Notes

TOPIC 1
INTERNATIONAL BUSINESS
 What is International Business?
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.

Transactions of economic resources include capital, skills, and people for the purpose of the
international production of physical goods and services such as finance, banking,
insurance, and construction. International business is also known as globalization.
Types of Operations
 Import & Export

 Multinational Companies
 Licensing
 Franchising
 International Joint venture
Once a firm decides to enter a foreign market, it must decide on a mode of entry. There are
six different modes to enter a foreign market. The firm must decide which mode is most
appropriately aligned with the company's goals and objectives.
The six different modes of entry are:
 Exporting- The first entry mode is exporting. Exporting is the sale of a product in a
different national market than a centralized hub of manufacturing. In this way, a
firm may realize a substantial scale of economies from its global sales revenue.
There are two primary advantages to exporting:
 Avoiding high costs of establishing manufacturing in a host country (when
these are higher) & gaining an experience curve.
 Some possible disadvantages to exporting are high transport costs and
high tariff barriers.
 Turnkey Projects- In a turnkey project, an independent contractor is hired by the
company to oversee all of the preparation for entering a foreign market. Once the
preparation is complete and the end of the contract is reached, the plant is turned
over to the company fully ready for operation.
 Licensing- Licensing allows a licensor to grant the rights to an intangible property to
the licensee for a specified period of time for a royalty fee.
 Franchising- Franchising is a specialized form of licensing in which the "franchisor"
sells the intangible property to the franchisee, and also requires the franchisee
operate as dictated by the franchisor.
 Establishing Joint Ventures with a Host-Country Firm- A joint venture is when a firm
created is jointly owned by two or more companies (Most joint venture are 50-
50 partnerships).
 Setting Up Wholly Owned Subsidiary in the Host Country- Wholly owned subsidiary,
when a firm owns 100 percent of the stock of a company in a foreign country
because it has either set up a new operation or acquires an established firm in that
country
Physical and Social Factors
 Geographical influences: There are many different geographic factors that affect
international business.
These factors are:
 The geographical size,
 The climatic challenges happening throughout the world,
 The natural resources available on a specific territory,
 The population distribution of a country
 Social Factors & Political Policies: Political disputes, particularly those that result in
the military confrontation, can disrupt trade and investment.
 Legal Policies: Domestic and international laws play a big role in determining how a
company can operate overseas.
 Behavioral Factors: In a foreign environment, the related disciplines such as
anthropology, psychology, and sociology are helpful for managers to get a better
understanding of values, attitudes, and beliefs.
 Economic Forces: Economics explains country differences in costs, currency values,
and market size.
 What is Globalozation?
Globalization, or globalisation (Commonwealth English; see spelling differences), is the process
of interaction and integration among people, companies, and governments worldwide.
Globalization is primarily an economic process of interaction and integration that is associated with
social and cultural aspects.
Economically, globalization involves goods, services, data, technology, and the economic

resources of capital.[2] The expansion of global markets liberalizes the economic activities of the
exchange of goods and funds. Removal of cross-border trade barriers has made the formation of
global markets more feasible. Advances in transportation, like the steam locomotive, steamship, jet
engine, and container ships, and developments in telecommunication infrastructure, like
the telegraph, Internet, mobile phones, and smartphones, have been major factors in globalization
and have generated further interdependence of economic and cultural activities around the globe.
Academic literature commonly divides globalization into three major areas: economic

globalization, cultural globalization, and political globalization.
Economic globalization is the increasing economic interdependence of national economies across

the world through a rapid increase in cross-border movement of goods, services, technology, and
capital.[58] Whereas the globalization of business is centered around the diminution of international
trade regulations as well as tariffs, taxes, and other impediments that suppresses global trade,
economic globalization is the process of increasing economic integration between countries, leading
to the emergence of a global marketplace or a single world market.
Economic globalization comprises: globalization of production; which refers to the obtainment of

goods and services from a particular source from locations around the globe to benefit from
difference in cost and quality. Likewise, it also comprises globalization of markets; which is defined
as the union of different and separate markets into a massive global marketplace. Economic
globalization also includes[60] competition, technology, and corporations and industries.
Cultural globalization refers to the transmission of ideas, meanings, and values around the
world in such a way as to extend and intensify social relations. [70] This process is marked by the
common consumption of cultures that have been diffused by the Internet, popular culture media, and
international travel. This has added to processes of commodity exchange and colonization which
have a longer history of carrying cultural meaning around the globe. The circulation of cultures
enables individuals to partake in extended social relations that cross national and regional borders.
The creation and expansion of such social relations is not merely observed on a material level.
Cultural globalization involves the formation of shared norms and knowledge with which people
associate their individual and collective cultural identities. It brings increasing interconnectedness
among different populations and cultures.[71]
Political globalization refers to the growth of the worldwide political system, both in size and
complexity. That system includes national governments, their governmental and intergovernmental
organizations as well as government-independent elements of global civil society such
as international non-governmental organizations and social movement organizations. One of the key
aspects of the political globalization is the declining importance of the nation-state and the rise of
other actors on the political scene
Political globalization is one of the three main dimensions of globalization commonly found in
academic literature, with the two other being economic globalization and cultural globalization.

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TOPIC 1

It involves cross-border transactions of goods and services between two or more countries.

 Import & Export

Economically, globalization involves goods, services, data, technology, and the economic

Academic literature commonly divides globalization into three major areas: economic

Economic globalization is the increasing economic interdependence of national economies across

Economic globalization comprises: globalization of production; which refers to the obtainment of

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