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12 views16 pages

Module3 Lec3

Uploaded by

mariellaaagarcia05
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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International Business

The global economy we live in


IBT 100_ International Business & Trade
Module 3
Learning Objectives:
At the end of this module you should be able to:

1. Define and explain the foundations of international business


2. Describe the history and impact of international businesses
3. Explain the components of international business environment
Need for International Business
• More and more firms around the world are going
global, including:
• Manufacturing firms
• Service companies (i.e. banks, insurance,
consulting firms)
• Art, film, and music companies
Need for International Business
• International business:
• causes the flow of ideas, services, and capital across the
world
• offers consumers new choices
• permits the acquisition of a wider variety of products
• facilitates the mobility of labor, capital, and technology
• provides challenging employment opportunities
• reallocates resources, makes preferential choices, and
shifts activities to a global level
What is International Business?

International business consists of transactions


that are devised and carried out across national
borders to satisfy the objectives of individuals,
companies, and organizations.
Types of International Business
Export-import trade
Foreign direct
investment

Licensing

Franchising

Management contracts

6
International Business Questions
• How will an idea, good, or service fit into the international
market?
• Should trade or investment be used to enter a foreign
market?
• Should supplies be obtained domestically or abroad?
• What product adjustments are necessary to be responsive to
local conditions?
• What are the threats from global competitors, and how can
these threats be counteracted?
THE FUNDAMENTALS OF
INTERNATIONAL TRADE

Figure 1-2
Although the process sounds simple, obstacles can arise. These obstacles are called trade
barriers. Trade barriers are restrictions that reduce free trade among countries. These
barriers could appear in several forms.
l Import taxes increase the cost of foreign products.
l Quotas restrict the number of imports.
l Laws prevent certain products from coming into a country.
THE INTERNATIONAL BUSINESS
ENVIRONMENT

Figure 1-3
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.
• In some societies, hugging is an appropriate business
greeting.
• In other societies, a handshake is the custom.
• Many businesses were traditionally closed in the
afternoon in Mexico while people enjoyed lunch and
a rest period known as a siesta.

The main cultural and social factors that affect


international business are language, education,
religion, values, customs, and social relationships.
These
relationships include interactions among families, labor
unions, and other organizations.
Geographic Conditions

The Climate , terrain , seaports and natural resources of a country


will influence its business activities.
Very hot weather will limit the types of crops that can be grown,

It will also restrict the types of businesses that can operate in that
Climate. A nation with many rivers or seaports is able to easily ship
products for foreign trade.
Countries with few natural resources must depend on imports
Political and Legal Factors

Different countries across the world have different


Economic and Political systems. These affect how Governments regulate the
conduct of local and foreign businesses in their countries.
The most common political and legal factors that affect International business
activities include:
• Type of government
• Stability of the government
• Government policies toward businesses

Generally government influences and regulates the following aspects of a


business:
• Regulation of fair advertising
• Enforcement of contracts
• Safety inspections
Economic Conditions
• Factors that influence the economic situation of a country include
the type of economic system,
• the availability of natural resources,
• the general education level of country’s population
Other factors include:
• types of industries and jobs in the country (service, manufacturing,
agriculture) and stability of money supply.
• Also, the level of technology and infrastructure available for
producing and distributing goods and services influences a nations’
economic situation
Impact of International Businesses on local
economies:
• As illustrated in the US Economy:
• U.S. international business outflows are important on the
macroeconomic level in terms of balancing the trade account.

• On the microeconomic level, participation in international business


can help firms achieve economies of scale that cannot be achieved in
domestic markets.
Impact of Globalization
• International business has created a network of global links that bind
countries, institutions, and individuals with trade, financial markets,
technology, and living standards.
• For example, a reduction in coffee production in Brazil would affect
individuals and economies worldwide.
References:
• Czinkota, Ronkainen, Moffet. International Business 7th edition
• Dlabay. Scott. International Business 3rd Edition

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