International Business Flashcards
International Business have globalization in:
- Markets
- Production
Globalization is reflected on 3 development:
- the rise of the global workplace and e- commerce
- the trend of the world’s becoming one big market
- the rise of both big firms and quick, Internet-enabled small firms worldwide.
Culture
- International business requires cultural literacy of
national cultures and subcultures - The main components of culture include Education, Values, Customs, Social structure, Religion and Language
Economic
- Infrastructure: the physical facilities that form the basis for its level of economic development.
- Developed countries: first-world countries (high level of economic development and level of income among their citizens)
- Less-developed countries: or developing countries, are third-world countries (low economic development and average incomes)
- Emerging Markets: High-growth markets
Political and Legal
- Political systems may be stable or unstable
- Political instability makes it difficult to commit to long-term investments as these could suffer from unforeseen events (Political Risk)
- Expropriation: defined as a government’s seizure of a domestic or foreign company’s assets.
- Conflict & violence
- Legal systems differ and may be permissive or restrictive towards business practices
- Corruption & Enforcement
- Intellectual property protection
- Taxation
lower risk and control to higher risk and control:
- Exporting:
*The basic level of international market development. - Producing products domestically and selling them abroad.
- Companies -> business abroad (wholesaler/ retailer) (and or) -> customer
- Licensing:
- Domestic firm granting a foreign firm the
rights to produce and market its product or use
its intellectual property rights in a defined geographical market.
*Firms grant licensing rights to others in foreign
countries to produce and/or sell their products
*Involves a licensor and a licensee, with royalties
being paid. - Franchising:
*Is a specialized type of licensing
*A firm expands through foreign franchising by
offering franchisees the right to duplicate a specific
business in other countries
*Involves a franchisor and a franchisee, with royalties being paid. - Foreign Direct investment:
*The deepest level of global involvement.
*Investing in foreign countries to set up manufacturing, distribution systems, and/or sales offices in foreign countries.
What is a foreign subsidiary?
It’s a company in a foreign country that is owned and controlled by the parent company.
The advantages of having a foreign subsidiary are:
* No sharing
* More control
* More in-country incentives
Exporting advantages and disadvantages? (nation vs corporation)
Advantages
- For a nation:
* Creation of wealth
* Local jobs
- For a corporation
* Allows for more volume
which covers fixed costs
* Lower prices
* Higher margins
* More competitive
Disadvantages
- For a nation
* None
- For a corporation
* Can be administratively complicated
* Export permits
* Import tariffs
* After-sales support
* And expensive
* High transportation &
insurance costs
* Currency variations
Importing advantages and disadvantages? (internationally, nation, and corporation)
Advantages
- Internationally
* Efficient allocation of
resources
- For nation:
* Access to goods at a lower
cost than domestically
- For corporation
* Access to goods &
services at a lower cost
* More Competitive
* More Productive
What are the barriers to trade?
- Trade protectionism = all of those to limit the import of goods and services.
- Tariffs: taxes on Imports
- A tariff is a trade barrier in the form of a customs duty, or tax, levied mainly on imports.
- Import Quotas:
- Import quota = limit on the quantity of a product that can be imported.
- Dumping = foreign company selling its products abroad for less than the price of the domestic product in that market.
- Embargoes: complete ban on the import or export of certain products
Trading blocs?
From Free trade areas to Political union
Examples:
* European Union
* USMCA (Before NAFTA)
What aspects are in global trade?
- Balance of trade: Value of a country’s exports compared to its imports in a period of time.
- Trade Surplus: The country has more export than import
- Trade Deficit: The country has more imports than export
- Balance-of-Payments Surplus: more money flows into a country than flows out.
- Balance-of-Payments Deficit: more money flows out of a country than flows in.
Global supply chain?
- Outsourcing: using suppliers outside the company to provide goods and services.
- Global outsourcing: using foreign suppliers to provide labor, goods, or services. Three
reasons to use offshoring are: - Special resources
- Special expertise
- Labor costs
- Joint venture: A strategic alliance, with a foreign company to share the risks and rewards of starting a new enterprise together in a foreign county. Three advantages are:
- Local expertise
- Local base
- Outside assistance
