Page 19 - DMGT545_INTERNATIONAL_BUSINESS

International Business

notes 7. Payments: In the internal trade, the goods are exchanged in the currency unit of the country.
In case of foreign trade currencies differ widely throughout the world and those also vary
in value.
8. Transport and insurance cost: The transport and insurance costs are less in case of domestic
trade. For the exports, on the other hand the cost of transport is high and the insurance is
complicated.

Notes Global Company is the one which has either produces in home country or in a
single country and focuses on marketing these products globally and focuses on marketing
these products domestically.

Task Expenses an transport will be higher international trader or domestic trader.

1.6 international Business approaches

In truth, we have become part of a global village and have a global economy where no organization
is insulted from the effects foreign markets and competition. Indeed, more and more firm are
reshaping themselves for international competition and discovering new ways to exploit markets
in every corner of the world. Failure to take a global perspective in one of the biggest mistakes
managers can make. Thus we start laying the foundation for our discussion by introducing and
describing the basic of international business.
An international business is one that is based primarily in a single country but acquires some
meaningful share of its resources or revenues (or both) from other countries. Sears fits this
description. Most of its stores are in the United States.

Example: The retailer earns around 90 percent of its revenues from its U. S. operation
with the remaining 10 percent coming sears stores in Canada. At the same time, however, many
of the products it sells, such as tools and clothing are made abroad from any perspective. Then
it is clear that we live in a truly global economy. Virtually all business today must be concerned
with the competitive situations they face in lands for from home and with how companies from
distant lands are competing in their homelands.
Douglas Wind and Pelmutter advocated four approaches of international business. They are:
Ethnocentric Approach: The excessive production more than the demand for the product, either
due to competition or due to change in customer preferences push the company to exports the
excessive production to the foreign countries. The company export the same product designed
for domestic market to foreign market under this approach. Thus, maintenance of domestic
approach towards international business is called ethnocentric approach.
Polycentric Approach: The company establishes a foreign subsidiary company and decentralized
all the operations and delegates decision making and policy making authority to its executives.
The executives of the subsidiary formulate the policies and strategies, design the product
based on the host country’s environment and the preferences of the local customer. Thus this
approach mostly focuses on the conditions of the host country in policy formulation, strategy
implementation and operations.
Regiocentric Approach: The foreign subsidiary considers the regional environmental for
formulating policies and strategies. It market more or less the same product designed under
polycentric approach in other countries of the region, but with different market strategies.

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