INTERNATIONAL
BUSINESS
What do you think about the
following?
• Why do companies engage in business beyond
domestic borders?
• How has globalisation changed what we wear, what
we eat, and where we work in India since 1991?
• Has globalisation made India more self-reliant or
more dependent?
• Do multinational corporations (MNCs) bring
opportunity or exploitation to developing countries?
Why companies engage in IB?
• Seek opportunities for growth through market
diversification
• Earn higher margins and profits
• Gain new ideas about products, services and business
methods
• Be closer to supply source
• Gain access to lower cost or better value factors of
production
• Develop economies of scale
• Confront international competition more effectively
• An iPhone is an example of globalisation in action.
• Why doesn’t Apple manufacture the entire phone in
one country?
• Why is assembly in China/Vietnam cheaper than in
the U.S.?
• Why does Apple retain high-value IP functions in the
U.S.?
• Why is an iPhone more expensive in India than in the
U.S.?
• What happens if tensions rise between China and the
U.S.?
Drivers of
Globalisation
POLITICAL - Lowering of Trade
and Investment Barriers
• Reduction in tariffs and quotas
• Role of GATT and WTO
• Removal of restrictions to FDI
• Lowering of Trade and investment barriers has
created competition (e.g. Indian automobile industry)
• Increase in the number of bilateral investment
treaties and DTAAs
Global Markets
• Tastes and preferences of consumers in different
nations are converging on some global norm
• Iphone, movies, OTT
• Despite offering the same basic product worldwide,
marketing strategies and product features sometimes need
to be customized (KFC)
• Global markets for industrial goods such as aluminum,
oil, semiconductors
Rise of low-cost countries/ better
quality suppliers
• A company may acquire something not readily
available in its home country
• Low cost countries (LCCs) provide a platform to
manufacture goods or secure services at lower costs
• China, India, Mexico, Brazil
• China has become a key centre for hardware design and
manufacturing
• India specializes in IT services, call centres, business back-
office operations
Expansion of Technology
• Communication
• Transport
• Information processing
Consumer Pressures
• Rising wants and aspirations
• Awareness about products and
services available abroad
• Rise in global income
• New, better and differentiated
products
Emergence of Global institutions
• Global institutions have been created
• to help manage and regulate the global marketplace,
and
• to promote the establishment of multinational treaties
to govern the global business system
• GATT, WTO, IMF, World Bank, UN
The Globalization debate
• “Why are some countries now pulling back from
globalisation after decades of promoting it?”
• “During the COVID-19 pandemic, why did global
supply chains collapse—and what does that tell us
about the limits of globalisation?”
• Why do Indian IT firms thrive in global markets,
while Indian farmers protest international trade
agreements?
Globalisation debate
• Merits • Pitfalls
• Lower prices for • Destroys manufacturing
goods and services jobs in wealthy,
advanced countries
• Economic growth
stimulation • Companies move to
countries with fewer
• Increase in consumer labor and environment
income regulations
• Creates jobs • Labour exploitation
• Countries specialize in • Effects on environment
production of goods
and services that are • Loss of sovereignty
produced most
efficiently