2.1: international business

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

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)

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

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