Introduction to International Business

Political boundaries of nations, states or regions are no longer the fetters for business in the global economic paradigm. There is a paradigm shift in the way businesses are done now. A product is seldom completely produced in one country nor consumed in the same country. On the other hand, its design, fabrication, assembling, stamping, etc… are done in different countries and then marketed world over. Thus production and consumption are globally spread for most products. That is the international aspect of business we are concerned with. Available data suggest that Multinational Companies (MNCs) or Multinational Enterprises (MNEs) are vastly responsible for the growth of cross-border or international production and marketing.

 

Economics, trade and finance know no national borders. By their nature these are not confinable through man-made fetters for long time. Economics, trade and finance are truly international, multinational, global and transnational. We see the continents of the world and some nations are divided by waters. But, beneath the depths of even the deepest Pacific Ocean, land mass unifies continents and nations. So, geographical divisions based on political aspects are man-made. But the nature unifies. And this applies to global economy, of which global trade and global finance are integral parts

 

 

The beverages you drink might be produced in India, but with the collaboration of a USA company. The perfume you apply might have been produced in France. The television you watch might have been produced with the Japanese technology.

 

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.

 

International business is a term used to collectively describe the operations of firms with interests in several countries. Simply, it is business beyond national or continental borders by firms. You hear very often terms such as International competition, Multinational corporation, Transnational deals, Globalization, Multi-domestic business models, Worldwide sales, dynamics of Global Market place and so on daily. All these capture one or other issues concerning international business. You know international business is the most competitive with mounting uncertainties. Success in international business requires more business acumen than managing a domestic firm. Of course opportunities abound in the borderless world. So also the threats wield an intimidating future.

 

Firms must be able to reap the opportunities while ably negotiating with the attending threats. Firms must not only deal with general business functions and values, but also understand and work from a global perspective that adds multiple variables such as divergent geo-political dynamics, multi-cultural nuances, volatile-financial conditions, different time zones, and vast spatial distance issues to the international business management equation. Deftness and foresightedness are much needed for doing business across the globe.

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, UniLever 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.

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