INTERNATIONAL BUSINESS

PGDM – 3rd Trimester | Comprehensive Exam Notes

MODULE 1: International Business Environment

MODULE 2: Globalization

Prepared for Academic Excellence | Score Full Marks

Covers: Concepts | Theories | Real-World Examples | Case Studies | Exam Q&A
 MODULE 1
INTERNATIONAL BUSINESS ENVIRONMENT

1.1 Evolution, Drivers, and Challenges of International Business

Definition
International Business (IB) refers to all commercial transactions — private or governmental — that take
place between two or more countries. It encompasses trade, investment, and operational activities that
cross national borders.

Evolution of International Business

IB has evolved through distinct historical phases:

Era Period Key Feature Example

Pre-Colonial Pre-1500 AD Barter, Silk Route trade India–Rome spice trade
Trade
Mercantilism 1500–1800 Maximize exports, British East India
minimize imports Company
Industrial 1800–1900 Factory production, Manchester textiles to
Revolution colonial markets India
Post-WW II 1945–1990 GATT, Bretton Woods US, Japan, Germany
Liberalization institutions led exports
Globalization 1990–2010 FDI boom, MNCs, WTO McDonald's, Coca-Cola
Era formation global expansion
Digital & 2010– E-commerce, digital Amazon, Alibaba, TCS,
Platform Era Present trade, AI Infosys

Key Drivers of International Business

MNEMONIC - TIPLE: Technology, Integration of markets, Political liberalization, Logistics
improvement, Economic growth

• Technology & Communication: Internet, smartphones, and cloud computing have eliminated
barriers. Example: Infosys delivers IT services from Bengaluru to Wall Street in real time.
• Market Liberalization & Trade Agreements: WTO, ASEAN, NAFTA/USMCA opened borders.
India's LPG (Liberalization, Privatization, Globalization) reforms in 1991.
• Economic Growth in Emerging Markets: BRICS countries (Brazil, Russia, India, China, South
Africa) became major FDI destinations.
• Multinational Corporation (MNC) Expansion: Apple's iPhone assembled in China, sold globally
— exemplifies global value chains.
• Improved Transportation & Logistics: Container shipping cut costs by 90%; DHL, FedEx enable
next-day global delivery.
 • Access to Resources & Talent: Companies like Tesla source lithium from Chile, hire engineers
from India.

⭐ KEY EXAM POINT: Drivers can be remembered as PESTLE factors in reverse — they
drive IB rather than restrain it: Political openness, Economic integration, Social
convergence, Technology, Legal harmonization, Environmental shared concerns.

Challenges of International Business

Challenge Description Real Example
Political Risk Government policy changes, Vedanta's Zambia copper
nationalization, political mine nationalization
instability
Cultural Language, religion, consumer McDonald's vegetarian
Differences behaviour variations menu in India
Currency Exchange rate volatility affects Infosys losing revenue due
Fluctuation profit margins to USD-INR movement
Trade Barriers Tariffs, quotas, non-tariff US-China tariff war 2018–
barriers 2024
Legal & IP laws, labour laws, taxation Google fined in EU for
Regulatory vary by country GDPR violations
Differences
Competitive Global companies compete in Amazon vs. Flipkart in India
Intensity domestic markets
Ethical & CSR Labour standards, Nike's sweatshop
Issues environmental practices controversy in SE Asia

1.2 Modes of Entry into International Markets

Definition
Modes of entry are the strategies and pathways a company uses to enter a foreign market. The choice
depends on risk appetite, capital availability, control desired, and host-country conditions.

Overview: Entry Mode Spectrum (Low Risk → High Risk, Low Control → High Control)

EXPORTING → LICENSING → FRANCHISING → JV → WHOLLY OWNED

SUBSIDIARY
Low Risk / Low Control ◄────────────────────────────► High Risk / High Control

Mode Description Investm Contro Risk Example

ent l
Exporting Selling domestic Low Low Low Amul exporting
(Direct/Indirect goods to foreign dairy to USA
 ) markets
Licensing Grant IP rights to Very Low Low Mediu Disney licensing
foreign firm for m characters to Indian
royalty firms
Franchising Business model Low Mediu Mediu McDonald's, KFC
+ brand granted m m in India
to franchisee
Contract Production Low Mediu Mediu Apple
Manufacturing outsourced to m m manufacturing in
foreign factory Foxconn, China
Turnkey Build & hand Medium Low High L&T building power
Projects over complete plants in Middle
facility East
Joint Venture Shared Medium- Shared Share Maruti Suzuki
(JV) ownership with High d (India-Japan JV)
local partner
Strategic Cooperation Medium Partial Low- Air India +
Alliance without Med Singapore Airlines
ownership
merger
Wholly Owned 100% owned Very Full Very Amazon's India
Subsidiary foreign entity High High subsidiary
(WOS) (Greenfield/Brow
nfield)
Management Manage foreign Low Operati Low Taj Hotels
Contracts firm for fee onal managing hotels
globally
Acquisition / Buy existing Very Full Very Tata Motors
M&A foreign company High High acquiring Jaguar
Land Rover

Factors Influencing Entry Mode Choice

MNEMONIC - MARC: Market size, Assets (IP), Risk tolerance, Cost of entry
• Market Potential: Large markets attract higher commitment (e.g., China attracts WOS)
• Competitive Intensity: High competition favours acquisition for quick market access
• Political & Legal Environment: Restrictive FDI laws push companies towards JV/licensing
• Cultural Distance: Greater cultural difference → franchising/JV with local partner
• Firm's Resources: SMEs prefer licensing/exporting; MNCs go for WOS

Real Examples — Indian Context

• Tata Group: Used acquisitions (JLR, Corus, Tetley) for rapid global expansion
• Reliance Retail: Uses JVs and partnerships (e.g., with 7-Eleven, BP) for international retailing
• Infosys: Initially entered US via direct exporting of services, then opened offices (WOS)

⭐ KEY EXAM POINT: EXAM TIP: Be able to compare at least 3 modes in a table format.
 Always justify mode choice with at least 3 factors.

1.3 Active Players in Multinational Business

Key Actors in International Business

Player Role Example

Multinational Produce/sell in multiple Apple, Unilever,
Corporations (MNCs) countries; drive FDI Samsung, TCS
Transnational Globally integrated; no single Shell, Nestlé, ABB
Corporations (TNCs) home country dominance
Small & Medium Niche exporters; increasingly Indian handicraft
Enterprises (SMEs) global via e-commerce exporters on
Etsy/Amazon
State-Owned Govt. backed; strategic sectors ONGC, Air India
Enterprises (SOEs) (India), Aramco
(Saudi Arabia)
Born Global Firms International from inception; Zoho, Freshworks
often tech startups (Indian SaaS firms)
International Facilitate/regulate IB WTO, IMF, World
Institutions Bank, UNCTAD
Governments Set trade policy, negotiate Ministry of Commerce
agreements (India), USTR (USA)
NGOs & Civil Society Monitor labour, environment, Greenpeace, Oxfam
human rights standards
Individual Cross-border freelancers, digital Upwork freelancers,
Entrepreneurs nomads YouTube creators

MNC vs TNC vs Born Global

Characteristic MNC TNC Born Global
HQ Clear home country Distributed globally Often start in home
HQ country
Strategy Adapt locally Globally integrated Global from Day 1
Decision Making Centralized Network-based Flat/Agile
Example Unilever (UK HQ) ABB (dual Swiss- Freshworks (India-
Swedish) USA)

⭐ KEY EXAM POINT: MNCs are the dominant force in IB — they account for over 80% of
global trade and FDI flows (UNCTAD 2023). India hosts 2,400+ MNC subsidiaries.

1.4 International Environment of International Business

PESTLE Framework for International Environment
The international environment encompasses all external forces that affect cross-border business
operations. The PESTLE framework is the standard analytical tool.

Dimension Key Elements IB Impact Example

Political Government stability, Affects market entry US sanctions on
trade policy, FDI and operations Iran affecting Indian
regulations, sanctions oil imports
Economic GDP growth, Determines market India's GDP growth
exchange rates, attractiveness & cost attracting FDI in
inflation, BOP, structure manufacturing
interest rates
Social Demographics, Shapes product design McDonald's no-
culture, religion, & marketing strategy beef menu for
consumer behaviour, Indian Hindu
education consumers
Technologi R&D, automation, Creates competitive China's AI
cal digital infrastructure, advantage or leadership
IP protection disruption threatening US
tech firms
Legal IP laws, labour laws, Affects compliance EU GDPR
competition laws, costs and partnership increasing
contract enforcement terms compliance cost for
US tech firms
Environme Climate policy, Supply chain EU Carbon Border
ntal carbon regulations, disruption, ESG Adjustment
resource availability compliance affecting Indian
steel exports

Cultural Environment — Hofstede's Dimensions

Geert Hofstede identified 6 cultural dimensions that explain differences in workplace behaviour and
business practices across nations:
Dimension High-Score Low-Score IB Implication
Country Country
Power Distance India, China Denmark, Affects management style
(hierarchical) Sweden in subsidiaries
Individualism vs USA Japan, India Team vs. individual
Collectivism (individualist) (collectivist) incentive structures
Uncertainty Greece, Japan Singapore, Risk appetite in
Avoidance (risk-averse) Jamaica negotiations
Masculinity vs Japan Sweden (quality Work-life balance policies
Femininity (competitive, of life) abroad
assertive)
Long-Term China, Japan USA, UK Investment horizon and
Orientation strategic planning
Indulgence vs Mexico, USA China, Russia Consumer spending
Restraint patterns
1.5 Terms of Trade — Meaning, Types, Importance & Factors

Definition
Terms of Trade (ToT) measure the relationship between the prices a country receives for its exports
relative to the prices it pays for its imports.

ToT = (Index of Export Prices / Index of Import Prices) × 100

ToT > 100 = Favourable (export prices rising faster than import prices → more imports per unit of
export)
ToT < 100 = Unfavourable (import prices rising faster → country buys less with same exports)

Types of Terms of Trade

Type Full Name Formula/Basis What it Measures
Net Barter ToT Commodity ToT (Px/Pm) × 100 Price ratio: exports to
imports
Gross Barter Volume ToT (Qx/Qm) × 100 Volume ratio: export qty to
ToT import qty
Income ToT Export Capacity (Px/Pm) × Qx Export earnings' purchasing
Index power for imports
Single Productivity- (Px/Pm) × Productive Effect of productivity on ToT
Factorial ToT Adjusted efficiency of export
sector
Double Mutual Adjusts both export & Full productive efficiency
Factorial ToT Productivity import productivity comparison

⭐ KEY EXAM POINT: EXAM FAVOURITE: Net Barter ToT is most commonly tested. If
export prices rise by 10% and import prices rise by 5%, ToT = (110/105) × 100 = 104.76
(Favourable)

Importance of Terms of Trade

• National Income & Welfare: Favourable ToT = higher real income; citizens can afford more
imports
• Balance of Payments: Improved ToT helps reduce trade deficit
• Exchange Rate Determination: Countries with favourable ToT tend to have stronger currencies
• Economic Development: Countries exporting manufactured goods vs. primary commodities face
secular deterioration in ToT (Prebisch-Singer Hypothesis)
• Policy Decisions: Tariff policy, export promotion, import substitution are all guided by ToT
analysis
Factors Affecting Terms of Trade
MNEMONIC - RECIPE: Reciprocal demand, Exchange rates, Competition level, Import
duties, Productivity, Economic size

Factor Effect on ToT Example

Reciprocal Demand Higher demand for Global demand for Indian spices
country's exports raised India's export prices
improves ToT
Exchange Rate Depreciation reduces INR depreciation made oil imports
ToT (import prices rise costlier for India
in local currency)
Tariffs & Trade Import tariffs improve India's steel import tariffs protected
Policy ToT by reducing import domestic industry
demand
Inflation Higher domestic Turkey's hyperinflation worsened its
inflation worsens ToT export competitiveness
(exports become
expensive, less
competitive)
Productivity & Higher productivity China's manufacturing efficiency
Technology lowers export cost, enabled competitive export prices
improving ToT
Commodity vs Commodity exporters African nations exporting copper
Manufactured face long-run ToT face declining ToT over decades
deterioration
Global Economic Recession in importing COVID-19 crushed demand for
Conditions countries reduces India's textile exports
demand, worsens
exporter's ToT

1.6 Free Trade — Concept, Benefits, and Criticisms

Definition
Free trade is an economic policy under which governments do not restrict imports or exports, allowing
goods, services, and capital to flow freely across borders without tariffs, quotas, or subsidies.

Theoretical Foundations
• Adam Smith's Absolute Advantage (1776): Countries should export what they produce most
efficiently
• David Ricardo's Comparative Advantage (1817): Even if one country is absolutely better at
producing everything, it still benefits from specialization and trade
• Heckscher-Ohlin Theory: Countries export goods that use their abundant factors (covered in
detail in 1.7)

Advantages of Free Trade

 Advantage Explanation Real Example
Consumer Access to cheaper, diverse Indians buying Korean
Welfare goods electronics at competitive
prices
Economic Resources allocated to most India's IT export boom using
Efficiency productive uses surplus English-speaking
talent
Economic Larger markets, economies China's 30-year growth story
Growth of scale driven by export-led strategy
Innovation Global competition forces Samsung innovating to
R&D investment compete with Apple in global
markets
Employment Export-oriented jobs created Apparel industry
in competitive sectors employment in Bangladesh
Peace & Trade interdependence EU integration reducing
Cooperation reduces conflict incentives European war risk

Arguments Against Free Trade / Criticisms

• Infant Industry Argument: Developing industries need protection from foreign competition initially
(Hamilton, List)
• Unemployment: Import competition destroys domestic jobs (e.g., US manufacturing job losses
to China)
• Income Inequality: Benefits concentrated in capital-owners; workers lose jobs
• National Security: Over-reliance on foreign suppliers for critical goods (semiconductors,
medicines)
• Environmental Dumping: Low-regulation countries attract dirty industries (pollution haven
hypothesis)
• Race to the Bottom: Competition lowers labour standards and wages

⭐ KEY EXAM POINT: India's approach: India practices 'Strategic Trade Policy' —
selectively free trade in some sectors (IT, pharma) while protecting others (agriculture,
steel) through tariffs and subsidies.

Major Free Trade Agreements (FTAs)

FTA/Bloc Members Status
ASEAN 10 SE Asian nations Active — India has
ASEAN FTA
USMCA (formerly USA, Canada, Mexico Active since 2020
NAFTA)
EU Single Market 27 European nations Deepest integration
globally
RCEP 15 Asia-Pacific nations Active — India opted out
India-UAE CEPA India, UAE Active since 2022
India-Australia ECTA India, Australia Signed 2022, expanding
1.7 Heckscher-Ohlin (H-O) Model of Trade

Definition & Core Idea

The Heckscher-Ohlin (H-O) model, developed by Swedish economists Eli Heckscher (1919) and Bertil
Ohlin (1933), explains international trade based on differences in factor endowments (capital and
labour) between countries.

CORE THEOREM: A country will export goods that intensively use its relatively
abundant factor and import goods that intensively use its relatively scarce factor.

Key Assumptions of H-O Model

• Two countries, two goods, two factors of production (2x2x2 model)
• Identical technology available to both countries
• Perfect competition in all markets
• No transport costs or trade barriers
• Factors of production are mobile within a country but immobile between countries
• Factors can be classified as either capital-intensive or labour-intensive

Four Core Theorems

Theorem Statement Implication
H-O Theorem Capital-abundant countries India exports textiles (labour-
export capital-intensive goods; intensive); USA exports aircraft
labour-abundant export labour- (capital-intensive)
intensive goods
Factor Price Free trade equalizes factor Wages in developing countries rise;
Equalization prices (wages, rents) across wages in developed countries fall
(Samuelson) countries over time
Stolper-Samuelson Trade raises return to Indian workers gain from trade;
Theorem abundant factor, lowers return Indian capital owners may lose
to scarce factor relatively
Rybczynski Increase in one factor causes India's increase in labour supply →
Theorem disproportionate increase in disproportionate rise in labour-
the product using that factor intensive manufacturing output
intensively

Leontief Paradox
In 1953, Wassily Leontief tested the H-O model on US data and found a PARADOX: the USA (the
world's most capital-abundant country) was EXPORTING labour-intensive goods and IMPORTING
capital-intensive goods. This contradicted H-O theory.

Explanations for the Paradox:

 • Human Capital: US workers are highly skilled (= capital-rich in human capital terms)
• Natural Resources: The US imports resource-intensive goods (oil, minerals) that require capital
• R&D Intensity: US exports are R&D and knowledge-intensive, not traditional capital-intensive

Real-World Application
Country Abundant Factor H-O Prediction Reality Check
India Labour (especially Export labour-intensive Confirmed — India is world's
unskilled/semi-skilled) goods: textiles, top software exporter and
garments, software major garment exporter
services
USA Capital + Human Export Confirmed — Boeing, Pfizer,
capital capital/knowledge- Microsoft dominate global
intensive goods: trade
aircraft,
pharmaceuticals,
software
Saudi Arabia Natural resources Export resource- Confirmed — oil constitutes
(oil) intensive goods 70%+ of Saudi exports
China Labour + Capital Export both labour- Evolving — China moving up
(now) intensive (clothing) and the value chain from clothing
capital-intensive to electronics to AI
(electronics)

⭐ KEY EXAM POINT: EXAM TIP: H-O model is a favourite 10-15 mark question. Always
include: assumptions, core theorem, 4 theorems, Leontief Paradox, and 2 real examples.

1.8 Product Life Cycle (PLC) Theory of International Trade

Definition
The PLC theory, proposed by Raymond Vernon (1966), explains trade patterns based on the stage of a
product's life cycle. It shows how a product first produced in an advanced country gradually migrates
production to developing countries.

The Four Stages of PLC Theory (Vernon's International Trade Version)

DIAGRAM: Product Life Cycle & Trade Pattern

Sales/ | /\
Production | / \ Maturity
| / \ ___________/
| / Growth\ /
| / \ / Standardization \
| / \/ \ Decline
| Intro \
|_______________________________________________> Time
US produces & exports | US exports grow | LDCs start production | LDCs become
 exporters

Stage Location of Trade Direction Key Characteristic Example

Production
Introduction Advanced country Produced & High R&D, skilled iPhone first
(USA/EU) — consumed labour, consumer launched in
innovation hub domestically; small feedback loop USA (2007);
exports to other initially only
advanced countries available there
Growth Advanced country Exports to similar Competition iPhones sold
scales production; markets; other emerges; price globally;
some production to developed nations becomes important Samsung
other developed start producing (South Korea)
nations starts
competing
Maturity / Production begins in Advanced country Product iPhones
Standardizat developing countries may start importing; standardized; cost assembled in
ion (lower cost) global production competition China by
shifts dominates Foxconn; cost is
key
Decline Predominantly Advanced country Mass market, Basic feature
developing countries becomes net commodity-like phones now
produce IMPORTER; product assembled in
developing country India, Vietnam,
becomes exporter Bangladesh

PLC Theory — Real-World Examples

Product Introduction Growth Maturity Decline
(Current)
Semiconductors USA (Bell Labs, USA + Japan 1970- Taiwan, South Production
Intel 1960s) 80s Korea (TSMC, moving to India,
Samsung) Vietnam
Smartphones USA (Apple 2007) USA + South Korea China (assembly) Vietnam, India
+ EU dominant becoming
assembly hubs
Automobiles USA, Germany Japan (1960s-70s) South Korea, China India, Mexico
(1900-1940s) (1990s-2000s) becoming export
hubs
Software USA (Silicon USA + India IT India, China, Global distributed
Valley) boom (1990s) Eastern Europe teams; no single
hub

Limitations of PLC Theory

• Does not explain intra-industry trade (countries simultaneously importing and exporting same
product)
• Globalized production from Day 1 (Born Global firms) contradicts the sequential stage model
• Digital products (software, apps) don't physically relocate; theory less applicable to services
 • Assumes USA as the sole innovator — ignores innovations from Japan, Germany, South Korea

⭐ KEY EXAM POINT: EXAM NOTE: PLC Theory is often asked as 'Explain Vernon's PLC
theory with a diagram and example.' Include all 4 stages, trade direction in each stage,
and limitations.

1.9 Balance of Payments (BOP)

Definition
The Balance of Payments (BOP) is a systematic record of all economic transactions between residents
of a country and the rest of the world during a specific period (usually one year). It shows whether a
country is a net lender or borrower to the world.

Structure of BOP

BOP STRUCTURE
BOP = Current Account + Capital Account + Financial Account + Errors & Omissions

Account Sub-Components India's Position Example

(approx.)
Current Account 1. Trade in Goods Goods deficit India exports IT services
(CA) (Merchandise Balance) (~$250B); Services $200B+; imports oil
2. Trade in Services 3. surplus (~$150B); $130B+
Primary Income (wages, Remittance inflow
investment income) 4. largest globally
Secondary Income (~$120B)
(remittances, grants)
Capital Account Capital transfers (debt Small in size for India Indian migrant bringing
forgiveness, migrant assets when relocating
transfers); Non-
produced, non-financial
assets (patents, land
rights)
Financial 1. Foreign Direct FDI inflow ~$70-80B; Apple investing $1B in
Account Investment (FDI) 2. Portfolio volatile; India = FDI inflow; FIIs
Portfolio Investment 3. Forex reserves buying Indian stocks =
Other Investment (loans, ~$640B (2024) portfolio
trade credit) 4. Reserve
Assets (RBI forex
reserves)
Errors & Statistical discrepancy Usually small; reflects Unrecorded hawala
Omissions between recorded and data quality transactions, smuggling
actual transactions

BOP Always Balances — The Accounting Identity

By definition, BOP = 0 (always balances). A deficit in the Current Account must be financed by a
surplus in the Capital/Financial Account (borrowing, FDI inflows, drawing down reserves).

Current Account Deficit (CAD) — India's Challenge

India's BOP Summary (FY 2023-24 approx.):
Goods Exports: ~$450B | Goods Imports: ~$680B → Trade Deficit: ~$230B
Services Exports: ~$340B | Services Imports: ~$180B → Services Surplus: ~$160B
Remittances Inflow: ~$120B (World's largest recipient)
CAD: ~$35-40B (manageable at ~1.2% of GDP)
FDI Inflow: ~$70B | Forex Reserves: ~$640B

BOP Disequilibrium — Causes & Remedies

Cause of Deficit Policy Remedy
High import demand (oil, gold, electronics) Import tariffs, domestic production incentives
(PLI scheme)
Low export competitiveness Export promotion, currency depreciation, FTAs
Capital flight Higher interest rates, stable political environment
Inflation eroding export competitiveness Monetary tightening, productivity improvement

⭐ KEY EXAM POINT: EXAM TIP: Know India's specific BOP figures. Current Account
Deficit is a critical concept — explain how it is financed and its relationship to exchange
rates.

1.10 Corporate Social Responsibility (CSR) in International Business

Definition
CSR refers to a company's commitment to operate ethically and contribute to economic development
while improving the quality of life for its workforce, local community, and society at large. In IB, CSR
becomes complex as companies operate across different legal, cultural, and ethical standards.

Carroll's CSR Pyramid

CARROLL'S CSR PYRAMID (Bottom to Top)
/\ Philanthropic: Be a good corporate citizen (donate,
community)
/ \ Ethical: Do what is right & fair (avoid harm)
/ \ Legal: Obey the law of the land
/______\ Economic: Be profitable (foundation of all CSR)

CSR in International Context — Challenges

Challenge Example CSR Response
 Labour Standards Nike's suppliers using Supplier Code of Conduct;
Gap child labour in Pakistan third-party audits
Environmental Apple's suppliers polluting Green supply chain; CDP
Standards rivers in China disclosure requirements
Corruption & Siemens bribery scandal Anti-bribery policy; FCPA/UK
Bribery in 8 countries (2008) Bribery Act compliance
Cultural Relativism LGBTQ+ workplace Global minimum standards +
policies in conservative local adaptation
countries
Tax Avoidance Google, Amazon routing OECD BEPS framework;
profits through tax havens public country-by-country
reporting

CSR in India — Legal Mandate

India is one of the FIRST countries to MANDATE CSR spending by law (Companies Act, 2013):
• Companies with net worth > Rs. 500 crore, OR turnover > Rs. 1,000 crore, OR net profit > Rs. 5
crore must spend 2% of average net profit of last 3 years on CSR activities
• CSR activities: Education, health, environment, rural development, poverty alleviation, women
empowerment
• Non-compliance: Mandatory disclosure + explanation required; directors can face penalties

Company CSR Activity International Dimension

Tata Group Education (Tata Trusts), healthcare, Follows UK and Indian CSR
rural development — Rs. 1200+ standards across subsidiaries
crore/year
Infosys Environment (carbon neutral by Reports to GRI, CDP; ESG-linked
2040), education (Infosys executive pay
Foundation)
Unilever India Lifebuoy handwashing campaigns; Linked to global Unilever
(HUL) Project Shakti (women Sustainable Living Plan
entrepreneurs)
Reliance Jio for rural connectivity; COVID-19 SDG-aligned CSR reporting
Industries relief (~Rs. 500 crore)

⭐ KEY EXAM POINT: EXAM NOTE: India's mandatory 2% CSR law is a global first.
Always connect Carroll's Pyramid to international CSR challenges. ESG (Environmental,
Social, Governance) reporting is the modern evolution of CSR.
MODULE 1 — CASE STUDIES

CASE STUDY: 1: Tata Motors' Acquisition of Jaguar Land Rover (JLR)

BACKGROUND
In 2008, Tata Motors (India) acquired Jaguar Land Rover (JLR) from Ford for $2.3 billion. Tata was
predominantly a commercial vehicle manufacturer with limited international presence. JLR was an
iconic British luxury brand struggling under Ford's ownership.
PROBLEM
How should an Indian conglomerate enter the premium global automotive market? Should it build
from scratch (Greenfield), license a brand, or acquire an existing brand?
CONCEPT LINKAGE
Modes of Entry (Acquisition/Brownfield FDI); Multinational Business Players; International Business
Environment (cultural differences between Indian management and British workforce); Terms of
Trade implications for UK manufacturing exports.
ANALYSIS
Tata chose ACQUISITION — the highest-commitment mode of entry — because: (1) JLR had
established brand equity worth far more than acquisition price; (2) Greenfield entry into luxury
automotive would take 20+ years; (3) JLR's British heritage was a strategic asset. However,
challenges included: cultural integration (British workers skeptical of Indian management), financial
stress (Tata took on JLR's existing liabilities), and the 2008-09 global financial crisis immediately
after acquisition.
SOLUTION
Tata's patient, hands-off approach proved successful. JLR revenue grew from £6.4B (2008) to
£22B (2023). Key success factors: (1) Retained British management initially; (2) Invested Rs.
30,000+ crore in R&D; (3) Aggressively expanded in China (JV with Chery Automobile); (4)
Launched electrification strategy (Defender PHEV, Range Rover EV). LESSON: When entering
high-complexity markets, acquisition of established brands + local partnership + long-term
commitment is the optimal strategy.

CASE STUDY: 2: McDonald's Entry into India — Cultural Adaptation & Mode
of Entry
BACKGROUND
McDonald's entered India in 1996 through a Joint Venture (JV) with Connaught Plaza Restaurants
(north India) and Hardcastle Restaurants (west/south India). India presented unique challenges:
80% Hindu (no beef), 40% vegetarian, diverse regional tastes.
PROBLEM
How to enter a culturally complex, price-sensitive market where the core global product (beef
burger) is culturally unacceptable?
CONCEPT LINKAGE
Modes of Entry (Joint Venture + Franchising); International Business Environment (cultural/social
factors); CSR (vegetarian options, halal certification); Free Trade (WTO-compliant FDI policy).
ANALYSIS
McDonald's used a JV structure to leverage local partners' cultural knowledge, supply chain
relationships, and regulatory navigation expertise. Product adaptation: Removed all beef/pork
products; introduced McAloo Tikki, Maharaja Mac (chicken), McVeggie; kept prices 50-60% lower
than US equivalents. By 2024, India has 500+ McDonald's outlets, making it one of the fastest-
growing markets.
SOLUTION
The success formula: (1) JV for local market knowledge; (2) Radical product adaptation
(glocalization); (3) Local supply chain development (cold chain, potato farming, lettuce cultivation);
(4) Price localization. LESSON: Cultural intelligence + appropriate entry mode + product adaptation
= key to success in complex emerging markets.

CASE STUDY: 3: India's Current Account Deficit Crisis (2013 Taper Tantrum)
BACKGROUND
In 2013, India's Current Account Deficit hit 4.8% of GDP — the highest ever. The US Federal
Reserve announced 'tapering' (reducing quantitative easing), causing capital flight from emerging
markets. India's rupee fell from Rs. 53 to Rs. 68 per USD in months.
PROBLEM
A large CAD makes India vulnerable to external shocks. Capital outflows compound the deficit by
weakening the currency, making imports even more expensive.
CONCEPT LINKAGE
Balance of Payments (CAD, Financial Account, Forex Reserves); Terms of Trade (rupee
depreciation worsened ToT by raising import prices); International Business Environment
(economic dimension).
ANALYSIS
BOP dynamics: Large CAD meant India needed massive capital inflows to finance it. When Fed
tapering signalled risk aversion, FIIs (Foreign Institutional Investors) withdrew $10B+ from Indian
markets in weeks. RBI forex reserves fell from $300B to $275B. Rupee depreciation made oil
imports (India imports 80% of oil) even more expensive, further widening CAD — a vicious cycle.
SOLUTION
Emergency measures taken: (1) RBI Governor Raghuram Rajan raised interest rates sharply
(attracted capital); (2) Gold import restrictions (gold was 30% of CAD); (3) FCNR(B) deposit
scheme (raised $34B from NRI diaspora); (4) Long-term: PLI schemes to boost domestic
manufacturing and reduce import dependence. LESSON: BOP management requires simultaneous
monetary, fiscal, and structural policy responses. Reliance on volatile portfolio flows to finance CAD
is dangerous.

CASE STUDY: 4: Apple's Global Value Chain — PLC Theory & H-O Model in
Action
BACKGROUND
Apple Inc. (USA) designs iPhones in Cupertino, California. Components are sourced from Japan
(cameras, displays), South Korea (chips, OLED), Taiwan (TSMC — semiconductors), Germany
(sensors), and assembled in China (Foxconn/Pegatron). Starting 2023, assembly shifting to India
(Foxconn Sriperumbudur, Tata Electronics).
PROBLEM
How does Apple's global value chain reflect core IB theories? What strategic rationale drives
production location decisions?
CONCEPT LINKAGE
Product Life Cycle Theory (smartphone industry maturation); Heckscher-Ohlin Model (factor
endowments determining production location); Modes of Entry (contract manufacturing);
International Business Environment (geopolitical risk — China+1 strategy).
ANALYSIS
PLC perspective: Smartphones have moved from Introduction (Apple USA design, 2007) → Growth
(Samsung South Korea competing) → Maturity (mass assembly in China) → now Decline stage for
simple assembly (shifting to India/Vietnam). H-O perspective: USA has comparative advantage in
design/R&D (human capital abundance); China/India have labour abundance for assembly;
Japan/South Korea have capital/technology abundance for components. Factor Price Equalization:
Apple's shift to India partly reflects rising Chinese wages eroding China's labour cost advantage.
SOLUTION
Apple's strategy — 'China+1' supply chain diversification — reduces geopolitical risk (US-China
tensions) while capturing India's labour cost advantage. India FDI commitment: $1B+ in FY24.
LESSON: Global value chains are not random — they follow H-O factor endowment logic, PLC
stage logic, and geopolitical risk management simultaneously.

CASE STUDY: 5: Infosys — Born Global IT Firm & Terms of Trade

BACKGROUND
Infosys was founded in 1981 in Pune with $250 in capital by 7 engineers led by N.R. Narayana
Murthy. By 2024, it is a $18B+ revenue global IT firm employing 300,000+ people across 50
countries. It built its business by exporting software services to USA/Europe from India.
PROBLEM
How did Infosys leverage India's comparative advantage to become a global leader? How do
exchange rate movements (ToT factor) affect its profitability?
CONCEPT LINKAGE
H-O Model (India's human capital abundance in English-speaking engineering talent); Terms of
Trade (INR/USD exchange rate as key revenue driver); Modes of Entry (exporting services initially
→ WOS later); Active Players (Born Global + MNC transition).
ANALYSIS
H-O Factor: India has an abundance of English-proficient engineering graduates at 1/8th the US
salary cost. This is India's comparative advantage in IT services. ToT Impact: Infosys earns ~62%
revenue in USD. A 1% depreciation of INR vs USD increases Infosys revenue by ~1-1.5% in INR
terms. However, reverse holds — rupee appreciation severely hurts margins. In FY2023, rupee
depreciation added ~Rs. 8,000 crore to revenue in INR terms despite flat USD revenues.
SOLUTION
Infosys strategy to manage ToT/FX risk: (1) Natural hedging — increasing USD expenses by hiring
in USA; (2) Forward contracts and options for currency hedging; (3) Revenue diversification —
Euros, GBP, AUD to reduce USD dependence; (4) Value chain upgrade — moving from cost
arbitrage to high-value AI/cloud consulting. LESSON: Understanding ToT and factor endowment
theory is not just academic — it directly explains how India's IT industry was built and how it
manages its biggest financial risks.
MODULE 1 — IMPORTANT QUESTIONS & ANSWERS

Section A: Theory Questions

Q1. Define International Business. Discuss the evolution and key drivers of globalization
of businesses.
INTRODUCTION: International Business encompasses all commercial transactions between parties
in different countries. Its evolution spans from ancient silk route trade to today's digital economy.
BODY: Evolution: Pre-colonial trade (barter) → Mercantilism (1500-1800) → Industrial Revolution
(1800-1900) → Post-WW II liberalization (GATT, Bretton Woods) → WTO-led globalization (1990s)
→ Digital IB (2010-present). Key Drivers: Technology (internet, smartphones), Market liberalization
(WTO, FTAs), Economic growth in emerging markets (BRICS), MNC expansion, Improved logistics,
Global value chains, Access to resources and talent. Real Examples: India's 1991 LPG reforms
opening economy; China joining WTO in 2001 triggering its export boom. CONCLUSION: IB today
is driven by the interplay of technological capability, political will for openness, and economic
incentives. Firms that understand these drivers gain first-mover advantages in emerging markets.

Q2. Explain the various Modes of Entry into international markets. Which mode would
you recommend for a mid-sized Indian IT firm entering Germany, and why?
INTRODUCTION: Entry modes range from low-risk/low-control (exporting) to high-risk/high-control
(WOS/acquisition). Choice depends on market characteristics and firm capabilities. BODY: Modes:
Exporting → Licensing → Franchising → Contract Manufacturing → JV → Strategic Alliance →
WOS (Greenfield/Brownfield/Acquisition). Key comparison dimensions: Investment required, degree
of control, risk exposure, speed of market access. Recommendation for Indian IT firm in Germany:
WHOLLY OWNED SUBSIDIARY (Greenfield) with initial STRATEGIC ALLIANCE with a German IT
consultancy. Reasoning: (1) Germany's high-trust business culture values direct relationships over
third parties; (2) German data privacy laws (GDPR) require local presence and compliance
capability; (3) IT services require tight client integration — licensing/franchising inadequate; (4) JV
risky due to IP sharing; (5) Strategic alliance with local firm provides initial market access, client
referrals, and cultural navigation. CONCLUSION: Entry mode decision is strategic — it must align
market characteristics, firm resources, IP protection needs, and long-term commitment. Indian IT
firms like Infosys, Wipro, and TCS have all used WOS + local acquisitions to establish European
presence successfully.

Q3. Critically examine the Heckscher-Ohlin Model of International Trade. Include all four
theorems and explain the Leontief Paradox.
INTRODUCTION: The H-O model extends Ricardo's comparative advantage by grounding it in
factor endowments — the relative abundance of capital and labour. BODY: Core Theorem: Capital-
abundant countries export capital-intensive goods; labour-abundant countries export labour-
intensive goods. Four Theorems: (1) H-O Theorem — as above; (2) Factor Price Equalization —
trade equalizes factor returns across countries over time; (3) Stolper-Samuelson — trade benefits
abundant factor, hurts scarce factor; (4) Rybczynski — increase in one factor causes
disproportionate rise in output using that factor intensively. Leontief Paradox: 1953 study showed
USA (most capital-rich country) actually exported labour-intensive goods — contradicting H-O.
Explanations: Human capital argument (US workers are skilled = capital-rich in human sense);
natural resource imports are capital-intensive; US exports are R&D intensive, not traditional capital-
intensive. India's Example: India exports labour-intensive IT services and garments (labour
abundant) — consistent with H-O. India imports capital equipment, aircraft, electronics (capital-
intensive) — also consistent. CONCLUSION: H-O model remains the most comprehensive
standard model of trade despite the Leontief Paradox. Its relevance endures in explaining factor-
driven trade patterns, though modifications (New Trade Theory by Krugman) extend it to include
economies of scale and product differentiation.

Q4. Explain Vernon's Product Life Cycle Theory with a diagram. How does it explain the
shifting of production from developed to developing countries?
INTRODUCTION: Vernon's PLC Theory (1966) provides a dynamic explanation of international
trade based on the innovation and diffusion of products across the globe. BODY: Stage 1 —
Introduction: Product invented in advanced country (USA), produced and consumed domestically;
small exports to similar advanced countries. High R&D cost, skilled labour needed. Example: iPhone
2007 — only sold in USA initially. Stage 2 — Growth: Production scales in home country; exports
grow to developed countries; competition from other advanced nations begins. Price becomes
important. Stage 3 — Maturity/Standardization: Technology diffuses; production moves to
developing countries with lower costs. Advanced country may start importing from low-cost
producers. Example: iPhone assembled in China (Foxconn) since 2008. Stage 4 — Decline: Mass
production in developing countries; advanced country becomes net importer; product is now a
commodity. Example: Basic handsets now assembled in Bangladesh, Vietnam. Diagram: Standard
S-curve with trade direction shift across stages (see notes diagram). Limitations: Does not explain
intra-industry trade; born global firms contradict sequential model; doesn't apply to services well.
CONCLUSION: PLC theory elegantly explains why manufacturing has progressively shifted from
USA/Europe to Japan/South Korea to China to India/Vietnam — a pattern perfectly visible in
electronics, textiles, and automobiles.

Q5. What is Balance of Payments? Explain its components with India-specific examples.
What causes BOP disequilibrium and how can it be corrected?
INTRODUCTION: BOP is a comprehensive record of a nation's economic transactions with the
world. It is both a diagnostic tool and a policy guide. BODY: Components: (1) Current Account:
Trade in goods (India's deficit ~$230B), trade in services (surplus ~$160B), primary income,
secondary income/remittances (India receives ~$120B — world's highest); (2) Capital Account:
Small in India — capital transfers; (3) Financial Account: FDI inflows (~$70-80B), portfolio
investment (volatile), reserve assets (RBI holds ~$640B forex). BOP always balances by accounting
identity — a CA deficit must be financed by FA surplus. Causes of Disequilibrium: High import
demand (oil, gold, electronics), low export competitiveness, capital flight, high inflation, deteriorating
terms of trade. Correction Mechanisms: Expenditure-switching (tariffs, exchange rate depreciation),
Expenditure-reducing (contractionary fiscal/monetary policy), Import substitution (PLI scheme),
Export promotion, Attracting FDI. India Example: 2013 CAD crisis (4.8% of GDP) corrected through:
gold import restrictions, FCNR(B) scheme, interest rate hike, and structural reforms boosting
exports. CONCLUSION: BOP management is central to macroeconomic stability. India's challenge
is managing a structural goods deficit by building manufacturing competitiveness (Make in India,
PLI) while leveraging its services and remittance surpluses.

Q6. What are Terms of Trade? Explain the types, importance, and factors affecting Terms
of Trade with examples.
INTRODUCTION: Terms of Trade (ToT) measure a country's relative position in international
exchange — whether its export earnings can buy increasingly more or less imports over time.
BODY: Formula: ToT = (Index of Export Prices / Index of Import Prices) × 100. Above 100 =
Favourable. Types: (1) Net Barter ToT — most common, price ratio; (2) Gross Barter ToT — volume
ratio; (3) Income ToT — export earnings' import purchasing power; (4) Single Factorial ToT —
productivity-adjusted; (5) Double Factorial ToT — mutual productivity adjustment. Importance:
Determines real income; influences exchange rates; guides trade policy; affects economic
development trajectory. Factors Affecting ToT: Reciprocal demand, exchange rates, tariffs, inflation
differentials, productivity changes, commodity vs. manufactured goods structure, global economic
conditions. India Examples: INR depreciation worsened India's ToT in 2013 as oil import costs
surged. India's IT export boom improved income ToT despite goods trade deficit. Prebisch-Singer
Hypothesis relevance: Countries exporting primary commodities face secular ToT deterioration.
 CONCLUSION: Managing ToT requires a combination of structural transformation (shifting from
primary to manufactured/service exports), exchange rate management, and productivity
enhancement — all of which are central to India's export strategy.

Q7. Write a detailed note on Corporate Social Responsibility (CSR) in International

Business. Include Carroll's Pyramid and India's mandatory CSR law.
INTRODUCTION: CSR has evolved from voluntary philanthropic activity to a strategic business
imperative, particularly complex in international contexts where ethical standards vary widely.
BODY: Carroll's CSR Pyramid (4 levels, bottom to top): (1) Economic Responsibility — be profitable;
(2) Legal Responsibility — obey laws; (3) Ethical Responsibility — do what is right beyond legal
requirements; (4) Philanthropic Responsibility — be a good corporate citizen. International CSR
Challenges: Labour standards (Nike's sweatshop controversy); Environmental standards; Corruption
and bribery (Siemens scandal); Cultural relativism; Tax avoidance (Google, Amazon via tax havens).
India's Mandatory CSR (Companies Act 2013, Section 135): Companies meeting any of 3 thresholds
(net worth Rs. 500cr / turnover Rs. 1000cr / net profit Rs. 5cr) must spend 2% of 3-year average net
profit on specified CSR activities. India is among the first countries to legally mandate CSR. Indian
Examples: Tata Group (CSR leaders, Rs. 1200cr+/year), Infosys Foundation (education, health),
HUL (Project Shakti — 100,000 rural women entrepreneurs), Reliance Foundation. ESG Evolution:
Modern CSR is embedded in Environmental, Social, Governance (ESG) frameworks used by
investors globally — creating financial incentive for responsible business. CONCLUSION: CSR in IB
is no longer optional — it is a strategic requirement. Companies ignoring CSR face reputational
damage, regulatory penalties, and exclusion from responsible investment portfolios. India's
mandatory CSR law sets a global precedent.

Section B: Case-Based Questions

QCB-1. Zara (Inditex, Spain) wants to enter India. Recommend the most suitable mode of
entry justifying your answer with relevant factors.
RECOMMENDATION: Joint Venture with an established Indian retail conglomerate (e.g., Reliance
Retail or Aditya Birla Fashion). JUSTIFICATION: (1) FDI Policy: India's FDI in multi-brand retail
requires 30% sourcing from Indian SMEs — a JV partner navigates this; (2) Cultural Knowledge:
Indian fashion tastes are diverse (regional variation) — local partner provides crucial insights; (3)
Real Estate Access: Premium retail real estate in India requires local relationships; (4) Supply
Chain: Indian textile supply chain navigation requires local expertise; (5) Brand Positioning: Zara is
mid-premium — pricing and positioning needs local calibration. Evidence: Zara already operates in
India via JV with Tata Trent. H&M, however, chose 100% FDI but still struggled with sourcing
requirements. CONCLUSION: JV is optimal for cultural-complex, policy-restricted retail markets.

QCB-2. India's trade deficit with China has exceeded $85 billion in FY2024. Analyse this
using the H-O model and suggest policy measures.
ANALYSIS USING H-O MODEL: China has comparative advantage in: (1) Capital-intensive
electronics manufacturing (high capital + technology endowment); (2) Labour-intensive goods at
scale (massive skilled workforce with manufacturing experience). India has comparative
disadvantage in: Capital goods, electronics, chemical intermediaries due to insufficient capital stock
and manufacturing infrastructure. WHY H-O EXPLAINS THE DEFICIT: India imports capital-
intensive goods (electronics, machinery) from China because India lacks sufficient capital
endowment. China imports India's labour-intensive IT services, pharmaceuticals — but these are
invisible trade, not captured in goods balance. POLICY MEASURES: (1) PLI Scheme — incentivize
domestic manufacturing in electronics, chemicals, pharma components (already $26B scheme); (2)
Tariff escalation on Chinese electronics — Buy India Electronics; (3) FTA with non-China suppliers
— Japan, South Korea, Taiwan for components; (4) Capital formation boost — increase domestic
savings and investment; (5) Technology transfer requirements for Chinese FDI. CONCLUSION: The
deficit reflects structural factor endowment gaps — addressing it requires long-term capital formation
and manufacturing capability building, not just trade restrictions.

QCB-3. As an IIBMS student, you are advising a Bengaluru-based agri-tech startup

(drone spraying services) on entering 3 international markets. Recommend entry modes
for: USA, Myanmar, and UAE.
USA: DIRECT EXPORTING of services initially + then ESTABLISH WOS. USA is a mature, high-IP-
protection market. Licensing is risky (IP theft). Starting with pilot contracts for US farms, then setting
up a Delaware incorporated subsidiary for tax efficiency and credibility. Timeline: 2-3 years.
MYANMAR: JOINT VENTURE with a local agri-business company. Myanmar has high political risk
(military government post-2021 coup), weak contract enforcement, and strong local relationship
requirements. A JV with a trusted local partner (who navigates regulatory uncertainty and local
farmer relationships) is essential. Manage risk with limited capital commitment. UAE: FRANCHISE
+ LICENSING model, leveraging UAE as a regional hub. UAE has strong IP protection, business-
friendly regulation, zero corporate tax (Mainland companies), and is a gateway to Middle East and
Africa. Franchise the drone service model to UAE agri-tech companies operating across the GCC
and Africa. Minimal capital risk, maximum geographic reach. CONCLUSION: No single entry mode
works across all markets. Political risk, IP protection, cultural factors, and market size all determine
optimal mode. The recommended sequence: UAE (low risk, high opportunity) → USA (high value)
→ Myanmar (long-term development market).
 MODULE 2
GLOBALIZATION

2.1 Routes of Globalization

Definition of Globalization
Globalization is the process by which businesses, cultures, and economies integrate and interact
across national borders, resulting in a more interconnected and interdependent world. It is driven by the
movement of goods, services, capital, people, ideas, and information.

Routes / Waves of Globalization

Wave Period Key Route Description Example
1st Wave 1870– Trade & Colonial trade; mass British cotton from
1914 Migration migration from Europe to India; Irish
Americas; telegraph migration to USA
communication
Reverse 1914– Deglobalizatio WWI, Great Depression, Smoot-Hawley
Wave 1945 n WWII collapsed trade; Tariff (USA 1930)
protectionism surged raised tariffs 20%
2nd Wave 1945– Trade in GATT-led tariff reduction; Japan's export
1980 Goods Marshall Plan; Bretton miracle; German
Woods; fixed exchange economic revival
rates
3rd Wave 1980– FDI + Services Financial deregulation; Indian IT boom;
2008 FDI boom; services China
trade; internet; manufacturing
outsourcing revolution dominance
4th Wave 2010– Digital & E-commerce; gig Amazon, Alibaba,
Present Platform economy; data flows; Zoom, Stripe, UPI
fintech; global platform for global payments
companies; AI

Routes Through Which Globalization Occurs

MNEMONIC - TIFCA: Trade in goods, Investment (FDI/FII), Financial flows, Cultural
exchange, Adoption of technology

• Trade Route: Reduction of tariffs (WTO), FTAs, e-commerce enabling global micro-trade
• Investment Route: FDI (factories, offices) and FII (stock markets, bonds) connecting capital
globally
• Technology Route: Internet, smartphones, cloud computing dissolving distance barriers
• Migration Route: Movement of skilled and unskilled labour — India's IT diaspora, Gulf migrant
workers
 • Cultural Route: Media, entertainment, food, fashion spreading globally — Hollywood, K-pop,
Bollywood
• Institutional Route: WTO, IMF, World Bank, G20, UN creating common rules and frameworks

Thomas Friedman's 'The World is Flat' — 10 Flatteners

Journalist Thomas Friedman identified 10 forces that 'flattened' the global playing field, enabling
individuals and companies to compete globally:
Flattener Description
1. Fall of Berlin Wall Opened Eastern Europe to global commerce; spread of democracy and
(1989) free market ideology
2. Netscape IPO (1995) Commercialized the internet; web browser made internet accessible to
masses
3. Workflow Software Enabled seamless digital collaboration across borders (SAP, Oracle,
email)
4. Open-Sourcing Apache, Linux, Wikipedia — collaborative development ignoring
borders
5. Outsourcing (Y2K) India's IT sector got global boost solving Y2K bug; demonstrated
remote work viability
6. Offshoring Companies moving entire production operations to low-cost countries
(China)
7. Supply Chaining Dell, Walmart's hyper-efficient global supply chains
8. Insourcing UPS, FedEx taking over entire supply chain and logistics functions for
companies
9. In-forming Google democratized access to information globally
10. Steroids Digital, mobile, virtual, personal amplification of all above flatteners

2.2 Modes of International Business

Overview
Modes of international business refer to the various ways companies conduct business across borders
— including trade in goods, trade in services, technology transfers, and investment. This is distinct from
'modes of entry' — it covers the broader business activity types.

Mode Description Indian Examples

Merchandise Trade Export/import of physical India exports pharmaceuticals
(Goods) goods across borders ($27B), gems & jewellery ($40B),
engineering goods
Services Trade Export/import of intangible India's IT/BPO exports ~$200B;
services: IT, tourism, finance, Medical tourism ~$9B
education
Foreign Direct Establishing or acquiring Tata's JLR; Amazon India; Apple
Investment (FDI) businesses in foreign countries manufacturing in India
Licensing & Selling rights to use IP, Indian pharma licensing generic
 Technology technology, processes drug formulations globally
Transfer
Franchising Granting business model rights McDonald's, KFC, Subway
to foreign operators franchises across India
Management Providing management Taj Hotels managing luxury
Contracts expertise to foreign entities properties globally
Turnkey Projects Engineering-Procurement- L&T, Tata Projects building
Construction (EPC) projects infrastructure in Middle East, Africa
Counter-trade Non-monetary trade — barter, India-Russia oil for rupees
offset, buyback arrangements arrangement; India-Iran trade in INR
E-commerce & Online cross-border Indian handicraft sellers on Amazon
Digital Trade transactions: goods, services, Global Selling; Freshworks SaaS
data globally

⭐ KEY EXAM POINT: India's Invisible Trade (Services) surplus ($160B+) partially
compensates its Visible Trade (Goods) deficit ($230B+). This distinction between visible
and invisible trade is crucial for BOP analysis.

2.3 Organizing International Business & Organizational Designs

Why International Organizational Design Matters

As firms expand internationally, they face a fundamental strategic tension: the need to achieve
GLOBAL INTEGRATION (efficiency, standardization) vs. LOCAL RESPONSIVENESS (adaptation to
local markets, cultures, regulations). How they resolve this tension determines their organizational
structure.

The Integration-Responsiveness Framework (Bartlett & Ghoshal)

INTEGRATION-RESPONSIVENESS (I-R) GRID

High | TRANSNATIONAL | GLOBAL

Integration | (Best of both) | (Standardize)
| |
Low | MULTIDOMESTIC | INTERNATIONAL
| (Local kings) | (Exporter)
Low Responsiveness High Responsiveness

Four International Organizational Strategies

Strategy Description Structure Advantage Disadvantage Example
International Home country Centralized Leverage Ignores local Harley-
innovations R&D; domestic needs; inflexible Davidson (US
transferred to decentralized innovations culture is the
foreign manufacturing globally brand)
subsidiaries; high
 home country
dominance
Multidomestic Each subsidiary Highly Maximum local No economies of Unilever
acts decentralized; responsiveness; scale; duplication (different
independently, subsidiaries cultural fit products in
fully adapts to are 'mini- each country)
local market companies'
Global Highly Centralized Economies of Low local Apple (same
standardized worldwide; HQ scale; consistent adaptation; iPhone
global controls all brand rigidity globally); IKEA
products/services (same furniture
; centralized globally)
decision-making
Transnational Both globally Matrix/Network Best of all Most complex; ABB, Unilever
integrated AND structure; worlds; flexible coordination transforming;
locally shared and efficient costs high Toyota global
responsive; authority localization
knowledge flows
in all directions

2.4 International Organizational Designs

Types of Organizational Structures for International Business

Structure Type Description Best For Advantage Disadvantage Example

International Separate Early-stage Simplicity; Creates Many Indian
Division division handles internationa dedicated domestic vs. companies
all international lization international international starting to
operations; focus divide; can export
domestic marginalize
divisions focus international
on home market
Global Worldwide Single- Standardization; Poor Oil companies
Functional functions product functional geographic like
Structure (Marketing, global expertise coordination; ExxonMobil
Finance, HR, companies concentration regional needs
R&D) report to ignored
HQ functional
heads
Global World divided Multidomes Strong local Duplication; Nestlé
Geographic into geographic tic strategy market focus; poor product (Americas,
(Area) Division regions; each regional coordination Europe, Asia
regional VP has autonomy across regions zones)
full P&L
responsibility
Global Product Each product Diversified Product Ignores GE (Aviation,
Division line manages its MNCs with expertise; global geographic Healthcare,
global distinct coordination of synergies; Energy each
operations product each product duplication global]
independently lines
 Global Matrix Dual reporting Transnation Balances Two-boss ABB, Procter &
Structure — product AND al strategy product and confusion; Gamble,
geography geographic conflict and Philips
axes; priorities slow decisions
employees have
two bosses
Transnational Flexible network Born Maximum Hardest to Nokia (pre-
Network of globals; flexibility; best manage; decline),
(Heterarchy) interconnected knowledge- practices requires very McKinsey,
subsidiaries; intensive shared globally high IDEO
knowledge firms coordination
flows multi- capability
directionally; no
rigid hierarchy

Factors Influencing Choice of Organizational Design

MNEMONIC - SPACE: Strategy (global vs. multidomestic), Products (standardized vs.
diverse), Age of IB (early vs. mature), Competitive dynamics, Environment
(political/cultural complexity)

Factor Implication for Design

Corporate Strategy Global strategy → global functional/product structure; Multidomestic →
geographic division; Transnational → matrix/network
Product Diversity Single product line → functional or product division; Multiple diverse
products → product division or matrix
Geographic Spread Few countries → international division; many countries → geographic
division or matrix
Technology Intensity High technology content → centralize R&D; low tech → decentralize
Cultural Distance High cultural distance between markets → decentralize to geographic
units with local autonomy
Size & Age Small/young MNC → simpler structures; Large/mature MNC → complex
matrix or transnational network
Regulatory Environment High local regulation (banking, pharma) → geographic decentralization
for compliance

2.5 Issues in Organization Design & Conflict Management in IB

Key Issues in International Organization Design

Issue Description Example & Solution
Centralization vs How much Apple: R&D and design centralized; distribution
Decentralization authority should localized. Balance through 'thin HQ, thick
HQ retain vs. subsidiaries' model.
delegate to
subsidiaries?
Coordination How to coordinate Formal (reporting systems, planning cycles),
 Mechanisms activities across Informal (global teams, expatriates),
dispersed global Socialization (common culture, training)
units?
Control Systems Output control McKinsey uses cultural control — strong shared
(results-based) vs. values ('One Firm') enable coordination without
Behavioural control bureaucracy
(process-based) vs.
Cultural control
(values)
Knowledge How to share best Toyota's 'jidoka' (quality at source) transferred
Transfer practices and from Japan to all global plants through
innovations across expatriate-led training
subsidiaries?
Subsidiary Role Strategic leaders Unilever's Hindustan Unilever (India) is a
vs. contributors vs. 'Strategic Leader' — innovations like Pureit
implementers vs. water filter, Shakti model shared globally
'black holes'
Global vs Local Ethnocentrism Geocentric approach: hire the best globally —
Talent (home country Satya Nadella (Indian-born as Microsoft CEO)
staff) vs.
Polycentrism (host
country) vs.
Geocentrism (best
person globally)

Conflict Management in International Business

Conflict in IB arises from differences in culture, interests, values, resource allocation disputes, and
misunderstandings across national and organizational boundaries.

Types of Conflict in IB
• HQ-Subsidiary Conflict: Subsidiary seeks more autonomy; HQ wants control (e.g., Ford vs. Ford
India over product localization)
• Partner Conflict: In JVs, partners disagree on strategy, profit sharing, management control (e.g.,
Danone vs. Wahaha in China)
• Cross-Cultural Conflict: Misunderstandings due to cultural differences in communication styles,
hierarchy, time orientation
• Resource Allocation Conflict: Competition between subsidiaries for HQ investment and support

Thomas-Kilmann Conflict Resolution Styles

Style Assertive Cooperati When to Use IB Example
ness on
Competing High Low When quick decisive USA in WTO dispute
action needed; when settlement against India's
stakes are high solar panel tariffs
Collaborating High High Win-win possible; both Toyota-BMW collaboration on
parties' concerns hydrogen fuel cell technology
important
 Compromisin Medium Medium Temporary settlement; India-Pakistan trade
g when goals are negotiations on specific
moderately important agricultural products
Avoiding Low Low Issue trivial; better timing Postponing sensitive transfer
needed; cool-down pricing discussions in JV
required
Accommodati Low High Relationship more Multinational adapting to host
ng important than the issue; country's preferred
preserve harmony management style

2.6 Reconciliation, Adjudication & Arbitration in IB

Dispute Resolution Mechanisms in International Business

Cross-border business disputes are common — over contract terms, IP rights, investment protections,
trade practices, and more. Three main mechanisms resolve these disputes:

1. Reconciliation / Negotiation / Mediation

• Definition: Parties work together (with or without a neutral mediator) to reach a mutually
acceptable solution
• Nature: Voluntary, non-binding (unless agreement reached), confidential, flexible, preserves
relationship
• Best For: Ongoing business relationships where parties want to preserve goodwill
• Example: Coca-Cola and its Indian bottling franchise partners resolving territorial disputes
through mediated negotiation before escalating to legal proceedings
• Advantage: Fast, cheap, relationship-preserving, confidential
• Disadvantage: Non-binding — either party can walk away; power imbalances can undermine
process

2. Adjudication (Litigation)
• Definition: Formal court proceedings in national courts to resolve disputes
• Nature: Binding, public, adversarial, follows strict procedural rules, slow and expensive
• Key Problem in IB: Which country's court has jurisdiction? Which country's law applies (choice
of law)?
• Enforcement Problem: A judgment from Country A's court may not be enforceable in Country B
• Example: Samsung vs. Apple patent dispute fought in courts of USA, Germany, South Korea,
Australia simultaneously — illustrating the complexity of cross-border litigation
• India: Indian courts (especially for IP, contract disputes) — but enforcement of foreign
judgments in India requires separate court proceedings under Code of Civil Procedure

3. Arbitration
• Definition: A neutral third party (arbitrator/tribunal) hears both sides and makes a binding
decision (award)
• Nature: Private, binding, faster than courts, chosen arbitrator has domain expertise, award
enforceable internationally
 • THE KEY ADVANTAGE: New York Convention (1958) — signed by 170+ countries — makes
arbitral awards enforceable across member states. This is NOT possible for court judgments.

Type Forum Best For Example

International ICC (Paris), LCIA Commercial disputes Repsol vs. Argentina oil
Commercial (London), SIAC between private parties company dispute via
Arbitration (Singapore) ICC
Investor-State ICSID (World Bank), Foreign investor vs. Vodafone vs. India
Arbitration (ISDS) UNCITRAL rules host government (retrospective tax case)
— India ultimately won
but ISDS process ran 8
years
Trade Arbitration WTO Dispute State-to-state trade India vs. USA on
Settlement Body disputes steel/aluminium tariffs at
WTO
Ad Hoc Arbitration UNCITRAL rules, One-time disputes, Used in complex M&A
parties appoint flexible disputes
arbitrators

Comparison: Negotiation vs. Arbitration vs. Adjudication

Factor Negotiation/ Arbitration Adjudication
Mediation
Binding? No (unless settled) Yes Yes
Confidential? Yes Yes No (public)
Speed Fast Medium (months- Slow (years)
years)
Cost Low Medium-High High
Enforceability Agreement only International (New Only in home country
York Convention) (mostly)
Best For Ongoing relationships Commercial cross- Simple domestic
border disputes disputes

⭐ KEY EXAM POINT: EXAM HIGHLIGHT: New York Convention (1958) is the
cornerstone of international arbitration — making arbitral awards enforceable in 170+
countries. Always mention this when discussing arbitration.

2.7 Supporting Institutions in International Business

The Bretton Woods System

At the Bretton Woods Conference (1944, USA), the post-WW II international economic order was
designed around three pillars — IMF, World Bank, and what eventually became the WTO. These
institutions form the backbone of global economic governance.
World Trade Organization (WTO)
Feature Details
Founded 1995 (replaced GATT, founded 1947)
Headquarters Geneva, Switzerland
Members 164 member countries (India is founding member)
Core Function Setting and enforcing rules for international trade in goods (GATT), services
(GATS), and IP (TRIPS)
Key Principles MFN (Most Favoured Nation), National Treatment, Reciprocity,
Transparency, Non-discrimination
Dispute Settlement Dispute Settlement Body (DSB) — legally binding rulings via panels and
Appellate Body
Current Challenges Appellate Body paralysis (USA blocking new judges since 2019); rise of
bilateral FTAs outside WTO; digital trade governance gaps
India & WTO India active in agricultural subsidies debate (food security programme);
opposed US solar panel tariffs successfully at WTO

International Monetary Fund (IMF)

Feature Details
Founded 1944 (Bretton Woods)
Headquarters Washington D.C., USA
Members 190 member countries
Core Functions International monetary cooperation; exchange rate stability; BOP support;
surveillance of global economy; emergency financial assistance
Key Instruments Special Drawing Rights (SDRs) — reserve asset; Stand-By Arrangements;
Extended Fund Facility; CCRT (debt relief for poorest)
Conditionality IMF loans come with 'structural adjustment' conditions (fiscal austerity,
privatization, deregulation) — controversial
India & IMF India last used IMF borrowing in 1991 BOP crisis (pledged gold). India now
a creditor to IMF, not borrower. Indian quota (voting power) = ~2.7%
Recent Role COVID-19 emergency financing ($100B+ globally); Ukraine war BOP
support; Sri Lanka bailout 2023 ($3B)

World Bank Group

Institutio Full Name Focus
n
IBRD International Bank for Reconstruction & Long-term loans to middle-income
Development developing countries
IDA International Development Association Concessional loans/grants to poorest
countries (e.g., Bangladesh, Ethiopia)
IFC International Finance Corporation Private sector investment in
developing countries
MIGA Multilateral Investment Guarantee Political risk insurance for FDI
 Agency
ICSID International Centre for Settlement of Arbitration for investor-state disputes
Investment Disputes
India & World Bank: India is one of the largest borrowers from World Bank/IDA. Key projects: Mumbai
Urban Transport, Andhra Pradesh Rural Roads, National Rural Livelihoods Mission.

Other Key International Institutions

Institution Role India Relevance
UNCTAD (UN Conference Promotes trade and India uses UNCTAD data for
on Trade & Development) development for developing trade negotiation positions
nations; publishes World
Investment Report (FDI
data)
OECD (Organisation for Policy research, tax India is OECD accession
Economic Cooperation & cooperation (BEPS), candidate; BEPS affects Indian
Development) development aid standards MNCs' transfer pricing
among wealthy nations
G20 / G7 Informal forum of world's India hosted G20 in 2023; key
largest economies for voice for developing country
coordinating economic interests
policy
Asian Development Bank Regional development bank India largest borrower from ADB
(ADB) — loans for infrastructure in — urban infrastructure, energy
Asia-Pacific projects
New Development Bank BRICS bank — alternative to India has received NDB loans
(NDB) World Bank; India is for metro projects, clean energy
founding member
Asian Infrastructure China-led multilateral India is 2nd largest shareholder
Investment Bank (AIIB) development bank — receives loans for
infrastructure

⭐ KEY EXAM POINT: EXAM TIP: Know the key function of each institution + India's
relationship with each. WTO (trade rules), IMF (monetary stability), World Bank
(development finance), UNCTAD (data & advocacy for developing countries).

2.8 Negotiation in International Business

Definition
International business negotiation is the interactive process by which representatives of two or more
parties across different nations and cultures seek to reach mutually acceptable agreements on
business matters (contracts, JVs, M&As, trade deals).

Stages of International Negotiation

 MNEMONIC - PRECA: Pre-negotiation (preparation) → Relationship building →
Exchanging information → Concession making → Agreement

1. Pre-Negotiation / Preparation: Research the counterpart's culture, authority structure, interests,

and BATNA (Best Alternative to a Negotiated Agreement). Know your walk-away point.
2. Relationship Building: Especially important in high-context cultures (China, India, Japan, Middle
East). Initial meetings often about trust, not business. Invest time.
3. Information Exchange: Understanding both parties' interests, constraints, and priorities. Listen
more than you speak. Never reveal your bottom line.
4. Persuasion / Bargaining: Make and respond to proposals. Use objective criteria. Be firm on
interests, flexible on positions.
5. Concession-Making: Strategic concessions build goodwill. Never give a unilateral concession
without getting something in return.
6. Agreement & Closing: Formalize in writing. Specify dispute resolution mechanism (arbitration
clause). Clarify implementation responsibilities.

Cultural Differences in Negotiation

Cultural High-Context Low-Context IB Implication
Dimension (China, India, (USA, Germany,
Japan, Arab) Scandinavia)
Communication Indirect, implicit, Direct, explicit, say Silence in Japan =
read between the what you mean thinking, not
lines disagreement.
Americans may misread
it.
Time Orientation Long-term Short-term; quick Chinese negotiations
relationship decisions valued may take many rounds;
building; slow Americans may push for
decisions quick close prematurely
Hierarchy Senior person must Functional experts Send your senior person
be in the room; negotiate; flatter to China; sending a
consensus from top hierarchy junior exec = disrespect
down
Contracts Relationship > Contract is final; Indian/Chinese partners
contract; contracts deviation = breach may expect
are framework, renegotiation;
flexible Europeans/Americans
may refuse
Negotiation Style Haggling expected; Reasonable An American may offer
initial offer far from opening offer; little 'best price' immediately;
real position movement Chinese counterpart
expects multiple rounds
of negotiation

Fisher & Ury's Principled Negotiation (Getting to Yes)

Principle Description IB Application
Separate People from Don't attack people; In JV negotiations, keep personal relationships intact
Problems attack the problem even when positions clash
Focus on Interests, Understand WHY the India wants preferential market access in FTA —
not Positions other party wants underlying interest is jobs, not the tariff rate itself
something, not just
WHAT they want
Invent Options for Brainstorm creative win- USA wants IP protection; India wants medicine
Mutual Gain win solutions before access — TRIPS flex clauses are the creative option
settling
Use Objective Criteria Base agreement on fair Use transfer pricing guidelines (OECD arm's length
standards: market rates, principle) as objective standard in MNC internal
industry norms, pricing negotiations
precedent

⭐ KEY EXAM POINT: EXAM FAVOURITE: BATNA concept — Best Alternative to a

Negotiated Agreement. A party with a strong BATNA has more negotiating power. Always
analyse both parties' BATNAs in case-based questions.
MODULE 2 — CASE STUDIES

CASE STUDY: 1: Amazon's Organizational Design in India — Global vs.

Local Tension
BACKGROUND
Amazon entered India in 2013 through Amazon India (a WOS — Wholly Owned Subsidiary). India's
e-commerce market required massive local adaptation: cash-on-delivery (70% of transactions),
regional language interfaces (22+ languages), unique seller ecosystem, and regulatory battles with
Indian FDI restrictions on inventory-led e-commerce.
PROBLEM
How should Amazon structure its Indian operations? A pure global structure (standardizing
everything from the US) vs. a multidomestic approach (giving India full autonomy) — or something
in between?
CONCEPT LINKAGE
International Organizational Designs (Transnational Strategy); Integration-Responsiveness
Framework; Modes of Entry (WOS); Organizing International Business; Conflict Management (HQ-
Subsidiary tensions).
ANALYSIS
Amazon chose a TRANSNATIONAL approach for India: Global Integration maintained in:
technology platform, fulfilment centre design, Prime subscription model, AWS infrastructure,
financial controls and reporting. Local Responsiveness given for: product categories (sarees,
cricket equipment, Indian FMCG), payment methods (UPI, CoD, EMI), seller onboarding (Kirana
stores), logistics (I Have Space — using local kirana stores as last-mile delivery), language
localization, rural markets strategy. HQ-Subsidiary tension: Amazon India initially had full P&L
ownership under Amit Agarwal — this geocentric leadership allowed deep local adaptation without
losing global efficiency.
SOLUTION
Amazon's India success metrics: $6.5B investment committed; ~500,000 sellers; 2nd largest e-
commerce market after Flipkart. KEY LESSON: Transnational organizational design — globally
integrated systems (tech, finance) + locally responsive operations (products, payments, logistics)
— is the winning formula for large, complex emerging markets. Rigid global standardization would
have failed; pure multidomestic approach would have sacrificed Amazon's core technological
advantage.

CASE STUDY: 2: The Danone-Wahaha JV Dispute — International Conflict

Management
BACKGROUND
In 1996, France's Danone Group entered a JV with China's Wahaha Group (led by Zong Qinghou)
to produce and sell beverages in China. By 2006, Wahaha had secretly set up parallel companies
competing directly with the JV — a flagrant breach of exclusivity clauses.
PROBLEM
How should Danone respond to a major JV partner creating competing parallel businesses in
secret? What conflict resolution mechanisms are available in cross-border JV disputes?
CONCEPT LINKAGE
Conflict Management (partner conflict); Reconciliation, Adjudication, Arbitration; Organizing
International Business (JV structure issues); International Business Environment (legal/cultural
dimensions).
ANALYSIS
The conflict escalated through multiple stages: Stage 1 — Private Negotiation (failed — Wahaha
denied wrongdoing); Stage 2 — Mediation attempts (failed — Zong used Chinese state media to
frame Danone as an 'imperialist bully', generating nationalist sympathy); Stage 3 — Arbitration
proceedings in Stockholm (ICC arbitration); Stage 4 — Parallel litigation in multiple jurisdictions
(Danone sued Wahaha entities in courts across China, USA, Samoa, British Virgin Islands).
Cultural dimension: Zong's use of nationalist rhetoric made any Chinese court hostile to Danone;
Chinese government was reluctant to enforce foreign company rights against a national champion.
SOLUTION
In 2009, Danone sold its 51% JV stake to Wahaha for $500M (reportedly below its actual value of
$1B+). Danone's strategic response post-dispute: invested separately in Chinese dairy companies
(Mengniu stake), used stricter governance in subsequent Asian JVs. KEY LESSONS: (1) Draft JV
agreements with explicit non-compete clauses and international arbitration (not Chinese court)
jurisdiction; (2) Understand that cultural/nationalist factors can make formal dispute resolution
mechanisms ineffective; (3) In high-risk markets, prefer WOS over JV despite market access
benefits; (4) BATNA is critical — Danone's weak BATNA (limited alternatives to exit) weakened its
negotiating position.

CASE STUDY: 3: India at the WTO — Agricultural Subsidies Negotiation

BACKGROUND
India's National Food Security Act (NFSA) provides subsidized food to 810 million people. Under
WTO's Agreement on Agriculture (AoA), developing countries can subsidize agriculture up to 10%
of the value of production. India's food procurement prices cause market price support to
periodically exceed this limit.
PROBLEM
India faces potential WTO challenges to its food security programme. How can India negotiate to
protect its domestic food policy while fulfilling its WTO obligations?
CONCEPT LINKAGE
Supporting Institutions (WTO, Dispute Settlement Body); Negotiation in IB (multilateral trade
negotiations); Free Trade (vs. food security); International Business Environment (legal/political
dimensions).
ANALYSIS
The negotiation involved: Positions: USA, EU, and agricultural exporters want India to cap food
subsidies per WTO AoA rules. India's position: food security is a sovereign right; AoA provisions
are outdated (use 1986-88 base prices which undervalue inflation). Interests: USA/EU want Indian
market access; India needs to feed 810M people at affordable prices. Key Moments: 2013 Bali
WTO Ministerial — India blocked Trade Facilitation Agreement (saving global trade $1T) unless
food security issue was resolved. This was India's BATNA — leveraging its veto power. 2014 —
Peace Clause: Interim agreement — no country can challenge India's food security programme at
WTO until a permanent solution is found.
SOLUTION
India's negotiation strategy: (1) Built coalition with African nations and other developing countries —
strength in numbers; (2) Used principled negotiation — 'food security is a public good, not a trade-
distorting subsidy'; (3) Exercised BATNA — blocking TFA to force compromise; (4) Secured the
'Peace Clause' as a win. ONGOING: Permanent solution still being negotiated in Doha Round
(stalled). KEY LESSON: In multilateral trade negotiations, building coalitions, framing issues in
globally appealing terms ('food security'), and having a credible BATNA are more powerful than
legal arguments alone.

CASE STUDY: 4: Globalization of Indian Pharma — TRIPS, Access to

Medicines & CSR
BACKGROUND
India's pharmaceutical industry ($50B+ export, world's largest generics supplier) was built on a
patent regime that did not recognize product patents in pharma until 2005 (when India amended its
Patents Act to comply with WTO-TRIPS agreement). Companies like Cipla supplied generic AIDS
drugs at $350/year vs. $10,000+ charged by Western MNCs.
PROBLEM
How should Indian pharma companies navigate globalization — complying with WTO-TRIPS
obligations while maintaining their global social responsibility role as affordable medicine suppliers?
CONCEPT LINKAGE
Routes of Globalization (institutional route — WTO/TRIPS); Supporting Institutions (WTO, TRIPS
agreement); Modes of International Business (licensing, exports); CSR in International Context;
Negotiation (TRIPS flexibilities).
ANALYSIS
TRIPS compliance changed India's pharma landscape: Pre-2005: India could copy any patented
drug and sell generics (this is how Cipla built its AIDS drug business). Post-2005: India must
respect product patents for 20 years. However, India smartly used TRIPS flexibilities: Section 3(d)
of Indian Patents Act — prevents 'evergreening' (minor modifications to extend patents);
Compulsory Licensing — India issued its first compulsory license in 2012 (Bayer's cancer drug
Nexavar → licensed to Natco Pharma at 3% royalty); Parallel Imports — allows importing cheaper
versions of patented drugs. Cipla's CSR role: Yusuf Hamied's decision to sell AIDS drugs at
$350/year (vs. $10,000+) to African nations saved millions of lives — recognized globally as
landmark pharmaceutical CSR.
SOLUTION
Indian pharma's winning formula: (1) Use TRIPS flexibilities strategically (Sec 3d, compulsory
licensing); (2) Focus R&D on novel drug discovery to build own IP (Sun Pharma, Dr. Reddy's
moving up value chain); (3) Leverage generics expertise for regulated markets (US FDA-approved
plants supply $15B+ to US market); (4) CSR through access to affordable medicines is both moral
AND strategic (builds brand equity in developing countries). KEY LESSON: International institutions
(WTO/TRIPS) can be navigated strategically — negotiating flexibilities and using them proactively
converts a constraint into a competitive advantage.

CASE STUDY: 5: Suzuki in India — JV to Dominance via Organizational

Design Evolution
BACKGROUND
In 1982, Suzuki Motor Corporation (Japan) entered India through a JV with the Indian government
under Maruti Udyog Ltd. By 2007, Maruti became a wholly owned subsidiary. Today, Maruti Suzuki
India controls 42%+ of India's passenger car market (~1.8 million units/year).
PROBLEM
How did Suzuki evolve its organizational design from a JV with the Indian government to becoming
the undisputed market leader? What lessons does this offer on entry mode, organizational design,
and negotiation?
CONCEPT LINKAGE
Modes of Entry (JV → WOS evolution); Organizing International Business (multidomestic strategy);
International Organizational Designs; Conflict Management (Suzuki vs. Indian government disputes
in 1990s); Negotiation.
ANALYSIS
Evolution in 4 phases: Phase 1 (1982-1991): Government JV — Suzuki brought technology and
management; Government provided capital, distribution, and political cover. JV was necessary as
India's FDI policy mandated local partnership. Phase 2 (1991-2002): Economic liberalization —
Suzuki began increasing its stake; conflicts with Government of India over pricing, capacity
expansion, and strategic direction (adjudicated through negotiation and courts). Phase 3 (2002-
2007): Maruti IPO (2003) — government stake reduced; Suzuki became largest shareholder. By
2007, Suzuki bought out government stake — JV converted to WOS. Phase 4 (2007-present): Fully
Suzuki-controlled but deeply India-rooted. India-specific product development (Alto, Swift, WagonR
variants). Organizational design: Geographic division with India having near-full P&L autonomy;
products designed in India; R&D centre in Rohtak; components sourced 70%+ locally.
SOLUTION
Success factors: (1) Patience — Suzuki committed for decades, not just years; (2) Deep
localization — products, prices, and supply chain adapted to India; (3) Quality manufacturing
(Gurgaon plant benchmarked against best Japanese facilities); (4) JV → WOS transition managed
smoothly through negotiation and market mechanisms (IPO, gradual stake increase); (5) Hybrid
organizational design — global technology + fully Indian market operations. KEY LESSON: Long-
term commitment + appropriate entry mode + organizational design evolution + local talent
development = sustainable market leadership in emerging markets.
MODULE 2 — IMPORTANT QUESTIONS & ANSWERS

Section A: Theory Questions

Q1. Explain the routes and waves of globalization. How has digital technology
transformed globalization in the 21st century?
INTRODUCTION: Globalization is not a recent phenomenon but a multi-century process that has
undergone distinct waves of acceleration and reversal. BODY: Waves: 1st Wave (1870-1914) —
trade and migration; Reverse Wave (1914-1945) — deglobalization due to wars and depression; 2nd
Wave (1945-1980) — GATT-led trade growth; 3rd Wave (1980-2008) — FDI and services; 4th Wave
(2010-present) — digital globalization. Routes: Trade (goods/services), FDI/FII (investment),
Technology transfer, Migration (people), Cultural exchange (media, entertainment), Institutional
frameworks (WTO, IMF). Digital Transformation: Thomas Friedman's 10 flatteners explain digital
globalization. Key changes: (1) E-commerce enabling micro-businesses to sell globally (Indian
artisans on Etsy); (2) SaaS companies born global from Day 1 (Freshworks, Zoho); (3) Data flows
now larger in value than physical trade; (4) Gig economy (Upwork, Fiverr) creating global labour
market; (5) Fintech (UPI, Stripe) enabling borderless payments; (6) COVID-19 accelerated remote
work — geographic location now less relevant. CONCLUSION: The 4th wave of digital globalization
is fundamentally different — it allows zero-marginal-cost replication of services globally, making
geographic distance irrelevant for knowledge-intensive industries. India is a major beneficiary — its
English-speaking, STEM-educated workforce accesses global markets digitally.

Q2. Explain the Integration-Responsiveness Framework. Compare Global, Multidomestic,

International, and Transnational strategies with examples.
INTRODUCTION: The central strategic challenge of international business is balancing the
efficiency benefits of global integration with the market-fit benefits of local responsiveness. BODY:
Framework (Bartlett & Ghoshal): Four strategies placed on two axes — degree of global integration
and degree of local responsiveness. International Strategy: Moderate integration, low
responsiveness. Home country innovations transferred abroad. Example: Harley-Davidson — the
American identity IS the product, cannot be localized. Global Strategy: High integration, low
responsiveness. Standardized products, centralized control. Example: Apple (same iPhone globally),
IKEA (same furniture, same store design globally). Multidomestic Strategy: Low integration, high
responsiveness. Each subsidiary is autonomous. Example: Unilever (different products in each
country — Hindustan Unilever is very different from Unilever UK). Transnational Strategy: High
integration AND high responsiveness — the ideal but hardest to execute. Example: Nestlé (global
brand consistency + local product variants), Toyota (global production efficiency + local design
adaptation — Innova for SE Asia, Hiace for Africa). India Example: HUL follows transnational —
global Unilever values + Indian product innovations (Pureit, Shakti, Bru instant coffee).
CONCLUSION: Most successful MNCs aspire to the transnational model — the transnational firm is
globally competitive, nationally responsive, and organizationally learning. However, execution
requires sophisticated coordination mechanisms, geocentric management, and investment in cross-
border knowledge systems.

Q3. What are the key international organizational design types? Explain with advantages,
disadvantages, and examples.
INTRODUCTION: Organizational design translates strategy into structure — the right structure
enables global strategy execution while the wrong one creates bottlenecks and conflicts. BODY:
Key Designs: (1) International Division — separate international unit; simple, good for early
internationalizers; example: Indian companies beginning exports. (2) Global Functional — worldwide
functions report to HQ function heads; excellent standardization; poor geographic focus; example:
Oil majors like ExxonMobil. (3) Global Geographic Division — world divided into regions with full
autonomy; maximum local focus; poor product coordination; example: Nestlé's regional structure. (4)
Global Product Division — each product manages globally; great product coordination; poor
geographic synergy; example: GE's business units. (5) Global Matrix — dual reporting (product +
geography); maximum information flow; highest complexity and conflict; example: P&G, Philips,
ABB. (6) Transnational Network — flexible heterarchy; knowledge flows in all directions; example:
McKinsey (strong one-firm culture enables coordination without hierarchy). Factors influencing
choice: Strategy (global vs. multidomestic), product diversity, geographic spread, technology
intensity, cultural distance, regulatory requirements. CONCLUSION: No single design is universally
optimal. As companies internationalize, they typically evolve from simpler structures (international
division) to more complex ones (matrix/network) as their international operations grow in scale,
complexity, and strategic importance.

Q4. Explain the dispute resolution mechanisms in international business: Reconciliation,

Adjudication, and Arbitration. Which is most preferred in IB and why?
INTRODUCTION: Cross-border disputes are inevitable in international business given different legal
systems, cultural norms, and interests. Three mechanisms exist — with very different
characteristics. BODY: Reconciliation/Mediation: Voluntary, non-binding (unless settlement
reached), confidential, fast, cheap, relationship-preserving. Best for ongoing business relationships.
Disadvantage: Either party can walk away. Adjudication (Litigation): Formal court proceedings.
Binding, public, adversarial, slow, expensive. Key IB problem: Jurisdictional complexity (which
court?) and enforceability (foreign judgments often not enforceable abroad). Example: Samsung vs.
Apple patent wars in multiple national courts. Arbitration: Neutral third party makes binding award.
Confidential, faster than courts, enforceable internationally via New York Convention (1958) — 170+
country enforcement framework. Types: ICC, LCIA, SIAC (commercial); ICSID (investor-state); WTO
DSB (state-to-state trade). Example: Vodafone vs. India retrospective tax dispute (UNCITRAL
arbitration — Vodafone won but India initially refused to comply, later settled). Preferred Mechanism:
ARBITRATION — because: (1) Cross-border enforcement (New York Convention); (2)
Confidentiality protects business reputation; (3) Arbitrators chosen for domain expertise; (4) Neutral
forum (neither party's home court); (5) Awards are binding and final. CONCLUSION: International
commercial arbitration has become the standard dispute resolution mechanism for cross-border
contracts. Every international contract should include a well-drafted arbitration clause specifying the
seat of arbitration (commonly Singapore, London, Paris, or Hong Kong), governing law, and rules
(ICC or UNCITRAL).

Q5. Examine the role of WTO, IMF, and World Bank in facilitating international business.
What are their current challenges?
INTRODUCTION: The post-WW II international economic architecture rests on three Bretton Woods
pillars — WTO (trade), IMF (monetary), and World Bank (development). Together they constitute the
rulebook and safety net for international business. BODY: WTO: Sets rules for $28T+ in annual
goods and services trade; MFN and National Treatment principles prevent discrimination; dispute
settlement adjudicates trade conflicts. Current challenges: Appellate Body crisis (USA blocking
judges since 2019, making WTO dispute settlement non-functional at appellate level); failure of
Doha Round negotiations; digital trade governance gap; rise of bilateral FTAs bypassing WTO. IMF:
Maintains exchange rate stability; provides BOP emergency financing (Sri Lanka $3B 2023,
Pakistan, Egypt); conducts global economic surveillance. Current challenges: Conditionality
controversies (austerity conditions harm developing countries); governance reform needed (voting
shares still reflect 1944 power structure, not 2024 economic realities); China's growing role in
alternative financing (BRI). World Bank: $100B+ in annual development financing; focuses on
poverty reduction, infrastructure, education, health. Challenges: Adapting to climate change
financing mandate; mobilizing private capital for development; addressing debt sustainability in
fragile states. India's Role: India is a key voice for reform of all three institutions — more
representation for developing countries, more flexible conditionality at IMF, WTO agricultural subsidy
reform, and World Bank climate focus. CONCLUSION: These institutions remain essential for
international business stability, but they require significant reform to remain legitimate and effective
in a multipolar world where China, India, and other emerging economies have grown to represent a
 larger share of global economic output than when these institutions were founded.

Q6. Discuss the role of culture in international business negotiations. How should an
Indian firm negotiate with Chinese and American counterparts differently?
INTRODUCTION: Negotiation is a culturally embedded process — what is considered persuasive,
respectful, appropriate timing, and acceptable terms varies dramatically across cultures. BODY:
Cultural Framework: Hall's High-Context (Asia, Middle East) vs. Low-Context (USA, Germany,
Scandinavia) communication; Hofstede's dimensions (Power Distance, Uncertainty Avoidance,
Long-Term Orientation) directly affect negotiation behaviour. Negotiating with CHINESE
Counterparts: Build relationship (guanxi) first — don't rush to business; send senior delegation (face
— mianzi); expect multiple rounds of negotiation; patience is essential; silence = thinking, not
disagreement; use indirect communication; expect price negotiation even after agreement; focus on
long-term relationship, not just the current deal; involve intermediaries who have existing Chinese
relationships. Negotiating with AMERICAN Counterparts: Be direct and prepared (come with data
and facts); Americans value time — have clear agenda; first offer is often close to final (low-context
culture); focus on contract terms and legal precision; enthusiasm and informality are acceptable;
quick decisions valued; be ready to negotiate hard on price, but once agreed, expect the contract to
be honored; avoid vague commitments — Americans will hold you to written agreements. Principled
Negotiation (Fisher & Ury): Separate people from problems; focus on interests not positions; invent
options for mutual gain; use objective criteria — applicable to all cultures but implementation varies.
CONCLUSION: Cultural intelligence (CQ) — the ability to adapt negotiation style based on the
counterpart's cultural context — is as important as technical preparation. Indian negotiators have
natural advantage with both Chinese (high-context relationship orientation) and American (English
language, direct engagement) styles — but must consciously adapt their default communication
style for each context.

Section B: Case-Based Questions

QCB-1. A Karnataka-based IT company wins a $50M software project with a Saudi

Arabian government entity. The contract is disputed 2 years in. Recommend the dispute
resolution approach.
ANALYSIS: This is an INVESTOR-STATE type dispute (private company vs. government) with
cross-cultural dimensions (Indian company, Saudi government entity, Islamic law considerations).
STEP 1 — Review Contract: Is there an arbitration clause? What seat of arbitration? What
governing law? If the contract specifies ICSID arbitration or UNCITRAL rules, proceed accordingly.
STEP 2 — Attempt Negotiation First: Given the relationship with a government entity, direct
negotiation at senior level is essential. In Saudi culture, personal relationships and face-saving are
paramount — a private meeting between senior executives can resolve much without formal
proceedings. STEP 3 — Mediation: If negotiation fails, attempt mediation through a neutral body —
potentially the Saudi Centre for Commercial Arbitration (SCCA) or ICC Mediation. This preserves the
possibility of future contracts. STEP 4 — Arbitration: If mediation fails, proceed to UNCITRAL
arbitration (if specified in contract) or ICC arbitration with seat in a neutral jurisdiction (Singapore or
London preferred — neutral, rule-of-law, New York Convention member). Avoid Saudi courts if
possible — Saudi law is Islamic law (Shariah), which may disadvantage foreign private parties.
STEP 5 — Enforcement: Once arbitral award obtained, enforce in India under the Arbitration &
Conciliation Act 1996, or in Saudi Arabia (New York Convention signatory since 1994). India and
Saudi Arabia have bilateral investment treaty provisions. RECOMMENDATION: Escalation ladder —
Negotiation (2 months) → Mediation (2 months) → UNCITRAL Arbitration (seat: Singapore). Budget
$500K-$2M for full arbitration proceedings. Ensure future contracts include explicit arbitration clause,
governing law clause, and performance guarantees.
QCB-2. Flipkart (now Walmart-owned) wants to expand to Southeast Asia. Using the
organizational design framework, recommend the best structure.
CONTEXT: Flipkart's acquisition by Walmart ($16B, 2018) means it is now part of a global retail
giant. SE Asia (Singapore, Indonesia, Malaysia, Vietnam, Thailand, Philippines) presents a diverse,
fast-growing, mobile-first e-commerce market already served by Shopee (Sea Group) and Lazada
(Alibaba). RECOMMENDED STRATEGY: TRANSNATIONAL — because SE Asia requires both
global efficiency (Walmart's supply chain, logistics technology) and deep local responsiveness (each
country has unique regulations, languages, payment systems, and consumer preferences).
RECOMMENDED STRUCTURE: GEOGRAPHIC DIVISION for initial entry (separate country-level
P&L centres) evolving to MATRIX (geographic + functional) as scale grows. RATIONALE: (1)
Geographic Division allows dedicated country teams who understand local consumer preferences
(Indonesians prefer cash payment, Singaporeans use GrabPay, Thais use PromptPay); (2) Each
country has unique e-commerce regulations (Indonesia restricts foreign e-commerce inventory;
Vietnam requires local entity); (3) Matrix overlay enables sharing of Walmart/Flipkart technology
platform, data analytics, and supply chain expertise across countries. KEY DESIGN DECISIONS:
Geocentric staffing at country-head level (local nationals, not expats); global technology platform
(Flipkart's existing stack); local payment systems integration; local logistics partnerships; category
management adapted per country. RISK: Competing with Shopee (Sea Group) and Lazada
(Alibaba) requires massive investment and patience — both are deeply embedded. Recommend
starting with Singapore (most sophisticated, English-language, strategic hub) then Indonesia (largest
population = largest opportunity).
QUICK REVISION SUMMARY — BOTH MODULES
Module 1 — Key Formulas & Facts
Topic Key Formula / Key Fact
Terms of Trade ToT = (Export Price Index / Import Price Index) × 100; Above 100 =
Favourable
BOP Identity Current Account + Capital Account + Financial Account + Errors = 0
India's BOP (FY24) Goods deficit ~$230B | Services surplus ~$160B | Remittances ~$120B
| CAD ~$35-40B
H-O Theorem Capital-abundant → export capital-intensive; Labour-abundant →
export labour-intensive
Leontief Paradox USA (capital-rich) was exporting labour-intensive goods — contradicted
H-O
PLC Stages Introduction → Growth → Maturity/Standardization → Decline;
production migrates to developing countries
India CSR Threshold Companies Act 2013: Net worth Rs. 500cr OR Turnover Rs. 1000cr OR
Net profit Rs. 5cr → 2% of 3-year avg net profit
Carroll's CSR Pyramid Economic → Legal → Ethical → Philanthropic (bottom to top)

Module 2 — Key Facts

Topic Key Fact
WTO Founded 1995; replaced GATT (1947); 164 members; HQ Geneva
IMF Founded 1944 (Bretton Woods); 190 members; HQ Washington D.C.
New York Convention 1958; makes arbitral awards enforceable in 170+ countries —
cornerstone of international arbitration
I-R Grid Strategies Global (hi integration, lo responsiveness) | Multidomestic (lo integration,
hi responsiveness) | Transnational (hi-hi)
Friedman's Flatteners 10 forces flattening the world: Fall of Berlin Wall, Netscape, Workflow
software, Open-sourcing, Outsourcing, Offshoring, Supply chaining,
Insourcing, In-forming, Steroids
BATNA Best Alternative to a Negotiated Agreement — defines negotiating
power
Fisher & Ury Principles Separate people from problems | Focus on interests not positions |
Invent options | Use objective criteria
High vs Low Context High-context (indirect, relationship) = China, India, Japan, Arab | Low-
context (direct, legal) = USA, Germany, Scandinavia

⭐ KEY EXAM POINT: FINAL EXAM CHECKLIST: (1) ToT formula + calculation + India
example; (2) H-O theorem + 4 theorems + Leontief Paradox; (3) PLC 4 stages + diagram;
(4) BOP components + India-specific figures; (5) Carroll's CSR Pyramid; (6) I-R
Framework + 4 strategies; (7) Arbitration vs. Adjudication (New York Convention); (8)
WTO/IMF/World Bank functions; (9) Principled Negotiation; (10) BATNA concept.