International Business: An Overview

1
International Business An Overview

• Daniels and Radebaugh
• Chapter 1

2
International Business An Overview

• Why companies engage in international Business?
• Why the growth of international business has
  accelerated?
• Patterns of international competition
• The evolution of international competition and
  globalization
• Patterns of international expansion and strategy.

3
Introduction

• The Field of International Business
• The goal of private business is to increase or to
  stabilize profits.
• Success is influenced by
• Foreign sales
• Foreign resources
• Government business (regulated companies or
  public companies) may or may not be
  profit-motivated

4
Introduction

• Why firms engage in international business?
• To expand their sales
• To obtain resources
• To diversify their sources of sales and supplies
• To minimize competitive risk

5
Introduction

• Reasons for Recent International Business Growth
• Expansion of technology
• Business is becoming more global because
• Transportation is quicker
• Communications enable control from afar
• Transportation and communications costs are more
  conducive for international operations
• Liberalization of cross-border movements
• Lower governmental barriers to the movement of
  goods, services, and resources enable companies
  to take better advantage of international
  opportunities

6
Introduction

• Development of supporting institutional
  arrangements
• Institutional arrangements
• Are made by business and government
• Ease flow of goods
• Reduce risk
• Increase in global competition
• More companies operate internationally because
• New products quickly become global
• Companies can produce in different countries
• Domestic companies competitors, suppliers, and
  customers become international

7
Modes of International Business

• Merchandise exports and imports
• Tangible items (e.g., cars, televisions,
  e.t.c)
• Service exports and imports
• Tourism and transportation
• Performance of services
• Use of intangible assets

8
Modes of International Business

• Investments
• Direct investment Key features are
• Control
• Access to foreign markets
• Access to foreign resources
• Higher foreign sales than exporting (often)
• Partial ownership (sometimes)

9
Modes of International Business

• Investments
• Portfolio investment Key features
• It is used for diversification purposes
• Noncontrol of foreign operations
• Financial benefit (for example, loans)

10
Patterns of international competition

• The pattern of international competition differs
  from industry to industry.
• Multidomestic industries
• Competition in one country does not affect
  competition in other countries.
• Global industries
• A firms competitive position in one country is
  significantly affected by its position in other
  countries

11
External Competitive Environment

• Economic forces determine competitive advantage
  and comparative advantage
• The role of government is excessive in
  international markets
• The competitive environment created by other
  companies.
• The next slide illustrates the international
  business environment.

12
International Business Operations and Influences
13
International Strategy Evolution

• Patterns of international expansion
• Strategies for heavy international commitments
  usually evolve gradually from
• Passive to active expansion
• External to internal handling of operations
• Deepening mode of commitment
• Geographical diversification
• Leapfrogging of Expansion

14
The Usual Pattern of Internationalization
15
Summary

• Companies engage in international business to
  expand sales, acquire resources, diversify sales
  and supplies, and minimize competitive risk.
• International business transactions have been
  growing rapidly because of technological
  improvements and government policies.
• A company can engage in international business
  through exports, imports, foreign investment.
• There is gradual evolution of international
  business strategies.