International Business

International Business Management deals with the maintenance and development of a multinational operation across national borders, whose manager has the knowledge and the skills to manage and handle cross-cultural processes, stakeholders and business environments in a right way.

Mercantilism Theory of International Trade

The mercantilists proposed Mercantilism theory of international trade. They were a group of economists who preceded Adam Smith. The foundations of economic thought between 1500 and 1800 were based on mercantilism. Mercantilists believed that the world had a finite store of wealth; therefore, when one country got more, other countries had less. Mercantilists restricted imports and encouraged or subsidized exports as a conscious policy to make their citizens better off. Mercantilists judged the success of trade by the size of the trade balance.

Mercantilism was a sixteenth-century economic philosophy that maintained that a country’s wealth was measured by its holdings of gold and silver.… Read the rest

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Political Environment of International Business

Political factors constitute an important environment factor in International Business. Actually politics and economics are inter-related as one influences the other. That was the reason for early writers of Economics preferred to caption their work as Political Economy. Political system, political parties in power, political parties in the opposition, political maturity of the parties, number of political parties, political awareness of people, political stability and the like have great impact on the business environment in a country. The economic policies pursued by a Government are to a great extent the by-product of political environment that impacts businesses very often.

Basic Political Ideologies

Political ideology refers to, ‘the body of ideas, theories, aims and means to execute the ideas, adapt the theories and fulfill the aims that constitute a sociopolitical programme for action’.… Read the rest

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Control in Multinational Enterprises (MNEs)

There are various methods of classification of management control in Multinational Enterprises (MNEs). By levels of control here it is meant whether the parent / corporate level managers or subsidiary/country-level managers are involved. The former might be called higher level and the later lower level control. Depending on the sphere of focus we have two types of control called Strategic control and Operational control. In the MNE’s context, strategic control is the responsibility of parent and operational control is the preserve of the subsidiary.

Another way puts ‘management control, tactical control and transactional control’ as the 3 levels of control respectively carried out by the corporate top management, collectively by corporate & subsidiary management and subsidiary management in the case of MNEs.… Read the rest

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New Trade Theory of International Trade

New Trade Theory  of International Trade  takes a different approach from the Ricardian and the Heckscher-Ohlin models on why countries engage in international trade. Both Ricardo and Heckscher assumed constant returns to scale where to them if all factors of production are doubled then output will also double. But a firm or industry may have increasing returns to scale or economies of scale in way that when all factors of production are doubled, output more than doubles which will necessitate a bigger market and thus forcing firms to engage in international trade where there is a larger market. The New Trade Theorist noted that the bigger the size of a firm or industry the more the efficiency of its operations in that the the cost per unit of output falls as a firm or industry increases output.… Read the rest

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Forward Foreign Exchange Contracts

Forward exchange is a device to protect traders against risk arising out of fluctuations in exchange rates. A trader, who has to make or receive payment in foreign currency at the end of a given period, may find at the time of payment or receipt that the foreign currency has appreciated or depreciated. If the currency moves down or gets depreciated the trader will be at a loss as he will get lesser units of home currency for a given amount of foreign currency, which he was holding. Similarly, an importer, who was contracted to make payment of a given amount in dollar at the end of a given period, may find that at the time of payment, the rupee dollar rate is higher.… Read the rest

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Foreign Exchange Department of Banks

The Foreign Exchange department, which is also being called as the International Banking Division, is one of the important departments of the banks operating in international market. In India also all scheduled commercial banks, both in the nationalized or non-nationalized sectors, do have Foreign Exchange departments, both at their principal offices as well as offices, in metropolitan centers. This department functions independently under the overall change of some senior executive or a senior officer well-versed in foreign exchange operations as well as in the rules and regulations in force from time to time pertaining to foreign exchange transactions advised by various government agencies.… Read the rest

Abey Francis
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