INTRODUCTION TO
INTERNATIONAL
BUSINESS
and Trade
( Part 1)
What is International Business
Defined?
• The exchange of Goods & Services, Resources, Knowledge, & Skills,
among individuals & businesses in two or more countries.
• Transactions that are carried out across national borders to satisfy
the objectives of individuals and organizations
• All Commercial transactions that take place between two or more
countries.
1. Private & Government
2. Sales
3. Investments
4. Logistics
5. Transportation
Features
• Large scale operations
• Integration of economies
• Dominated by developed countries and MNCs
• Benefits to participating countries
• Keen competition
• Special role of science and technology
• International restrictions
Strategic Choices
Strategic Process
1. Strategic Formulation
2. Strategic Implementation
3. Strategic Evaluation and Control
Problems
• Political factors
• High foreign investments and high cost
• Exchange instability
• Entry requirements
• Tariffs, quota etc.
• Corruption and bureaucracy
• Technological policy
• Quality Management
Advantages
• Faster growth
• Access to cheaper inputs
• Increased quality and efficiency
• New market opportunities
• Diversification
Disadvantages
• Increased costs
• Foreign regulations and standards
• Delays in payments
• Complex organizational structure
Reason for recent growth in IB
1. Expansion of technology
2. Business is becoming more global because
• Transportation is quicker
• Communications enable control from afar
• Transportation and communications costs are more conducive for
international operations
3. Liberalization of cross-border movements
• Lower Governmental barriers to the movement of goods, services,
and resources enable Companies to take better advantage of
international opportunities
Reason for recent growth in IB
General agreement on Tariff and trade
(GATT)
• An international organization formed to reduce or
eliminate tariff and other barrier to international
trade
International Monetary Fund (IMF)
• An international financial organization that lend
money to countries in conducting international
trade
Reason for recent growth in IB
World Bank
• An international financial organization that lend
money to underdeveloped and developing
countries for development
Economic Communities
• World Trade Organization (WTO)
• European Community (EC)
• North American Free Trade Agreement (NAFTA)
• Asian Free Trade Agreement (AFTA)
End of
Part 1
Djfsalon
Introduction to International
Business and Trade
PART 2
Globalization
The Shift towards a more integrated and interdependent
world economy
Two components:
The Globalization of Markets
The Globalization of Productions
Globalization of Markets
The Merging of distinctly separate national markets into
a global marketplace
▪ Tastes and preferences converge onto a global norm.
▪ Firms offer standardized products worldwide creating a
world market.
▪ Significant differences still exist between national markets on
many relevant dimensions.
▪ These differences require that marketing and operating
strategies and product features be customized to best match
conditions in a country.
“Localization” changing the product to fit the market
▪ Countries are different
▪ Range of Problems are wider and more complex
▪ Government intervention in trade and investment creates problems
▪ International Investments is impacted by different currencies.
Globalization of Production
Refers to sourcing of goods and services from locations around the world to
take advantage of
▪ Differences in cost or quality of the factors of production
▪ Labor
▪ Land
▪ Capital
Influences and Goals of International
Business
Companies engage in international business to:
Expand Sales- compared to one country, the number of
people and the level of their purchasing powers are
higher for the international level.
Acquire resources- businesses look for foreign resources
such as capital, technologies and information because
those are either not available in their country or those
can reduce the costs of the company.
Minimize Risk- Companies who seek out foreign markets
minimize swings in sales and profits arising out of business
cycles recessions and expansions which occur differently
in different countries.
Problems of International Business
Political and Legal Differences – The complexity
generally increases as the number of countries in which
a company does business increases.
Economic Differences- The Economic Environment may
vary from country to country.
Differences in the Currency Unit- This may sometimes
cause problems of currency convertibility, besides the
problems of exchange rate fluctuations.
Differences in the Language- Even when the same
language is used in different countries, the same words
or terms may have different meanings.
Differences in the Marketing Infrastructure- The
Availability and Nature of the Marketing facilities
available in different countries may vary widely.
Trade Restrictions- Particularly import controls, is a very
important problem, which an international marketer
faces.
High Cost of Distance- When the markets are far
removed by distance, the transport cost become high
and the time required for affecting the delivery tends to
become longer.
Differences in Trade Practices- Trade Practices and
customs may differ between two countries.
Why Study International Business
It comprises a large growing portion of the world’s total
business;
All companies are affected by global events and
competition.
End of
Part 2
Djfsalon