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The prompt will ask you three questions.
How many short and long questions do you want to generate from the provided data?
Nature of questions? (Complex, medium, simple, scenario-based, or mix)
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"5 short 2 long
Scenario-based
Data: INTERNATIONAL BUSINESS - INTRODUCTION
The beverages you drink might be produced in India, but with the collaboration of a USA
company. The tea you drink is prepared from the tea powder produced in Srilanka. The television
you watch might have been produced with Japanese technology.
Most of you have the experience of browsing internet and visiting different websites,
purchasing the goods and services without visiting those manufacturing countries. All these
activities have become a reality due to the operations and activities of International Business. Thus,
international business is the process of linking the global resources with global people.
EVOLUTION:
The origin of International Business goes back to human civilization. Sindh civilization had
many traces of having a trade relationship with the Eastern civilization. Later the concept of
International Business – a broader concept of integration of economies goes back to 19th century.
The first phase was took with the end of first World War in 1919. the import of raw
materials by colonial countries emperor from colonies and exporting them finished goods again to
the colonies. There is an increase in the level of international business.
But after second world war in 1945, the most of the colonial governments refused to export
the raw materials and import finished goods for the purpose of protecting the domestic companies.
There is a decrease in international business.
The consequences of World War II had made the world countries to feel the need of
international co-operation of global trade which led to the formation of various organizations like
International Monetary Fund (IMF) and International Bank for Reconstruction and
Development(IBRD), now called AS World Bank.
NATURE:
Globalization – is an attitude of mind – it is a mindset which views the entire world as a
single market so that the corporate strategy is based on the dynamics of global business
environment. The concept of globalization has filled up the concept of International business. In
International Business M.Com,
4th sem
Navya S Murthy, SSCASC Page 2
fact, the term International Business was not popular before 2 decades. International Business is
come from the word International marketing and International Marketing is come from the word
International Trade.
International Trade – International Marketing:
Originally, the producers used to export their products to the nearby countries and gradually
extended the export to far-off countries. Gradually the companies extended the operations beyond
trade.
International Marketing – International Business:
The MNC’s which are producing in home country band marketing them in foreign countries,
now started locating their plants and other manufacturing facilities in foreign/ host countries.
Later they started producing in one country and marketing in other foreign countries.
A true global companies views the entire world as a single market. There is a great renovision,
given by Arvindh Mills:
Source raw material wherever they are cheapest.
Manufacture wherever in the world is most cost effective.
Sell in those markets where the prices are highest.
Raise finance globally.
‘forge international strategy alliance.
To manage all these, take the best talent from all over the world.
And you will have achieved the stature of a true multinational.
MEANING:
International Business refers to the exchange of goods and services between two parties of
different countries.
International Business may be understood as those business transactions involve crossing of
national boundaries.
International Business M.Com,
4th sem
Navya S Murthy, SSCASC Page 3
International Business is the process of focusing on the resources of the globe and objectives
of the organization on the global business opportunities and threats in order to produce/buy/sell or
exchange of goods and services worldwide.
FEATURES:
1. Large Scale Operations:
In International business, all the operations are conducted on a very huge scale. Production
and marketing activities are conducted on a very large scale. It first sell its goods in the local market
and then the surplus goods are exported.
2. Integration of Economies:
International Business integrates (combines) the economies of many countries. This is
because it uses finance from one country, labour from other country and infrastructure from another
country. It designs the product in one country, produces its parts in many different countries and
assembles in another country and sells in many countries.
3. Dominated by developed countries and MNC’s
International Business is dominated by developed countries and their multinational
companies. Europe and Japan dominate the foreign trade, this is because they have high financial
and other resources.
4. Benefits to Participating countries:
International Business gives benefits to all participating countries. However, the developed
countries get the maximum benefits, the developing countries also get benefits. They get foreign
capital and technology. They get rapid industrial development. They get more employment
opportunities.
5. Keen Competition:
International Business has to face competition in the world market. The competition is
between unequal partners. In this situation, the developed countries are in favorable position as they
International Business M.Com,
4th sem
Navya S Murthy, SSCASC Page 4
produce the superior quality goods and services, but developing countries find difficulty to face
competition.
6. Special role of science and technology:
International Business gives a lot of importance to science and technology. Science and
Technology helps the business to have a large scale production. Developed countries use high
technology. International business helps them to transfer top-end technology to the developing
countries.
7. International Restrictions:
International Business faces many restrictions on the inflow and outflow of capital,
technology and goods. Many government do not allow international business to enter their
countries. They have many trade blocks, tariff barriers, foreign exchange restrictions, etc. All this is
harmful to international business.
8. Sensitive Nature:
The International Business is very sensitive in nature. Any changes in the economic policies,
technology, political environment has a huge impact. Therefore it must conduct marketing research
to find out and study these changes. They must adjust their business activities and adopt accordingly
to survive changes.
9. International Business need accurate information to make appropriate decision.
10. International Business house need not only accurate but also timely information.
11. International Business house segments their markets based on the geographic market segment.
International Business M.Com,
4th sem
Navya S Murthy, SSCASC Page 5
REASONS FOR THE EMERGENCE OF INTERNATIONAL BUSINESS:
To achieve higher rate of profits
The basic objective of the business firm is to earn profit. The domestic markets do not
promise a higher rate of profits. Business firms search for foreign market which hold promise for
higher rate of profits. Thus the objective of profits affects and motivates the business to expand its
operations to foreign countries.
Expanding the production capacity
Domestic companies expanded their production capacities more than the demand for product
in domestic countries. In such cases, these companies are forced to sell their excessive production in
foreign developed market.
Severe competition in home country
The countries oriented towards market economies since 1960’s, experience severe
competition from other business firm in the home country. The weak companies which could not
meet the domestic countries started entering the markets of developing countries.
Limited home market
When the size of the home market is limited either due to the smaller size of the population
or due to lower purchasing power of the people or both, the companies internationalize their
operations.
Political Stability v/s Political Instability
Business firms prefer to enter the politically stable countries and are restrained from locating
their business operations in politically instable countries. In fact, business firms shift the operations
from politically instable countries to the politically stable countries.
Availability of Technology and Managerial Competency
Availability of advanced technology and competent human resource in some countries acts
as pulling factors for business firms from the home country. The developed countries due to these
International Business M.Com,
4th sem
Navya S Murthy, SSCASC Page 6
reasons attract companies from developing world. In fact, American and European countries depend
on Indian Companies for software products and services through their BPO’s.
High cost of transportation
Initially companies enter foreign countries trough their marketing operations. At this stage,
the companies realize the challenge from the domestic companies. Added to this, the home
companies enjoy higher rate of profit margins where as the foreign firms suffer from lower profit
margins. The major factor for this situation is the cost of transportation,
Under such conditions, the foreign companies are inclined to increase their profit margin by
locating their manufacturing unit in foreign countries where there is enough demand either in one
country or in a group of neighboring countries.
Nearness to Raw materials
The source of highly qualitative raw materials and bulk raw materials is a major factor for
attracting the companies from the various foreign countries. Most of the US based companies open
their manufacturing unit in Middle East countries due to the availability of petroleum. These
companies, thus, reduces the cost of transportation.
Availability of Quality HR at less cost
This is the major factor, in recent times, for software, high technology and telecommunication companies to locate their operations in India. India is a major source for high
quality and low cost human resources unlike USA and other developed countries.
Liberalization and Globalization
Most of the countries in the globe liberalized their economies and opened their countries to
the rest of the globe. These changed policies attracted the multinational company."