Professional Documents
Culture Documents
1.1
International Business
International business can be defined as any business that crosses the national borders
of a country. It includes importing and exporting; international movement of goods,
services, employees, technology, licensing, and franchising of intellectual property
(trademarks, patents, copyright and so on). International business includes investment
in financial and immovable assets in foreign countries. Contract manufacturing or
assembly of products for local sale or for export to other countries, establishment of
foreign warehousing and distribution systems, and import of goods from one foreign
country to a second foreign country for subsequent local sale is part of international
business.
1.2
Globalization
Globalization is a process where businesses are dealt in markets around the world,
apart from the local and national markets. According to business terminologies,
globalization is defined as 'the worldwide trend of businesses expanding beyond their
domestic boundaries'. It is advantageous for the economy of countries because it
promotes prosperity in the countries that embrace globalization.
1.4
Drivers of Globalization
1. Global Market Place: International business has become easier since the
advent of internet and the emergence of e-business. A company must have a
good product, the right strategy and an appetite to take risk at the global
marketplace in order to do business internationally.
2. Emerging Markets: Compared to developed countries, developing countries
are growing at a healthy pace, thus reducing the barriers of trade. Emerging
markets provide an unexplored marketplace with unlimited potential and
scope for business. Any company with good or innovative products and
services cannot afford to ignore the opportunities provided by these emerging
markets. Foreign Direct Investment (FDI) policy of a nation lays down the
foundation for competitive and prosperous market conditions. Embracing
globalization has become a vital component of development strategy for
developing countries, and is being used as an effective instrument of economic
growth. Some countries like China, India, and Philippines also provide tax
holidays to foreign companies for setting up their business (in certain sectors)
in these countries. Such incentives make these countries an attractive
destination for companies looking for low cost production.
3. Small Domestic Market: A company, which is mature in its domestic market,
is driven to sell in more than one country because the sales volume achieved in
its own domestic market is not large enough to fully capture the manufacturing
economies of scale. For example, Nokia is an international company based in
Finland.
4. Diminishing Trade and Investment Barriers: The lowering of barrier to
trade and investments (by most countries around the world) also provides an
opportunity to companies looking for expanding their business. Expanding
into a foreign country provides access to low wage labourers, highly skilled
work force, larger market base and so on. Companies have a chance to set up
subsidiaries in low-cost countries for manufacturing their products. Easy flow
of goods and services results in the company literally designing the product in
one country, manufacturing the various components in different countries,
assembling the final product in a third country and marketing the product
across the world.
IV.