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Unit I Introduction for International Business Mcom sem 2 Delhi University

Unit I Introduction for International Business MCOM sem 2 Delhi University:- we will provide complete details of Unit I Introduction for International Business MCOM sem 2 Delhi University in this article.

Unit I Introduction for International Business Mcom sem 2 Delhi University

International business comprises all commercial transactions (private and governmental, sales, investments, logistics, and transportation) that take place between two or more regions, countries and nations beyond their political boundaries. Usually, private companies undertake transactions for profit; governments undertake them for profit and for political reasons. The term “international business” refers to all those business activities which involve cross-border transactions of goods, services, and resources between two or more nations. Transactions of economic resources include capital, skills, people etc. for the purpose of the international production of physical goods and services such as finance, banking, insurance, construction etc.

A multinational enterprise (MNE) is a company that has a worldwide approach to markets and production or with operations in several countries. Well-known MNEs include fast-food companies such as McDonald’s and Yum Brands, vehicle manufacturers such as General Motors, Ford Motor Company and Toyota, consumer-electronics producers like Samsung, LG and Sony, and energy companies such as Exxon Mobil, Shell and BP. As shown, multinational enterprises can make business in different types of market.

Areas of study within this topic include differences in legal systems, political systems, economic policy, language, accounting standards, labor standards, living standards, environmental standards, local culture, corporate culture, foreign-exchange market, tariffs, import and export regulations, trade agreements, climate, education and many more topics. Each of these factors may require changes in how individual business units operate from 1 country to the next.

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Unit I Introduction for International Business Mcom sem 2 Delhi University:-Background

International business can be defined as the study of multinational companies. One of the first scholars to engage in developing a theory of multinational companies was Stephen Hymer. Throughout his academic life he developed theories that sought to explain foreign direct investment and why firms become multinational.

There were three phases in Hymer’s work. The first phase was his dissertation in 1960 called the International Operations of National Firms. In this thesis, Hymer departs from neoclassical theory and opens up a new area of international production. At first Hymer started analyzing neoclassical theory and the financial investment wherein the main reason for capital movement is difference in interest rates. Then he started analyzing the characteristics of foreign investment by large companies for production and direct business purposes, calling this Foreign Direct Investment. By analyzing the two types of investments Hymer distinguished financial investment from direct investment. The main distinguishing feature was control. Where in portfolio investment is a more passive approach, and the main purpose is financial gain, with foreign direct investment a firm has control over the operations abroad. So the traditional theory of investment based on differential interest rates does not explain the motivations for FDI.

According to Hymer there are two main determinants of FDI wherein an imperfect market structure is the key element. The first is the firm specific advantages which are developed at the specific companies home country and, profitably, used in the foreign country. The second determinant is the removal of control wherein Hymer wrote: ‘’When firms are interconnected, they compete in selling in the same market or one of the firms may sell to the other,’’ and because of this ‘‘it may be profitable to substitute centralised decision making for decentralised decision making’’

The second phase is his neoclassical article in 1968. This paper includes theory of internationalization and explains the direction of growth of the international expansion of firms. In a later stage Hymer went to a more Marxist approach where he explains that MNC as agents of an international capitalist system causing conflict and contradictions, causing among other inequality and poverty in the world. Hymer is the father of the theory of MNE”, and explains the motivations for companies doing direct business abroad.

Among modern economic theories of multinationals and foreign direct investment are internalization theory and John Dunning’s OLI paradigm. Hymer and Dunning are considered founding fathers of international business as a specialist field of study.

Unit I Introduction for International Business Mcom sem 2 Delhi University:-Importance of International Business Education

  • Most companies are either international or compete with international companies.
  • Modes of operation may differ from those used domestically.
  • The best way of conducting business may differ by country.
  • An understanding helps you to make better career decisions.
  • An understanding helps you decide what governmental policies to support.

Managers in international business must understand social science disciplines and how they affect all functional business fields.

Unit I Introduction for International Business Mcom sem 2 Delhi University:-Importance of language/cultural studies in International Business

A considerable advantage in International Business is gained through the knowledge and use of language. Advantages of being an International Businessperson who is fluent in the local language include the following:

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  • Having the ability to directly communicate with employees and customers
  • Understanding the manner of speaking within business in the local area to improve overall productivity
  • Gaining respect of customers and employees from speaking with them in their native tongue

In many cases it is truly impossible to gain an understanding of a culture’s buying habits without first taking the time to understand the culture. Examples of the benefit of understanding local culture include the following:

  • Being able to provide marketing techniques that are specifically tailored to the local market
  • Knowing how other businesses operate and what might or might not be social taboos
  • Understanding the time structure of an area. Some societies are more focused on “being on time” while others focus on doing business at “the right time”
  • Associate with other people whom do not know several languages.

Unit I Introduction for International Business Mcom sem 2 Delhi University:-Importance of studying International Business

The International Business standards focuses on the following:

  • raising awareness of the interrelatedness of one country’s political policies and economic practices on another;
  • learning to improve international business relations through appropriate communication strategies;
  • understanding the global business environment—that is, the interconnectedness of cultural, political, legal, economic, and ethical systems;
  • exploring basic concepts underlying international finance, management, marketing, and trade relations; and
  • identifying forms of business ownership and international business opportunities.

By focusing on these, students will gain a better understanding of Political economy. These are tools that would help future business people bridge the economical and political gap between countries.

There is an increasing amount of demand for business people with an education in International Business. A survey conducted by Thomas Patrick from University of Notre Dame concluded that Bachelor’s degree holders and Master’s degree holders felt that the training received through education were very practical in the working environment. Business people with an education in International Business also had a significantly higher chance of being sent abroad to work under the international operations of a firm.

Unit I Introduction for International Business Mcom sem 2 Delhi University

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