International business and international marketing: meaning, evolution, trends and reasons for going international

1. Meaning of international business

International business is any commercial transaction — trade in goods and services, investment, licensing of technology or brands, management contracts — carried out across national borders between parties in two or more countries. It covers private firms and government bodies alike, and both trade (exports and imports) and investment (setting up or buying businesses abroad).

International marketing, the focus the KSLU syllabus names, is narrower: the planning and carrying out of marketing (product, price, promotion, distribution) in more than one country. The American Marketing Association’s definition of marketing, applied across borders, is the usual starting point. Every international marketer is in international business, but international business also includes finance, production, sourcing and investment decisions that are not marketing.

Its scope therefore includes: (i) export and import of merchandise; (ii) export and import of services (software, tourism, banking, shipping, education); (iii) licensing and franchising; (iv) foreign investment, direct (FDI) and portfolio (FPI); and (v) management of the multinational firm itself.

2. Domestic and international business distinguished

3. Evolution of international business

1. Ancient and medieval trade. The Silk Route, Indian trade with Rome and South-East Asia in spices, cotton and indigo; trade was carried by merchants and caravans.
2. Mercantilism and chartered companies (16th–18th centuries). Nations sought an export surplus and gold; the English East India Company (1600) and the Dutch East India Company (1602) were the first large firms operating across continents.
3. Classical free trade and the Industrial Revolution. Adam Smith (The Wealth of Nations, 1776) and David Ricardo (comparative cost, 1817) argued for free trade; steam shipping and railways cut transport costs; colonies supplied raw materials.
4. The inter-war collapse. The Great Depression of the 1930s brought tariff wars (the US Smoot-Hawley Tariff of 1930) and a fall in world trade.
5. The post-1945 order. The Bretton Woods institutions (IMF and World Bank, 1944) and GATT (1947) lowered tariffs round after round; American and European multinationals spread across the world.
6. Globalisation since the 1980s. China’s opening (1978), the fall of the Soviet bloc, India’s reforms of 1991, the WTO (1995), containerisation and the internet created integrated global supply chains.
7. The present phase. Digital trade and e-commerce, services trade, regional and bilateral agreements, and a pull-back from the most open phase: trade wars, “friend-shoring” and diversification of supply chains after the COVID-19 disruptions.

4. Trends in international trade

• Growth faster than world output for most of the post-war period, so trade is a rising share of GDP.
• Rising share of services — IT, finance, logistics, tourism — and of digitally delivered services, where India is strong.
• Intra-industry and intra-firm trade: countries trade similar goods (cars for cars), and a large share of trade is between branches of the same multinational.
• Global value chains: a product is designed in one country, its parts made in several, assembled in another (see the next note on production sharing).
• Shift towards Asia: China, the ASEAN economies and India are a growing part of world exports; developing countries trade more with each other (South–South trade).
• Regionalism: more trade inside blocs such as the EU, ASEAN and USMCA, and a wave of free trade agreements.
• Non-tariff barriers: as tariffs fell, standards, sanitary rules, anti-dumping duties and subsidies became the main obstacles.
• New concerns: environment (carbon border taxes), labour standards, data localisation and economic security.

5. Reasons for going international

Textbooks divide the reasons into pull (proactive) and push (reactive) factors.

1. Larger market and growth. The home market may be small or saturated.
2. Higher profits. Prices and margins may be better abroad.
3. Economies of scale. A bigger total output lowers unit cost.
4. Using surplus capacity left idle by weak home demand.
5. Spreading risk. Selling in many markets reduces dependence on one economy’s business cycle.
6. Extending the product life cycle (Raymond Vernon, 1966): a product mature at home may be new in another market.
7. Access to resources: raw materials, cheaper labour, technology, capital.
8. Competition: following a competitor or customer abroad, or escaping strong competition at home.
9. Government incentives: export incentives, tax benefits, SEZs (Unit V).
10. Liberalisation and better communication: WTO tariff cuts, the internet and cheaper transport have lowered the cost of going abroad.

For a country (as February 2025 phrased it), add: earning foreign exchange to pay for imports; employment; access to technology; specialisation along comparative advantage; and political goodwill.

6. Competitive advantage in a global setting

June 2025 asked about the competitive advantage of international business. Use Michael Porter’s diamond (The Competitive Advantage of Nations, 1990): a nation’s firms succeed where four conditions are favourable — (i) factor conditions (skilled labour, infrastructure), (ii) demand conditions (demanding home buyers), (iii) related and supporting industries, and (iv) firm strategy, structure and rivalry — with chance and government as outside influences. India’s software industry is the standard illustration: English-speaking engineers, early demanding foreign clients, clusters in Bengaluru and Hyderabad, and intense rivalry among Indian firms. At the level of the firm, Porter’s generic strategies (cost leadership, differentiation, focus) apply.

7. “Life is not a bed of roses”: problems of international business

• Political risk: war, sanctions, expropriation, sudden policy change.
• Exchange-rate risk: a contract priced in dollars may become unprofitable when the rupee moves.
• Legal differences: contract, product-liability and IP laws vary; disputes are hard to enforce across borders.
• Trade barriers: tariffs, quotas, standards, anti-dumping actions.
• Cultural and language barriers: products and advertising may need adapting.
• Distance and logistics: transit time, freight, insurance, documentation.
• Payment risk: buyers in distant countries may default; letters of credit and ECGC cover reduce this (Unit V).
• Intense competition from firms with global brands and deep pockets.

The answer to the quotation is that the rewards listed in section 5 come with these risks, and a firm that goes abroad must plan for them through market research, the right mode of entry, hedging and insurance.

How this is examined

For “What is international business and why go international?” give the definition, the scope in five items, and the reasons divided into push and pull. “Evolution” is a 6-mark note: list the seven phases with one line each. “Distinguish domestic and international business” is best answered with the table. For the “bed of roses” question, open with the attractions, then set out the problems, and close with how firms manage them. The trade-law background (GATT, WTO) is covered in the International Trade Economics note on GATT and the WTO.