International Business

International Business

International Business is all business transactions that involve two or more countries.

Why Companies Engage in International Business?

• To Expand Sales: companie’s sales are dependent on two factors: the consumers’ interest in their product or services and the consumers’ ability and willingness to buy them. 
• Acquire Resources: products, services, technology, and information.
• Diversify Sources of Sales and Supplies.
• Minimize Competitive Risk: companies move internationally for defensive reasons. Profits from one market can be used to expand operations in other markets.

 Reasons for Recent International Business Growth

• Expansion of Technology:Transportation, telecommunications; Transportation and telecommunications costs are more conducive for international operations.
• Liberalization of Cross-Border Movements:Goods, Services, Labour, Capital.
• Development of Supporting Institutional Arrangements: development by business and governments of institutions that enable us to effectively apply that technology.
• Increase in Global Competition: New products become global; Globalization of production. 

Modes of International Business

• Merchandise Exports and Imports: Visibles and Invisibles.
• Performance of Services: fees; Turnkey Operations; Management Contracts.
• Use of Assets: Licensing Agreements; Royalties; Franchising.
• Investments.

Evolution of Strategy in the Internationalization Process

• Patterns of Expansion: Passive; External to internal handling of the business; limited to extensive modes of operations.
• Deepening mode of Commitment.
• Geographic Diversification (similar cultural background).
• Leapfrogging of Expansion: companies are starting with a global focus.

Emergence of Global Institutions

Globalization has created the need for institutions to help manage, regulate and police the global marketplace.

• GATT
• WTO
• IMF
• World Bank
• United Nations

Global drivers 

Macro factors that underlie trend towards greater globalization.

• Decline in trade barriers. 
• Technological change.

Decline in Trade Barriers

Globalization of markets and production has been facilitated by

• Reduction in trade barriers.
• Removal of restrictions to foreign direct investment.

Technological Change

• Microprocessors and telecommunications.
• The internet and world wide web.
• Transportation technology.