TOPIC 1:

OVERVIEW OF
INTERNATIONAL BUSINESS
SESSION APRIL 0423

BUS2233: International Business & Entrepreneurship

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How International Businesses
react towards recent pandemic?

Any thoughts on businesses with post-pandemic?

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Basic Concepts & Definition

International business
refers to the trade of
goods, services,
technology, capital
and/or knowledge across
national borders and at a
global or transnational
scale. It involves cross-
border transactions of
goods and services
between two or more
countries.
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Basic Concepts and Definition
 What is International Business? - Globalization?
 The world is moving away from self-contained national
economies toward an interdependent, integrated global
economic system
 Globalization refers to the shift toward a more integrated and
interdependent world economy
 Why going global? For businesses, this globalization process has
produced many opportunities. Firms can expand their revenues
by selling around the world and/or reduce their costs by produc­
ing in nations where key inputs, including labour, are cheap.
 Companies compete more effectively by lowering their overall
cost of structure or improving quality of functionality of their
product offerings.

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What Does Globalization Mean For Firms?
 Lower barriers to trade and investment mean firms can
 view the world, rather than a single country, as their market
 base production in the optimal location for that activity
 Technological change means
 lower transportation costs - firms can disperse production to
economical, geographically separate locations
 lower information processing and communication costs - firms
can create and manage globally dispersed production systems
 low cost global communications networks - help create an
electronic global marketplace
 low-cost transportation - help create global markets
 global communication networks and global media - create a
worldwide culture, and a global market for consumer products
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Examples International Business Concepts
 National economies were rela­tively self-contained entities,
isolated from each other by barriers to cross-border trade and
investment; by distance, time zones, and language; and by
national differences in government regulation, culture, and
business systems.
 Interdependent global economy, an American might drive to
work in a car designed in Germany that was assembled in
Mexico by Ford components made in the United States and
Japan that were fabricated from Korean steel and Malaysian
rub­ber.

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Globalization of Markets
 In many markets the emergence of a global
marketplace has begun to occur. There are three
causes: falling barriers to cross-border trade have
made it easier to sell internationally; consumer
tastes and preferences are converging on some
global norm helping to create a global market; and
firms are facilitating the trend by offering
standardized products worldwide creating a global
market.

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Importance of International Business
 Historically distinct and separate national markets are
merging
 It no longer makes sense to talk about the “German
market” or the “American market”
 Instead, there is the “global market”
 falling trade barriers make it easier to sell globally
 consumers’ tastes and preferences are converging on some
global norm
 firms promote the trend by offering the same basic products
worldwide
 A company does not have to be the size of these multinational
giants to facilitate, and benefit from the globalization of
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Importance of International Business
 Increased market access:.
 Access to resources:
 Economies of scale:
 Increased competitiveness:
 Risk diversification.
 Enhanced reputation:
 Knowledge transfer:
 Economic growth

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Difference between International Business and
Domestic Business

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Difference between International Business and
Domestic Business
 The main difference between international business and
domestic business is that international business involves
transactions that take place between countries or across
borders, while domestic business involves transactions that
take place within a single country.
 Legal & Regulatory Environment
 Cultural Differences
 Language Barriers
 Supply chain complexity
 Marketing & Sales strategy
 Risk Management
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Domestic Business
 Domestic business involves those economic transactions that
take place inside the geographical boundaries of a country.
Both the buyer and seller belong to the same country in this form
of business. Domestic business is also known as 'Internal Business'
or 'Home Trade.
 For example: Companies also may be referred to as foreign
businesses when they are outside of the state in which they were
formed. For example, a corporation that is incorporated in
Delaware will be considered a domestic business there and a
foreign business in all other states.
 Domestic business has less capital investment than
international business does, and there are not as many
restrictions, as they only have to follow law taxation for one
country. International business has law taxation, quotas, rules,
and tariffs for many different countries that they need to follow.
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 GDP – Gross Domestic Product
What Makes Domestic Business Differ
With International Business?
 Transactions
 Customers
 Cross-Border
 Economy
 Marketability
 Currency
 Capital Investment
 Competition
 Risk
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What Is Driving Globalization?
 The decline in barriers to the free flow of
goods, services, and capital that has occurred
since the end of World War II
 since1950, average tariffs have fallen significantly
and are now at 4 percent
 countries have opened their markets to FDI
 Technological change
 microprocessors and telecommunications
 the Internet and World Wide Web
 transportation technology

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What Is Driving Globalization?
 The drivers of international business are the factors that
motivate companies to expand their operations beyond
their domestic market and engage in international
business. Some of the main drivers of international
business include:

 Market Expansion
 Access to resources
 Technology and Innovation
 Deregulation & Liberalization
 Globalization
 Economic of Scale
 Risk Diversification
 Strategic Alliances

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The importance of International Business
 Participation in international business allows countries to take
advantage of specialized expertise and abundant factors of
production to deliver goods and services into the international
marketplace. This has the benefit of increasing the variety of goods
and services available in the marketplace.
 Market expansion - Everyone wants to expand their market share and
to sell more and more products. The importance of International
business lies in the fact of a new market to enter and to expand in. 
 Global Opportunities - Global business provides global opportunities to
business organizations.
 Employment Opportunities
 Quality Product
 Product differentiation
 Growth in demand in other markets - As demand rises in new markets,
the growth in demand automatically attracts new companies
 Attract local customers
Drivers of International Business
 Technological Drivers
 Technology & Communication
 Political Drivers
 Political Stability
 Market Drivers
 Limited Home Market
 Global Market Place
 Emerging Markets
 Growth in Market Share
 Cost Drivers
 High Rate of Profits
 Competitive Drivers
 Access of Production

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Drivers of International Business
 The two macro factors underlie the trend towards greater globalization:
the decline in the barriers to free flow of goods, services, and capital;
and technological change in communications, information processing, and
transportation technologies.
 International trade occurs when a firm exports goods or services to
consumers in another country. 
 FDI occurs when a firm invests resources in business activities outside its
home country.

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Risk of International Business
 Firms should be aware that while the more integrated global
economy presents new opportunities, it also could result in political
and economic disruptions that may throw plans into disarray
 Is the shift toward a more integrated and interdependent global
economy a good thing?  Anti-globalization protesters now turn up at
almost every major meeting of a global institution.  Protesters fear
that globalization is forever changing the world in a negative way.
 Critics of globalization worry that jobs are being lost to low-wage
nations. Supporters of globalization argue that free trade will result
in countries specializing in the production of those goods and
services that they can produce most efficiently, while importing
goods and services that they cannot produce as efficiently

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The Four Risk of International Business

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Summary
 Basic Concepts & Definition
 Difference between International Business & Domestic
Business
 Importance of International Business
 Drivers of International Business
 Risk in International Business
 The Era of Globalization

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Thank
You!!!
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Discussions

1. What are the drivers for a firm going global?

2. Why international business is important?

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