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Unit 1: International Business: An Overview
Geocentric Approach: Under this approach, the entire world is just like a single country for notes
the company. They select the employees from the entire globe and operate with the number
of subsidiaries. Each subsidiary functions like an independent and autonomous company in
formulating policies, strategies, product design, human resource policies, operations etc.
1.7 advantages of international Business
1. To achieve higher rate of profits:
z Expanding the production capacities beyond the demand of the domestic country
z Severe competition in the home country
z Limited home market
2. Political stability vs. political instability:
z Availability of technology and competent
z Human resource
z High cost of transportation
z Nearness to raw materials
z Availability of quality human resources at low cost
z Liberalization and globalization
3. To increase market share:
z To achieve higher rate of economic development
z Tariffs and import quotas
4. High living standards:
z Increased socio-economic welfare
z Wider market
z Reduced effects of business cycles
z Reduced risks Large-scale economies
5. Potential untapped markets:
z Provides the opportunity for and challenge to domestic business
z Division of labour and specialization
z Economic growth of the world
z Optimum and proper utilization of world resources
z Cultural transformation
z Knitting the world into a closely interactive traditional village.
Notes The foreign subsidiary considers the regional environmental for formulating
policies and strategies.
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