2.1: international business

trade balance

• imports: goods and services purchased abroad
• exports: goods and services sold abroad
• trade balance: the difference between a country’s imports and exports
    * trade surplus — imports < exports   * trade deficit — imports > exports
      * US currently in a deficit
• GDP: gross domestic product
    * US currently has the largest economic value by GDP
    * value created in a given country’s economy
• free trade areas — facilitate international trade
    * USMCA replaced NAFTA
    * EU
• protectionism
    * tariff: a tax on imports
    * quota: a restriction on the quantity of goods that can enter a country
    * embargo: a total ban on the import of a good from a particular country

economic advantages

• absolute advantage: the ability of a producer to produce more of a good than another producer with the same quantity of inputs
    * inputs include land, labor, and capital
    * entities will benefit from specialization based on their comparative advantages
• comparative advantage: the idea that producers should produce the goods that they are most efficient at producing
    * includes opportunity cost (absolute advantage does not)
    * eg. US — imports simple manufactured goods and exports sophisticated, high tech products
• diamond in national advantages
    * factor conditions — labor, infrastructure → ability to compete in an industry
      * significant impact on entrepreneurship and productivity
    * demand conditions — demand for products/services in market
    * related/supporting industries — presence/absence of competitors
    * firm strategy, structure, and rivalry — nature of domestic rivalry and how companies are created/organized/managed
      * bankruptcy: US → liquidation vs. reorganization (how to best pay off debts)

international expansion

• direct export
    * market product internationally, export directly to consumer
      * eg. google ads
        * easy to advertise to people abroad
        * can be very specific with target market
• foreign intermediary
    * someone who understands business in a given country who can help you run a business there
    * may be employee or free agent
• licensing agreement
    * an agreement with a parent company to run a business in a certain way while giving up ownership
• strategic alliance/joint venture
    * share with other countries in a given country
    * eg. airlines may share websites
• multinational corporations
    * have officials globally
    * need to have expertise in each country
      * deal with language barriers, differing laws
• cultural differences — note Geert Hofstede’s cultural dimensions
    * individualism vs. collectivism
    * long- vs. short-term orientation
    * masculinity vs. femininity
    * high vs. low power distance
    * high vs. low uncertainty avoidance

international career planning

• advantages of working abroad
    * career advancement
    * exciting work environment
    * working with different people
    * exciting place to live (food, culture)
• disadvantages of working abroad
    * language barrier
    * safety
    * differing customs/culture shock
    * different currency
    * leaving family and friends
• expatriates (expats)
    * citizens of one country who temporarily live/work in another
• businesses encourage international work via
    * raises
    * time off to travel home
      * covering travel expenses
    * building expat communities abroad that mimic home cultures
    * providing security personnel