Introduction To International Business

Introduction to
International Business
BY PROF. SUYOG KELUSKAR
Why to study International Business?
India is an attractive market for foreign investors Indian business are becoming ‘Global’ – The Indian
Multinationals
➢India 4th most attractive investment market for global CEOs:
PwC survey (2019) ➢Indian companies have invested more than US$344 billion in
➢According to Department for Promotion of Industry and
international expansion over the period 2003-2012
Internal Trade (DPIIT), FDI equity inflow in India stood at US$
469.99 billion during April 2000 and March 2020
➢In June 2020, Jio Platforms Ltd. sold 22.38 per cent stake worth
Rs 1.04 trillion (US$ 14.75 billion) to ten global investors in a
span of eight weeks under separate deals, involving Facebook,
Silver Lake, Vista, General Atlantic, Mubadala, Abu Dhabi
Investment Authority (ADIA), etc. This is the largest continuous
fundraise by any company in the world
➢After China, India is the biggest and diverse market
➢Talented human capital, natural resources, technology, and
liberal mindset are some of the key USPs
International Brands in India
India is an attractive market for foreign
investors
➢Colonial Beginnings & Early Global Brands in India
➢ East India Company in India in 1617, A number of European (and
American) brands entered India in late 1800’s and early 1900’s that
included the Lever Brothers (now Hindustan Unilever), Eveready
Industries, GlaxoSmithKline (now GSK), Nestle, Imperial Tobacco
Company (now ITC), Colgate Palmolive, Cadbury (now a part of
Mondelez), Bata, Hadfields (now Berger Paints), and Goodlass (now Lever Brothers,
a Kansai company) among others early Sunlight Soap advertisement
➢The Second Wave: 1990s Market Liberalisation

1970 Nescafé instant coffee advertisement
➢ This phase saw the entry of a number of major global brands (and
retail businesses) that included Levi’s, M&S, Metro Cash & Carry,
Walmart, Carrefour, Tesco, Spar, Auchan, Tommy Hilfiger, L’Oréal,
Mothercare, Hamley’s, LG Electronics, Samsung, Kellogg, Coca Cola
& PepsiCo (after a hiatus of nearly 20 years), Danone, Triumph (the
lingerie maker), etc.
➢Contemporary New Entry Brands

➢ The third timeline is the current one, which has seen a big entry of Iconic 1990s Pepsi commercial
new brands not only from Europe and the USA but also from Korea,
Japan, and China. H&M, Ikea,Gap, Starbucks, Miniso, Xiaomi and
Oppo
Starbucks on Mumbai-Pune Expressway
India in International Business
Definition
International business involves commercial activities that cross national
frontiers.
❖It concerns the international movement of goods, capital, services, employees and
technology; importing and exporting;
❖cross-border transactions in intellectual property (patents, trademarks, know-how,
copyright materials, etc.) via licensing and franchising;
❖investments in physical; financial assets in foreign countries;
❖contract manufacture or assembly of goods abroad for local sale or for export to
other nations; buying and selling in foreign countries;
❖the establishment of foreign warehousing and distribution systems;
❖and the import to one foreign country of goods from a second foreign country for
subsequent local sale
Why firm engage in International
Business
Businesses undertake international operations in order to expand sales, acquire resources from
foreign countries, or diversify their activities
➢Commercial risk can be spread across several countries
➢Involvement in international business can facilitate the 'experience curve' effect, i.e. cost reductions
and efficiency increases
➢Economies of scope might become available
➢The costs of new product development could require so much expenditure that the firm is
compelled to adopt an international perspective
➢There might be intense competition in the home market but little in certain foreign countries
➢Sudden collapses in market demand in some countries may be offset by expansions elsewhere
➢Cross-border trade is today much easier to organize than in the past
Why enter overseas market?
Push factors Pull Factors
• Saturation in domestic markets • The attraction of overseas markets
• Economic difficulty in domestic markets • Increase sales
• Near the end of the product life cycle at • Enjoy greater economies of scale
home • Extend the product life cycle
• Risk diversification • Exploit a competitive advantage
• Excess capacity • Personal ambition
Factors in the choice of which overseas market(s) to enter:

✓ Size of the market (population, income)
✓ Economic factors (state of the economy)
✓ Cultural linguistic factors (e.g. preference for countries with similar cultural background)
✓ Political stability (there is usually a preference for stable areas)
✓ Technological factors (these affect demand and the ease of trading)
Constraints & Difficulties in entering
overseas market (1/2)
•Deals might have to be transacted in foreign languages and under foreign laws, customs and
regulations.
•Information on foreign countries needed by a particular firm may be difficult (perhaps
impossible) to obtain.
•Foreign currency transactions will be necessary. Exchange rate variations can be very wide and
create many problems for international business.
•Numerous cultural differences may have to be taken into account when trading in other nations.
•Control and communication systems are normally more complex in foreign than for domestic
operations.
Continue….(2/2)
•Risk levels might be higher in foreign markets. The risks of international business include
• political risks (of foreign governments expropriating the firm's local assets, of war or revolution
interfering with trade, or of the imposition of restrictions on importers' abilities to pay for imports);
• commercial risks (market failure, products or advertisements not appealing to foreign customers, etc.)
• financial risks - of adverse movements in exchange rates, tax changes, high rates of inflation reducing
the real value of a company's foreign working capital, and so on.
•International managers require a broader range of management skills than do managers who
are concerned only with domestic problems.
•Large amounts of important work might have to be left to intermediaries, consultants and
advisers.
Entry Strategies to foreign market
❑Exports - Exporting commonly requires coordination among four players: Exporter, Importer,
Transport provider and Government
❑Licensing - Because little investment on the part of the licensor is required, licensing has the
potential to provide a very large ROI
❑Franchising - This is a special form of licensing which allows the franchisee to sell a highly
publicized product or service using the parent’s brand name or trademark, carefully developed
procedures and marketing strategies.
❑Foreign Branch - This is an extension of the company in its foreign market- a separately located
strategic business unit
❑Joint Venture - There are five common objectives in a joint venture: market entry, risk/reward
sharing, technology sharing and joint product development, and conforming to government
regulations.
Type of Organisation Structure
o International Companies – importers and exporters with no investment outside their country
e.g. many SMEs, Tier 2/3 Manufacturers, Small IT companies, etc.
oMultinational Companies – have investments in other countries but, no coordinated product
offerings in each country e.g. MDH Masale, Dabur, Himalaya, etc.
oGlobal Companies – invested and present in many countries; market products using same
brands in multiple markets. E.g. Coca-Cola, Pepsi, Pfizer, Apple, etc.
oTransnational Companies – Central corporate office but decision making, R&D, marketing
powers to individual foreign market. E.g. Unilever, P&G, MacDonald’s, IKEA, etc.
oMultidomestic Companies - firms compete in each national market independently of other
national markets. Involves products tailored to individual countries innovation comes from local
R&D. There is decentralization of decision making within the organization. A multidomestic
company uses a unique marketing and sales approach for each of the markets. E.g. Wal-Mart,
Nestle, Honda, Suzuki, etc.
Type of Orientation
❑Ethnocentric: governance is top down, strategy is global integration, products development is
determined primarily by the needs of home country customers and people of home country are
developed for key positions everywhere in the world. E.g. Panasonic, Sony, Hyundai and Hitachi
❑Polycentric: governance is bottom up where each subsidiary decides on local objectives, strategy is
national responsiveness, local products are developed based on local needs and people of local
nationality are developed for key positions in their own country. E.g. Unilever, Nestle, etc.
❑Regiocentric: governance is mutually negotiated between regions and its subsidiaries, strategy is
regional integration and national responsiveness, products are standardized within region but not
across regions, regional people are developed for key positions anywhere in the region. E.g. Coca
Cola, Nike, HSBC (‘World’s local Bank)
❑Geocentric: governance is mutually negotiated at all levels of the corporation, strategy is global
integration and national responsiveness, global products with local variation, best people everywhere
in the world are developed for key positions everywhere in the world. E.g. Google, Microsoft, Infosys,
TCS, Ford, etc.

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Introduction to

➢The Second Wave: 1990s Market Liberalisation

➢Contemporary New Entry Brands

Factors in the choice of which overseas market(s) to enter:

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