarantee that
producers receive a fair share of the profits.

6.Trade in Intellectual Property:

Intellectual property (IP) has become a valuable asset in international trade. The
trade of patents, copyrights, trademarks, and trade secrets has increased
significantly, driven by innovation and knowledge-based economies.
Example: A pharmaceutical company licenses its patented drug to a
manufacturing company in another country, allowing them to produce and
distribute the medication while protecting the company's IP rights.
Trends in International Trade when it comes to Automobile sectors:
1.Global Value Chains: The automobile industry operates through complex
global value chains, with different stages of production and assembly taking
place in various countries. Manufacturers often source components and parts
from multiple countries to take advantage of cost efficiencies and specialized
expertise.
Example: A car manufacturer based in Germany sources engines from Japan,
electronic components from South Korea, and material from Mexico to
incorporate them into their final product.

2.Electric Vehicles (EVs): The growing demand for electric vehicles has led to
a shift in international trade patterns. Countries are investing in the
development and production of EVs and related technologies, leading to
increased trade in EV components and infrastructure.
Example: China, as a major producer of EVs, exports electric vehicle batteries
to countries around the world, including the United States and European
nations.
 Reasons for going International
1.Market Expansion: Countries seek to expand their markets by venturing into
international markets to increase sales, reach new customers, and tap into
growing consumer demand.
Example: South Korean electronics companies like Samsung and LG have
expanded their operations globally to access larger consumer markets and
establish a global presence, enabling them to sell their products to customers
worldwide.

2. Access to Resources: Countries may engage in international activities to

secure access to vital resources such as raw materials, energy sources, or
agricultural products that are scarce or unavailable domestically.
Example: China's significant demand for natural resources led to its engagement
in international trade and investment to secure access to commodities like iron
ore, oil, and soybeans from countries like Australia, Saudi Arabia, and Brazil.
3.Cost Efficiency: Countries may engage in international trade and investment
to take advantage of cost efficiencies, such as lower production costs, cheaper
labor, or access to specialized skills and expertise.
Example: Many multinational clothing companies outsource their
manufacturing operations to countries with lower labor costs, such as
Bangladesh or Vietnam, to reduce production expenses and stay competitive in
the global market.

4.Technology and Knowledge Acquisition: Countries may seek international

engagement to acquire advanced technologies, expertise, and knowledge to
foster domestic innovation and economic development.
Example: India's information technology sector has benefited from international
engagement by acquiring technological know-how through collaborations,
partnerships, and acquisitions with global technology companies. This has
helped India become a major player in the global IT services industry.
5.Diversification and Risk Management: Countries engage internationally to
diversify their economic activities and reduce dependence on a single industry or
market, minimizing the risk of economic downturns or market fluctuations.
Example: Countries like Norway and Saudi Arabia, heavily reliant on oil
exports, have pursued international investments and diversified their sovereign
wealth funds into various sectors like real estate, infrastructure, and technology
to reduce their exposure to oil price instability.

6.Geopolitical Influence and Diplomacy: International engagement allows

countries to expand their geopolitical influence, build diplomatic relations, and
enhance their soft power on the global stage.
Example: China's Belt and Road Initiative (BRI) is a large-scale infrastructure
and economic development project that aims to strengthen China's geopolitical
influence by building infrastructure, trade networks, and fostering economic ties
with numerous countries across Asia, Europe, Africa, and the Middle East.
 International Orientations
International orientations refer to the
- various approaches and perspectives that businesses adopt when
engaging in international business activities.
These orientations shape the
- company's strategies,
- decision-making processes, and
- overall approach to operating in global markets.

1.Ethnocentric Orientation:
An ethnocentric orientation occurs when a company primarily focuses on its
home country and assumes that its domestic approaches, products, and
practices are superior and should be replicated globally.
In this approach, the company's headquarters maintain tight control over
decision-making, and foreign subsidiaries are expected to conform to the home
country's practices.
For example, a Japanese automaker expanding its operations to the United
States might implement Japanese management techniques and maintain
Japanese expatriates in key positions, disregarding local preferences and
practices.

Toyota:
Toyota, a Japanese automobile manufacturer, has historically exhibited an
ethnocentric orientation in its international operations. The company has been
known for implementing Japanese management practices and maintaining a
strong Japanese influence in its overseas subsidiaries.
Key decision-making and strategic direction often come from the headquarters
in Japan, with limited autonomy granted to local subsidiaries.
This approach emphasizes the transfer of Japanese practices and values to
foreign markets.

Samsung: Samsung, a South Korean multinational conglomerate, has also

demonstrated elements of an ethnocentric orientation.
The company has traditionally been centered around its South Korean
headquarters, with a strong influence on global operations.
Major decisions regarding product development, design, and branding often
originate from the headquarters, reflecting the ethnocentric approach.
This centralized decision-making structure allows Samsung to maintain tight
control over its international operations.

Volkswagen:
Volkswagen (VW), a German automotive manufacturer, has historically
exhibited an ethnocentric orientation in its international business approach.
The company places a strong emphasis on German engineering and
manufacturing practices.
VW's global subsidiaries often follow standardized processes and technologies
developed in Germany. This centralized approach allows the company to
maintain consistent quality and brand identity across different markets.
2. Polycentric Orientation:
A polycentric orientation occurs when a company acknowledges the diversity of
foreign markets and allows its subsidiaries in different countries to operate with
significant autonomy.
Local managers are given authority to make decisions that are best suited for their
respective markets.
The company adapts its products, marketing strategies, and operations to meet the
specific needs and preferences of each local market.

Coca-Cola: Coca-Cola is known for its polycentric approach to international business.

The company adapts its products and marketing strategies to cater to local preferences
and cultures.
For instance, Coca-Cola offers different flavors and packaging sizes to suit the diverse
tastes and consumption habits in various countries. Additionally, the company often
collaborates with local celebrities and incorporates local traditions into its advertising
campaigns, further demonstrating its commitment to adapting to local markets.
Procter & Gamble:
Procter & Gamble (P&G) is a multinational consumer goods company that
follows a polycentric approach. P&G understands the importance of localizing
its products to meet the specific needs of consumers in different markets.
The company tailors its product formulations, packaging, and branding to align
with local preferences and cultural nuances.
For example, P&G's laundry detergents may have different scents and
ingredients in different regions to better suit local consumer preferences.

Unilever:
Unilever, another major player in the consumer goods industry, employs a
polycentric orientation. The company recognizes the diversity of consumer
behavior and preferences across various countries and adapts its product
offerings accordingly.
Unilever develops region-specific brands and products that cater to the unique
needs of consumers in different markets.
For instance, they offer a wide range of skincare products with formulations
specifically designed for different climates and skin types found in various
regions.

These examples illustrate how these companies understand the importance of

adapting their products, marketing strategies, and operations to meet the unique
needs of local markets.
By adopting a polycentric orientation, they strive to build strong connections
with consumers, increase market share, and maintain relevance in diverse
international markets.
3. Geocentric Orientation:
A geocentric orientation represents a global perspective in which a company
seeks to integrate its operations and management practices on a worldwide
scale.
The company emphasizes a unified global approach, considering the best
interests of the organization as a whole rather than favoring any specific
country or region.
It hires top talent from different countries and develops a global mindset
throughout the organization.

For example, a multinational technology company like Google strives to create

a consistent brand image and user experience across all countries where its
products and services are available.
IBM (International Business Machines):
IBM, a multinational technology company, is known for its geocentric approach to
international business. The company aims to integrate its operations on a global scale
and develop a consistent organizational culture and strategy across different countries.
IBM hires top talent from various countries, promotes knowledge sharing and
collaboration across borders, and seeks to leverage the strengths of each region to drive
overall company growth.

Siemens:
Siemens, a German multinational conglomerate, is known for its geocentric orientation
in international business. The company operates in various industries, including
energy, healthcare, and transportation, and focuses on global integration and
collaboration.
Siemens promotes a unified approach to research and development, manufacturing,
and marketing across different regions. The company's global mindset allows it to
leverage the strengths and resources available in each country to drive innovation and
competitiveness.
4. Regio centric Orientation:
A regiocentric orientation involves organizing business activities based on
regional groupings rather than individual countries.
The company recognizes the similarities and shared characteristics of countries
within a particular region and develops strategies that cater to the regional
market as a whole.
This approach allows for economies of scale, knowledge sharing, and
coordinated decision-making within the region.

For instance, an automobile manufacturer might create a regional division for

Latin America and develop products and marketing campaigns that are tailored
to the preferences and needs of consumers in that region.
Honda: Honda, a Japanese multinational corporation primarily known for its
automobiles and motorcycles, has demonstrated a regiocentric orientation in its
international business approach.
The company organizes its operations based on regional groupings, such as
North America, Europe, and Asia.
Each regional division has a degree of autonomy in decision-making and adapts
its products, marketing strategies, and operations to cater to the specific needs
and preferences of the respective region.

Sony: Sony Corporation, a Japanese multinational conglomerate, follows a

regiocentric approach in its international business operations. The company has
divided its operations into regional segments, such as North America, Europe,
Japan, and Asia Pacific.
Each region is given some degree of decision-making authority and adapts its
product offerings and marketing strategies to cater to the unique characteristics
of the regional market.
 Growing economic power of Developing countries
The concept of the growing economic power of developing countries refers to
- the increasing influence and importance of emerging economies in the
global economic landscape.

Historically, developed countries, such as the

- United States, Japan, and Western European nations, have dominated the
global economy.

However, over the past few decades, several developing countries, including
- China, India, Brazil, and South Korea, among others, have experienced
rapid economic growth and are now considered major players in the global
economy.
 Factors contributing to the Growing Economic Power of Developing
Countries:
1.Economic Growth:
Developing countries have achieved high rates of economic growth, often
outpacing those of developed countries. This growth has been fueled by factors
such as
- technological advancements,
- investments in infrastructure,
- increased trade and foreign direct investment, and
- the emergence of a burgeoning middle class.

2.Population and Labor Force:

Developing countries often have large populations, which can be a valuable
asset in terms of labor supply and market potential.
The demographic dividend resulting from a young and growing workforce has
been a significant advantage for many developing countries, as it contributes to
productivity and innovation.

3.Resource Availability:
Many developing countries possess abundant natural resources, including
- minerals, oil, gas, and
- agricultural products.
These resources can be leveraged to drive economic growth and attract foreign
investments, giving these countries a competitive edge in global markets.

4.Trade Liberalization:
Developing countries have been actively engaging in international trade and
have benefited from trade liberalization measures.
By participating in global trade networks and signing trade agreements, these
countries have expanded their export markets, gained access to advanced
technologies, and diversified their economies.

5.Technological Advancements:
Developing countries have made significant strides in adopting and leveraging
technology to drive economic growth. Advances in information and
communication technology have improved connectivity, facilitated innovation
and entrepreneurship, and enabled advancing in certain sectors.

6.Infrastructure Development:
Developing countries have made substantial investments in building and
upgrading infrastructure, including transportation networks, energy systems,
and communication facilities. Improved infrastructure enhances productivity,
reduces transaction costs, and attracts investments.
7.Policy Reforms:
Many developing countries have implemented economic and governance
reforms to
- create a conducive business environment,
- attract investments, and promote entrepreneurship.
These reforms have included measures to enhance
- legal frameworks,
- streamline bureaucracy,
- reduce corruption, and
- strengthen institutions.

The growing economic power of developing countries has important

implications for the global economy.
It has led to a shift in economic and geopolitical dynamics, as developing
countries exert greater influence in international forums and institutions. These
countries have become important engines of global growth, driving demand for
goods and services, and offering new investment opportunities.
However, challenges such as income inequality, social disparities, and
environmental sustainability need to be addressed to ensure inclusive and
sustainable growth in these countries.
 The growing economic power of developing countries has significant
implications for International Business.
1.Market Potential:
Developing countries with expanding economies and rising middle classes offer
vast market potential for international businesses.
These countries represent untapped consumer bases, which can drive increased
demand for goods and services.
International companies can benefit from targeting these markets to expand
their customer base and boost revenue.

2.Investment Opportunities:
Developing countries often present attractive investment opportunities. As their
economies grow, they require investments in various sectors such as
infrastructure, manufacturing, technology, and services.
International businesses can tap into these opportunities by establishing local
operations, forming joint ventures with local partners, or making direct
investments. This allows them to access new markets, leverage local resources,
and benefit from lower production costs.
3.Global Supply Chains:
Developing countries have become integral to global supply chains. They
often serve as manufacturing hubs for international companies due to their
competitive labor costs and availability of raw materials.
Companies can set up production facilities or outsource certain operations to
these countries to enhance efficiency and reduce costs.
4.Access to Resources:
Many developing countries possess abundant natural resources, including
minerals, oil, gas, and agricultural products.
This presents opportunities for international businesses to secure access to these
resources through partnerships, contracts, or direct investments.
These resources can be crucial for industries such as energy, mining,
agriculture, and manufacturing.

5.Technological Innovation:
Developing countries are increasingly becoming hubs for technological
innovation and entrepreneurship.
They have witnessed significant advancements in areas such as information
technology, mobile technology, renewable energy, and healthcare.
International businesses can collaborate with local startups, research institutions,
and technology companies to access these innovations, develop new products,
and enhance their competitiveness.

6.Trade Relations:
Developing countries have been actively engaging in international trade and
forming trade agreements with other nations.
These agreements provide
- preferential access to markets,
- tariff reductions, and
- trade facilitation measures.
International businesses can leverage these trade relations to expand their export
opportunities and establish mutually beneficial trade partnerships.
7.Cultural Understanding and Localization:
Operating in developing countries requires an understanding of local cultures,
norms, and business practices.
International businesses need to adapt their products, marketing strategies, and
operations to the specific cultural context of these countries.
Localization efforts, including
- language translation,
- customization, and
- localization of products and services,
can help businesses establish strong connections with local consumers and gain
a competitive advantage.
8.Sustainability and Corporate Social Responsibility (CSR):
The growing economic power of developing countries brings attention to
sustainability and CSR.
International businesses need to address
- environmental concerns,
- social issues, and
- ethical practices to build trust with local communities and stakeholders.
Emphasizing sustainable business practices and CSR initiatives can help
businesses navigate the unique challenges and expectations of developing
countries.
Overall, the growing economic power of developing countries opens up new
avenues and challenges for international businesses.
It requires a clear understanding of
- local markets,
- partnerships with local stakeholders,
- adaptability to cultural differences, and
- a long-term perspective to navigate the evolving dynamics of these economies
successfully.
 International Decision
International decisions in the context of international business refer to the choices
and actions taken by companies when conducting business operations across national
borders.
These decisions are influenced by various factors such as
- market conditions,
- cultural differences,
- legal frameworks,
- political environments, and
- economic considerations.
Here are some examples of international decisions made by companies engaged in
international business:

1. Market Entry Mode:

When expanding into foreign markets, companies must decide on the appropriate
market entry mode.
This decision involves choosing between options such as
- exporting, - licensing,
- franchising, - joint ventures, or
- wholly owned subsidiaries.
For example, a company may decide to enter a foreign market through a joint
venture with a local partner to leverage their knowledge of the local market and
reduce risks.
International Decisions

2. Product Adaptation:
Companies often need to make decisions regarding product adaptation to suit
local market preferences and cultural norms.
This can involve
- modifying product features,
- packaging,
- branding, or
- pricing strategies to align with local customer preferences and requirements.
For instance, a fast-food chain may offer different menu items in different countries
to cater to local tastes and dietary preferences.

3. Supply Chain Management:

Companies operating internationally need to make decisions about their global
supply chain management. This includes
- choices regarding sourcing strategies,
- logistics,
- transportation,
- warehousing, and
- inventory management.
For example, a company may decide to establish regional distribution centers or
utilize local suppliers to optimize supply chain efficiency and reduce costs.

4. International Pricing:
Pricing decisions in international business require considerations of factors such as
- exchange rates,
- local market conditions,
- competition, and
- purchasing power.

Companies must determine optimal pricing strategies that balance profitability with
affordability in different markets. They may adopt pricing strategies such as
- cost-based pricing,
- market-based pricing, or
- skimming pricing based on the specific market dynamics.
5. Cross-Cultural Communication:
International businesses need to make decisions regarding cross-cultural
communication strategies. This includes
- decisions about language translation,
- localization of marketing campaigns,
- adapting communication styles to cultural norms, and
- understanding local business etiquette.
For example, a multinational company may decide to hire local employees or
consultants to bridge the communication and cultural gaps in their international
operations.

6.Legal and Regulatory Compliance:

Companies engaged in international business need to comply with various legal
and regulatory requirements in different countries.
This involves making decisions regarding
- legal structures,
- intellectual property protection,
- taxation,
- labor laws, and
- trade regulations.
For instance,
- a company may need to decide on the appropriate legal entity to establish in a
foreign country to ensure compliance with local laws.
7. International Expansion:
Companies may make decisions regarding their international expansion
strategies. This includes
- selecting target markets,
- prioritizing regions for expansion, and
- evaluating the feasibility of entering new markets.

For example, a company may decide to expand into emerging markets with high
growth potential or enter markets where there is a strategic advantage or
favorable regulatory environment.
These are just a few examples of international decisions that companies face in
the realm of international business.
Each decision requires careful analysis, market research, risk assessment, and
consideration of various factors to ensure successful international operations.