Q1 Explain International Trade, International Marketing, International Business. with reference to Indian example and Foreign Example Q2-- Define International Business ? Needs and Importance of IB for India Q3-- Evolution of International Business Q4-- International Business Approaches ( Ethnocentric, E thnocentric, Polycentric, Regiocentric, Geocentric)Evolution Geocentric)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 II period witnessed an unexpected expansion of national companies into international or multinational companies. The post 1990’s 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 te rm ‘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 far-off 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: 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 Liver 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.
International Business in India
International Business in India looks really lucrative a nd 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 i mprovement 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 i t 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 : 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13.
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 :
1. These bodies work closely with the Government and the different business promotion organizations to infuse more business development in India. 2. They help to build strong relationships with the different international business organizations and the multinational corporations. 3. These bodies help to identify the bilateral business co-operation potential and thereafter make apt policy recommendations to the different overseas Governments. 4. 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 de finitely has more to offer to the entire world.
International business is defined as ‘any commercial transaction taking place across boundary lines of a sovereign entity.
Importance of international business
Every company is trying to expand its business by entering foreign markets. International business helps in the following ways:1. Helps as growth strategy: - Geographic expansion may be used as a business strategy. Even though companies may expand their business at home. 2. Helps in managing product life cycle: - every product has to pass through different stages of product life cycle-when the product reaches the last stages of life cycle in present market, it may get proper response at other markets. 3. Technology advantages: - some companies have outstanding t echnology advantages through which they enjoy core competency. This technology helps the company in capturing other markets. 4. New business opportunities: - business opportunities in overseas markets help i n expansion of many companies. They might have reached a saturation point in domestic market. 5. Proper use of resources: -Sometimes industrial resources like la bor, minerals etc. are available in a country but are not productively utilized. 6. Availability of quality products: - when markets are open, better quality goods will be available every where. Foreign companies will market latest products at reasonable prices. Good product will be available in the markets. 7. Earning foreign exchange: - international business helps in earning foreign exchange which may be used for strategic imports .India needs foreign exchange to import crude oil, deface equipment, raw material and machinery. 8. Helps in mutual growth: - countries depend upon each other for meeting their requirements. India depends on gulf countries for its crude oil supplies. 9. Investment in infrastructure: - international business necessitates proper development of infrastructure. A company entering international business must invest in roads.
Douglas Wind and Pelmutter advocated four approaches of international business. They are: 1. Echnocentric Approach
The domestic companies normally formulate their strategies, their product design and their operations towards the national markets, customers and competitors. But, the excessive production more than the demand for the product, either due to competition or due to changes in customer preferences push the company to export the excessive production to foreign countries. The domestic company continues the exports to the foreign countries and views the foreign markets as an extension to the domestic markets just like a new
region. The executives at the head office of the company make the decisions relating to exports and, the marketing personnel of the domestic company monitor the export operations with the help of an export department. The company exports the same product designed for domestic markets to foreign countries under this approach. Thus, maintenance of domestic approach towards international business is called ethnocentric approach. Managing Director
Manager - R&D
Manager Human Resources
Manager Production
Manager Finances
Manager Marketing
Asst. Manager North India
Asst. Manager South India
Asst. Manager Exports
Fig: Organization Structure of an Echnocentric Company
2. Polycentric Approach
The domestic companies, which are exporting to foreign countries using the ethnocentric approach, find at the latter stage that the foreign markets need an altogether different approach. Then, the company establishes a foreign subsidiary company and decentralists all the operations and delegate decision making and policy-making authority to its executives. In fact, the company appoints executives and personnel including a chief executive who reports directly to the
Managing Director of the company. Company appoints the key personnel from the home country and the people of the host country fill all other vacancies.
Fig: Organization Structure of a Polycentric Company
3. Regiocentric Approach
The company after operating successfully in a foreign country thinks of exporting to the neighboring countries of the host country. At this stage, the foreign subsidiary considers the regions environment (for example, Asian environment like laws, culture, policies etc.) for formulating policies
and strategies. However, it markets more or less the same product designed under polycentric approach in other countries of the region, but with different market strategies.
Fig: Organization Structure of a Regiocentric Company
4. Geocentric approach
Under this approach, the entire world is just like a single country for the company. They select the employees from the entire globe and operate with a number of subsidiaries. The headquarters coordinate the activities of the subsidiaries. Each subsidiary functions like an independent
and
autonomous
company
in
formulating
policies,
strategies, product design, human resource policies, operations etc.
Fig: Organization Structure of a Geocentric Company
