International Business — Unit 1: Globalization B.

Com Honours, Sem IV | Delhi University NEP

INTERNATIONAL BUSINESS
UNIT 1: GLOBALIZATION & INTERNATIONAL BUSINESS
[Link] (Hons.) Semester IV — Department Specific Core
University of Delhi — New Education Policy (NEP)

COMPLETE STUDY NOTES

Based on unit slides, Hill & Hult Global Business Today, and standard IB references

1. GLOBALIZATION

1.1 Definition of Globalization

Globalization refers to the process by which businesses, cultures, and governments around the world
become increasingly interconnected and interdependent. It is driven by trade, investment, technology,
and the movement of people.

Two key definitions to remember:

• Economic definition: Globalization is the integration of economies around the world through the
free flow of goods, services, capital, and labor.
• Process definition: Globalization is the process of increasing interconnectedness and
interdependence among countries through trade, communication, culture, and technology.

Exam Tip
Both definitions may appear in exams. The economic definition emphasizes integration; the
process definition emphasizes interconnectedness. Use both when writing a long answer.

1.2 Aspects/Dimensions of Globalization

Globalization manifests in two primary business dimensions:

A. Globalization of Markets
This refers to the merging of distinct national markets into a single, vast global market. Key features
include:

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International Business — Unit 1: Globalization [Link] Honours, Sem IV | Delhi University NEP

• Convergence of consumer tastes and preferences across countries (e.g., the universal
popularity of McDonald's, Starbucks, Apple).
• Reduction in trade barriers allows companies to sell the same product worldwide.
• Multinational corporations (MNCs) like Coca-Cola, Nike, and Samsung treat the world as a
single market.
• Global brands create standardized products that are sold in largely the same form worldwide.

B. Globalization of Production
This refers to the sourcing of goods and services from locations around the world to take advantage of
national differences in cost and quality. Key features include:
• Companies disperse production activities to different countries (e.g., Apple designs in USA,
manufactures in China).
• Access to low-cost labor (e.g., textile factories in Bangladesh, Vietnam).
• Access to specialized skills (e.g., India's software engineers for IT services).
• Creation of global supply chains — raw materials and components cross multiple borders before
final assembly.

Case Example — Apple iPhone

An iPhone is designed in California, uses semiconductors from Germany and Taiwan, memory
from Korea and Japan, display panels from Korea and Taiwan, and is assembled by Foxconn in
China. This is a classic example of globalization of production. Over 1.5 million people globally
are involved in its engineering and assembly.

1.3 Phases/History of Globalization

Phase Time Period Key Features
Pre-Modern Before 1500s Silk Road trade, spice routes, early maritime trade between
Globalization Asia, Middle East, and Mediterranean regions.
Early Modern 1500s – 1800s European colonial expansion, establishment of trading
Globalization companies (British East India Company), transatlantic slave
trade, mercantilism.
Industrial 1800s – 1900s Steam power, railways, telegraphs, mass production;
Revolution exports from industrialized nations surged.
Early 20th 1900s – 1945 Rise of protectionism, World Wars disrupted global trade,
Century Great Depression, collapse of global integration.
Post-WWII 1945 – 1970s Bretton Woods institutions (IMF, World Bank, GATT),
Marshall Plan, reconstruction of Europe, renewed
liberalization.

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Late 20th 1980s – 2000s Reagan-Thatcher era deregulation, WTO established

Century (1995), IT revolution, China opens up, FDI surges, global
supply chains emerge.
Contemporary 2000s – Present Digital economy, e-commerce, social media, AI, gig
economy, rise of China as global power, 2008 financial
crisis, COVID-19 disruptions, sustainability concerns.

1.4 Influence/Impact of Globalization

Globalization has deeply penetrated everyday life. A relatable Indian example from your notes:
Consider a typical day of a Delhi student (Priya): she wakes to an iPhone (designed in California, made
in China), eats Kellogg's cornflakes (American brand) with Amul milk (Indian), rides a Hyundai car
(South Korean, made in Chennai), stops at Costa Coffee (British chain, beans from Ethiopia), uses
Instagram (Meta, USA) on a Samsung Galaxy tablet (South Korea, made in Vietnam), works on a Dell
laptop (USA, assembled in China) with Intel processors, exercises in Nike shoes (American, made in
Vietnam) listening to Spotify (Sweden), and eats at Pizza Hut (USA) with Italian mozzarella. This
illustrates how globalization is woven into daily life.

1.5 Drivers/Causes of Globalization

Globalization is driven by multiple interconnected forces:

A. Technological Drivers
• Communication Technology: Internet, mobile phones, email, video conferencing have
eliminated distance barriers and enabled real-time global communication.
• Transportation Innovation: Containerization, jet aircraft, and efficient logistics have drastically
reduced shipping costs and time. Since 1950, the cost of ocean freight has fallen by over 70%.
• Information Technology: ERP systems, cloud computing, and digital platforms enable globally
distributed operations to be coordinated seamlessly.
• Automation and Artificial Intelligence: Robotics reduce the labor-cost advantage of some
countries; AI enables remote service delivery globally.

B. Economic Drivers
• Trade Liberalization: Reduction of tariffs and quotas through GATT/WTO agreements. Average
global tariffs fell from ~40% in 1947 to under 5% by the 2000s. India's average tariff fell from
125% in 1990–91 to just 13% in 2014–15.
• Global Financial Markets: Free flow of capital across borders enables FDI, portfolio investment,
and currency trading.

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• Multinational Corporations (MNCs): MNCs spread production, R&D, and marketing across
countries, driving integration.
• Global Supply Chains: Companies source inputs from lowest-cost global suppliers, creating
interdependence.

C. Political Drivers
• International Agreements & Institutions: WTO (trade), IMF (finance), World Bank (development),
UNCTAD, regional trade agreements (ASEAN, EU, NAFTA/USMCA).
• Government Policies: Economic reforms, liberalization, deregulation, privatization (India's 1991
reforms; China's 1978 opening).
• Regional Economic Blocs: EU, ASEAN, SAARC, African Union — reduce barriers within
regions.
• Political Stability: Stable governments attract FDI; democracies with rule of law promote open
markets.

D. Social and Cultural Drivers

• Migration and Mobility: Movement of workers spreads skills, remittances, and cultural practices.
• Cultural Exchange: Movies, music, fashion, food create global cultural flows (Bollywood, K-pop,
Hollywood).
• Tourism: International travel spreads ideas, tastes, and cross-cultural understanding.
• Educational Exchanges: Study abroad programs, international universities create globally
mobile professionals.

E. Environmental Drivers
• Environmental Challenges: Problems like climate change, ozone depletion, and ocean pollution
require global cooperation — driving multilateral agreements (Paris Accord, Kyoto Protocol).
• Sustainability and Green Innovation: Clean energy technologies are developed and shared
globally.

F. Crisis and Global Interdependence

• Financial Crises: The 2008 Global Financial Crisis showed how interconnected economies can
transmit shocks worldwide.
• Health Crises: COVID-19 pandemic demonstrated both deep global interdependence (vaccine
development, supply chains) and vulnerability.
• Natural Disasters and Conflicts: Disruptions in one region (e.g., Japan tsunami, Ukraine war)
affect global supply chains.

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1.6 Advantages and Disadvantages of Globalization

Advantage Explanation
Economic Growth & Boosts trade, investment, and job creation. Developing countries
Development benefit from FDI inflows; export-led growth (East Asian miracle).
Access to Goods and Services Wider variety of products at competitive prices; efficiency gains
through global sourcing.
Technological Advancement Rapid spread of innovations across borders; digitalization connects
people worldwide.
Cultural Exchange Cultural understanding through arts, media, cuisine, and
entertainment; enriches societies.
Improved Education Access to world-class education; international research
collaboration.
Global Cooperation Nations collaborate on climate, pandemics, security via institutions
like UN, WHO, WTO.

Disadvantage Explanation
Economic Inequality Wealth concentrated in developed nations; small businesses cannot
compete with MNCs; income gap widens.
Loss of Cultural Identity Global brands overshadow local traditions; cultural homogenization
threatens unique identities.
Environmental Impact Industrialization causes pollution and climate change;
overexploitation of natural resources.
Job Displacement Outsourcing leads to job losses in home countries; poor wages in
host countries.
Dependency & Vulnerability Over-reliance on global supply chains creates vulnerability to
disruptions (pandemic, wars).
Exploitation & Ethics Worker exploitation in developing nations; MNCs prioritize profits
over ethics (e.g., sweatshops).

Environmental Note — Kuznets Curve

Research suggests that as incomes rise, pollution first increases then decreases (inverted U-
shape) for many pollutants — this is the Environmental Kuznets Curve. However, CO2 emissions
do not follow this pattern and continue rising with income. This means globalization-driven growth
may worsen climate change even as it improves local environmental quality.

Case Example — Nike Sweatshops

Nike set up factories in North Korea, China, and Taiwan in the 1970s to lower production costs.
Workers were paid as little as $1.35/hour, worked 9-13 hours/day in poor conditions. In the
1990s, Nike faced massive boycotts and 'Anti-Sweat' marches. Although Nike formulated a Code
of Conduct, violations continued. Notably, Michael Jordan was paid $20 million in 1992 for brand
association — more than the total annual wages of Nike workers in some countries. This case
illustrates the 'exploitation' downside of globalization.

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International Business — Unit 1: Globalization [Link] Honours, Sem IV | Delhi University NEP

2. CONCEPT OF INTERNATIONAL BUSINESS

2.1 Definition of International Business

International business refers to all commercial transactions — private and governmental — that take
place between two or more countries. It includes the movement of goods, services, capital, technology,
and personnel across national boundaries.

International Business includes:

• Exports and Imports of inputs, finished goods, and services

• Investment by companies in assets (FDI — Foreign Direct Investment & FPI — Foreign Portfolio
Investment) of foreign countries
• Contractual agreements such as Licensing, Franchising with foreign companies
• Dealing in Intellectual Property rights (patents, trademarks, copyrights) across national
boundaries

2.2 Domestic Business vs. International Business

Aspect Domestic Business International Business
Definition Business conducted within a single Business conducted across multiple
country countries
Geographical Scope Limited to one country's boundaries Spans multiple countries and
regions
Currency Single local currency Multiple currencies; requires
exchange
Market Dynamics Affected by local competition only Influenced by global trends and
global competition
Legal Framework One country's laws and regulations Multiple legal systems, trade
agreements, international law
Language & Culture Common language/culture Language barriers, cultural
differences
Trade Barriers Generally free of tariffs/quotas May face tariffs, quotas, trade
restrictions
Complexity Less complex More complex: economic, political,
legal systems vary
Risk Domestic market risk only Political, exchange rate, global
competition risks
Supply Chain Local/regional suppliers Global supply chains across multiple
countries

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Competition Only domestic competitors Both local and international

competitors
Technology Adoption Slower adoption of global trends Faster adoption of cutting-edge
global technology

2.3 Stages of Internationalization

Companies typically move through four progressive stages as they expand internationally:

Stage Characteristics Strategy

1. Domestic Company Operates only in home market. Focus on domestic market; reactive
New/limited resources. No to foreign opportunities if any.
international activity.
2. International Begins exploring foreign markets. Exporting with NO modification to
Company Exports products to foreign buyers. products or strategies — home
strategy applied abroad.
3. Multinational Significant foreign operations; Modifies marketing mix for each
Company (MNC) manufacturing abroad; adapts for country. Different product for
each market. different markets. Recognizes
national differences.
4. Transnational/Global Worldwide operations; views world Identifies similarities across
Company as single market. Maximum markets. Global brand.
economies of scale. Simultaneous global standardization
with local flexibility.

Memory Trick
DIMT — Domestic → International → Multinational → Transnational. Each stage involves deeper
commitment, more resources, and greater complexity. Think of it as going from 'selling abroad' to
'operating globally'.

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International Business — Unit 1: Globalization [Link] Honours, Sem IV | Delhi University NEP

3. INTERNATIONAL ORIENTATION — EPRG FRAMEWORK

The EPRG Framework (developed by Howard Perlmutter, 1969) describes the four possible
management orientations or mindsets that companies can adopt toward international business. The
orientation affects strategy, staffing, and marketing decisions.

3.1 Ethnocentric Approach (E)

• Definition: Home country practices and values are considered superior. Headquarters
dominates.
• Strategy: Standardized products and marketing — what works at home is applied globally
without modification.
• Organization: Centralized decision-making; key positions held by home country nationals.
• Advantage: Cost-effective due to standardization; consistent brand image.
• Disadvantage: May fail to meet local needs; cultural insensitivity; limited adaptability.

Examples of Ethnocentric Companies:

Company Industry Strategy

Coca-Cola (early years) Beverages Same formula and product sold globally without
adapting to local tastes.
Harley-Davidson Automotive Same iconic models globally; emphasizes U.S.
heritage.
Rolex Luxury Watches Uniform global marketing emphasizing Swiss
craftsmanship.
Levi's Apparel Promoted American denim culture worldwide;
minimal customization.
Microsoft (early years) Technology Software distributed with minimal
language/regulatory adaptation.

3.2 Polycentric Approach (P)

• Definition: Each foreign market is treated as unique. Local managers make decisions.
• Strategy: Significant adaptation of products, marketing, and strategy for each local market.
• Organization: Decentralized; local subsidiaries operate autonomously ('think local, act local').
• Advantage: Better local market fit; cultural sensitivity; local knowledge.
• Disadvantage: Duplication of efforts; higher costs; loss of scale economies; brand
inconsistency.

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Examples of Polycentric Companies:

Company Industry Strategy

McDonald's Food & Beverage McAloo Tikki in India, rice burgers in Asia,
kosher menus in Israel.
Nestlé Food & Beverage Maggi noodles — curry flavor in India, teriyaki
flavor in Japan.
Starbucks Food & Beverage Green tea lattes in Asia; dulce de leche in Latin
America.
Samsung Electronics Dual-SIM smartphones customized for India's
two-SIM culture.
P&G Consumer Goods Ariel detergent formula adapted for water
hardness in each market.

3.3 Regiocentric Approach (R)

• Definition: Groups countries into regions; develops regional strategies. Combines
standardization within a region with adaptation between regions.
• Strategy: Regional product lines and marketing strategies; regional integration of operations.
• Organization: Regional headquarters with some autonomy from global HQ.
• Advantage: Balances scale economies with some adaptation; culturally sensitive at regional
level.
• Disadvantage: Still misses individual country differences within regions.

Examples of Regiocentric Companies:

Company Industry Strategy

Toyota Automotive Small fuel-efficient cars for Southeast Asia;
trucks for North America; luxury for Europe.
IKEA Retail/Home Compact furniture for Europe; larger for
Furnishings Americas; store layouts differ by region.
Adidas Sportswear Football sponsorships in Europe; cricket in
South Asia; basketball in North America.
Huawei Technology Customized telecom infrastructure for Asia and
Africa.
Unilever Consumer Goods Affordable sachet-sized products for Southeast
Asia; large formats for West.

3.4 Geocentric Approach (G)

• Definition: The world is viewed as a single market. Best practices from anywhere are applied
globally. No bias toward home or host country.

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• Strategy: Integrated global strategy that combines global standardization with selective local
adaptation ('think global, act local' or 'glocal').
• Organization: Truly international staffing; global teams; headquarters has global perspective.
• Advantage: Best of both worlds — global scale with local sensitivity; truly global innovation.
• Disadvantage: Complex to implement; requires sophisticated global coordination; expensive.

Examples of Geocentric Companies:

Company Industry Strategy

Apple Technology Consistent global brand; minor adjustments for
local regulations (charger standards).
Google Technology Gmail and YouTube globally; language support
and local regulatory adaptation.
Tesla Automotive Global electric vehicle vision; adapts charging
standards for local regulations.
Nike Sportswear Unified 'Just Do It' message worldwide; partners
with local athletes for campaigns.
Airbnb Hospitality Global platform with culturally relevant listings
and local travel experiences.

Summary: EPRG at a Glance

Ethnocentric = Home country is best. Polycentric = Every country is different. Regiocentric =
Regions are similar. Geocentric = World is one market. Exam questions often ask you to 'identify
the orientation of Company X' — match the company's behavior to these definitions.

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International Business — Unit 1: Globalization [Link] Honours, Sem IV | Delhi University NEP

4. MOTIVES FOR INTERNATIONAL BUSINESS

EXPANSION

Companies expand internationally for two broad categories of reasons: Proactive (opportunity-driven)
and Reactive (pressure-driven).

4.1 Proactive Motives (Opportunity-Driven)

These are positive, forward-looking reasons where companies see international expansion as an
opportunity to grow.

i. Market Expansion
• Meaning: Companies enter foreign markets to increase customer base, reach untapped
markets, and achieve higher revenues.
• Example: Tesla entered European and Asian markets to meet rising demand for electric
vehicles.

ii. Access to Resources

• Meaning: Companies expand to secure raw materials, skilled labor, or advanced technologies
unavailable domestically.
• Example: Shell expands globally to access natural resources in oil-rich regions like the Middle
East and Africa.

iii. Economies of Scale

• Meaning: International expansion allows companies to produce in larger volumes, lowering per-
unit costs.
• Example: Toyota sets up global manufacturing plants to optimize production costs and serve
local demand.

iv. Profit Maximization

• Meaning: Some foreign markets offer higher margins due to lower competition or greater
willingness to pay.
• Example: Apple sells products in emerging markets to tap into the growing middle class and
premium demand.

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v. Diversification of Risk
• Meaning: Operating in multiple markets protects companies from economic downturns or
instability in any one region.
• Example: Coca-Cola operates in over 200 countries, reducing dependence on any single
market.

vi. Brand Building and Global Reputation

• Meaning: Global presence enhances brand equity, prestige, and market position.
• Example: Luxury brands like Louis Vuitton and Gucci expand internationally to strengthen their
reputation as global icons.

4.2 Reactive Motives (Pressure-Driven)

These are defensive reasons where companies expand internationally in response to pressures.

i. Competitive Pressure
• Meaning: Companies expand internationally to counter competitors entering their domestic
market or to maintain competitive edge globally.
• Example: PepsiCo expanded aggressively internationally to compete with Coca-Cola's global
presence.

ii. Saturation of Domestic Market

• Meaning: Companies enter foreign markets when domestic growth opportunities are limited.
• Example: Walmart expanded internationally after its U.S. market matured, focusing on Mexico,
Canada, and China.

iii. Cost Reduction (Labor and Production)

• Meaning: Businesses move operations to countries with lower labor costs, cheaper inputs, or
tax advantages.
• Example: Nike and other apparel brands outsource to Vietnam and Bangladesh to reduce
manufacturing costs.

iv. Access to Emerging Markets

• Meaning: Companies target rapidly growing markets with increasing consumer spending
power.
• Example: Netflix expanded into India and other emerging markets to tap into their large internet
user base.
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v. Government Incentives and Trade Policies

• Meaning: Favorable trade agreements, tax breaks, or subsidies encourage international
expansion.
• Example: Companies set up in free trade zones or low-tax countries like Ireland or Singapore.

vi. Political or Economic Instability in Home Country

• Meaning: Companies diversify geographically to reduce exposure to home country political risk.
• Example: Many multinationals operating in Venezuela diversified to neighboring countries due
to economic crises.

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International Business — Unit 1: Globalization [Link] Honours, Sem IV | Delhi University NEP

5. MODES OF ENTRY INTO INTERNATIONAL MARKETS

A mode of entry is the way a company chooses to enter a foreign market. The choice depends on
factors like risk tolerance, desired control, available capital, market conditions, and the company's
strategic objectives.

5.1 Exporting
• Definition: Selling goods/services produced domestically to customers in another country.
• Direct Exporting: Company sells directly to foreign customers or distributors.
• Indirect Exporting: Company uses intermediaries (agents, trading companies) to sell abroad.
• Example: Boeing exporting aircraft to airlines worldwide; Indian software companies exporting
IT services.
• Advantages: Low risk and investment; easy to scale; retains control over production.
• Disadvantages: Limited control over foreign marketing; vulnerable to tariffs; no local presence.

5.2 Licensing
• Definition: A contractual agreement where the licensor grants rights to a licensee to use
intellectual property (patents, trademarks, technology) in exchange for fees or royalties.
• Example: Disney licenses its characters for merchandise production globally; Coca-Cola
licenses its formula.
• Advantages: Low investment and risk; generates passive income from IP; fast market entry.
• Disadvantages: Limited control over licensee's operations; risk of creating a future competitor;
IP leakage.

5.3 Franchising
• Definition: A specialized licensing arrangement where the franchisor grants the franchisee the
right to operate under its brand and business model for fees/royalties.
• Example: McDonald's globally; Subway; KFC; Domino's.
• Advantages: Rapid expansion with minimal capital; franchisees bring local market knowledge.
• Disadvantages: Limited control over franchise operations; brand damage risk from poor
franchise management.

5.4 Joint Ventures (JV)

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• Definition: A partnership between two or more companies from different countries to share
resources, risks, and profits for a specific project or business.
• Example: Tata Starbucks (Starbucks + Tata Consumer Products); Maruti Suzuki (Maruti +
Suzuki).
• Advantages: Access to local market knowledge; shared financial and operational risk; easier
regulatory compliance.
• Disadvantages: Potential partner conflicts; profit sharing; loss of control; cultural clashes.

5.5 Strategic Alliances

• Definition: A cooperative agreement between two or more companies to achieve mutually
beneficial goals while remaining independent.
• Example: Starbucks + PepsiCo alliance to distribute bottled coffee beverages worldwide; Star
Alliance (airlines).
• Advantages: Access to new markets, resources, or technologies; shared costs; flexibility.
• Disadvantages: Conflicts over objectives; risk of knowledge leakage to competitors.

5.6 Foreign Direct Investment (FDI)

• Definition: Establishing a physical presence in a foreign market by setting up or acquiring
operations such as factories, subsidiaries, or offices.
Two types:
• Greenfield Investment: Building operations from scratch in a foreign country (e.g., Honda setting
up a new factory in India).
• Brownfield Investment: Acquiring or taking over an existing foreign business or facility (e.g.,
Tata Motors acquiring Jaguar Land Rover).
• Example: Samsung's manufacturing plant in India; Amazon's warehouses globally.
• Advantages: Full control over operations; long-term strategic presence; access to local
markets.
• Disadvantages: Very high investment and risk; regulatory and political challenges.

5.7 Turnkey Projects

• Definition: A company designs, builds, and equips a facility for a foreign client, then hands it
over fully operational ('turn the key and it runs').
• Example: L&T (Larsen & Toubro) building power plants or refineries in developing countries.
• Advantages: Generates significant revenue from large projects; no long-term commitment
required.

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• Disadvantages: Limited long-term revenue stream; legal and operational risks at handover.

5.8 Wholly Owned Subsidiary

• Definition: A company establishes or acquires a fully owned (100%) business entity in a foreign
market.
• Example: BMW's wholly owned manufacturing subsidiary in the USA; Apple's retail stores
globally.
• Advantages: Full control over operations and profits; strong brand presence; IP protection.
• Disadvantages: Highest initial investment; exposed to political and economic instability.

5.9 Piggybacking
• Definition: A smaller company uses the established distribution network of a larger company to
enter a foreign market.
• Example: Small artisan food brands selling internationally through Amazon FBA; small tech
apps distributed through Apple App Store globally.
• Advantages: Very low cost and risk; immediate access to established networks.
• Disadvantages: Dependence on the larger company; limited control over market presence and
pricing.

5.10 Contract Manufacturing

• Definition: A company outsources production to foreign manufacturers while retaining control
over branding, marketing, and design.
• Example: Apple outsources iPhone production to Foxconn in China; Nike outsources shoe
manufacturing to Vietnam.
• Advantages: Significant cost savings; allows company to focus on core competencies
(marketing, design).
• Disadvantages: Dependence on contractor's quality and reliability; risk of intellectual property
theft.

5.11 Comparison of Modes of Entry

Mode of Entry Investment Risk Control Speed of Entry
Exporting Low Low Limited Fast
Licensing Low Low Limited Moderate
Franchising Low– Low Limited Moderate
Medium

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Joint Ventures Medium Medium Shared Moderate

Strategic Alliances Medium Medium Shared Moderate
FDI (Greenfield/Brownfield) High High Full Slow
Turnkey Projects Medium Medium Limited Moderate
Wholly Owned Subsidiary High High Full Slow
Piggybacking Low Low Limited Fast
Contract Manufacturing Low Medium Limited Moderate

Key Insight for Exams

Notice the inverse relationship between control and risk vs. investment. Low investment modes
(exporting, licensing) give limited control. High investment modes (FDI, wholly owned subsidiary)
give full control but carry the most risk. In exams, questions may ask: 'A company wants to enter
a foreign market with minimum investment and risk. Which mode should it choose?' — Answer:
Exporting or Licensing.

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International Business — Unit 1: Globalization [Link] Honours, Sem IV | Delhi University NEP

6. QUICK REVISION — IMPORTANT TERMS GLOSSARY

Term Definition
Globalization Process of increasing interconnectedness of economies,
cultures, and nations.
Globalization of Markets Merging of distinct national markets into one global market.
Globalization of Production Sourcing goods/services from different countries for cost/quality
advantages.
MNC (Multinational Corporation) Company with significant operations in more than one country.
FDI (Foreign Direct Investment) Investment establishing a lasting interest in an enterprise in
another country (10%+ equity stake, IMF definition).
FPI (Foreign Portfolio Investment) Investment in foreign financial assets (stocks, bonds) without
managerial control.
Trade Liberalization Reduction or elimination of trade barriers like tariffs, quotas, and
restrictions.
Tariff A tax imposed by a government on imported goods.
EPRG Framework Management orientation model: Ethnocentric, Polycentric,
Regiocentric, Geocentric.
Ethnocentric Home country orientation — home practices seen as superior.
Polycentric Host country orientation — each local market treated as unique.
Regiocentric Regional orientation — countries grouped into regions with
regional strategy.
Geocentric Global orientation — world as one market; integrates global and
local approaches.
Greenfield Investment FDI by building new operations from scratch in a foreign country.
Brownfield Investment FDI by acquiring or merging with an existing foreign company.
Franchising Licensing arrangement allowing franchisee to operate under
franchisor's brand and model.
Licensing Grant of rights to use intellectual property in exchange for
royalties.
Joint Venture Shared ownership business between two or more companies
from different countries.
Strategic Alliance Cooperative agreement between independent companies for
mutual goals.
Turnkey Project Company builds and transfers a fully operational facility to a
foreign client.
Contract Manufacturing Outsourcing production to foreign manufacturers while retaining
branding control.
Piggybacking Using a larger company's distribution network to enter foreign
markets.

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International Business — Unit 1: Globalization [Link] Honours, Sem IV | Delhi University NEP

Sweatshop Factory with poor working conditions, low pay, long hours —
often in developing countries.
Supply Chain The network of organizations involved in producing and
delivering a product.
Proactive Motives Opportunity-driven reasons for internationalization (e.g., new
markets, resources).
Reactive Motives Pressure-driven reasons for internationalization (e.g.,
competition, market saturation).

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International Business — Unit 1: Globalization [Link] Honours, Sem IV | Delhi University NEP

7. LIKELY EXAM QUESTIONS & ANSWER POINTERS

Short Answer (4–6 marks)

1. Define globalization. Distinguish between globalization of markets and globalization of
production.
• Define globalization (both definitions)
○ Globalization of markets = merging of national markets; example — global brands
○ Globalization of production = dispersing production globally for cost/quality; example —
Apple supply chain

2. What are the drivers of globalization?

• Technological: communication, transport, IT, AI
• Economic: trade liberalization, financial markets, MNCs, supply chains
• Political: WTO, government policies, regional blocs
• Social/cultural: migration, cultural exchange, tourism
• Environmental and crisis-driven factors

3. Explain the EPRG framework.

• Define each orientation with example company
• Ethnocentric → home is best; Polycentric → local adaptation; Regiocentric → regional strategy;
Geocentric → global integration

Long Answer (10–12 marks)

4. Explain the motives for international business expansion.
• Define international business expansion
• Proactive motives: market expansion, resource access, economies of scale, profit maximization,
risk diversification, brand building — 2 lines + example each
• Reactive motives: competitive pressure, market saturation, cost reduction, emerging markets,
government incentives, home instability — 2 lines + example each
• Conclusion: Proactive = opportunity-seeking; Reactive = threat-avoiding

5. Discuss the various modes of entry into international markets.

• Brief intro: definition and factors affecting mode choice
• Cover all 10 modes with definition, example, 1 advantage, 1 disadvantage each
• Conclude with the comparison table (investment vs. control vs. speed)

Study Notes | For complete study use alongside textbook Page 21

International Business — Unit 1: Globalization [Link] Honours, Sem IV | Delhi University NEP

6. Critically evaluate the advantages and disadvantages of globalization.

• Introduction: define globalization and its spread
• Advantages: economic growth, access to goods, technology, cultural exchange, education,
global cooperation — with examples
• Disadvantages: inequality, cultural loss, environment, jobs, dependency, exploitation — with
examples
• Critical analysis: net benefit depends on policies; developing countries face both opportunities
and risks
• Case: Nike sweatshops as exploitation example; Indian IT sector as opportunity example

General Exam Writing Tips

1. Always define key terms at the start of every answer. 2. Use real-world examples —
examiners appreciate relevant examples (Apple, McDonald's, Nike, Indian IT sector). 3. For long
answers, use a structured format: Introduction → Main Points → Examples → Conclusion. 4. The
comparison table for modes of entry is very important — memorize it. 5. EPRG framework is a
common short-answer topic.

— End of Unit 1 Study Notes —

Prepared from unit slides + Hill & Hult Global Business Today + standard IB references

Study Notes | For complete study use alongside textbook Page 22