International Business

Chapter-1
Introduction to International Business Management
Definition of International Management
International business consists of transactions that are devised and carried out across
national borders to satisfy the objectives of individuals and organizations. The
direction and management of business activities among two or more countries is
known as international management. The process of direction and management of the
activates which have arisen from transferring the goods and services measuring by
money or as equivalent to money from one country to another is known as
international management. In other word, international management means the import
and export of goods and services, capital, human, resources and other services from
one country to another country. Some definitions are given below:
1.
Ricky W. Griffin, The managerial activities for a business that is primarily
based in a single country but acquires some meaningful share of its resources
or revenues from other countries.
2.
BNET Business Dictionary, International business is a process of running a
multinational business made up of formerly independent organization.
3.
Richard Mead, International business is defined as the process of practice in
business techniques with in an international environment.
4.
G. John & D. Danils International business is the business of all commercial
transaction between two or more countries.
5.
Helen Deresky, International management is the process of planning,
organizing, leading and controlling in a multinational or cross cultural
environment.
6.
Fred Luthans, The process of applying business concepts and techniques in
a multinational, multicultural environment.
7.
Weihrich Koontz, International management to cases on the operation of
international firms in host countries and concern with managerial issues related
to the flow of people goods and money with the ultimate aim being to manage
better is situations that involve crossing national boundaries.
From the above discussion it can be said that international management means the
business related activities, directions and management process among two or more
countries.

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International Business

Features of International Management

The activities of international management are so large and wide. It directs and
manages the organizations human and non human elements among two or more
countries. The features of international management are as follows:
1. International activities:
2. Boundaries:
3. Country involvement:
4. Currency:
5. Universality:
6. Group activities:
7. Transactions of economic resources:
8. Authority and responsibility:
9. Coordination of different elements:
10. International rules-regulations:
11. International pressure group:
12. Means of achieving objectives:

Importance of International Management

Management means the social activities which are maintained appropriately in
different countries business, industry culture, sports behavior etc. Management has a
great importance in coordinating and directing the business which is done among two
or more companies and in the case of multinational company when it conducts its
activities. The importance of international management is given below1. Development of national economies: For the success of international
management, one should coordinate the indigenous and international elements.
By coordinating the human and nonhuman assets, one can achieve the
objectives. By directing the international activities successfully, it is possible to
play an important role in the development of national economy.
2. Development of human resources: Management team should be skillful and
qualified to sustain in the international competitive market. So, training should
be given to all level of mangers. In this way, an organization can get developed
human resources.
3. Large scale of production: The organizations which are directing by
international management, the production scale of these are generally large.
Because, these is no alternative of large scale of production to sustain in the
competitive market. And by large scale of production and by management an
organization can achieve it specific objectives.

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International Business

4. Reduction of cost: By directing the international managerial activities

skillfully and effectively, it can be possible to reduce cost. By utilizing the skill
and experience of the mangers in every level of production and supply an
organization can reduce cost and can achieve objectives.
5. Utilizations of resources: For the proper utilization of indigenous and
international resources, strong and effective management is receded. No
country can be developed without proper utilization of resources.
6. Increase efficiency and effectiveness: International management works very
widely. So, its management must be more effective and efficient. So. Different
kinds of training programs are taken at different levels for developing the
human resources. By increasing the efficiency and effectiveness, international
management tries to achieve objectives.
7. Technological development: It is impossible to develop a national or
international organization without technological development. Because it is the
age of technology. One of the main aim of international management to achieve
organizational objectives by utilizing he modern technology in every sphere of
production and supply.
8. Development leadership: For achieving the organizational goal, managerial
activities have to do effectively and efficiently. It is not possible to complete
manorial activities efficiently without appropriate leadership. By international
monument, it is possible to develop world wide leadership.
9. Achievement of objectives: The main aim of management is to achieve the
forecasted objectives. For fulfilling these objectives, different kinds of elements
are coordinated. International management completes its all activities
successfully by effective management and leads to achieve objectives.
10. Research and Development: For developing the international management,
there is no alternative of effective and efficient research. By researching many
new goods and technology can be innovated for the management.

The Functions of International Management

Every organizational has do some specific activities for completing the national and
international business successfully. For directing and managing every organization has
to consider the culture, internal and external environment of different countries. The
activities of the international management are discussed briefly1. Planning in multinational company: The first activity of the international
management is to make short term and long term planning for the organization.
The planning of a multinational company is to set long term plan for finding
out the way how to achieve it. Planning related to international business means
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International Business

the process of forecasting which goods and services will be imported and
exported.
2. Organizing the multinational company: For achieving the forecasted
objectives organization should coordinated the human and nonhuman
resources. There two kinds of resources in an organization. One is human
resource, for example the persons who are involved from the top level
management to lower level employees. The other one is non-human resources
such equipment, furniture, building, fixture etc.
3. Staffing the multinational company: International management can staff
qualified personnel from national and international sources. In case
multinational company staffing can be made firstly, they can staff from their
home country.
4. Leading in the multinational company: Another objective of international
management is to lead the subordinate to achieve specific goal. Leading is one
of the strategies to influence to employees. Leading in the multinational
companies try to direct in order to achieve effectiveness by giving appropriate
information.
5. Motivating in the multinational company: Multinational companies use
different kinds of motivation bye com side ring the social and economic
condition of a country. Mangers should not only lead or direct the employees
but also find out the ways by which the employees can get pleasure in their
work, they get motivated and they can do the work by a mental satisfaction.
Employees should be given the financial and non-financial facilities.
6. Controlling in the multinational company: Controlling in the last step of
international management which is essential for achieving the objectives.
Controlling is a continuing process and it justifies that the activities are going
on according to the plan or not. If there is a deviation between the plan and the
actual result, then the control system play an active role. The system of control
differs across countries boned on the social and the task environment. Again
there is another difference in evaluating performance of the employees among
different countries.
From the above discussion, it can be said that the activities of international
management are not same every where. The success of international business depends
on the countries internal and external environment. Management activities may also
differ for the social, economical and political environment. But there are some
common applicable sides for the success of management.

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International Business

Difference between Management and International Management

Subject
Management
International Management
1. Definition Management is the process of International management is
planning, organizing, leading defined as the process of practice
and controlling all commercial in management techniques within
transaction
for
achieving an international environment.
forecasted goal.
2. Scope of Managerial
activities
are Managerial
activities
are
operation
completed within the territory conducted among two or more
or a country.
countries.
3.
Only one country is related to More than one countries are
Involvement the management.
related here.
of country
4. Rules and Organization should maintain Organization should maintain
Regulations only one countrys rules and more than one countries internal
regulation.
and international rules and
regulation.
5. Currency Indigenous currently is used to International currency is used to
complete
management complete managerial activities.
activities.
6. Cultural This kind of management is International management is
difference
conducted within on countrys conducted by maintaining various
culture.
countries cultures.

Here the managerial activities Here the managerial activities are

7. Political are directed within one country directed by maintaining more than
environment political environment.
one
countrys
political
environment.
8.
Managerial
activities
are Managerial activities are directed
Government directed according to one according to more than one
policies
countrys government policies. country and the international
policies.
9. Economic Within one countrys economic Here the activities are conducted
system
system,
activities
are within more than one countries
conducted.
economic system.
10. Methods Since the managerial activities Since the managerial activities are
of
are done within one countrys done in more than one counties
coordination territory, so the methods of territory, so the methods of

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International Business

coordination become easier.

11. Pressure The managerial activities are
groups
influenced by one countys
pressure groups.
12.
Since the managerial activities
Managerial are limited to one country, so
skills
the efficiency and effectiveness
is also limited to that specific
country.
13.
Time Thought the managers have to
consuming
follow only national activities,
it can be completed within a
little time.

coordination become difficult.

The managerial activities are
influenced by more than one
country pressure groups.
Thought the managerial activities
are done in two or more countries
sot the manger should be more
efficient and experienced.
Here the mangers have to follow
the international performance too.
So, he she takes more time to
mange.

Factors Affecting the Success of Strategic Alliance

The popularity of strategic alliance depends on many factors. The more the use of
factors, the more the success will come. The factors which are affecting in the success
of strategic alliance are described below1. Large amount of fund: Far directing any business alliance large amount of
fund is needed. If there has sufficient amount of money, ten any alliance can be
directed easily. Without money many good opportunities many be missed. So,
for the success of strategic alliance, sufficient reserve of capital is essential.
2. Skilled and experienced human resources: Skilled and experienced human
resources are the key to success. Of strategic business alliance. The more the
skilled and experienced human resources the more the possibility of success. It
is impossible to maintain and organization with unskilled or inexperienced
human resources. So, it the members of an alliance wants to get more
opportunities then the direction and management of that company should be
given on skilled and experienced person.
3. Modern technology: In 21st century, the development of any organization is
not possible without using the modern technology. The development of
strategic alliance is not possible without modern and improved technology. By
utilizing the modern technology the members of the strategic business alliance
can be more successful and can achieve the organizational goal.
4. Comparative advantages: For the success, one organization should give more
facilities to its members than other organization. Because, it is difficult for an
organization to sustain in the competitive market without giving comparatively
more advantages.

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International Business

5. Role of government: The success of strategic alliances mainly depends on the

role of government. If the government has no positive attitude, then the
possibility of the success of an organization is very rare. Because, government
is the controller of the alliances.
6. Competitive movement: The effectiveness and the efficiency of an
organization can not be increased without competition. If an alliance is
committed to give good services and opportunities to its members but after a
some time it is unable to give those, then the members may leave this alliance
and many enter to a competitor alliance.
7. Research and development: The possibility of failure of a strategic business
alliance is to rare. Because they have modern research and development. If
there arises any problem then the research and development department find
out the reasons, it disadvantages and the remedies of that problem.
From the above discussion, it can be said that if a strategic business alliance has
these factors then, it will be succeed in the near future.
Causes of Rising International Business
There are various causes of rising international business which are follows:
1. To create new customer: The goods and services which are produced by one
country can be spread by the international business. So, new customers can be
created of this product or service. And it helps to create new demand as well as
the opportunity of employment. For example,- Bangladesh earns of lot of
foreign currency by exporting ready made garments shrimp etc.
2. To achieve lower costs and enhance firms competitiveness: As a result of
international business every country wants to reach to the customers as quickly
as possible as the other countries. So, commercial competitiveness is created.
On the other hand, every organization and country tries to meet the demand of
the customers and make them as a stable customer. So, international business is
conducted to achieve lower costs and enhance firms competitiveness in the
specified market.
3. To achieve customers belief: When a person or an organization engaged them
salve in the international business by exchanging goods and services, then it
can easily create a positive impression in the customers mind. In this case,
customers believe that this organization supply quality product and for this
reason it is able to engage in the international business. By this way,
organization can make an internal power. To maintain this goodwill and to
make it more competitive, try to find out it fault and to solve it.
4. To reduce risk: Because of the relations of international markets, the economic
and organizational activities and it motion and nature are influence. As a result,
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International Business

if one market fails to reach its goal then the other market which is succeed in
reaching goals can make a balance by reducing the loss. By this may, it helps in
reducing risk.
5. To reduce cost of product and supply : For international business it can be
possible that one country will produce only those products in which she has
absolute advantages in the production and buy other products from
international markets. As a result, the cost of product and supply can be
reduced.
6. To increase customers satisfactions: The demand, habit, taste, likings may
differ form country to country and person to person. And these can not be met
by only one organization or only one country. So, to meet the different
demands and likings, international business is operated.
7. To develop standard of living: For international business customers can get
quality product at a low price. And this develops the standard of living day by
day. For example- we can use the cosmetics of the world known organizations.
As a result, our living standard increasing.
8. To introduce new product and services : To compete in international market
every organizations engaged themselves in the continuous research and find out
or introduce new products and services and develop the quality of the existing
products or services.
9. Distribution of labor: For producing different kinds of products, every
organization needs skilled labors or employees. Sometimes this is not sufficient
in the local labor market. For international business, qualified and skilled
labors are appointed in he specific field for producing goods and services. This
is possible by the distribution of labor.
10. Specialized in production: In the case of international business, one country
produces only those products in which she has absolute advantages. That
means, the resources need to produce a product. Which country contains these
specific resources abundant to produce the specific product, she will produce
this product only. By this way, she can be specialized in this sector.
From the above discussion, it can be said that, international business makes profit
by fulfilling the demands of the customers and introducing new products, ideas etc.

Risk of Entry in Global Market

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International Business

The company has to follow some strategies to enter into competitive world market.
Thought the business organization follow some strategies they sometimes face
different kinds of risk and constraints, such as marketing barriers, economic barriers
etc. Generally, the disadvantages which are flowed in entering into world market are
discoursed below1. Financial risk: Any business organization thinks about the financial risk
before entering into a new market. Because, it needs subsidiaries can make a
challenge about the decisions of the head quarter and can apply to change these
decisions. It is said that, when the necessity comes to coordinate, the control
strategy can be taken by following the formal and informal strategies, and form
that types of activities and internal communication system which will help in
reducing the conflict among the subsidiaries. The importance of informal
control will increase in future. The only reason is that the increasing size of the
subsidiaries and he control of the important assets. This development helps in
increasing the burgeoning power of the subsidiaries too much money to enter
into a competitive market. If the owners of the business do not get any security
of their capital, then they will loss their interest in entering into international
market. So, businessmen invest in these strategic sectors so that invested
money can be returned costly. Otherwise, they should supply hose products or
services which have so much marketed demand. So, one should consider the
strategic financial risk before entering into the world market.
2. Political risk: In the case of entering into international market organizations
must consider the political risk. It is essential to know about the stability of the
political condition of that country where the organization will supply the goods
and services. It the political condition is not stable of that country then there is
a possibility to face the loss. For example it can be said that the business risk is
too high in Iraq or Afghanistan in todays situation (December, 2007).
3. Religious risk: Religion has an important affect in the living of the human
being. For the religious feelings sometimes organizations face risks. Such as
Saudi Arabia or Pakistan has little prospect in making profit by doing the
drinks business. Because they are Muslim countries. Muslim society thinks that
drinks in forbidden. Because it is made harm in the Holy Quran.
4. Demand related risk: Before entering into international market we must think
about the demand of goods and services of the specific countries. One should
not enter into the international market with the product or services which has
little demand no demand. Organization should enter into the market by those
products which have time competence and which depend on the modern
technology and which has quality. Because, with the help of it one can reduce
the strategic demand.
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International Business

5. Technological risk: By using the modern technology one can produce quality
products and services and by this one can change revolutionarily in the
production and in the marketing. So the products and services by which one
will enter into the world market should be time competence. On the other hand
the products or services which are too dependent on the technology have high
risks. Because, technology makes the living of the human being easier on the
one hand and destroy it easily on the other hand. So, to reduce the
technological risk the use of technology should be ensured.
6. Competitive risk: In the case of entering into international market,
organizations have to face different kinds of competition. Competitions
sometimes bring goods result and sometimes it brings bad result. The
competition is so large in these products which have limited demand but have a
large amount of supply. To sustain n the competitive market one should supply
quality product at a completive price.
7. Ownership and control risk: There are so many ways to enter into the
international market. When nay organization wants to enter into an
international market it should follow any one of the methods. The ownership
and control dependent on the method by which one enters into the international
business. How many ownership and control will be consumed by head quarter
and the subsidiary office will determine the level of risk in their competitions.
If it is possible to reduce the clash between the head quarter and the subsidiary
office them the organization can conduct the business in the international
market successfully.
8. Operational risk: In the competitive business market, it is very difficult to
conduct business by sustaining with completion. In the world market special
strategies are followed in conducting business.
9. Marketing risk: Today in the age of marketing. The organization which can
market its products strategically can be successful. Because, the aim of the
businessman is not only to produce goods but also to market it. For this reason,
to attract customers all possible strategies are taken and the products are
reached to the customers and consumers by using effective strategies.
10. Risk of economical structure: In the todays world market, there have
different kinds of economy. All types of economic structure are not suitable for
the international business. In this age of economic market business can make
profit in that country easily where the economy is free. For business one can
decide that country where economic strategies are conservative.
From the above discussion it can be said that, there are so many strategic risks in the
international market. For the success in the world market, one has to face these risks

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International Business

strategically. One should consider these ways by which one can conduct business
successfully by avoiding the risk instead of facing these.
Analyzing Foreign Markets
There are almost 200 countries in the world. It is impossible for only one country to
supply goods to all countries and is unprofitable too. So, companies have to interest in
analyzing the market and sleeting the profitable business sectors. Analyzing market
means to select the comparatives more profitable and conductible market among the
all prospective markets. For analyzing profitable market we have to take the following
steps1. The products which the company wants to export, these products or other
related products size, price, quality, customers demand etc and other related
essential data and information have to be collected firstly by the company for
analyzing market.
2. Since the supply of products in the international market is an expensive, painful
and long term process so here the sustainability of the market should be long
term for achieving the profit. And in this step the sustainability of the market
should be analyzed by analyzing the information and the activities.
3. The income and the expenditure of supplying goods and services in the
indigenous market and in the foreign market should be analyzed. If the supply
of goods in international market is more profitable and advantageous then one
must try to supply goods in international market.
4. One should consider the market size, business environment and the economic
condition of that country where the products will be supplied. Such as the large
demandable market India and china where both the advantages and the
disadvantages involved in supplying goods. In this ease if the advantages and
more than the disadvantages and the market condition is positive then one can
be involved in supplying goods in that country. But in this case the price of the
exportable product must be considered.
5. In case of exporting, the expenses of export are an important matter. If the
import tariff, VAT, transportation expenses etc are comparatively height in that
country where the product will be exported then the price of the product will be
high in his case the supply of product will be risky.
6. If there is any special constraints in some special exportable product etc should
be considered.
7. One should consider and takes an idea about he social and cultural condition,
religious feelings etc. in that country where these will be exported. Because on
should not export these type of product which hits that countrys people social,
cultural and religious feelings.
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8. Where the product will be exported, that countrys peoples tastes, likings,
consumers, trends of consumers etc should be analyzed carefully.
9. One should not only collect the data and information but also to analyzed and
evaluate those by using right research method and should take decisions on the
basis of these result.
From the above discussion, it is clear that, for achieving the business goals correctly,
one should collect information and data about he market condition and business
environment and should analyzed and evaluate thee and take decisions on the basis of
these data and information before entering into a foreign market.

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