Asked in Business Globalization
Define the concept of international business and also explain its scope and nature?
INTERNATIONAL BUSINESS MANAGEMENT
The beverages you drink might be produced in India, but with
the collaboration of a USA company. The tea you drink is
prepared from the tea powder produced in Sri Lanka. The
spares and harddisk of the computer you operate might have
been produced in the United States of America.
The perfume you apply might have been produced in France.
The television you watch might have been produced with the
Japanese technology. The shoe you wear might have been
produced in Taiwan, but remarketed by an Italian company. Air
France and so on so forth might have provided your airtravel
services to you.
Most of you have the experience of browsing Internet and
visiting different web sites, knowing the products and services
offered by various companies across the globe. Some of you
might have the experience of 'even ordering and buying the
products through Internet. This process gives you the opportunity
of transacting in the international business arena without
visiting or knowing the various countries and companies across
You get all these even without visiting or knowing the country
of the company where they are produced. All these activities
have become a reality due to the operations and activities of
Thus, international business is the process of focusing on the
resources of the globe and objectives of the organizations on
global business opportunities and threats.
Evolution of International Business
The business across the borders of the countries had been
carried on since times immemorial. But, the business had been
limited to the international trade until the recent past. The post
World War If period witnessed an unexpected expansion of
national companies into international or multinational companies.
The post 1990s period has given greater fillip to
In fact, the term international business was not in existence
before two decades. The term international business has
emerged from the term international marketing, which in turn,
emerged from the term 'export marketing'.
International Trade to International Marketing: Originally, the
producers used to export their products to the nearby countries
and gradually extended the exports to faroff countries. Gradually,
the companies extended the operations beyond trade. For
example, India used to export raw cotton, raw jute and iron ore
during the early 1900s. The massive industrialization in the
country enabled us to export jute products, cotton garments
and steel during 1960s.
India, during 1980s could create markets for its products, in
addition to mere exporting. The export marketing efforts
include creation of demand for Indian products like textiles,
electronics, leather products, tea, coffee etc., arranging for
appropriate distribution channels, attractive package, product
development, pricing etc. This process is true not only with
India, but also with almost all developed and developing
International Marketing to International Business: The
multinational companies which were producing the products in
their home countries and marketing them in various foreign
countries before 1980s, started locating their plants and other
manufacturing facilities in foreign/host countries. Later, they
started producing in one foreign country and marketing in other
foreign countries. For example, Uni Lever established its
subsidiary company in India, i.e., Hindustan Lever Limited
(HLL). HLL produces its products in India and markets them
in Bangladesh, Sri Lanka, Nepal etc. Thus, the scope of the
international trade is expanded into international marketing and
international marketing is expanded into international business.
Nature of International Business
The 1990s and the new millennium clearly indicate rapid
internationalization and globalization. The entire globe is
passing at a dramatic pace through the transition period. Today,
the international trader is in a position to analyze and interpret
the global social, technical, economic, political and natural
environmental factors more clearly.
Conducting and managing international business operations is
a crucial venture due to variations in political, social, cultural and
economic factors, from one country to another country. For
example, most of the African consumers prefer less costly
products due to their poor economic conditions. Whereas the
German consumers prefer high quality and high priced products
due to their higher ability to buy. Therefore, the international
businessman should produce and export less costly products to
most of the African countries and vice versa to most of the
European and North American countries. High priced and high
quality Palmolive soaps are marketed in European countries and
the economy priced Palmolive soaps are exported and marketed
in developing Countries like Ethiopia, Pakistan, Kenya, India,
International business houses need accurate information to
make an appropriate decision. Europe was the most opportunistic
market for leather goods and particularly for shoes. Bata
based on the accurate data could make appropriate decision to
enter various European countries.
International business houses need not only accurate but timely
information. CocaCola could enter the European market based
on the timely information, whereas Pepsi entered later. Another
example is the timely entrance of Indian software companies
into the US market compared to those of other countries.
Indian software companies also made timely decision in the case
laws, business laws and policies and regulations formulated by
the Indian Government. For example, international business
should enter into joint venture with the domestic company to
enter Malaysia. Important among them include:
Host Country's Monetary System: Countries regulate the price
level, flow of money, production levels etc. through their
monetary systems. In addition, they regulate foreign exchange
rates also through the monetary system. The tools of monetary
system include bank rate, cash reserve ratio, statutory liquidity
ratio etc. Governments also regulate remittance of the profit of
international business houses to other countries. International
companies should obey these regulations. The Indian Government
introduced full convertibility on current account; in fact,
many Governments introduced full convertibility on current
account as a part of economic liberalisation.
National Security Policies of the Host Countries: Every country
formulates the policies for its national security. Multinational
companies should abide by these national security policies. For
example, USA is a free economy as far as carrying out the
business compared to many
Impact of Culture of Switzerland
On Marketing of Dishwashers
In Switzerland, foreign dishwasher manufacturers expected the
same rapid sales as they had first obtained in other West
European markets; but sales in Switzerland were so slow that
research had to be done to find out why (this research should,
of course, have been done before not after market entry). The
research showed that the Swiss housewife had a different set of
values to, for example, her French and English counterparts; she
was very conscious of her role as strict and hardworking and her
responsibility for the health of her family. To the Swiss
housewife dishwashers simply made life easy, and this conflicted
with her Calvinistic work ethic. As a result of th s research,
dishwasher manufacturers had to change their advertising
promoting, instead of ease and convenience, hygiene and
health. They did this by emphasizing that because dishwashers
used temperature higher than hand hot, the process was more
hygienic than washing up by harid. Thereafter, they had no
automatic dishwashers in Swit7erland.
Language: language is an important factor in international
business. Even though 'English language' is a major language
in business operations in the world, there are still a large
number of 'nonEnglish' speaking countries. Therefore,
international business houses should train their employees in
the local language of THC host country. Added to this, there
would be many languages in use in many, countries like ours.
Therefore, the business houses should train their employees in
the local languages also.
Nationalism and Business Policy : Nationalism is a dominating
factor of the social life of the people of the host countries.
In fact, nationalism also affects the business operations of the
multinational corporations dramatically and drastically. The US
people used the slogan 'Be American and Buy American Made',
when the US automobile industry failed to meet the competition
of Japanese automobile companies operating in USA.
Similar incidents are dso observed in developing countries.
Therefore, international business houses should be cautious of
nationalism and its after effects