Contents – Fundamentals of International Business


Preface to the First Edition

Preface to the Fourth Edition


About the Author

1. Globalization and International Business

Journey of the Wimbledon Tennis Ball


Elements of Globalization

Economic Globalization

Cultural Globalization

Political Globalization

International Business

TNCs – A Classification

Growth of International Business

Economic Forces

Political Forces

Technological Forces

Impact of Globalization

International Versus Domestic Business

Motives for Firm Internationalization

International Orientations

Ethnocentric Orientation

Polycentric Orientation

Regiocentric Orientation

Geocentric Orientation

Modes of Entry

Trade-related Entry Modes

Contractual Entry Modes

Investment-related Entry Modes

Chapter Summary

Key Terms

Discussion Questions

Examination Questions

2. Economic and Political Environment

The Sharing Economy


Economic Environment

Economic Systems

Economic Indicators

Demographic Environment

Population Size

Age Distribution

Demographic Dividend

Rural–Urban Distribution

Political Environment

Political Ideologies and Systems

Political Risk

International Business Negotiation

Objectives of International Business Negotiation

Bargaining Power of the TNC

Chapter Summary

Key Terms

Discussion Questions

Examination Questions

3. Cultural and Legal Environment

Chocolate Fries and Pikachu Help McDonalds


Elements of Culture


Non-verbal Communication


Values and Attitudes

Customs and Manners


Legal Environment

Global Legal Systems

Legal Jurisdiction

Ethics in International Business

Chapter Summary

Key Terms

Discussion Questions

Examination Question

4. International Trade Theories

The Logitech Mouse


International Trade Theories

Mercantilist Doctrine

Classical Approach

Factor Proportions Theory

Leontief Paradox

Linder’s Income-preference Similarity Theory

Product Life Cycle Theory

The New Trade Theory

National Competitive Advantage

Theory Assessment

Developments in World Trade

World Trade Trends

Volume of Trade

Composition of World Trade

Direction of World Trade

Trade in Services

Digital Trade

Chapter Summary

Key Terms

Discussion Questions

Examination Questions

5. Commercial Policy Instruments

US Embargo on Kinder Joy Chocolate


Government Intervention in Trade

Economic Rationale

Non-economic Rationale

Instruments of Trade Control

Tariff Barriers

Non-tariff Barriers

Analysis of India’s Foreign Trade

Volume of India’s Foreign Trade

Composition of India’s Foreign Trade

Direction of India’s Foreign Trade

Chapter Summary

Key Terms

Discussion Questions

Examination Questions

6. Multilateral Regulation of Trade

Trade Wars


General Agreement on Tariffs and Trade (GATT)

Objectives and Principles

Uruguay Round

GATT: An Evaluation

World Trade Organization (WTO)

WTO Agreements

General Agreement on Tariffs and Trade (GATT)

General Agreement on Trade in Services (GATS)

Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPS)

Agreement on Trade-related Investment Measures (TRIMS)

Organizational Structure of WTO

Principles of WTO

Most-Favoured-Nation (MFN)

National Treatment

Functions of WTO

WTO: An Evaluation

Developing Country Issues

Dispute Resolution Mechanism

Subsidies in Agriculture

Future Challenges for WTO

WTO Achievements

United Nations Conference on Trade and Development (UNCTAD)

Functions of UNCTAD

UNCTAD: An Assessment

Chapter Summary

Key Terms

Discussion Questions

Examination Questions

7. International Trade Finance and Promotion

The New Indian Trade Policy


International Trade Payment

Cash in Advance

Letter of Credit (L/C)

Documentary Collection

Open Account

Terms of Trade

Free on Board (FOB)

Free Alongside Ship (FAS)

Cost, Insurance, and Freight (CIF)

Cost and Freight (CFR)

Delivered at Frontier (DAF)

International Trade Finance

Private Sources

Government sources

International Trade Credit

Trade Promotion in India

Organizations for Export Promotion

Export Incentives

Marketing Assistance

Market Development Assistance

Market Access Initiative

Foreign Exchange

Trade Fairs and Exhibitions

Export Risk Insurance

Production Assistance/Facilities

Special Economic Zones (SEZs)

Export Processing Zones

Free Trade Zone (FTZ)

Export-oriented Unit (EOU)

Export Houses

Special Economic Zone

Chapter Summary

Key Terms

Discussion Questions

Examination Questions

8. Foreign Direct Investment

TECNO Captures the African Market


FDI: A Classification

Asset-based View

Nature of Business Activity

Motive-based View

Modes of FDI Entry

Branch Office

Strategic Alliances

Wholly Owned Subsidiary

Forms of Wholly Owned Subsidiaries: Greenfield Investment versus Mergers and Acquisitions

Umbrella Holding Company

Differences Between Joint Ventures and Mergers

FDI: An Evaluation

Host-country Perspective

Home-country Perspective

Global FDI Patterns

Trends in FDI

Direction of FDI

FDI Outflows

Foreign Investment in India

Policy Perspective

Sectoral Dimensions of FDI Flows

FDI Policy Changes

Geographical Composition

Outward Indian FDI

Chapter Summary

Key Terms

Discussion Questions

Examination Questions

9. Regional Economic Integration

Brexit Spells Doom for Wine, Ham and Cheese


Levels of Economic Integration

Free Trade Area (FTA)

Customs Union

Common Market

Economic Union

Political Union

Effects of Integration

Trade Creation and Trade Diversion

Reduced Import Prices

Increased Competition and Economies of Scale

Higher Factor Productivity

Regional Trading Agreements—A Global Overview

European Union (EU)


North American Free Trade Agreement (NAFTA)

NAFTA Provisions

Importance of NAFTA

Implications of a New Agreement

Association of Southeast Asian Nations (ASEAN)

Objectives of ASEAN

ASEAN Evolution and Growth

ASEAN Achievments

South Asian Association for Regional Cooperation (SAARC)

Chapter Summary

Key Terms

Discussion Questions

Examination Questions

10. International Financial Environment

Venezuela’s Experiments with the Bolivar


International Financial System

Foreign Exchange Markets

Functioning of the Foreign Exchange Market

Foreign Exchange Risk and Exposure

International Capital Market

International Money Markets

International Bond Markets

International Stock Markets

Chapter Summary

Key Terms

Discussion Questions

Examination Questions

11. Exchange Rate Determination

The Falafel Index

Basics of Foreign Exchange

Exchange Rate Determination

Demand for a Currency

Supply of a Currency

Fixed and Flexible Exchange Rate Systems

Currency Convertibility

Factors Affecting the Exchange Rate

Relative Inflation Rates

Relative Interest Rates

Relative Economic Growth Rates

Political and Economic Risk

Expectations and the Asset Market Model of Exchange Rates

Central Bank Reputations and Currency Values

Theories of Exchange Rate Determination Interest Rate Parity

Purchasing Power Parity

Fisher Effect

Evolution of the Global Monetary System

The Gold Standard (1876–1914)

The Inter-war Years and World War II (1914–44)

The Bretton Woods System (1944–73)

The Post-Bretton Woods System: 1973–Present

Contemporary Exchange Rate Systems

Fixed Exchange Rate System

Independent Float System

Currency Board Arrangement

Soft Pegs

Crawling Peg

Pegged Exchange Rates within Horizontal Bands

Floating Arrangements

Chapter Summary

Key Terms

Discussion Questions

Examination Questions

12. International Financial Institutions

The New BRICS Bank


International Monetary Fund (IMF)

Objectives of IMF

Functions of the IMF

World Bank Group



Chapter Summary

Key Terms

Discussion Questions

Examination Questions

13. International Balance of Payments

Customs Duty to Curtail Balance of Payments Difficulties 215


Fundamentals of Balance of Payments Accounting

Defining International Economic Transactions

The BOP as a Cash Flow Statement

BOP Accounting: Double Entry Bookkeeping

Components of the Balance of Payments Account

Current Account

Capital and Financial Account

Net Errors and Omissions

Official Reserves Account

The Balance of Payments in Totality

Chapter Summary

Key Terms

Discussion Questions

Examination Questions

14. International Marketing

Selling Cookies in China


International Market Assessment

The Marketing Mix

Market Segmentation


Producer Goods

Consumer Goods

Determinants of Product Adaptation

Brand Management

New Product Development

Promotion Strategy

Pricing Strategy


Chapter Summary

Key Terms

Discussion Questions

Examination Question

15. International Human Resource Management

IKEA Says ‘No’ to Child Labor


Recruitment and Selection

Ethnocentric Approach

Polycentric Approach

Geocentric Approach

Regiocentric Approach

Training and Development

Cross-cultural Training

Language Training

Specific Skills Training


International Labor Relations

International Labor Standards

Chapter Summary

Key Terms

Discussion Questions

16. International Production and Supply Chain Operations

The Pharma Supply Chain


Supply-Chain Management

Objectives of Supply Chain Management

International Logistics

Systems Concept

Total Cost Concept

Trade-off Concept

Global Supply Chain Decisions


Third-party Logistics (3PL)

Location Decisions

Production Decisions

Purchasing Decision

Inventory Decisions

International Packaging Issues

International Storage Issues

Transportation Decisions

Transportation Infrastructure

Chapter Summary

Key Terms

Discussion Questions

Examination Question

17. Global E-commerce

The Changing Online Marketplace


E-commerce versus E-business

Types of E-commerce

B2B E-commerce

B2C E-commerce

B2G E-commerce

C2C E-commerce

C2B E-commerce


E-commerce—An Evaluation

E-commerce Advantages

Disadvantages of E-commerce

Drivers of E-commerce

Global Factors

Demographic Factors

Economic and Financial Resources

Information Infrastructure

Industry Structure

Firm Size

Entrepreneurial Environment

Consumer Preferences

National Policy

Chapter Summary

Key Terms

Discussion Questions

Examination Questions

18. Environmental Issues in International Business

Sustainability Initiatives at McDonald’s


Climate Change

Transboundary Pollution

International Legal Frameworks for Environmental Protection

Kyoto Protocol

International Emissions Trading

Chapter Summary

Key Terms

Discussion Questions

Examination Questions

19. Global Outsourcing

Past, Present and Future of Outsourcing


Forms of Outsourcing

Drivers of Outsourcing

Theory of Comparative Advantage

Concentration on Core Competency

Developments in Technology

Existence of Low-cost and Skilled Manpower

Changes in Regulatory Environment

Infrastructural and Institutional Development

Factors Behind a Decision to Outsource

Technical and Institutional Separability

Standardization and Automation

Cost Minimization

Market Size

Software Industry in India

Large Skilled English Speaking Work Force

Time Advantage

Location Advantage

Growth Drivers of India’s ITES–BPO Sector

Abundant Talent

Sustained Cost Competitiveness

Continued Focus on Quality

World Class Information Security Environment

Rapid Growth in Key Business Infrastructure

Enabling Business Policy and Regulatory Environment

Problems and Pitfalls of the ITES–BPO Industry

Changing Value of the Rupee

Poor Infrastructure

Increasing Demand for Trained Manpower

Employee Dissatisfaction and High Attrition Rates

Intensifying Competition

Future Threats

Chapter Summary

Key Terms

Discussion Questions

Examination Questions

Model Question Papers