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IN A GLOBALIN A GLOBAL
PERSPECTIVEPERSPECTIVE
MS. INDRAYANI
DEEKSHIT
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COVERAGECOVERAGE
Increasing interdependence in the
GlobalEconomy
Trends in Intl. Trade & Cross-BorderFinancial
Flows Recent Developments in GlobalFinancial
MarketsChallenges of Intl. Financial 2
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INTERNATIONALINTERNATIONAL
BUSINESSBUSINESSEncompasses our daily lives
- Beverages from USA
- Tea from Sri Lanka
- Mobile instrument from China
- TV from Japan
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INTERNATIONALINTERNATIONAL
BUSINESSBUSINESS An English princess with an Egyptian boyfriend crashes in a French tunnel driving a German car with a
Dutch engine driven by a Belgian who was high on Scottish
whiskey followed closely by Italian
Paparazzi on Japanese motorcycles
treated by an American doctor usin Brazilian medicines! 4
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INTERNATIONALINTERNATIONAL
BUSINESSBUSINESSAnd this is sent to you by a Filipino
using Bill
Gates' technology which isAmerican. And you are
probably reading this on one of theIBM clones
use Taiwanese-made chips, andKorean made
monitors, assembled byBangladeshi workers in a
Singapore plant, transported bylorries driven by
Pakistanis, hijacked by Indonesians5
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INTERNATIONALINTERNATIONAL
BUSINESSBUSINESS
Focus upon resources across theglobe
To seize global businessopportunities and address threats
In order to buy or sell goods or
services worldwide
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EVOLUTION OFEVOLUTION OF
INTERNATIONAL BUSINESSINTERNATIONAL BUSINESS
Began around 1870 and endedwith World War I driven by
industrial revolution in UK /Germany / USA
Trade barriers set and trade
sufferedBreakdown of Gold standard &
the need for international co-
operation in the post-World war II 7
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EVOLUTION OFEVOLUTION OF
INTERNATIONAL BUSINESSINTERNATIONAL BUSINESS
Post 1947, the GeneralisedAgreement on Trade & Tariffs
( GATT ) came into beingIn 1995, GATT was replaced by
WTO
Efforts of IMF, World Bank & WTOalongwith efforts of individualcountries led to globalisation asclosed economies needed too en u 8
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WTO - ImplicationsWTO - Implications
WTO set up to strengthen Worldeconomy, leading to more trade,investment , employment andincome growthIn the wake of WTO, tariffs were
reduced from over 30 40 % tobelow 5 %
Regional integrations play asignificant role NAFTA,ASEAN,SAARCDecline in Investment barriers to
promote and protect investment 9
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Recent developmentsRecent developments
Growth in FDI Investment inmanufacturing and in markets
FDI Inflows increased from USD 564 Bn in1980 to USD 2.8 Tn in 2008
82% came from advanced countriesEmerging economies received higher FDIUSA has been the largest provider of FDIBRICS now in focusInternet and Worldwide webOnline commerceReduced travel timeTechnological developments Internet,
Worldwide web, Online commerce
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Changing global trendsChanging global trends
GDP as % of World GDP
1963
2009USA 40.3
28.4
GERMANY 9.74.0
UK 6.53.1
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Changing global trendsChanging global trends
COUNTRY SHARE INWORLD GDPAS %
SHARE INWORLDEXPORTS AS%
USA 2..4 16
GERMENY 4.0 8.6
FRANCE 3.0 6.2
UK 3.1 3.8
JAPAN 6.0 4.3
CHINA 12.6 8.5INDIA 5.1 1.7
( WORLD ECONOMIC OUTLOOK 2010 )
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Growth of MultinationalGrowth of Multinational
CompaniesCompanies
The no. of companies that didbusiness in more than one
country grewOf the 500 top MNCs 139 were
from USA, 71 from Japan and 46
from China
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Managing Intl. business -Managing Intl. business -
FactorsFactors
Political
Social
Cultural
Economic
Higher cost / Lower cost countries
Higher quality-conscious countries
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Intl. business - FeaturesIntl. business - Features
Accuracy of information needed
Timely information required
Business size needs to be large
Markets need to be segmented
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Intl. business -Intl. business -
DimensionsDimensionsBusines opportunitiesThreats
Customer preferences
Behaviour
Cultural aspects Namaaz(Middle east) / Family activities
(Fiji Islands)Employees
Business Environment16
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Intl. business -Intl. business -
DimensionsDimensions
HR Practices
Govt.Policies
Monetary System
National Security issues FATF /OFAC
Language
Nationalism and Business Policy
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Stages of InternationalisationStages of Internationalisation
of companiesof companies
Stage I Domestic companyStage II International company
domestic prdn. Off-loaded in fgn. Mkts.
Also branch in fgn. CountryStage III Branches work like domesticbranch in each country (polycentric).
These are multi-domestic companies(Philips of Netherlands)
Stage IV Global company has globalstrategy. Produces in home / singlecountry and markets globally ( Dr.Reddys Labs )
Stage V Transnational company produces, markets, invests and 18
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Transnational company -Transnational company -
featuresfeaturesIntegrated global enterprise
linking global resources to globalmarkets at profit
Geocentric orientation Thinkglobally and Act locally
Assets across the World
Knowledge and experience invarious markets is shared
Information relating to various
markets is collected and scanned 19
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Transnational company -Transnational company -
featuresfeaturesVision is GLOBALGeographic scope offers
opportunities
Operating style key operationsglobalisedAdaptation to markets
Extension of markets nochange in pdt.HRM Policies Top key positions
for home nationals. Best
practices 20
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Domestic vs Intl. BusinessDomestic vs Intl. Business
DomesticBusiness
InternationalBusiness
Approach Ethnocentric
Scope NationalOperating style
Domestic activities
Environment National
Quotas / Tariffs / Forexrates / Exim proceduresof other countries Nodirect impact
Culture / HR / Mk. &Customers - Local
Approach
PolycentricScope International
Operating style Global
Environment GlobalQuotas / Tariffs / Forex
rates / Eximprocedures of othercountries Direct
impactCulture / HR / Mk. &
Customers Global
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International BusinessInternational Business
approachesapproachesEthnocentric Same domestic
product is exported ( earlystage).
Polycentric Fgn. Subsidiary.Strategy of home country andkey personnel from home
country.Regiocentric Subsidiary exports
to countries in region. Strategy of
Region 22
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Mode of entry into Intl.Mode of entry into Intl.
businessbusinessDirect ExportIndirect ExportLicensing arrangements with fgn.
Cos.Franchising arrangements with fgn.
Cos.Contract manufacturingTurnkey projectsManagement contractsDirect InvestmentJoint Venture
Megers and Acquisitions 23
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Challenges of Intl.Challenges of Intl.
businessbusiness
Rate of Return Expansion / Excess production beyond demand
leading to ExportCompetition in Home country Political stability
Availability of Technology and PersonnelTransportation costs Proximity to Raw-material sourceCost of Human Resources LiberalisationMarket-share growthHigher rate of Economic developmentTariffs and Inport quota
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Challenges of Intl.Challenges of Intl.
businessbusinessPolitical factorsForex risks
Entry requirements and barriers
Tariffs / Quotas / Trade barriers
Corruption / Piracy / Bureaucracy
Quality maintenance
Higher costs
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Advantages of Intl.Advantages of Intl.
businessbusinessHigh living standardsIncreasing socio-economic
welfare
Wider marketLarge-scale economies ability
to expand
Reduced impact of economicconditions / political andcommercial risks
Growth of World economy 26
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Advantages of Intl.Advantages of Intl.
businessbusinessTransformationSpecialisationBargaining capacity
Economic portfolio allocationTaxation benefitsCost-efficiency of products /
servicesInnovation / Product
developmentSourcing at lower costs
material, people and technology 27
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THANKTHANK
YOUYOU
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