1-introduction to international business-august 10
TRANSCRIPT
8/2/2019 1-Introduction to International Business-August 10
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Introduction to InternationalBusiness
By Prof: Sham ChoughuleMaster of Foreign Trade –Pondicherry University EMIB -Indian Institute of Foreign Trade-New Delhi
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Globalization
• TATA Group of companies• Soap- Dove• Refrigerator –Samsung –South Korea• Washing Machine - L G• T V Onida –Japan
• Mobile –Nokia- Sweden• Bank a/c –SHBC Multi national bank from Hong Kong• Computer –Assemble –CPU –Intel –Monitor –Samsung• Fast food –Pizza in McDonald's • Car- from Hyundai
• Bus –Volvo A.B Swedish• Furniture from China• Ganesh Idol from China• Shoes –Nike• House –Millennium towers –constructed by French technology
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Globalization
• Personal –Camera in Italy while traveling in Europe
• Organization -Deoo from Korea
• Land –Jubel Ali Free Trade zone• Labour –India -Pakistan –Bangladesh
• Capital –Through Newark stock exchange
• Technology –Germany• Marketing arrangement from UK
• Selling all over world
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International Business
due to globalization-Indian scenario
• Volvo A.B –Swedish firm extensive network in world
• Eicher Motors Ltd –spare part maker UK for brandedproduct
• Joint venture between two companies for business
• Name of the new company Volvo-Eicher CommercialVehicles
• Business decision-Investment of Rs 288 crore in newengine plant at Pithampur-Indore by 2012
• This will become manufacturing hub of company for medium duty engine
• Global market-Africa-Indonesia –Middle east and Malaysia
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Globalization
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Reasons of globalization
• There has been growth in globalization in recent decades due to thefollowing factors
• Governments are removing international business restrictions.• Example-India’s import policy• Institutions provide services to ease the conduct of international
business. ESSAR in foreign oil field• Consumers know about and want foreign goods and services.
Electronic items• Competition has become more global.• Political relationships have improved among some major economic
powers. China & USA
• Countries cooperate more on transnational issues.• Example-Communication or gas pipe line from Iron to India
• Cross-national cooperation and agreements. • Many FTA-Free Trade Agreements are taking place all over world
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Globalization in India
• Globalization in India has allowed companies toincrease their base of operations, expand their
workforce with minimal investments, and provide
new services to a broad range of consumers
• Therefore, many companies are landed into
foreign countries –Exam L & T in China
• One of the major forces of globalization in India
has been in the growth of outsourced IT andbusiness process outsourcing (BPO) services
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Domestic Business
• Production only for local market• Limited Market –Only India is Market
• Heavy taxes –Excise duty –sale tax –service tax –corporate tax-Import duty etc
• Raw material –costly raw sugar
• High Labour cost –old out dated machinery –production
cost is high
• Interest rate is high 12- % PLR• Logistics problems-Rice from Punjab to Assam
• Therefore, domestic business is not economical viable
• Risk –Import is flooding into India –Foreign Goods available
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International business
• Whole world is market
• Production cost is low –China –Bangladesh
• Advantage of Free Trade Agreement - SAFTA• Exploration of natural resources
• Analyze & Focus on following issues –Risk
• Global-(WTO)-Social –Technical –Economic
• Political factors and other business environment
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Domestic V/s Int Business
• Top 500 companies in India mostly are IndianMNC
• Liberalization policy of Govt• Go to foreign country and expand your market.
If not then you will finish –JCT/Baroda rayon MIDC /GIDC
• Therefore, many companies become IndianMNC and venturing into foreign business
• L & T has set manufacturing base in China
• Indian Overseas bank has opened Branch inSingapore
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Domestic V/s Int Business
• Ethnocentric Approach
• Operation –Limited
• Environment –local
• DTA –Many taxes• No impact on Foreign
Exchange
• Indian Culture –same
• Market size• Customers
•
• Global approach
• Operation –Multi levels
• Global Business environment
• Tariff is different of each
country
• Impact of foreign exchange
• Various culture –Gulf Arab
• Huge market size
• Unknown various customers
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Characteristic of International
business
• International business is a term used to
collectively describe all commercial
transactions (private and governmental,
sales, investments, logistics, andtransportation) that take place between
two or more nations
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Objectives of I.B
• To achieve higher rate of profit
• Enhancement of capacity of production Renuka Sugar Ltd largest producer in the country with 8 mills
• Daily cane crushing capacity of 1.15 millions tonnes. After acquiringVDI-vale-do Ivai SA in Brazil including 2 Sugar & ethanol factories of
combine cane crushing capacity will be 3.1 million tonnes -3 times
• Expansion of Business
• All cargo movers –Logistics based company
• This company has acquired 34% equity share in Belgian ECU Hold
NV
• ECU hold owns and operate CFS in Antwerp-Dubai-Hong Kong Italy –brazil
–France
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Objectives of I.B
• Reva –Electric car Manufacturing-Bangalore
• To grab world market and reduce transportation cost,
setting up plants in different part of the world
• UK-Norway-Spain-France –Germany Costa Rica• Arvind mills manufacturing unit in Mauritius
• Business development
• BOB in Africa –IOB in Singapore and bank of India in
China
• Liberalization –Foreign companies pushing to domestic
companies to go out from your market
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Objectives of I.B
• Save from domestic competition
• Garware Marine Industries
• Limited Home market push to world market • Availability of raw material –Coal field in
Indonesia -Adani Group
• Achieve higher rate of Economic Dev• Example –India & China
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Mode of Entry
• Indirect export
• Deem export
• Physical export
• Service export
• Licensing arrangement with foreign company
• Franchising –Education field
• Manufacturing
• Turn Key projects
• FDI for green field projects
• Strategic alliance –shipping consortium
• Joint venture
• Merger & acquisitions
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Importance of I B
• Studying international business is important because
• Most companies are either international or compete with another international companies.
• Example-Apple V/s Computer
• Modes of operation may differ from those used domestically.Example-ESSAR company
• The best way of conducting business may differ by country.Business in USA and in Sri Lanka is different
• An understanding helps you make better career decisions. Are you
fit to work in MNC?• An understanding helps you decide what governmental policies to
support
• Example- Indian’s Foreign trade policy FDI norms
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Stages of Internationalization
• Domestic company
Operation is limited with home country
• International company
Extended arm of domestic company
• Multi National company
• Different strategy for different market
• Global company
• Global marketing strategy
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Domestic company
• Limits its operation –vision
• Ethnocentric approach
• Focus on domestic market opportunities• Analyze national business environment
• Never thing of growing globally
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International company
• These companies select the strategy of
locating a branch in the foreign market
and extending same domestic operation
• Example
• 1) Export of domestic product
• 2) Opening branch of bank in foreigncountry
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Multinational company
• Formulating different strategies for
different market thus focus shift from
• Ethnocentric to polycentric
• Opening subsidiaries of a multi national
companies
• Example –Shipping company agencies
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Global company
• Global company produces in single
country and focuses on marketing these
product globally
• Example –Deoo from Korea
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Changing Scenario of I B
• 1)Globalization of various economics
• Example Asian countries follows by India in
1991
• 2) Establishment of WTO
• 3)Free Trade agreement
• 4)Higher GDP growth of China-India and Latin
American countries• 5)FDI inflows from develop countries to under
develop countries
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Current trends
• ONGC has largest JV in Brazil-Colombia –
Sudan-Angola and Syria
• TATA steel has acquired Dutch steel maker
Korus –national steel Singapore• JSW energy to buy majority stack in S.A coal
mining company
• Videocon made Dubai as its international exporthub
• LIC eyes Singapore as base for South Asia
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• Book for reference
• International Business-Subba Rao
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Assignment
• Assignment -1• Why India is attractive investment destination for
foreign company ?• Economy• Politics• Govt Policies• Legal issues
• Social and cultural issues• Indian Market• Opportunities for Merger and takeover
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• Thanks
• You have entered in to Global business• Think globally and not locally
• Prof:Sham Choughule