Business Globalization

Define the concept of international business and also explain its scope and nature?

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09/12/2011

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

the globe.

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

international business.

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

international business.

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

economies.

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,

Cambodia etc.

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

of' Europe.

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

Housewives

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