International Business in India

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International Business in India

International Business in India looks really lucrative and every passing day, it is coming up with only more possibilities. The growth in the international business sector in India is more than 7% annually. There is scope for more improvement if only the relations with the neighboring countries are stabilized. The mind-blowing performance of the stock market in India has gathered all the more attention (in comparison to the other international bourses). India definitely stands as an opportune place to explore business possibilities, with its high-skilled manpower and budding middle class segment.

With the diverse cultural setup, it is advisable not to formulate a uniform business strategy in India. Different parts of the country are well-known for its different traits. The eastern part of India is known as the 'Land of the intellectuals', whereas the southern part is known for its 'technology acumen'. On the other hand, the western part is known as the 'commercial-capital of the country', with the northern part being the ‘hub of political power'. With such diversities in all the four segments of the country, international business opportunity in India is surely huge.

Sectors having potential for International business in India :

Information Technology and Electronics Hardware.

Telecommunication.

Pharmaceuticals and Biotechnology.

R&D.

Banking, Financial Institutions and Insurance & Pensions.

Capital Market.

Chemicals and Hydrocarbons.

Infrastructure.

Agriculture and Food Processing.

Retailing.

Logistics.

Manufacturing.

Power and Non-conventional Energy.

Sectors like Health, Education, Housing, Resource Conservation & Management Group, Water Resources, Environment, Rural Development, Small and Medium Enterprises (SME) and Urban Development are still not tapped properly and thus the huge scope should be exploited.

To foster the international business scenario in India, bodies like CII, FICCI and the various Chambers of Commerce, have a host of services like :

These bodies work closely with the Government and the different business promotion organizations to infuse more business development in India.

They help to build strong relationships with the different international business organizations and the multinational corporations.

These bodies help to identify the bilateral business co-operation potential and thereafter make apt policy recommendations to the different overseas Governments.

With opportunities huge, the International Business trend in India is mind boggling. India International Business community along with the domestic business community is striving towards a steady path to be the Knowledge Capital of the world.

It was evident till a few years back that India had a marginal role in the international affairs. The image was not bright enough to be the cynosure among the shining stars. The credit rating agencies had radically brought down the country's ratings. But, as of now, after liberalization process and the concept of an open economy - international business in India grew manifold. Future definitely has more to offer to the entire world. I UNIVERSITY OF CALICUT

MASTER OF BUSINESS ADMINISTRATION

MBA 3.3 INTERNATIONAL BUSINESS

Introduction to international business-Local, regional, national, international and global business— management orientation of overseas business-ethno centric, poly centric, region centric and geocentric orientation--reasons for internationalization of business-factors restricting internationalization of business—major global companies in the world.

1) IB field is concerned with the issues facing international companies and governments in dealing with all types of crossborder transactions. IB involves all business transactions that involve two or more countries. IB consists of transactions that are devised and carried out across borders to satisfy the objectives of individuals and organizations. ) IB consists of those activities private and public enterprises that involve the movement across national boundaries of goods and services, resources, knowledge

International business is a term used to collectively describe all commercial transactions (private and governmental, sales, investments, logistics,and transportation) that take place between two or more regions,countries and nations beyond their political boundary. Usually, private companies undertake such transactions for profit; governments undertake them for profit and for political reasons.[1] It refers to all those business activities which involves cross border transactions of goods, services, resources between two or more nations. Transaction of economic resources include capital, skills, people etc. for international production of physical goods and services such as finance, banking, insurance, construction etc.[2]

A multinational enterprise (MNE) is a company that has a worldwide approach to markets and production or one with operations in more than a country. An MNE is often called multinational corporation (MNC) or transnational company (TNC). Well known MNCs include fast food companies such as McDonald's and Yum Brands, vehicle manufacturers such as General Motors, Ford Motor Company and Toyota, consumer electronics companies

like Samsung, LG and Sony, and energy companies such as ExxonMobil, Shell and BP. Most of

the largest corporations operate in multiple national markets.

within this topic include differences in legal policy, language, accounting standards, labor

standards, environmental standards, local culture,corporate culture, foreign exchange market, tariffs, import and export regulations, trade agreements, climate, education and many more topics. Each of these factors requires significant changes in how individual business units operate from one country to the next.

The conduct of international operations depends on companies' objectives and the means with which they carry them out. The operations affect and are affected by the physical and societal factors and thecompetitive environment.

Objectives: sales expansion, resource acquisition, risk minimization

Modes: importing and exporting, tourism and transportation, licensing and franchising, turnk ey operations, management contracts, direct investment and portfolio investments.

Functions: marketing, global manufacturing and supply chain management, accounting, finance, human resources

Overlaying alternatives: choice of countries, organization and control mechanisms

Physical and societal factors

Political policies and legal practices

Economic forces

Geographical influences

Major advantage in price, marketing, innovation, or other factors.

Number and comparative capabilities of competitors

Competitive differences by country

There has been growth in globalization in recent decades due to the following eight factors:

Technology is expanding, especially in transportation and communications.

Governments are removing international business restrictions.

Institutions provide services to ease the conduct of international business.

Consumers know about and want foreign goods and services.

Competition has become more global.

Political relationships have improved among some major economic powers.

Countries cooperate more on transnational issues.

Cross-national cooperation and agreements.

Studying international business is important because:

Most companies are either international or compete with international companies.

Modes of operation may differ from those used domestically.

The best way of conducting business may differ by country.

An understanding helps you make better career decisions.

An understanding helps you decide what governmental policies to support.

Managers in international business must understand social science disciplines and how they affect all functional business fields.

Tom Travis, the managing partner of Sandler, Travis & Rosenberg, PA. and international trade and customs consultant, uses the Six Tenets when giving advice on how to globalize one's business. The Six Tenets are as follows[3]:

1. Take advantage of trade agreements: think outside the border

Familiarize yourself with preference programs and trade agreements.

Read the fine print.

Participate in the process.

Seize opportunities when they arise.

2. Protect your brand at all costs

You and your brand are inseparable.

You must be vigilant in protecting your intellectual property both at home and abroad.

You must be vigilant in enforcing your IP rights.

Protect your worldwide reputation by strict adherence to labor and human rights standards.

3. Maintain high ethical standards

Strong ethics translate into good business.

Forge ethical strategic partnerships.

Understand corporate accountability laws.

Become involved with the international business self-regulation movement.

Develop compliance protocols for import and export operations.

Memorialize your company's code of ethics and compliance practices in writing.

Appoint a leader.

4. Stay secure in an insecure world

Security requires transparency throughout the supply chain.

Participate in trade-government partnerships.

Make the most of new security measures.

Secure your data.

Keep your personnel secure.

5. Expect the Unexpected

The unexpected will happen.

Do your research now.

Address your particular circumstances.

6. All global business is personal

Go to the source.

Keep communications open.

Keep the home office operational.

Fly the flag at your overseas locations.

Relate to offshore associates on a personal level.

Be available to overseas clients and customers 24/7.

Conducting and managing international business operations is more complex than undertaking domestic business. Differences in the nationality of parties involved, relatively less mobility of factors of production, customer heterogeneity across markets, variations in business practices and political systems, varied business regulations and policies, use of different currencies are the key aspects that differentiate international businesses from domestic business. These, moreover, are the factors that make international business much more complex and a difficult activity

Differences between International Trade and Domestic Trade

Scope: Scope of international business is quite wide. It includes not only merchandise

exports, but also trade in services, licensing and franchising as well as foreign

investments. Domestic business pertains to a limited territory. Though the firm has

many business establishments in different locations all the trading activities are inside a

single boundary. To the nations: Through international business nations gain by way of earning

foreign exchange, more efficient use of domestic resources, greater prospects of growth and creation of employment opportunities. Domestic business as it is conducted locally there would be no much involvement of foreign currency. It can create employment opportunities too and the most important part is business since carried locally and always dealt with local resources the perfection in utilisation of the same resources would obviously reap the benefits. To the firms: The advantages to the firms carrying business globally include prospects for higher profits, greater utilization of production capacities, way out to intense competition in domestic market and improved business vision. Profits in domestic trade are always lesser when compared to the profits of the firms dealing transactions globally. Market Fluctuations: Firms conducting trade internationally can withstand these situations and huge losses as their operations are wide spread. Though they face losses in one area they may get profits in other areas, this provides for stabilizing during seasonal market fluctuations. Firms carrying business locally have to face this situation which results in low profits and in

has several options available to it. These range from exporting/importing to contract

manufacturing abroad, licensing and franchising, joint ventures and setting up wholly

owned subsidiaries abroad. Each entry mode has its own advantages and

disadvantages which the firm needs to take into account while deciding as to which

mode of entry it should prefer. Firms going for domestic trade does have the options but

not too many as the former one.

To establish business internationally firms initially have to complete many formalities

which obviously is a tedious task. But to start a business locally the process is always

an easy task. It doesn't require to process any difficult formalities.

Modes of entry:

A firm desirous of entering into international business

Purvey: Providing goods and services as a business within a territory is much easier than doing the same globally. Restrictions such as custom procedures do not bother domestic entities but whereas globally operating firms need to follow complicated customs

procedures and trade barriers like tariff etc.

Sharing of Technology: International business provides for sharing of the latest technology that is innovated in various firms across the globe which in consequence will improve the mode and quality of their production.

Political relations: International business obviously improve the political relations among the nations which gives rise to Cross-national cooperation and agreements. Nations co-operate more on transactional issues.

Business Link’s face-to-face service operates on a regional basis across England and is funded by the

relevant Regional Development Agencies (RDAs). The service uses an IDBT (information, diagnostic,

brokerage and transaction) model to advise businesses. Regional Business Links run a variety of events

and workshops on topical issues and general business skills. This service was evaluated on a number

of occasions [8] These assessments generally found positive impacts of Business Link on companies

that received advice. However, some commentators worried about the cost of Business Link and the

variability of advice [9]. Some of the Business Links were chosen to provide more intensive support to

fewer companies and these seemed to do comparatively well. Other Business Links showed less success

with a 'spreading the jam thinly model' [10]

The Business Link regional advisory service will continue to offer advice and support to businesses

until November 2011[11]. After this time the regional advisory service will be abolished along with

the Regional Development Agencies (RDAs). The Business Link website[12] and the national helpline will

continue to operate. Local Enterprise Partnerships (LEPs) will be expected to drive regional economic

growth in the absence of the Business Link regional advisory service.[13]

A business refers to a legally recognized organization designed to provide goods and services to consumers. National business is a national commercial enterprise trading in goods or services which incurs expenditure, earns income and trades, hopefully, at a profit.

Vodafone United Kingdom

General Electric United States

Vivendi Universal France

Deutsche Telekom AG Germany

ExxonMobil Corporation United States

Ford Motor Company United States

International business =

Business transactions crossing national borders at any stage of the transaction. But then very often other questions crop up. A company that sells their domestic products to §

different countries through export/import agents, and A company that knows how to adapt its marketing, sales, products and business strategies to sell to clients in different countries

A company with in-house international expertise across all business activities has an international

bToday, business is acknowledged to be international and there is a general expectation that

this will continue for the foreseeable future. International business may be defined simply as

business transactions that take place across national borders. This broad definition includes the

very small firm that exports (or imports) a small quantity to only one country, as well as the very

large global firm with integrated operations and strategic alliances around the world. Within this

broad array, distinctions are often made among different types of international firms, and these

distinctions are helpful in understanding a firm's strategy, organization, and functional decisions

(for example, its financial, administrative, marketing, human resource, or operations decisions).

One distinction that can be helpful is the distinction between multi-domestic operations, with

independent subsidiaries which act essentially as domestic firms, and global operations, with

integrated subsidiaries which are closely related and interconnected. These may be thought of as

the two ends of a continuum, with many possibilities in between. Firms are unlikely to be at one

end of the continuum, though, as they often combine aspects of multi-domestic operations with

aspects of global operations.

International business grew over the last half of the twentieth century partly because of

liberalization of both trade and investment, and partly because doing business internationally had

become easier. In terms of liberalization, the General Agreement on Tariffs and Trade (GATT)

negotiation rounds resulted in trade liberalization, and this was continued with the formation of

the World Trade Organization (WTO) in 1995. At the same time, worldwide capital movements

were liberalized by most governments, particularly with the advent of electronic funds transfers.

In addition, the introduction of a new European monetary unit, the euro, into circulation in

January 2002 has impacted international business economically. The euro is the currency of

the European Union, membership in March 2005 of 25 countries, and the euro replaced each

country's previous currency. As of early 2005, the United States dollar continues to struggle

against the euro and the impacts are being felt across industries worldwide.

In terms of ease of doing business internationally, two major forces are important:

1. technological developments which make global communication and transportation

relatively quick and convenient; and

2. the disappearance of a substantial part of the communist world, opening many of the

world's economies to private business.

3. THEINTERNATIONAL

BUSINESS ENVIRONMENT

4. International business is different from domestic business because the environment changes when

a firm crosses international borders. Typically, a firm understands its domestic environment

quite well, but is less familiar with the environment in other countries and must invest more time

and resources into understanding the new environment. The following considers some of the

important aspects of the environment that change internationally.

5. The economic environment can be very different from one nation to another. Countries are often

divided into three main categories: the more developed or industrialized, the less developed

or third world, and the newly industrializing or emerging economies. Within each category

there are major variations, but overall the more developed countries are the rich countries,

the less developed the poor ones, and the newly industrializing (those moving from poorer to

richer). These distinctions are usually made on the basis of gross domestic product per capita

(GDP/capita). Better education, infrastructure, technology, health care, and so on are also often

associated with higher levels of economic development.

6. In addition to level of economic development, countries can be classified as free-market, centrally

planned, or mixed. Free-market economies are those where government intervenes minimally in

business activities, and market forces of supply and demand are allowed to determine production

and prices. Centrally planned economies are those where the government determines production

and prices based on forecasts of demand and desired levels of supply. Mixed economies are those

where some activities are left to market forces and some, for national and individual welfare

reasons, are government controlled. In the late twentieth century there has been a substantial

move to free-market economies, but the People's Republic of China, the world's most populous

country, along with a few others, remained largely centrally planned economies, and most

countries maintain some government control of business activities.

7. Clearly the level of economic activity combined with education, infrastructure, and so on, as well

as the degree of government control of the economy, affect virtually all facets of doing business,

and a firm needs to understand this environment if it is to operate successfully internationally.

8. The political environment refers to the type of government, the government relationship with

business, and the political risk in a country. Doing business internationally thus implies dealing

with different types of governments, relationships, and levels of risk.

9. There are many different types of political systems, for example, multi-party democracies,

one-party states, constitutional monarchies, dictatorships (military and nonmilitary). Also,

governments change in different ways, for example, by regular elections, occasional elections,

death, coups, war. Government-business relationships also differ from country to country.

Business may be viewed positively as the engine of growth, it may be viewed negatively as the

exploiter of the workers, or somewhere in between as providing both benefits and drawbacks.

Specific government-business relationships can also vary from positive to negative depending

on the type of business operations involved and the relationship between the people of the host

country and the people of the home country. To be effective in a foreign location an international

firm relies on the goodwill of the foreign government and needs to have a good understanding of

all of these aspects of the political environment.

10. A particular concern of international firms is the degree of political risk in a foreign location.

Political risk refers to the likelihood of government activity that has unwanted consequences

for the firm. These consequences can be dramatic as in forced divestment, where a government

requires the firm give up its assets, or more moderate, as in unwelcome regulations or

interference in operations. In any case the risk occurs because of uncertainty about the likelihood

of government activity occurring. Generally, risk is associated with instability and a country

is thus seen as more risky if the government is likely to change unexpectedly, if there is social

unrest, if there are riots, revolutions, war, terrorism, and so on. Firms naturally prefer countries

that are stable and that present little political risk, but the returns need to be weighed against the

risks, and firms often do business in countries where the risk is relatively high. In these situations,

firms seek to manage the perceived risk through insurance, ownership and management choices,

supply and market control, financing arrangements, and so on. In addition, the degree of political

risk is not solely a function of the country, but depends on the company and its activities as

well—a risky country for one company may be relatively safe for another.

11.The cultural environment is one of the critical components of the international business

environment and one of the most difficult to understand. This is because the cultural environment

is essentially unseen; it has been described as a shared, commonly held body of general beliefs

and values that determine what is right for one group, according to Kluckhohn and Strodtbeck.

National culture is described as the body of general beliefs and values that are shared by a nation.

Beliefs and values are generally seen as formed by factors such as history, language, religion,

geographic location, government, and education; thus firms begin a cultural analysis by seeking

to understand these factors.

12. Firms want to understand what beliefs and values they may find in countries where they do

business, and a number of models of cultural values have been proposed by scholars. The most

well-known is that developed by Hofstede in1980. This model proposes four dimensions of

cultural values including individualism, uncertainty avoidance, power distance and masculinity.

Individualism is the degree to which a nation values and encourages individual action and

decision making. Uncertainty avoidance is the degree to which a nation is willing to accept and

deal with uncertainty. Power distance is the degree to which a national accepts and sanctions

differences in power. And masculinity is the degree to which a nation accepts traditional male

values or traditional female values. This model of cultural values has been used extensively

because it provides data for a wide array of countries. Many academics and managers found

this model helpful in exploring management approaches that would be appropriate in different

cultures. For example, in a nation that is high on individualism one expects individual goals,

individual tasks, and individual reward systems to be effective, whereas the reverse would be the

case in a nation that is low on individualism. While this model is popular, there have been many

attempts to develop more complex and inclusive models of culture.

13. The competitive environment can also change from country to country. This is partly because of

the economic, political, and cultural environments; these environmental factors help determine

the type and degree of competition that exists in a given country. Competition can come from a

variety of sources. It can be public or private sector, come from large or small organizations, be

domestic or global, and stem from traditional or new competitors. For the domestic firm the most

likely sources of competition may be well understood. The same is not the case when one moves

to compete in a new environment. For example, in the 1990s in the United States most business

was privately owned and competition was among private sector companies, while in the People's

Republic of China (PRC) businesses were owned by the state. Thus, a U.S. company in the PRC

could find itself competing with organizations owned by state entities such as the PRC army. This

could change the nature of competition dramatically.

14. The nature of competition can also change from place to place as the following illustrate:

competition may be encouraged and accepted or discouraged in favor of cooperation; relations

between buyers and sellers may be friendly or hostile; barriers to entry and exit may be low or

high; regulations may permit or prohibit certain activities. To be effective internationally, firms

need to understand these competitive issues and assess their impact.

15. An important aspect of the competitive environment is the level, and acceptance, of technological

innovation in different countries. The last decades of the twentieth century saw major advances in

technology, and this is continuing in the twenty-first century. Technology often is seen as giving

firms a competitive advantage; hence, firms compete for access to the newest in technology,

and international firms transfer technology to be globally competitive. It is easier than ever for

even small businesses to have a global presence thanks to the internet, which greatly expands

their exposure, their market, and their potential customer base. For economic, political, and

cultural reasons, some countries are more accepting of technological innovations, others less

NATIONAL BUSINESS

1. A company or other organization engaged in commerce. A business sells goods and/or services to clients. For example, a widget maker selling widgets to wholesalers orretailers is a widget business. A business may be for-profit or non-profit.

2. Informal; an industry. For example, one may refer to the automotive industry as the "car business."

3. Informal; commerce. One who buys or sells with a company is said to "do business" with that

company.

The National Business Incubation Association (NBIA), founded in 1985, is a nonprofit organization comprised of business incubator developers and managers, corporate joint venture partners, venture capital investors, and economic development professionals.

WHAT IS GLOBAL BUSINESS?

Global business consists of transactions that are devised and carried out across national borders

to satisfy the objectives of individuals, companies, and organizations. These transactions take on

various forms, which are often interrelated. Primary types of international business are importexport trade and foreign direct investment (FDI). The latter is carried out in varied forms,

including wholly owned subsidiaries and joint ventures. Additional types of international

business are licensing, franchising, and management contracts.

As the definition indicates, and as for any kind of domestic business, “satisfaction” remains a

key tenet of global business. Beyond this, because transaction environmental factors, to different

constraints, and to quite frequent conflicts resulting from different laws, cultures, and societies.

The basic principles of business still apply, but their application, complexity, and intensity vary

substantially. To operate outside national borders, firms must be ready to incorporate

international considerations into their thinking and planning, making decisions related to

● How will our idea, good, or service fit into the international market?

● Should we enter the market through trade or through investment?

● Should I obtain my supplies domestically or from abroad?

● What product adjustments are necessary to be responsive to local conditions?

refers to international trade whereas a global business is a company

doing business across the world. The exchange of goods over great distances goes back a very long time. Anthropologists have already established long-distance trading in Europe in the Stone Age. Sea-borne trading was commonplace in many regions of the world in times predating Greek civilization. Such trade, of course, was not by definition "global" but had the same characteristics. In the 16th century all of the continents came to be routinely linked by ocean-based communications. Trading activity in the modern sense rapidly followed at the beginning of the 17th century; it might be more accurate to say that it "returned" again because trading of such character had taken place in Roman times as well.

It is not intended here to discuss another and related subject covered separately in this volume: globalization. Globalization is a long-standing program advocated by the

economically advanced nations to free up international trade across the globe through treaties. It has also come to mean the relocation of production or service activities to places that have much lower labor costs. Global business in the past—or currently—does not require what advocates of globalization seek, namely a so-called level playing field. International trade has always had a mixed character in which national organizations

and private enterprises have both participated, in which monopolies have been imposed, frequently defended by armed forces, in which all manner of restraints and tariffs have been common and participants have made all sorts of efforts to counter such interference or to profit from it.

GLOBAL ENTERPRISES

Fernand Braudel, a prominent historian of commerce, describes early trading with distant points around the globe—from Europe to the Americas and from Europe toIndia and Asia—in what then was still called Christendom, as speculative ventures funded by highinterest loans from patrons: traders had to pay back double the money they borrowed; failure to pay the money back—unless they had been shipwrecked—meant a period of slavery until the debt was satisfied. Very high profits could be achieved trading in spices and silk with the "Indies"; such profits justified the risks. In parallel with such private trading, government-sponsored ventures also took to the oceans; they became the dominant form of international trade shortly before and all through the period of colonialism. Thus Spain exploited its discoveries in South America by shipping gold and silver from America to Europe—thus setting off a great inflationary period. Global enterprise, thus, in the modern sense, began to develop during the Age of Discovery. It was instrumental in stimulating colonialism. Single merchants or groups of explorers went forth and came back with treasures. Government-sponsored consortia, the early global businesses, followed in

the adventurers' wake.

The two earliest global companies, both government chartered, were the British East India Company begun in 1600 and the Dutch East India Company, established in 1602. Both have now passed into history. The British company dissolved in 1874, but in its nearly 300-year history it had launched and for a long period had practically run the British Empire. The Dutch company was dissolved in 1798 after nearly 200 years of operations in Asia, India, Sri Lanka, and Africa. But the Hudson Bay Company, another British-founded monopoly to exploit the North American fur trade, was established in 1670 and is still going—so much so that Canadians explain that the company's initials stand for "Here Before Christ." HBC has long since ceased to be a global monopoly and is known today in Canada as a department store.

Early global companies were usually state-chartered trading companies. The Danes, the French, and the Swedes all had East India companies. Japan established companies known as the sogo shosha (for "general trading company") in the 19th century. Japan had tried and failed to preserve its isolation. When it opened itself to the world, it channeled trade through these ventures. Great trading companies were and continue to be important in transportation as well; operating shipping supports their activities. A contemporary American example is the privately held Cargill Corporationwhich trades internationally in

agricultural, food, pharmaceutical, and financial products.

Commodity-based international corporations emerged in the 19th century with oil. The first global oil company was Standard Oil, founded by John D. Rockefeller. That honor was held by others since, including Exxon Corporation and Royal Dutch/Shell Group until, in the mid-2000s, Saudi Arabia's Aramco became Number 1. Major companies in turn emerged

in chemicals and in artificial fibers, in automobiles, in aircraft manufacturing, and then in virtually every industry in the second part of the 20th century.

The term "multinationals" came into currency during the same time to designate corporations that operated in at least two different countries—but the actual use of the label applies to corporations that have a global presence. The term is used in a neutral sense simply to indicate very large size and participation in global markets. A more negative connotation of the term is that such corporations are effectively beyond the full reach of national laws because they have a presence in many locations, can move money and resources around at will, can sometimes escape taxation, and thus represent a power beyond public control.

GLOBAL MARKETS

From the point of view of a seller, a global market is an export market; from the buyer's vantage point, the global market represents imports from abroad. World statistics on international trade are collected by the World Trade Organization (WTO) located in Geneva. The most current data available in early 2006 were for the year 2004; all economic data lag the current time, but international data more so than national. In 2004, the global market for exports was $11.28 trillion, with merchandise exports representing 81.2 and commercial services 18.8 percent of that total. Merchandise exports, using WTO's definition, include commodities as well as manufactured and semi-manufactured goods. Services are divided into transportation, travel, and the "other services" categories.

Merchandise Trade

The largest category of foreign trade is in machinery and transportation equipment, representing

16.8 percent of the total—but the category pointedly excludes both automobiles and related equipment as well as office and telecommunications equipment. Fuels and Mining Products is second with 14.4 percent of share. The other major categories are Office and Telecom Equipment (12.7 percent), Chemicals (11.0), Automobiles and Related (9.5), Agricultural Products (8.8), Other Manufactured Products not already mentioned (8.6), Semi-Manufactures (like parts and components, 7.1 percent), Iron and Steel (3.0), Clothing (2.9), and Textiles other than clothing (2.2 percent).

Just ten countries around the world represent 54.8 percent of all merchandise exports. Germany led the world in 2004 with a 10 percent share of all exports, followed by the U.S. with an 8.9 percent share. Other leading exporters in order of share were China(6.5), Japan (6.2), France (4.9), the Netherlands (3.9), Italy (3.8), United Kingdom (3.8), Canada (3.5), and Belgium (10 percent of total).

At the top of world trading, anyway, the same countries were also the top importers, but not in the same order. The U.S. was top importer: 16.1 percent of all world imports were bought by U.S. consumers; Germany was second with 7.6 percent of imports. The others were China (5.9 percent), France and the United Kingdom (both 4.9), Japan (4.8), Italy (3.7), the Netherlands (3.4), Belgium (3.0), and Canada (2.9).

More interestingly, six of 10 countries achieved a trade surplus and the others had a trade deficit. The U.S. had the largest negative, a deficit of $706.7 billion, followed by the United Kingdom ($116.6 billion), France ($16.7 billion), and Italy ($1.9 billion).

Commercial Services

In the export and import of commercial services, the U.S. ranked first on both sides of this

ledger, representing 15 percent of exports and 12 percent of services imports—and achieved a $58.3 billion trade surplus—not enough, however, to erase its very large merchandise trade deficit. The other leading exporters of services were United Kingdom (8.1 percent of services exports resulting in a $35.7 billion services trade surplus), Germany (6.3 percent, a $59.1 billion deficit—which reduced its healthy merchandise surplus), France (5.1 percent of exports, achieving $13.1 billion in surplus, which almost wiped out its merchandise trade deficit), and Japan (4.5 percent, experiencing a $39.1 billion deficit in this category of trade).

MANAGEMENT ORIENTATION

http://www.inc.com/encyclopedia/global-business.html

• Assumes home country is superior to the rest of the world; associated with attitudes of national

arrogance and supremacy Management focus is to do in host countries what is done in the home

country– Sometimes called an international company Products and processes used at home are

used abroad without adaptation.

• Management operates under the assumption that every country is different; the company

develops country-specific strategies Sometimes called a multinational company Company

operates differently in each host country based on that situation Opposite of ethnocentrism

Regiocentric Orientation

• Region becomes the relevant geographic unit (rather than by country) Management orientation

is geared to developing an integrated regional strategy European Union– NAFTA.

• Entire world is a potential market• Managerial goal is to develop integrated world market

stratergies Global companies serve world markets from a single country and tend to retain

association with a headquarters country Transnational companies serve global markets and

acquire resources globally; blurring of national identity.

“Transnationality” Rankings –

• 1. Nestle (Switzerland) Thomson Corp

• 3. Holderbank Financiere

• 6. ABB Asa Brown Beveri

• 7. Electrolux (Sweden)

Electronics (Netherlands)

• 12. Northern Telecom

• 13. Glaxo Wellcome (UK)

Forces Affecting Global

Regional economic agreements

Market needs and wants

Transportation and communication

Product development costs

World economic trends

REASONS FOR RISING INTERNATIONALIZATION OF BUSINESS

International trade has always been an integral part of the economic enterprise. Companies have found opportunities for growth and profitability in new markets-outside their home base. There are several reasons for increased international operations: Capitalizing on Growth Opportunities. Companies in diverse industries such as telecommunication, tobacco, personal computer (PC), cosmetics and hygiene, fast food, pharmaceutical, software, and biotechnology have ventured into international markets with success. U.S. companies in mature, declining, and growth industries have focused on growth opportunities in overseas markets. Taking Advantage of Cost Differences. There are differences in resource endowments among regions of the world and among countries. Prudent companies take advantage of these

differences. Gaining Economies of Scale and Making a Profit Technological advances have reduced the costs of communication and transportation, and made it easier for companies to target wider markets. Similarly, advances in manufacturing technologies have allowed companies to "mass customize" some of their products. This has helped companies meet the needs of customers in different markets while making a profit Protecting the Company`s Home Base Market. Some international operations represent a defensive move to counteract the penetration of foreign producers of the company`s home markets. The analysis of a competition in an industry requires consideration of the economics of the characteristics of competitors. However, in a global industry, the analysis is not limited to one market, but extends to all markets (geographic or national) taken together. Michael E. defines a global industry as "one in which the strategic positions of competitors in major geographic or national markets are fundamentally affected by their overall global positions." Thus, an industry becomes global because it perceives a net strategic advantage to competing in a coordinated way in many national markets. Internationalization leads to four key changes in the structure of industries: • Barriers to entry decline and, as a result, it becomes easier for foreign companies to penetrate national markets. • Concentration declines as a result of entry by foreign producers. Concentration shows the amount of market share controlled by the top four or eight producers in the industry. A low concentration ratio indicates a highly competitive industry. • Competition intensifies as a result of internationalization. Moreover, the diversity of competitors rises with internationalization. This happens because companies from different

countries enter the industry and compete by using different strategies. • Consumer buying power rises with increased internationalization. The entry of companies with different strategies gives consumers many new options from which to choose. Michael E. Porter suggests that industries form a continuum, ranging from "multidomestic" to truly "global industries." This is an important distinction, because it affects the way the company competes and creates a competitive advantage. In a multidomestic industry, each country (or a small number of countries) is treated differently. A company`s competitive strategies in these countries (or regions) are independent. Retailing, insurance, and consumer package goods are prime examples of multidomestic industries. These industries exhibit great variations in their structures and bases of competition. These variations reflect the diversity of national culture, socioeconomic variables, and political regimes. Because of these variations, little coordination can be achieved on a global scale.

A global industry exhibits considerable similarities across its different segments. Competing in a global industry requires coordination of the company`s activities. That is, what a company does in one market affects its actions in other markets.

FACTORS RESTRICTING INTERNATIONALIZATION OF BUSINESS

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