Questions Has anything of IB gripped your attention till now? What is International Business? What have been the major developments in the world of IB? What is the story of IB in India? What has driven IB activities?

1
QuestionsHas anything of IB gripped your
attention till now?What is International
Business?What have been the major developments
in the world of IB?What is the story of IB in
India?What has driven IB activities?
Amar KJR Nayak/IB/XIMB
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Amar KJR Nayak/IB/XIMB
International Business (IB)
Commercial Activities that cross National
Frontiers
International Movement of Goods, Capital,
Technology, Services
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Amar KJR Nayak/IB/XIMB
Growth Phase 1880s - 1920
Ownership / Control of many of the worlds
natural resources - IB
Trading companies, banks and utilities had
created a global infrastructure
Movement of the latest and the newest
technological products
IB Prominent in chemicals, machinery and branded
consumer products.
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Amar KJR Nayak/IB/XIMB
The Great Depression, 1920 - 1930
Collapse of primary commodity prices
World Political Uncertainties Break of the
Second World War
Halted the growth of international trade for
nearly a decade.
IB could not retain its momentum as prior to the
1920s
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Amar KJR Nayak/IB/XIMB
Limited Growth Phase, 1930 1950
IB in the world economy halted
IB expanded in the automobiles
International cartels to restrict output,
maintain prices, and to transfer technologies
across borders
FDI dominated by USA, Britain and the Netherlands
Limited flow of FDI to the less industrialized
nations
The new independent nations sought to control of
the nations strategic natural resources and
utilities from the foreign companies
IB from the 1950s numerous borders
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Amar KJR Nayak/IB/XIMB
Growth Restricted, 1950 1970
Vertical integration strategies of MNEs started
to get fragmented
Foreign ownership of energy, communication
airlines and utilities challenged and prohibited
Significant growth in areas like advertising
agencies, accounting, hotels, fast food
restaurants in the industrialized nations
Trading firms found a firm role in these
industrialized nations
The Sogo Shosha functioned as Japans leading MNEs
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Amar KJR Nayak/IB/XIMB
New Growth Phase, 1970 -
IB entered a new environment and a new growth
phase
Regained the level of importance that of period
before the 1920s
Germany, France and Japan re-emerged as major
outward investors
Newly industrialized countries in Asia emerged as
new sources multinational investment.
China and Eastern Europe also were open for FDI
India
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Amar KJR Nayak/IB/XIMB
Key Features
Multinational investment overtook trade as the
driving force
Air transportation, Utilities, Natural Resources
opened up for FDI
New forms of international borders Regulations
and control
Contracts and Joint Ventures Means to control
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Amar KJR Nayak/IB/XIMB
Sectoral distribution () of IB
Sector 1914 1978 1992
Natural Resources 55 22 11
Manufacturing 15 52 39
Service 30 26 50
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Amar KJR Nayak/IB/XIMB
International Business
A striking mixture of continuities and
discontinuities
Change has been the most key feature of IB
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Amar KJR Nayak/IB/XIMB
Why How of IB
Is there a single driving force?
Nineteenth century need for raw materials and
foodstuffs in the industrialized world.
Maturing markets in the industrialized countries
High transaction costs in many markets and the
capital intensity
Firms want to Become Multinational corporation?
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Amar KJR Nayak/IB/XIMB
How it happened
Improvement in transport and communications

• Reduced the problem of co-ordination of
  business across countries, time and cost of
  traversing space

Strong and dynamic organizational structure were
critical
Protection of proprietary technology, brands
complex written contracts
Modes of investment (joint venture, equity and
non-equity)
International cartels (as in the 1930s), MA,
Alliances Networks
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Interaction b/wHost Country Foreign Company
willing to InvestMotivations of both
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Amar KJR Nayak/IB/XIMB
Significance to Managers Business in most
industries have crossed the national boundaries
Compete for a share of global market Develop
capabilities to operate in the international
market
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Amar KJR Nayak/IB/XIMB
International Business India Nature Scope
Investment of foreign companies in India
(1900s-2000) 1900s-1920 British Dominated
Growth 1920-1940 Indian companies assert,
British co. enter mfg. 1940-1960 American
other European companies rush in 1960-1980 Contro
lled Growth, Committed survived 1980-2000 Gates
opened, Flooding of FDI