UNIT 1 International Business (MBA Notes)

 UNIT I AN OVERVIEW OF INTERNATIONAL BUSINESS

Definition and drivers of International Business- Changing Environment of International Business- Country attractiveness- Trends in Globalization- Effect and Benefit of Globalization-International Institution: UNCTAD Basic Principles and Major Achievements, Role of IMF, Features of IBRD, Role and Advantage of WTO.

DEFINITION OF INTERNATIONAL BUSINESS:

· International business includes any type of business activity that crosses national borders. 

· At one end of the definitional spectrum, international business is defined as organization that buys and/or sells goods and services across two or more national boundaries, even if management is located in a single country. 

· At the other end of the spectrum, international business is equated only with those big enterprises, which have operating units outside their own country. 

· In the middle are institutional arrangements that provide for some managerial direction of economic activity taking place abroad but stop short of controlling ownership of the business carrying on the activity, for example joint ventures with locally owned business or with foreign governments.

In fact, sometimes the foreign operations and the comparative business are used as synonymous for international business. Foreign business refers to domestic operations within a foreign country. Comparative business focuses on similarities and differences among countries and business systems for focuses on similarities and differences among countries and business operations and comparative business as fields of enquiry do not have as their major point of interest the special problems that arise when business activities cross national boundaries. For example, the vital question of potential conflicts between the nation-state and the multinational firm, which receives major attention is international business, is not like to be centered or even peripheral in foreign operations and comparative business. 

The Changing Demographics of the Global Economy

Hand in hand with the trend toward globalization has been a fairly dramatic change in the demographics of the global economy over the past 30 years. As late as the 1960s, four stylized facts described the demographics of the global economy. 

The first was U.S. dominance in the world economy and world trade picture. The second was U.S. dominance in world foreign direct investment. Related to this, the third fact was the dominance of large, multinational U.S. firms on the international business scene. The fourth was that roughly half the globe-the centrally planned economies of the communist world-was off-limits to Western international businesses. 

1.      THE CHANGING WORLD OUTPUT AND WORLD TRADE PICTURE

In the early 1960s, the United States was still by far the world's dominant industrial power. In 1963 the United States accounted for 40.3 percent of world economic activity, measured by gross domestic product (GDP). By 2009, the United States accounted for 24.l percent of world output (measured by gross national income, or GNI), still the world's largest industrial power but down significantly in relative size since the 1960s.

By the end of the 1980s, the U.S. position as the world's leading exporter was threatened.

Over the past 30 years, U.S. dominance in export markets has waned as Japan, Germany, and a number of newly industrialized countries such as South Korea and China have taken a larger share of world exports. During the 1960s, the United States routinely accounted for 20 percent of world exports of manufactured goods. But as Table 1.2 shows, the U.S. share of world exports of goods and services had slipped to 8.6 percent by 2010, behind that of China. 

As emerging economies such as China, India, and Brazil continue to grow, a further relative decline in the share of world output and world exports accounted for by the United States and other long-established developed nations seems likely. By itself, this is not bad. The relative decline of the United States reflects the growing economic development and industrialization of the world economy, as opposed to any absolute decline in the health of the U.S. economy. 

Most forecasts now predict a rapid rise in the share of world output accounted for by developing nations such as China, India, Russia, and Indonesia. 

2.      THE CHANGING FOREIGN DIRECT INVESTMENT PICTURE

Reflecting the dominance of the United States in the global economy, U.S. firms accounted for 66.3 percent of worldwide foreign direct investment flows in the 1960s. British firms were second, accounting for 10.5 percent, while Japanese firms were a distant eighth, with only 2 percent. The dominance of U.S. firms was so great that books were written about the economic threat posed to Europe by U.S. corporations. Several European governments, most notably France, talked of limiting inward investment by U.S. firms. 

However, as the barriers to the free flow of goods, services, and capital fell, and as other countries increased their shares of world output, non-U.S. firms increasingly began to invest across national borders. The motivation for much of this foreign direct investment by non-U.S. firms was the desire to disperse production activities to optimal locations and to build a direct presence in major foreign markets. Thus, beginning in the 1970s, European and Japanese firms began to shift labor-intensive manufacturing operations from their home markets to developing nations where labor costs were lower.

3.      THE CHANGING NATURE OF THE MULTINATIONAL ENTERPRISE

A multinational enterprise (MNE) is any business that has productive activities in two or more countries. Since the 1960s, two notable trends in the demographics of the multinational enterprise have been (1) the rise of non-U.S. multinationals and (2) the growth of mini-multinationals. 

Non-U.S. Multinationals

In the 1960s, global business activity was dominated by large U.S. multinational corporations.With U.S. firms accounting for about two-thirds of foreign direct investment during the 1960s, one would expect most multinationals to be U.S. enterprises. In 1973, 48.5 percent of the world's 260 largest multinationals were U.S. firms. The second-largest source country was the United Kingdom, with 18.8 percent of the largest multinationals. Japan accounted for 3.5 percent of the world's largest multinationals at the time. The large number of U.S. multinationals reflected U.S. economic dominance in the three decades after World War II, while the large number of British multinationals reflected that country's industrial dominance in the early decades of the twentieth century. By 2008 things had shifted significantly. Some 19 of the world's 100 largest non financial multinationals were now U.S. enterprises; 13 were French; 13, German; 14, British; and 10, Japanese.

.The Rise of Mini-Multinationals

Another trend in international business has been the growth of medium-size and small multinationals (mini-multinationals). When people think of international businesses, they tend to think of firms such as Exxon, General Motors, Ford, Fuji, Kodak, Matsushita, Procter & Gamble, Sony, and Unilever-large, complex multinational corporations with operations that span the globe. Although most international trade and investment is still conducted by large firms, many medium-size and small businesses are becoming increasingly involved in international trade and investment. The rise of the Internet is lowering the barriers that small firms face in building international sales. 

Consider Lubricating Systems, Inc., of Kent, Washington. Lubricating Systems, which manufactures lubricating fluids for machine tools, employs 25 people and generates sales of $6.5 million. It's hardly a large, complex multinational, yet more than $2 million of the company's sales are generated by exports to a score of countries, including Japan, Israel, and the United Arab Emirates.

 THE CHANGING WORLD ORDER 

Between 1989 and 1991 a series of democratic revolutions swept the Communist world.In country after country throughout Eastern Europe and eventually in the Soviet Union itself, Communist Party governments collapsed. The Soviet Union receded into history, having been replaced by 15 independent republics. Czechoslovakia divided itself into two states, while Yugoslavia dissolved into a bloody civil war, now thankfully over, among its five successor states. 

Many of the former Communist nations of Europe and Asia seem to share a commitment to democratic politics and free market economics. For half a century, these countries were essentially closed to Western international businesses. Now they present a host of export and investment opportunities. Just how this will play out over the next 10 to 20 years is difficult to say.

Country Attractiveness

The International business environment includes various factors like social, political, regulatory, cultural, legal and technological factors that surround a business entity in various sovereign nations. There are exogenous factors relative to the home environment of the organization in the international environment. These factors influence the decision-making process on the use of resources and capabilities. They also make a nation either more or less attractive to an international business firm. 

Country attractiveness is a measure of a country’s attractiveness to the international investors. In international business, investment in foreign countries is the most important aspect and hence firms want to determine how suitable a country is in terms of its external business environments.

Benefits In the most general sense, the long-run monetary benefits of doing business in a country are a function of the size of the market, the present wealth (purchasing power) of consumers in that market, and the likely future wealth of consumers. International businesses need to be aware of this distinction, but they also need to keep in mind the likely future prospects of a country. In 1960 South Korea was viewed as just another impoverished Third World nation. By 2003 it was the world’s 11th largest economy, measured in terms of GDP. By identifying and investing early in a potential future economic star, international firms may build brand loyalty and gain experience in that country’s business practices. In contrast, late entrants may find that they lack the brand loyalty and experience necessary to achieve a significant presence in the market. In the language of business strategy, early entrants into potential future economic stars may be able to reap substantial first-mover advantages, while late entrants may fall victim to late-mover disadvantages. (First-mover advantages are the advantages that accrue to early entrants into a market. Late-mover disadvantages are the handicap that late entrants might suffer from.)

Costs A number of political, economic, and legal factors determine the costs of doing business in a country. With regard to political factors, the costs of doing business in a country can be increased by a need to pay off the politically powerful to be allowed by the government to do business. With regard to economic factors, one of the most important variables is the sophistication of a country’s economy. It may be more costly to do business in relatively primitive or undeveloped economies because of the lack of infrastructure and supporting businesses. As for legal factors, it can be more costly to do business in a country where local laws and regulations set strict standards with regard to product safety, safety in the workplace, environmental pollution, and the like (since adhering to such regulations is costly). Also, local laws that fail to adequately protect intellectual property can lead to the “theft” of an international business’s intellectual property, and lost income.

Risks As with costs, the risks of doing business in a country are determined by a number of political, economic, and legal factors. Political risk has been defined as the likelihood that political forces will cause drastic changes in a country’s business environment that adversely affect the profit and other goals of a business enterprise.     Social unrest can result in abrupt changes in government and government policy or, in some cases, in protracted civil strife.  On the economic front, economic risks arise from economic mismanagement by the government of a country. Economic risks can be defined as the likelihood that economic mismanagement will cause drastic changes in a country’s business environment that hurt the profit and other goals of a particular business enterprise. When legal safeguards are weak, firms are more likely to break contracts and/or steal intellectual property if they perceive it as being in their interests to do so. Thus, legal risks might be defined as the likelihood that a trading partner will opportunistically break a contract or expropriate property rights.

Overall Attractiveness The overall attractiveness of a country as a potential market and/or investment site for an international business depends on balancing the benefits, costs, and risks associated with doing business in that country.

What Is Globalization?

As used in this book, globalization refers to the shift toward a more integrated and interdependent world economy. Globalization has several facets, including the globalization of markets and the globalization of production. 

THE GLOBALIZATION OF MARKETS 

The globalization of markets refers to the merging of historically distinct and separate national markets into one huge global marketplace. Falling barriers to cross-border trade have made it easier to sell internationally. It has been argued for some time that the tastes and preferences of consumers in different nations are beginning to converge on some global norm, thereby helping to create a global market. Consumer products such as Citigroup credit cards, Coca-Cola soft drinks, Sony PlayStation video games, McDonald's hamburgers, Starbucks coffee, and IKEA furniture are frequently held up as prototypical examples of this trend. Firms such as those just cited are more than just benefactors of this trend; they are also facilitators of it. By offering the same basic product worldwide, they help to create a global market. 

• The merging of distinctly separate national markets into a global marketplace 

- Falling barriers to cross-border trade have made it easier to sell internationally 

- Tastes and preferences converge onto a global norm 

- Firms offer standardized products worldwide creating a world market 

• Some problems occur when companies begin operating globally. These include: very significant differences still exist among national markets along many relevant dimensions, including consumer tastes and preferences, distribution channels, culturally embedded value systems, business systems, and legal regulations. These differences frequently require that marketing strategies, product features, and operating practices be customized to best match conditions in a country. For example, automobile companies will promote different car models depending on a range of factors such as local fuel costs, income levels, traffic congestion, and cultural values. Similarly, many companies need to vary aspects of their product mix and operations from country to country depending on local tastes and preferences. 

• The most global markets are not consumer markets 

• The most global markets are for industrial goods and materials that serve a universal need the world over.

Implications for the Globalization of Markets 

1. Low-cost global communications networks such as the World Wide Web are helping to create electronic global marketplaces. 

2. Low-cost transportation has made it more economical to ship products around the world, thereby helping to create global markets. For example, due to the tumbling costs of shipping goods by air, roses grown in Ecuador can be cut and two days later sold in New York. This has given rise to an industry in Ecuador that did not exist 20 years ago and now supplies a global market for roses. 

3. In addition, low-cost jet travel has resulted in the mass movement of people between countries. This has reduced the cultural distance between countries and is bringing about some convergence of consumer tastes and preferences. 

THE GLOBALIZATION OF PRODUCTION 

The globalization of production refers to the sourcing of goods and services from locations around the globe to take advantage of national differences in the cost and quality of factors of production (such as labor, energy, land, and capital). By doing this, companies hope to lower their overall cost structure or improve the quality or functionality of their product offering, thereby allowing them to compete more effectively. 

Consider Boeing's 777, a commercial jet airliner. Eight Japanese suppliers make parts for the fuselage, doors, and wings; a supplier in Singapore makes the doors for the nose landing gear; three suppliers in Italy manufacture wing flaps; and so on.11 in total, some 30 percent of the 777, by value, is built by foreign companies. For its most recent jet airliner, the 787, Boeing has pushed this trend even further; some 65 percent of the total value of the aircraft is outsourced to foreign companies, 35 percent of which goes to three major Japanese companies. 

• Historically this has been primarily confined to manufacturing enterprises 

• Increasingly companies are taking advantage of modern communications technology, and particularly the Internet, to outsource service activities to low-cost producers in other nations 

• Outsourcing of productive activities to different suppliers results in the creation of products that are global in nature 

• Impediments to the globalization of production include 

• Formal and informal barriers to trade 

• Barriers to foreign direct investment 

• Transportation costs 

• Issues associated with economic risk 

• Issues associated with political risk 

Implications for the Globalization of Production 

As transportation costs associated with the globalization of production have declined, dispersal of production to geographically separate locations became more economical. As a result of the technological innovations discussed above, the real costs of information processing and communication have fallen dramatically in the past two decades. These developments make it possible for a firm to create and then manage a globally dispersed production system, further facilitating the globalization of production. A worldwide communications network has become essential for many international businesses. 

For example, Dell uses the Internet to coordinate and control a globally dispersed production system to such an extent that it holds only three days' worth of inventory at its assembly locations. Dell's Internet-based system records orders for computer equipment as they are submitted by customers via the company's website, then immediately transmits the resulting orders for components to various suppliers around the world, which have a real-time look at Dell's order flow and can adjust their production schedules accordingly. 

The Emergence of Global Institutions

Over the past half century, a number of important global institutions have been created to help perform these functions, including the General Agreement on Tariffs and Trade (GATT) and its successor, the World Trade Organization (WTO); the International Monetary Fund (IMF) and its sister institution, the World Bank; and the United Nations (UN). All these institutions were created by voluntary agreement between individual nation-states, and their functions are enshrined in international treaties. 

The World Trade Organization (like the GAT T before it) is primarily responsible for policing the world trading system and making sure nation-states adhere to the rules laid down in trade treaties signed by WTO member states. As of 2011, 154 nations that collectively accounted for 97 percent of world trade were WTO members, thereby giving the organization enormous scope and influence. The WTO is also responsible for facilitating the establishment of additional multinational agreements between WTO member states. Over its entire history, and that of the GAT T before it, the WTO has promoted the lowering of barriers to cross-border trade and investment. 

The International Monetary Fund and the World Bank were both created in 1944 by 44 nations that met at Bretton Woods, New Hampshire. The IMF was established to maintain order in the international monetary system; the World Bank was set up to promote economic development. The IMF is often seen as the lender of last resort to nation-states whose economies are in turmoil and whose currencies are losing value against those of other nations. During the past two decades, for example, the IMF has lent money to the governments of troubled states, including Argentina, Indonesia, Mexico, Russia, South Korea, Thailand, and Turkey. 

The United Nations was established October 24, 1945, by 51 countries committed to preserving peace through international cooperation and collective security. Today nearly every nation in the world belongs to the United Nations; membership now totals 191 countries. When states become members of the United Nations, they agree to accept the obligations of the UN Charter, an international treaty that establishes basic principles of international relations. According to the charter, the UN has four purposes: to maintain international peace and security, to develop friendly relations among nations, to cooperate in solving international problems and in promoting respect for human rights, and to be a center for harmonizing the actions of nations. 

United Nations Conference on Trade and Development

The Headquarters of the UNCTAD are located at the Palais des Nations in Geneva

The United Nations Conference on Trade and Development (UNCTAD) was established in 1964 as an intergovernmental organization intended to promote the interests of developing states in world trade.

UNCTAD is the part of the United Nations Secretariat dealing with trade, investment, and development issues. The organization's goals are to: "maximize the trade, investment and development opportunities of developing countries and assist them in their efforts to integrate into the world economy on an equitable basis". UNCTAD was established by the United Nations General Assembly in 1964 and it reports to the UN General Assembly and United Nations Economic and Social Council.

The primary objective of UNCTAD is to formulate policies relating to all aspects of development including trade, aid, transport, finance and technology. The conference ordinarily meets once in four years; the permanent secretariat is in Geneva.

Basic principles of UNCTAD technical cooperation:

Ø Demand-driven
Ø Embracing country ownership
Ø Based on principle of transparency, efficiency, effectiveness and accountability
Ø Geographically balanced implementation

Achievements

Since its inception, the Programme has provided country assistance to 110 institutions in 72 developing countries. The Programme pays particular attention to helping countries produce clearly identifiable outputs through tailor-made technical assistance projects. 

At the end of 2019, 84 institutions in 57 countries actively use the DMFAS software for their day-to-day debt management operations. Concrete and sustainable results include improved debt coverage, enhanced transparency and reporting, improved operational risk management and greater integration with public finance management. Tangible results at the end of 2019 comprise:

Improved debt coverage:

• 95 per cent of DMFAS user countries had comprehensive and reliable debt databases in respect of government and government-guaranteed external debt
• 67 per cent of DMFAS 6 user institutions responsible for domestic debt were using DMFAS to capture it
• 16 central banks monitoring private external debt using DMFAS

​Enhanced transparency and reporting ​​

• 41 DMFAS user countries regularly publish statistical bulletins 
• 93 per cent of low- or middle-income DMFAS user countries reported effectively to the Debtor Reporting System of the World Bank
• 65 per cent of DMFAS user countries were participating in the IMF-World Bank Quarterly External ​Debt Statistics database (QEDS), 86 per cent of which provided data on time 
• 26 DMFAS user countries regularly produce a debt portfolio analysis

Improved operational risk management 

• 25 DMFAS user countries having an up-to-date procedures manual for back office operations
• 21 DMFAS user countries reported effective disaster recovery plans for the DMFAS database

Greater integration with public finance management​

• 25 DMFAS user institutions have linked the DMFAS database with other integrated systems

Features of IBRD

The International Bank for Reconstruction and Development (IBRD), commonly referred to as the World Bank. 

The World Bank was established in December 1945 at the United Nations Monetary and Financial Conference in Bretton Woods, New Hampshire. It opened for business in June 1946 and helped in the reconstruction of nations devastated by World War II. Since 1960s the World Bank has shifted its focus from the advanced industrialized nations to developing third-world countries. 

The WTO is a body designed to promote free trade through organizing trade negotiations and act as an independent arbiter in settling trade disputes. To some extent the WTO has been successful in promoting greater free trade. 

Functions:

World Bank is playing main role of providing loans for development works to member countries, especially to underdeveloped countries. The World Bank provides long-term loans for various development projects of 5 to 20 years duration.

The main functions can be explained with the help of the following points:

1. World Bank provides various technical services to the member countries. For this purpose, the Bank has established “The Economic Development Institute” and a Staff College in Washington.

2. Bank can grant loans to a member country up to 20% of its share in the paid-up capital.

3. The quantities of loans, interest rate and terms and conditions are determined by the Bank itself.

4. Generally, Bank grants loans for a particular project duly submitted to the Bank by the member country.

5. The debtor nation has to repay either in reserve currencies or in the currency in which the loan was sanctioned.

6. Bank also provides loan to private investors belonging to member countries on its own guarantee, but for this loan private investors have to seek prior permission from those counties where this amount will be collected.

Role and Advantage of WTO.

The principles of the WTO are

1. Promote free trade through gradual reduction of tariffs
2. Provide legal framework for negotiation of trade disputes. This aims to provide greater stability and predictability in trade.
3. Trade without discrimination - avoiding preferential trade agreements.
4. WTO is not a completely free trade body. It allows tariffs and trade restrictions under certain conditions, e.g. protection against 'dumping' of cheap surplus goods.
5. WTO is committed to protecting fair competition. There are rules on subsidies, dumping
6. WTO is committed to economic development. For example, recent rounds have put pressure on developed countries to accelerate restrictions on imports from the least-developing countries.

Advantages of promoting free trade

1. Lower prices for consumers. Removing tariffs enables us to buy cheaper imports
   Free trade encourages greater competitiveness. Through free trade, firms face a higher incentive to cut costs. For example, a domestic monopoly may now face competition from foreign firms.
   The law of comparative advantage states that free trade will enable an increase in economic welfare. This is because countries can specialise in producing goods where they have a lower opportunity cost.
   Economies of scale. By encouraging free trade, firms can specialise and produce a higher quantity. This enables more economies of scale, this is important for industries with high fixed costs, such as car and aeroplane manufacture. In new trade theory, it is this specialisation and exploitation of economies of scale that is most important factor in improving economic welfare

Drivers of Globalization 

Two macro factors underlie the trend toward greater globalization. The first is the decline in barriers to the free flow of goods, services, and capital that has occurred since the end of World War II. The second factor is technological change, particularly the dramatic developments in recent decades in communication, information processing, and transportation technologies.  

DECLINING TRADE AND INVESTMENT BARRIERS

During the 1920s and 30s many of the world's nation-states erected formidable barriers to international trade and foreign direct investment. International trade occurs when a firm exports goods or services to consumers in another country. Foreign direct investment (FDI) occurs when a firm invests resources in business activities outside its home country. Many of the barriers to international trade took the form of high tariffs on imports of manufactured goods. The typical aim of such tariffs was to protect domestic industries from foreign competition. One consequence, however, was "beggar thy neighbor" retaliatory trade policies, with countries progressively raising trade barriers against each other. Ultimately, this depressed world demand and contributed to the Great Depression of the 1930s. 

Having learned from this experience, the advanced industrial nations of the West committed themselves after World War II to removing barriers to the free flow of goods, services, and capital between nations. This goal was enshrined in the General Agreement on Tariffs and Trade. 

THE ROLE OF TECHNOLOGICAL CHANGE

The lowering of trade barriers made globalization of markets and production a theoretical possibility. Technological change has made it a tangible reality. Since the end of World War II, the world has seen major advances in communication, information processing, and transportation technology, including the explosive emergence of the 

Internet and World Wide Web. Telecommunications is creating a global audience. 

Transportation is creating a global village. From Buenos Aires to Boston, and from Birmingham to Beijing, ordinary people are watching MTV, they're wearing blue jeans, and they're listening to iPods as they commute to work.

Microprocessors and Telecommunications

Perhaps the single most important innovation has been development of the microprocessor, which enabled the explosive growth of high-power, low-cost computing, vastly increasing the amount of information that can be processed by individuals and firms. The microprocessor also underlies many recent advances in telecommunications technology.

Over the past 30 years, global communications have been revolutionized by developments in satellite, optical fiber, wireless technologies, and the Internet and the World Wide Web (WWW). These technologies rely on the microprocessor to encode, transmit, and decode the vast amount of information that flows along these electronic highways. The cost of microprocessors continues to fall, while their power increases (a phenomenon known as Moore's Law, which predicts that the power of microprocessor technology doubles and its cost of production falls in half every 18 months). As this happens, the cost of global communications plummets, which lowers the costs of coordinating and controlling a global organization.

The Internet and World Wide Web

The explosive growth of the World Wide Web since 1994 when the first web browser was introduced is the latest expression of this development. In 1990, fewer than 1 million users were connected to the Internet. By 1995, the figure had risen to 50 million. By 2010 the Internet had 1.97 billion users.30 The WWW has developed into the information backbone of the global economy.

The web makes it much easier for buyers and sellers to find each other, wherever they may be located and whatever their size. It allows businesses, both small and large, to expand their global presence at a lower cost than ever before. It enables enterprises to coordinate and control a globally dispersed production system in a way that was not possible 20 years ago.

 Transportation Technology

In addition to developments in communication technology, several major innovations in transportation technology have occurred since World War IL In economic terms, the most important are probably the development of commercial jet aircraft and superfreighters and the introduction of containerization, which simplifies transshipment from one mode of transport to another. The advent of commercial jet travel, by reducing the time needed to get from one location to another, has effectively shrunk the globe.

MERITS AND DEMERITS OF GLOBALISATION 
The Globalization Debate

Problems of International Business 

What make international business strategy different from the domestic are the differences in the marketing environment. The important special problems in international marketing are given below: 

1. Political and Legal Differences: The political and legal environment of foreign markets is different from that of the domestic. The complexity generally increases as the number of countries in which a company does business increases. It should also be noted that the political and legal environment is not the same in all provinces of many home markets. 

Example: The political and legal environment is not exactly the same in all the states of India. 

2. Cultural Differences: The cultural differences, is one of the most difficult problems in international marketing. Many domestic markets, however, are also not free from cultural diversity. 

3. Economic Differences: The economic environment may vary from country to country. 

4. Differences in the Currency Unit: The currency unit varies from nation to nation. This may sometimes cause problems of currency convertibility, besides the problems of exchange rate fluctuations. The monetary system and regulations may also vary. 

5. Differences in the Language: An international marketer often encounters problems arising out of the differences in the language. Even when the same language is used in different countries, the same words of terms may have different meanings. The language problem, however, is not something peculiar to the international marketing. 

Example: The multiplicity of languages in India. 

6. Differences in the Marketing Infrastructure: The availability and nature of the marketing facilities available in different countries may vary widely. For example, an advertising medium very effective in one market may not be available or may be underdeveloped in another market. 

7. Trade Restrictions: A trade restriction, particularly import controls, is a very important problem, which an international marketer faces. 

8. High Costs of Distance: When the markets are far removed by distance, the transport cost becomes high and the time required for affecting the delivery tends to become longer. Distance tends to increase certain other costs also. 

9. Differences in Trade Practices: Trade practices and customs may differ between two countries.