International business

●​ Encompasses all commercial activities that take place to promote the transfer of
goods, services, resources, people, ideas, and technologies across national
borders
●​ Occurs in many different forms​
○​ the movement of goods from one country to another (exporting,
importing, trade)
○​ contractual agreements that allow foreign firms to use products, services,
and processes from other nations (licensing, franchising)
○​ formation and operations of sales, manufacturing, research and
development
○​ distribution facilities in foreign markets
●​ Consists of devised transactions in advance, which are implemented through
national borders, in order to satisfy the needs of individuals, companies and
other business
●​ It links all countries, institutions and individuals
●​ Enterprises should identify goals and objectives to be placed on the
international market
○​ It means to determine the target countries and the possibilities of selling
products and services in these countries and of course to assess what
profit to gain from selling of its products and services on the markets in
selected countries
●​ Is realized within the process of globalization of business which means
increasing international integration and manufacturing processes and
international market for goods and services
●​ Refers to realizing processes of liberalization of national economies, reducing
trade restrictions or barriers, free movement of foreign direct investment
worldwide, strengthening the role of international companies in the international
production and mutual trade and exchange

International trade
●​ Exchange of capital, goods, and services across international borders or
territories
●​ All countries need goods and services to satisfy their people
●​ Production of goods and services requires resources
●​ Every country has limited resources; therefore a country solely cannot produce
all the goods and services that it requires
●​ Required goods which cannot be produced or the amount is insufficient as
required, need to be provided from other countries
●​ Countries sell their products to others also when the production of goods comes
in surplus quantities than demanded in the country
●​ International Trade
●​ The notion of international trade refers to trade of goods and services between
countries
○​ Every country, regardless of the technological advantages will still find a
product that can be placed on the foreign market
●​ International trade is an extension of the production, exchange and consumption,
which are basic elements of life. Producers and consumers included in
international trade are from different countries.
●​ International trade is an exchange of goods and services between individuals
and companies from different countries
●​ International trade is an economic activity that covers trade in goods and
services abroad
●​ Represents the total exchange of material goods between countries
●​ Narrowly foreign trade covers only trade in goods between the economic
entities from different countries and is subject to exchange occurring only to
those goods that cross state borders or customs lines of one or more countries
●​ In broad terms, foreign trade, despite the international exchange of goods,
includes the exchange of services (visible and invisible exports and imports), the
turnover of capital, movement of people (tourism) and the transmission of news
and Information (telecommunications market).
●​ It’s a trade of goods and services etc. in which the exchange takes place
between entities from foreign countries, so that the subject of the sale renames
borders or customs line and the territory of the seller (exporter) and land buyer
(importer). All this is done under written foreign trade agreement.
●​ Foreign trade
○​ Normally performed by certain rules and laws, and the rights and
obligations of the participants are determined in the contract
○​ Only competitive products and services are included in terms of quality,
price, payment, terms of delivery
●​ Significance and role of international trade
○​ Reflected in the fact that with its help of foreign trade that countries
supplying goods and services that cannot alone produce or unable to
produce sufficient quantities to meet the needs of consumers country
○​ International trade stimulates the division of labor, reduces production
costs, creates more competition between buyers and producers, reduces
the possibilities of creating monopolies and rapid price changes and
facilitates the movement of capital
●​ Is also subject to the law or the legislation of the members adopted to the
country's needs or "invited" countries. Domestic power can reach a conclusion or
decision to withdraw from working with uninvited partners. Many countries may
 prescribe measures such as customs, ownership control, restrictions of work
performance or property.
●​ Performance of foreign markets
○​ Accomplished in an institutional environment that consists of a set of
political, social and legal rules
■​ These rules form the right of production, exchange and
distribution, leading to it to achieve specified security and
expectations about the actions with others and will ensure steady
realization of business
■​ The most important rules in each system are the rules that define,
allocate and ensure the rights of ownership and the terms and
conditions that specify legal and illegal forms of cooperation and
competition (standards, rules of bargaining, trading conditions,
etc.)
■​ A well-defined and secure system of property rights is a basic
system performance of foreign markets. Expression of ownership
and the right to use trade and other resources is essential for
market development and marketing activities.

Modern economic conditions, technology development, improvement of transport

and communication methods
●​ Cause many companies to operate from different locations, such as in their
country and in other countries
●​ Each company that performs any exchange of goods, services or international
transactions outside their country, is a participant in the international market
directly or indirectly
​ ​ ​
Globalization of international business
​ ​ ​ ​ ​
Globalization
●​ Refers to growth of global connectivity, integration and interdependence of
economic, social, technological, cultural, political and environmental spheres
●​ It’s a common term which best explains the processes of economic
interdependence, the growing influence of culture, great advantages of
information technology and new geopolitical changes that lead to bringing
people together in a global system
●​ It represents an internationalization regarding different countries
●​ It’s about the increase in the processes of economic integration worldwide and
everything is actually achieved through trade and financial flows
●​ The notion of globalization is linked to the movement of people, labor and
knowledge (technology) across international borders
 ●​ There are broad dimensions of globalization pertaining to culture, political and
environmental aspects
●​ Economic globalization can be measured in different manners; nevertheless
those measurements target 4 economic trends:
a.​ movement of goods and services and increase of the national income per
capita;
b.​ increased employment - movement of the population may result in better
employment, if not in person’s home country it may be realized in other
countries;
c.​ movement of capital as direct investments;
d.​ technology development as a result of the flow of international research
and development and investment

International market traits

●​ The market of each country is different
○​ Differences are set from the culture and lifestyle, differences in
population demographic characteristics, the demands and purchasing
habits, differences in production and expenses to sell products and
services, currencies, political power and regulations, the size of markets
and the level of competition.
●​ The operation of the international market is burdened because many countries
with various regulations and measures limit the free movement of goods or
protect domestic production
○​ These are so-called barriers to market entry of a country
○​ Rationalizing the overtaking of protective measures is justified by
arguments that target the need to:
■​ protect the under-developed economy where costs are often
higher, and the quality is at a lower level;
■​ Protection against unfair competition;
■​ Protection of vital national economic activities;
■​ Interventions in the foreign - trade balance;
■​ Protection of living standards

Taking protective measures, reduces the competition, leads to price increases, causes
inflation, consumers have a lesser amount of products and services to choose from, and
trade balance is easily disturbed and there is not enough competition

In a global economy, no country is not prepared to produce everything that is

necessary to satisfy the needs of the population without establishing cooperation with
other countries. Each country is involved in different types of trade or other activities
for sale of finished products, supply of materials or other resources that are lacking in
the country, achieving a more efficient and cheaper production etc. The global
economy promotes efficiency and providing of various types of products, often
produced at lower cost. The globalization of production, at the same time causes
globalization of trade, and they cannot function one without the other.

Successful placement on the international market is based on realization of business

activities of a known market. It is necessary to know who the buyers of products and
services are, the existing and future ones, which will expand the operation. It should be
known that the unmet needs and desires of consumers, how they relate to the market
and how to attract.

Consumers in the international market have higher claims, greater opportunities and
get more information about products and services and want to buy the best products
that meet their needs.

There are 3 main issues that should be considered when determining the necessity of
performance of international market:​ ​ ​
●​ Market size and who is placed on it
●​ How to understand the market better;
●​ What is the optimal approach to provide the best target market?

International trade system

In order to be able to perform in a foreign or international market it is necessary to
know the international trading system. They should be known what are the so-called
trade restrictions and organizations working on the promotion of trade or international
trade in goods.

Development of international trade and other forms of international cooperation and

state influence on the conduct of international trade, leads to the necessity to establish
some form of mutual agreement and bargaining between companies from different
countries. It is done on a bilateral basis, but it must be pointed out that the issues of
concern to many countries, can not be comply in this way because it requires concluding
multinational and multilateral conventions and agreements.

One of the most important world organizations working on the development of creation
of conditions for free movement of goods and services between the countries in the
world is the World Trade Organization. WTO World Trade Organization – WTO [3],
is new important and powerful institution that monitors and influences the global, world
or international trade. It is one of the major mechanisms for joint globalization. It has
occurred on 01.01.1995, with the restructuring - the General Agreement on Tariffs and
Trade GATT - General Agreement on Tariffs and Trade. Svetskata Trade Organization
- WTO,
The World Trade Organization (WTO)
●​ An international organization that was established to control and liberalize
world trade
●​ Works with rules of trading between countries, on a direct global level, and is
responsible for the negotiation and implementation of new trade agreements
and obligations of the agreements that have signed numerous member states of
the organization, from different countries

Forms of establishing international business

More complex forms of foreign market entry include conducting more complex
operations such as (1) joint ventures or realization of joint operations (2) direct
investment (3) work in duty-free zones

Making the choice to enter foreign markets depends on many factors, primarily on the
nature of the existing products of the company and the conditions for entering the
foreign target market

Exports
●​ Simplest form of realization of international business (direct or indirect)
○​ Direct sales of the products of a foreign company
○​ Indirectly through export intermediaries, such as agents or intermediary
commissions by export or trade companies
●​ One of the most traditional ways of entry and operation on foreign markets
●​ Considered as taking action to sell the products in another country for products
produced by the manufacturer’s home country or a third country
●​ Achieving the export business activities in another country requires significant
assets
○​ These funds should not provide detailed information on the
implementation of export activities as they do to domestic companies, but
to develop appropriate information for the preparation of detailed
export strategies
●​ Exports can be managed as an active and passive
○​ Passive export - one in which the exporter is expecting to receive order
for purchasing when necessary
○​ Aggressive export marketing - developing strategies that create an
offensive and a clear picture of what the company’s plans are to the
foreign markets
●​ Indirect export
○​ Achieving exports of goods through mediator
■​ Mediators
 ●​ Can be agents or companies performing the export
■​ Agents
●​ Operate as brokers or establish relationships between
exporter and foreign buyers
●​ Agents would not do the sale on the foreign market but
will facilitate and help in the realization of the export
logistics, especially in the area of packaging, shipping and
preparation of product documentation
●​ Representative agents
○​ Operate on the principle of a given sale
○​ They find buyers for the products of the company
that wants to export
○​ Agents shall have the authority to negotiate on
behalf of the exporting company that hired them
●​ Foreign distributors
○​ Generally hawkers
○​ They take products from the exporter which allows
customers to these people to get faster
○​ Distributors often provide after sales service for
customer needs of foreign markets
○​ Can be found through trade or chambers of
commerce or other economic associations in the
country whose market is to be performed, and can
use various publications of commercial activities
●​ Foreign government agents or foreign government
agencies
○​ Can also be used for the realization of some export
activities or to detect certain export opportunities.
○​ Also, for these purposes foreign economic attaches
as representatives of foreign embassies can be used
●​ Direct export to foreign markets
○​ To control the movement of the goods and the logistics of goods intended
for foreign markets
○​ As an option for direct export of goods abroad the direct sale of
products of consumers can be done
■​ This kind of sale is practiced depending on the product
■​ For example, manufacturers of healthcare equipment can sell
equipment to hospitals, or regarding the equipment for education,
selling directly to schools or universities, or certain individual
business customers
Consumer goods in foreign markets
●​ Can be sold through foreign retailers
●​ Can be found with the help of the representatives for sale or to travel to the
foreign market with brochures or materials of the product and samples, call the
retailer by telephone or products to be presented via direct mail campaign
●​ Direct marketing approach can reduce the cost of the mediators and travel
abroad.

License
●​ Consent or permit given to someone that can use the intellectual property rights
●​ May be given even for technical or business knowledge or so-called know– how
●​ May be exclusive and non-exclusive
○​ Non-exclusive license - right to use the intellectual property given to not
more than a single user license
○​ Exclusive license - right of use of intellectual property used alone for one
user; access to the licensee or licensee may be someone who works in a
certain area or of a particular country
●​ Patent license
○​ Consent or authorization to produce, use or to sell patented products to
use a certain design or process
●​ The license for branded product or service
○​ Consent or permission given by the owner of a brand of product, so that
product is manufactured or sold by another
○​ This type of license is distinguished from other types because the licensor
retains some degree of control over the nature and quality of the
product or service
○​ With this type of license, the licensor has the control to ensure products
are produced from the one that received the license having the same
quality as those of the licensor
●​ License is different from authorization
●​ Authorization
○​ Transferring the IPR such as to work or to produce something
●​ With the license the intellectual property right usually remains with the owner
named as licensors, and it is not taken from the one who receives the license -
licensee
●​ Intellectual property rights
○​ Can be patent, trademark of a product, manufacturing technology of a
product, and the method of selling a product

Franchising
 ●​ One of the business strategies applied to ensure an increase of the number of
buyers
●​ A marketing system by which an understanding picture of current and future
customers is created about how the products or services of a company can serve
to meet their needs
●​ A marketing system established between two countries or two companies on the
basis of an agreement
○​ A particular company or a firm contracts with each other to sell its
products or services in a particular market or in a certain area
●​ Method of products distribution and services to meet the needs of the consumers
●​ A network of independent business relationships that enables identifying
product brand; method for successful operation; real marketing system
●​ Can be defined as a strategic agreement between the two companies and two
commercial entities that build specific relationships and responsibilities in order
to realize mutual goals, and they can be expressed as a desire for conquest
and domination of the market (i.e. to attract and retain more customers or
consumers than their competitors)
●​ It is not a business itself; it is a way to work
●​ Franchising means building business relationships in which the company realizes
certain business alike - franchisor – by contract with another company or
companies - franchisees - allows its products to be sold directly to the market
and use the name of the company for a certain period of time
●​ Franchising of the international market is defined as a continuous relationship
between the person who gives the franchise in order to provide benefits for
business, the organization of work in sales and management

Joint ventures or business activities

●​ Companies which are formed from two or more persons or companies in order
to work together and make a profit
●​ Represent a form of organization of the enterprises in which two or more entities
come together to accomplish certain activities and create profit
●​ Parties that undertake joint activities agree to create a new company to
increase capital and share profits and costs and to control the operation of the
company
●​ Realization of a specific project or continuously working together can be
considered as joint activity
●​ Each participant invests funds and risk taking
●​ In most cases, joint ventures or activities are bilateral
○​ It involves 2 sides of a business (partners in order to build certain
strategic advantages)
 ●​ The main reason for achieving such activities may be, for example, access to
new techniques through which companies will gain competitive advantages;
getting certain intellectual knowledge, necessary human resources to the closed
channels for product distribution in certain regions of the world etc.
○​ Also, in this way, the difficulties in integrating the cultures of the
organizations can be overcome

Best way to participate fully on foreign markets

●​ Total ownership of the company which means a fully independent capital
management and business operations with the company
○​ Through this, the possibilities for communication and control remain fully in
the hands of the owner

When a company is working on the international market, ownership strategy and the
strategy of the management of the company must be determined, because it is based
in order to maintain competitive advantage. These decisions are made separately and
depend on the size of the company and the opportunities offered by the domestic
market, the available resources, market size, the available labor force and its facilities.

Operations of foreign companies on the market in another country have 2

characteristics: (1) investment in physical facilities and equipment (2) control activities in
the marketing. Working in the foreign market with their own means to broaden the
knowledge and technology upgrades. This must be done in order to ensure the creation
of competitive advantages on that market, which no other participants from the
industry of such a firm would have at their disposal.

Foreign direct investment (FDI)

●​ Plays a very important role in the development of global business
●​ May enable the company to provide new markets and marketing channels,
cheaper means of production, access to new technologies, products, knowledge
and financial resources
●​ General definition - investment of a company from abroad in a particular
country
●​ Investments may take the form of physical investment that mean building
factories and provision of equipment and technique, direct purchases from
foreign companies, constructing facilities or investing in mutual activities and
encouraging the creation of strategic alliances intended to bring technology
license or intellectual knowledge
●​ It should be noted that they are direct investments of means of production to a
foreign firm in any country
●​ Investments may be (3):
■​ manufacturing - with the intention to create new operational or
production capabilities;
■​ establishing new or teaming up with existing firms;
■​ entry of international firms, companies that realizing business
activities in more than one country