International Business and Trade

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International Business

refers to the trade of goods and service goods, services, technology, capital and /or knowledge across national borders and at a global or transnational scale.

Trade

The action of buying and selling goods and services, either within a country or between countries.

International Trade

the exchange of capital, goods, and services across international borders or territories because there is a need or want of goods or services. .

Unilateral Agreement

A one-sided contract where the offeror promises to pay only after the completion of a task by the offered.

Bilateral Agreement

also called a clearing trade or side deal, refers to an agreement between parties or states that aims to keep trade deficits to a minimum. It varies depending on the type of agreement, scope, and the countries that are involved in the agreement

—a binding agreement between two parties where they both exchange promises to perform and fulfill one side of the bargain.

Trilateral Agreement

Cooperation and alliances among three countries, such as the US, Japan, and the Philippines.

Marketplaces

Locations where people gather for buying and selling goods, known as souks, bazaars, mercados, or tranguis.

Globalization

the growth in international exchange of goods, services, and capital, and the increasing levels of integration that characterize economic activity.

World Economy

The sum of activities within and between countries, each with its own production, labor market, and resources.

Investment

Putting capital to use today to increase its value over time, involving time, money, and effort for future payoff.

Foreign Exchange or forex

The conversion of one country's currency into another based on supply and demand.

Barriers

Obstacles like barricades or hurdles that impede international business operations.

Foreign Markets

Markets outside a company's home country, requiring research and a market entry strategy.

Exporting

the practice of producing a good or service in one country and selling it to consumers in another country.

Selling goods or services produced in one country to consumers in another country. (ai)

Importing

the act of introducing new goods, customs, or ideas into a country from another country

Introducing goods, customs, or ideas from one country to another.

Decision Making

The process of making choices by identifying decisions, gathering information, and assessing resolutions.

Tariff

a tax or duty to be paid on a particular class of imports or exports.

Embargo

an official ban on trade or other commercial activity with a particular country.

Liberalization

The removal or loosening of restrictions on economic or political systems to promote international business.

International Business Plan

A development plan for a new business proposal to start operations abroad, involving steps like identifying goals and market entry strategies.

1.    Identify the business strategy goal - (what is what he wants to achieve?)

2.    Decide on what product or service to market

3.    Conduct feasibility study for such a product.

4.    Ascertain the level of competition in your target market - (who are your opponents?)

5.    Determine the needed organizational structure for your international business.

The steps in an international business plan

•    Exporting - selling finished products outside

•    Licensing - about giving permission

•    Franchising

TYPES OF INTERNATIONAL BUSINESS

in raising living standards,

providing employment and

enabling consumers to enjoy a greater variety of goods.

THE IMPORTANCE OF INTERNATIONAL TRADE

THE IMPORTANCE OF INTERNATIONAL BUSINESS

International Business on the other hand takes the job of facilitating export and import; it arranged international loans for countries for growth and development and is an influential factor in growth and development

TYPE OF INTERNATIONAL BUSS: EXPORTING

selling finished products or unprocessed ones including services abroad

TYPE OF INTERNATIONAL BUSS: Licensing

  giving permission to domestic firms abroad to process or produce your products under your strict supervision using your own name and logo and formula.
Normally, the foreign owner has to have shares in the firm to be setup up to 40% (Philippines) and partake in the profit and management of the company.

TYPE OF INTERNATIONAL BUSS: Franchising

a form of business arrangement between the owner of the franchise (franchisor) and the one to franchise called the franchisee. E.g. McDonald, KFC, KR Ace Hardware etc.

TYPE OF INTERNATIONAL BUSS: Foreign Direct Investment

foreign companies that invested in the domestic economy some may own one hundred percent while most 40% and rest to local investors e.g. HSBC, Yokohama tires, and Chevrolet

Political

FACTORS AFFECTING INTERNATIONAL BUSINESS

host government towards your business. Normally a foreign business must not involve itself whatsoever in any politics in its host country because it detriments its business interest.

Economic

factors which may impact the operation of your business abroad like: the level of inflation, debts, unemployment, exchange rate, commodity prices especially oil, and trading of securities

Legal

Laws that may hamper business operations e.g. anti-trust law in the US, Laws on intellectual property rights, laws on corrupt practices, etc. If you think your business cannot deal with these laws legally then never attempt to open a branch in that certain country.

Social

The firm needs to investigate the social conditions in a country where you desire to open a business.

Environmental

This includes both physical, business and peace and order conditions if such are conducive to business

Technical

This is the technology which your firm possesses if such is at grade against other firms in the industry.

Factors affecting Intl Business

PELSET

• electrical machines and gadgets, with their accessories (USD 38.01 million)

• mechanical items, boilers, and nuclear reactors (USD9.45 million)

• articles made from copper (USD 2.58 million)

• optical, medical, and precision items (USD 2.20 million)

• ores, slag, and ash of products (USD1.98 million)

• eatable like fruits, nuts, and melons (USD 1.91 million)

• animal and vegetable fats and oils (USD 1.49 million)

• plastic articles (USD 1.26 million) 

• automobiles, especially four-wheelers, and cars (USD 1.17 million)

TOP 10 EXPORT PRODUCTS IN THE PHILIPPINES

1. Increased revenues

2. Enhances competition

3. Improvement in product quality

4. Low capital cost

5. Better risk management

6. Benefiting from currency exchange

7. Access to export financing

8. Wider market for domestic product

1. BENEFITS OF  INTERNATIONAL BUSINESS AND TRADE

1. Wide Market

2. Minimal Business Risk

3. More human talent may be be accessed because of world-wide operation thus enabling the firm to lower its managerial and labor cost

4. Easier to develop brand

5. attaining economies of scale production

6. Susceptibility to consumer taste and fashion

7. Improve consumer confidence

Advantages of International Business

1. Foreign Rules and Regulations

2. Handling logistics

3. Speaking the language

4. Coordinating time zones

5. Foreign exchange rate

6. Mitigating credit risk

7. It poses greater risk for unpaid international sales

8. Following foreign politics

Disadvantages of International Business

1. Geographical Factor

   -Proximity

   -Endowment

   -Trade alliances

2. Social Factor

3. Legal factors

4. Behavioral Economic Factors

Factors of International Trade

1. Liberalization

2. MNCs- Multinational Companies

3. Technology

4. Transportation and communication revolutions

5. Product development and efforts

6. Rising aspirations and wants

7. World economic trends

8. Regional integration

9. Leverages

10. Experience Transfers

DRIVING FORCES OF INTERNATIONAL BUSINESS

• Tariffs: a tax or duty to be paid on a particular class of imports or exports, still depends on the government 

• Non-tariff barriers to trade: products being imported but has no tariff

• Import licenses

• Export licenses

• Import quotas

• Subsidies

• Voluntary Export Restraints: Government restriction from one country to another

• Local content requirements

• Embargo: official ban on trade or other commercial actvity with a particular country

• Currency devaluation: decrease of the value of currency

• Trade restrictions: rules and regulations in certain country

BARRIERS AND CONSTRAINTS IN INTERNATIONAL BUSINESS

1. Geographical Factors

2. Cultural and Social Factors

3. Political and Legal factors

4. Economic Conditions

FACTORS TO CONSIDER IN INTERNATIONAL OPERATIONS

Geographical Factors

• The climate, terrain, seaports, and natural resources of a country influence business activities.

Cultural and Social Factors

Culture is the accepted behaviors, customs, and values of a society. A society's culture has a strong influence on business activities.

Political and Legal Factors

• we encounter examples of government influence on business.

• Regulation of fair advertising, enforcement of contracts, and safety inspections of foods and medications are a few examples.

Economic Factors

• Everyone faces the problem of limited resources to satisfy numerous needs and wants.

• This basic economic problem is present for all of us. We continually make decisions about the use of our time, money, and energy.

Export Trade, Import Trade and Entreport Trade.

TYPES OF INTERNATIONAL TRADE

Export Trade

international trade is a good or service produced in one country that is sold into another country. The seller of such goods and services is called ———

Import Trade

referred to as goods and services purchased into one nation from another.

 the foreign buyer of such goods is called an ——-.

Entrepot trade

refers to a trade in one country for the goods of other countries.

re-export, combination of export and import.

trade in which imported goods are re-exported with or without any additional processing or repackaging.

• Transaction costs.

• Tariff and non-tariff costs.

• Transport costs.

• Time costs.

Elements of International Trade (4Ts)

Transaction costs.

• The costs related to the economic exchange behind trade.

Tariff and non-tariff costs.

• Levies imposed by governments on a realized trade flow.

Transport Cost

• The cost of transporting products from one country to another country.

Time Costs

• The time needed to move them.

1. Differences in technology.

2. Differences in resource endowments.

3. Differences in demand.

4. The presence of economies of scale.

5. The presence of government policies.

REASONS FOR INTERNATIONAL TRADE (5)

Importing

also known as global sourcing.

Distributors

—are export intermediaries who represent the company in the foreign market. Acts as a “face” of the company. 

Outsourcing

 the act of a company relying on an external provider for a business process that otherwise would be internal.

1. Licensing

2. Franchising

3. Investment

4. Joint Venture

4 main contractual mode: FILJ

Contractual

Specialized Entry Mode

Licensing

defined as the granting of permission by the licenser to the licensee to use intellectual property rights, such as trademarks, patents, brand names, or technology, under defined conditions.

Franchising

a joint venture between a franchisor and franchisee.

Investment

an asset or item accrued with the goal of generating income or recognition. In an economic outlook, an —— is the purchase of goods that are not consumed today but are used in the future to generate wealth.

Joint Venture

a combination of two or more parties that seek the development of a single enterprise or project for profit, sharing the risks associated with its development

1. Finding the right partners

2. Local partners may gain the know-how to produce its own competitive products to rival the multinational firm.

Risk of Joint Ventures

Wholly Owned Subsidiaries

operates as a separate and distinct corporation from its parent company. This benefits the company for the purposes of taxation, regulation, and liability.

1. Location

2. Long-term strategic role

3. Outsourcing

4. Supply Chain Management

5. Locally Managed or Outsourced

5 questions in global production

1. Country Factors

2. Technological

3. Product Factor

Objectives

• Availability of skilled labor and supporting industries

• Formal and informal trade barriers

• Future exchange rate changes 

• Transportation Cost

• Regulations affecting the business

• Technological factors

Country Factors

1. Level of fixed cost

2. Minimum efficient scale

3. Flexibility of the technology

Three (3) Characteristics of Manufacturing Technology 

1. Concentrating them in the optimal location that can serve the world market.

2. Price

Locating Production Facilities 

1. Pressure to lower costs or respond to local market

2. Strategic Role of Foreign Factories

3. The essence of Make-or-Buy Decisions (choose which activities to outsource and which to keep in-house.)

Strategic Role of Foreign Factories

• It lower cost

• Make protect technology 

• Cost structure

• Strategic alliances

• Just-in-time inventory 

• Making the most soluble solution to a certain problem

Advantages of Make Decision

1. Optimal use of natural resources

2. Availability of all types of goods

3. Specialization

4. Advantages of large-scale production

5. stability in prices

6. Exchange of technical know-how and establishments of new industries

7. Increase in efficiency

8. Development of the means of transport and communication

9. International co-operation and understanding

10. Ability to face natural calamities

Advantages of Intl Trade

1. Impediment of home industries

2. Economic dependence

3. Political Dependence

4. Mis-utilization of natural Resources

5. Import of harmful goods

6. Storage of goods

7. Danger

8. World Wars

Disadvantages of International Trade