About the Tutorial

1 International Business Management i About the Tutorial International Business is a subject that teaches how to nurture a local business and make it global. It explains the business practices and strategies required to succeed in international markets. In this Tutorial , it has been our endeavor to cover the multidimensional aspects of International Business in an easy-to-understand manner. Audience This Tutorial is specially designed for the students of Management, Commerce, Human Resources, marketing , and Business Law. Prerequisites To understand this Tutorial , it is advisable to have a foundation level knowledge of business and management studies. However, general students who wish to get a brief overview International business may find it quite useful. Copyright & Disclaimer Copyright 2019 by Tutorials Point (I) Pvt.

2 Ltd. All the content and graphics published in this e-book are the property of Tutorials Point (I) Pvt. Ltd. The user of this e-book is prohibited to reuse, retain, copy, distribute or republish any contents or a part of contents of this e-book in any manner without written consent of the publisher. We strive to update the contents of our website and tutorials as timely and as precisely as possible, however, the contents may contain inaccuracies or errors. Tutorials Point (I) Pvt. Ltd. provides no guarantee regarding the accuracy, timeliness or completeness of our website or its contents including this Tutorial . If you discover any errors on our website or in this Tutorial , please notify us at International Business Management ii Table of Contents About the Tutorial .. i Audience .. i Prerequisites.

3 I Copyright & Disclaimer .. i Table of Contents .. ii PART 1: THE INTERNATIONAL BUSINESS ECOSPHERE .. 1 1. IB Introduction .. 2 A Global Village .. 2 What is International Business? .. 2 Internationalization of Business .. 3 Advantages of Internationalization .. 3 Globalization .. 4 Factors Causing Globalization of Businesses .. 4 2. IB Country Attractiveness .. 6 Adapting to Changing Needs .. 6 Country Attractiveness .. 7 Business Environments .. 7 3. IB Protectionism .. 10 4. Liberalization .. 12 Liberalization Vs Deregulation .. 12 Arguments, Counterarguments, and Discussions .. 12 Liberalization, Privatization, and Globalization .. 13 Revolutionary Economic Trends .. 13 PART 2: INTERNATIONAL TRADE .. 14 5. General Agreements on Tariffs and Trade .. 15 General Agreements on Tariffs and Trade .. 15 GATT Major Principles.

4 15 Role of GATT in Promoting International Trade .. 15 6. World Trade Organization .. 17 Reasons behind the Formation of WTO .. 17 Role of WTO in Promoting International Trade .. 18 Role of Developing Countries .. 19 7. Global Trade Major Challenges .. 20 8. IB Modern Theories .. 22 The Heckscher and Ohlin Model .. 22 The Samuelson and Jones Model .. 22 The Krugman and Obsfeld Model .. 23 The Michael Porter Model .. 23 9. Global Competetiveness .. 24 International Business Management iii Factors Affecting Global Competitiveness .. 24 10. Regional Trading Blocs .. 25 What are Regional Trading Blocs? .. 25 Regional Trading Blocs Advantages .. 25 Regional Trading Blocs Disadvantages .. 26 11. Major Trade Blocs .. 27 ASEAN .. 27 EU .. 27 27 NAFTA .. 28 PART 3: STRATEGIC APPROACHES .. 29 12. Strategic Compulsions.

5 30 Areas of Strategic Compulsions .. 30 Standardization Vs Differentiation .. 31 Strategic Options .. 31 Factors that Affect Strategic 32 13. Global Portfolio 34 Factors Affecting Global Portfolio Investment .. 34 Modes of Global Portfolio Management .. 35 Drawbacks of Global Portfolio Management .. 36 14. IB Modes of Entry .. 37 Exporting .. 37 Licensing .. 37 Franchising .. 38 Turnkey Project .. 38 Mergers & Acquisitions .. 38 Joint Venture .. 38 Wholly Owned Subsidiary .. 39 15. IB Organizational Structures .. 40 Centralization vs. Decentralization .. 40 Use of Subsidiary Board of Directors .. 40 Organizational Structures .. 40 Mixed Matrix .. 46 16. IB Control Mechanisms .. 48 Objectives of Control .. 48 Types of Control Mechanisms .. 48 Approaches to Control 49 Constraints of Control 50 17. IB Performance Issues.

6 52 Effective Performance Measurement System .. 53 Performance Evaluation 53 Financial and Non-Financial Measures of Evaluation .. 54 Types of Performance Evaluation Systems .. 54 International Business Management iv UNIT 4: BUSINESS OPERATIONS .. 55 18. IB Production Issues .. 56 Factors that Affect Production .. 56 Facility or 56 Scale of 57 Cost of Production .. 57 Make-or-Buy Decisions .. 57 19. IB Supply Chain Issues .. 59 Globalization and its Effect on Supply Chain .. 59 20. Global marketing Mix .. 60 Global marketing Mix: Consumer Products .. 60 Global marketing Mix: Price .. 61 Global marketing Mix: Promotion .. 62 Global marketing Mix: Distribution .. 64 Application of 4 P s .. 65 21. IB Financial Aspects .. 67 Foreign Investment by International Companies .. 67 International Investment 68 Factors for Investment Decisions.

7 68 Funding the International Business .. 69 Sources of Funds .. 69 Foreign Exchange Risks .. 69 Hedging Forex Risks Internal Techniques .. 70 Hedging Forex Risks External Techniques .. 70 22. IB HRM 72 Recruitment and Selection .. 72 Development & Training .. 72 Performance Evaluation .. 73 Management of Expatriates .. 73 PART 5: MISCELLANEOUS .. 75 23. IB Adverse 76 24. IB Conflict Management .. 78 Types of Conflicts .. 78 Factors Causing Conflicts .. 79 Conflict Management .. 79 Five A s Technique .. 81 25. IB 83 Role of International Agencies in Negotiations .. 84 26. IB Ethical Issues .. 86 Employment Practices and Ethics .. 86 Human Rights .. 86 Environmental Pollution .. 86 Corruption .. 87 International Business Management v Moral Obligations .. 87 International Business Management 1 Part 1: The International Business Ecosphere International Business Management 2 A Global Village The world is fast becoming a global village where there are no boundaries to stop free trade and communication.

8 Keeping pace with it, the way we do business has changed in an unprecedented manner. The competition, in the global marketplace, is at its peak where all companies want to sell their goods to everyone, everywhere on the globe. Figure: A Global Village without Boundaries For example, the faucet we see in our bathroom may be from Italy. The towels we use may be a Brazilian product. The automobile we drive may be a Japanese or German brand. The air conditioners we use may be from France. It is almost impossible to stay isolated and be self-sufficient in this day and age. That is why multinational companies are a reality. What is International Business? Any business that involves operations in more than one country can be called an international business. International business is related to the trade and investment operations done by entities across national borders.

9 1. IB INTRODUCTION International Business Management 3 Firms may assemble, acquire, produce, market, and perform other value-addition-operations on international scale and scope. Business organizations may also engage in collaborations with business partners from different countries. Apart from individual firms, governments and international agencies may also get involved in international business transactions. Companies and countries may exchange different types of physical and intellectual assets. These assets can be products, services, capital, technology, knowledge, or labor. Note: In this Tutorial , we are primarily focusing towards business operations of the individual firm. Internationalization of Business Let s try to explore the reasons why a business would like to go global. It is important to note that there are many challenges in the path of internationalization, but we ll focus on the positive attributes of the process for the time-being.

10 There are five major reasons why a business may want to go global: First-mover Advantage: It refers to getting into a new market and enjoy the advantages of being first. It is easy to quickly start doing business and get early adopters by being first. Opportunity for Growth: Potential for growth is a very common reason of internationalization. Your market may saturate in your home country and therefore you may set out on exploring new markets. Small Local Markets: Start-ups in Finland and Nordics have always looked at internationalization as a major strategy from the very beginning because their local market is small. Increase of Customers: If customers are in short supply, it may hit a company s potential for growth. In such a case, companies may look for internationalization. Discourage Local Competitors: Acquiring a new market may mean discouraging other players from getting into the same business-space as one company is in.