Prelims 1

International Business

Refers to the exchange of goods, services, capital, technology, and knowledge across national borders.

Cross-border transactions involving multiple stakeholders

Businesses interact with foreign governments, international organizations, suppliers, and consumers.

(ex: A Philippine electronics exporter dealing with buyers in Japan must comply with Japanese quality standards and coordinate with logistics providers across countries.)

Exposure to foreign exchange, trade policies, and geopolitical risks

Currency fluctuations can directly affect profitability, while political instability or trade restrictions can disrupt operations.

(ex: a depreciation of the Philippine peso can make exports more cheaper and more competitive abroad, but it can also increase the cost of imported raw materials.)

Cultural and institutional differences

Firms must adapt to language, customs, negotiation styles, and legal frameworks.

(ex: marketing strategies used in the Philippines may not work in Middle Eastern markets due to cultural sensitivities.)

Need for strategic coordination across borders

Multinational operation require managing subsidiaries, supply chains, and human resources globally.

(ex: a global company like Unilever adapts it's product offerings based on local tastes in different countries.)

Trade in Goods and Services (Exports and Imports)

This is the most visible form of international business. Countries specialize in producing goods which they have advantage.

(ex: the Philippines exports semiconductors and provides IT-BPO services to global clients.)

Foreign Direct Investment and Joint Ventures

Companies invest directly in foreign markets to establish production or operations.

(ex: Toyota sets up manufacturing plants in Southeast Asia to serve regional markets.)

Licensing, franchising, and outsourcing

Firms expand internationally without heavy capital investment.

(ex: McDonald's operates in the Philippines through franchising, adapting it's menu to local preferences.)

Global supply chain and logistics management

Production is often fragmented across countries to reduce costs and improving efficiency.

(ex: a smartphone maybe designed in the U.S, assembled in China, and use components sourced from multiple countries, including the Philippines.)

Digital and e-commerce expansion

Technology has enabled even small businesses to enter international markets.

(ex: Filipino entrepreneurs selling products globally through platforms such as Amazon and Shopee.)

Economic growth and national development

It contributes to GDP growth, industrialization, and infrastructure development.

(ex: the Philippine BPO sector has become a major driver of economic growth and employment.)

Market expansion and revenue growth

Firms can access larger markets beyond their domestic boundaries.

(ex: a Filipino food brand exporting to overseas Filipino communities increases its sales and global presence.)

Employment generation

International business creates direct and indirect employment opportunities through foreign investment, multinational companies, and export industries.

(ex: the Philippine BPO industry employs millions of Filipinos and supports various related industries.)

Technology transfer and innovation

International business enable countries and firms to access advanced technologies, modern production methods, and global best practices.

(ex: foreign investors introduce modern manufacturing techniques that improve productivity.)

Increased competitiveness

Local firms are encouraged to improve quality and efficiency to compete globally.

(ex: Philippine companies upgrading their standards to meet international certification requirements.)

Cultural exchange and global integration

International business promotes interaction among people from different culture, fostering greater understanding and global cooperation.

(ex: Filipino BPO employees working with international clients gain exposure to diverse cultures and business practices.)

Globalization

Refers to the increasing interconnectedness and interdependence of national companies through the flow of goods, services, capital, technology, and information.

Technological innovation

The rise of digital platforms, automation, and advanced logistics systems has reduced transaction costs and increased efficiency.

(ex: Filipino freelancers and firms deliver services globally through platforms such as Upwork, enabling participation in international markets without physical relocation.)

Trade liberalization and regional agreements

Government reduce trade barriers to promote international trade. Regional blocs enhance cooperation and economic integration.

(ex: the ASEAN promotes freer movement of goods and services among member countries, benefitting Philippine exports.)

Expansion of Multinational Corporations (MNCs)

MNCs drive globalization by investing and operating across multiple countries, integrating global production and markets.

(ex: Samsung sources components globally and sells products worldwide, including in the Philippines.)

Global Value Chains and Outsourcing

Production processes are fragmented and distributed across countries based on cost and efficiency advantages.

(ex: the Philippines specializes in service outsourcing becoming a key node in global value chains.)

Global Trade Flows

Refers to the movement of goods and services across borders and are central to international business.

Comparative Advantage

Countries specialize in producing goods or services where they have lower opportunity costs.

(ex: the Philippines has a comparative advantage in English-speaking labor, supporting its BPO industry.)

Government Policies (Tariffs and Quotas)

Trade policies can either encourage or restrict trade. Protectionist measures may shield local industries but can reduce competitiveness.

(ex: the Philippine government may impose higher tariffs on imported agricultural products such as rice to protect local farmers from cheaper imports but it may also lead to higher prices and less incentive.)

Exchange Rates

Currency appreciation or depreciation affects export and import prices.

(ex: a weaker peso makes Philippine exports cheaper for foreign buyers, boosting demand.)

Regional Trade Agreements

It reduce tariffs and other trade barriers among member countries, making it easier and less costly to conduct business across borders.

(ex: the ASEAN Free Trade Area promotes trade among ASEAN member countries by lowering tariffs, allowing goods to move freely within the region.)

Logistics and Infrastructure

Efficient ports, transportation, and supply chains significantly influence trade competitiveness.

(ex: improvements in Philippine ports increase export efficiency.)

Growth of the BPO Industry

The Philippines has become one of the world's leading outsourcing destinations due to its skilled, English-speaking workforce.

(ex: Accenture operate large service centers in the country.)

Increased Foreign Investments

It has supported infrastructure, manufacturing, and services, contributing to economic development.

Expanded Export Markets

Philippine exports, especially electronics and semiconductors, are integrated into global supply chains.

Job Creation and Income Growth

Globalization has created employment opportunities in various sectors, including services, manufacturing, and overseas work.

Vulnerability to Global Economic Shocks

Economic crises in major economies can affect Philippine exports, remittances, and investments.

(ex: global downturns can reduce demand for outsourced services.)

Increased Competition

Local firms may face pressure from more efficient or lower-cost foreign competitors.

Dependence on Overseas Employment and Remittances

While remittances support the economy, overreliance may indicate limited domestic opportunities.

Income Inequality

Benefits of globalization are not evenly distributed, often favoring urban and skilled workers over rural populations.

Multinational Corporations (MNCs)

Are firms that operate in multiple countries through subsidiaries, branches, or joint ventures.

Facilitate Foreign Direct Investment (FDI)

MNCs bring capital into host countries, enabling infrastructure development and industrial expansion.

(ex: Intel has invested in semiconductor operations in the Ph, supporting the electronics export sector.)

Transfer Technology and Managerial Expertise

MNCs introduce advanced technologies, production methods, and global best practices.

(ex: Toyota applies lean manufacturing systems that improve efficiency and quality standards in host countries.)

Create Employment and Develop Local Industries

They generate direct and indirect employment while supporting supplier networks.

(ex: large BPO firms employ thousands of Filipino workers, enhancing skills in IT and customer service.)

Integrate Countries into Global Value Chains

MNCs fragment production across countries, assigning specific tasks based on cost and expertise.

(ex: electronics firms assemble components in the Ph for export worldwide.)

Enhance Competition and Productivity

The presence of MNCs encourages local firms to improve their products, services, and operational efficiency to remain competitive in the market.

(ex: the entry of international fast-food chains has encouraged local restaurant businesses in the Ph to enhance food quality, customer service, and operational efficiency to attract and retain customers.)

Hosting MNCs in Key Sectors

The country attracts foreign firms in electronics, manufacturing, retail, and BPO due to its skilled workforce and strategic location.

(ex: Accenture operates major delivery centers in the Ph, making it a global hub for outsourcing.)

Exporting Goods and Services

The Philippines exports semiconductors, garments, agricultural products, and services such as IT-BPO.

(ex: the electronics sector remains the country’s top export contributor.)

Participation in Regional and Global Trade Agreements

Engagement in agreements enhances market access and trade efficiency.

(ex: membership in the ASEAN enables reduced tariffs and stronger regional integration.)

Labor Mobility and Overseas Employment (OFWs)

Filipino workers contribute globally in healthcare, maritime, construction, and domestic services. Remittances significantly support the Philippine economy and household incomes.

Digital Participation in Global Markets

Filipino entrepreneurs and freelancers increasingly engage in cross-border e-commerce and digital services.

(ex: online sellers use platforms like Amazon to reach international customers.)