International Business: An Overview

Module 1: International Business vs. Domestic Business

• International Business is conducted across national borders.
• Foreign Business refers to the of a company's operations outside of its home country.
• An International Company operates in multiple nations.
• External Forces influencing business are generally uncontrollable, encompassing political, economic, and socio-cultural factors.
• Internal Forces in a business are controllable aspects like human resources and finance.

History and Future of International Business

• Trade has ancient origins dating back to civilizations such as the Phoenicians, Greeks, and the Ottoman Empire.
• The Industrial Revolution significantly boosted international trade.
• Modern globalization is economic power has shifted towards Asia due to rapid industrialization.

Internationalization of Business

• There has been an increase in multinational enterprises (MNEs) and foreign direct investment (FDI).
• FDI involves direct investments in equipment, structures, and organizations in a foreign country, to a level that enables significant management control.
• Globally, there are over 103,000 MNEs, that contribute over half of the world's trade.
• Exports, Imports, and FDI have expanded as companies have broadened their operations globally.

Drivers of International Business Expansion

• Political drivers include the reduction in trade barriers and privatization efforts.
• Technological advancements include communication and transportation improvements.
• Market factors involve access to new customers and emerging markets.
• To reduce Costs, lower production expenses, and benefit from economies of scale.
• Competitive factors include protecting market share and securing raw materials.

Globalization of Business: Pros & Cons

• Enhanced trade, economic development, and job creation are all benefits.
• Concerns include unequal economic benefits, labor exploitation, environmental challenges, and potential loss of national sovereignty.

Module 2: International Trade and Investment

• International trade grew from $4 trillion in 1990 to over $24 trillion in 2019.

Growth & Magnitude of International Trade

• Regional trade has increased as developing nations contribute a larger share of exports.

Direction of Trade & Major Trading Partners

• Economies have become more regionalized due to trade agreements like ASEAN, EU, and USMCA.
• The top 10 partners account for 64% of U.S. exports and 69% of imports.
• The U.S. experiences a trade deficit, importing more than it exports.

Theories of International Trade

• Mercantilism promotes government actions to increase national wealth by encouraging exports and limiting imports.
• Absolute Advantage theory, from Adam Smith, advocates for national specialization of efficient production.
• Comparative Advantage theory, as argued by David Ricardo, recommends focusing on producing with the least relative inefficiency.

Module 3: Sociocultural Forces

• Culture means the beliefs, values, behaviors, and material objects that shape a society.
• Ethnocentricity refers to the belief that one's own culture is superior.
• Culture is not innate, but acquired through social interaction and shared experiences.

Culture's Impact on Business Functions

• Advertising, branding, and pricing must consider cultural values.
• Leadership styles, motivation, and evaluation approaches vary internationally.
• Examples of hierarchical vs. egalitarian workplace cultures.

How Culture Shows Itself

• Cultural views on beauty, music, and art influence product design and branding.
• Religious beliefs influence business ethics, work schedules, and product acceptability.
• Product demand is impacted by the physical objects and technology.
• The way cultures use language, including verbal and nonverbal cues, varies across cultures.

Cultural Frameworks for Business

• High-Context Cultures (Japan, China, Arab nations) have indirect communication, strong social bonds, and an emphasis on relationships.
• Low-Context Cultures (U.S., Germany, Scandinavia) feature direct communication, explicit rules, and transaction-based interactions.

Module 4: Sustainability and Natural Resources

• Sustainability ensures environmental, social, and economic needs are met without endangering future generations.
• The Brundtland Commission defines sustainable developments that meet the present needs without compromising the future.

Frameworks for Sustainability

• Cradle-to-Cradle (C2C) Design encourages recycling and reusing materials to eliminate waste.

Measuring and Reporting Sustainability

• The United Nations Global Compact encourages reporting on sustainability issues like human rights, labor, and impact.
• The Carbon Disclosure Project (CDP) focuses on tracking greenhouse gas emissions and water usage.
• The Sustainability Accounting Standards Board (SASB) provides 77 industry-specific standards for measuring the financial impact of environmental practices.

Characteristics of a Sustainable Business

• Businesses must operate within the earth's boundaries to protect resources (e.g., air, water, fossil fuels).
• Equity Distribution means ensuring fairness through ethical supply chains to foster sustainability.
• Stakeholder Theory urges companies to consider all stakeholders, not just shareholders, when making decisions.

Climate debate

• Temperate climates (Europe, North America) tend to foster stronger economies.
• Extreme climates (tropical, desert regions) tend to face development challenges, which may slow economies.

Module 5: Political Forces that Affect Global Trade

• Governments take control of businesses through nationalization when they believe public ownership is best.
• Privatization involves the selling off government-owned businesses to private firms, for the purposes of increased efficiency, raise funds, or shift political direction.

Why Political Stability Matters for Business

• Stable Governments enable predictable policies and fewer disruptions.
• Unstable Governments have a higher Risk of sudden law changes, revolutions, or economic crises.
• Business owners and employees in high-risk regions face kidnapping for ransom.
• Cybercrime tactics include hacking, data theft, and espionage that threaten multinational businesses.
• Cargo ship hijacking remains a problem, especially near Africa & Southeast Asia.

Government Motivations to Restrict Trade

• National Security Concerns can include protecting critical industries (e.g., defense, technology), but it can also hinder exports and slow innovation.
• Political rights violations can result in economic sanctions when they are the basis for punishments against nations.
• Infant (new) and failing industries might need to be given protection to help companies become competitive.

Types of Tariffs

• Ad Valorem Tariff is charged as a percentage of the product's price.
• A Specific Tariff is a fixed charge per unit (e.g., $2 per liter of wine).
• A Compound Tariff includes a mix of percentage-based & fixed fees.
• Variable Levy = adjusts to keep domestic prices stable.

Module 6: Intellectual Property Rights & Other Legal Forces

• Civil Law systems are based on codified laws from Roman legal traditions and consist of the most common legal system worldwide
• Common Law relies on precedents (past court decisions) and is more adversarial and flexible than civil law.
• Religious Law is based on sacred texts and religious doctrines, and can prohibit charging interest (usury)

Rule of Law & International Law

• International Law governs relations between countries.
• Customary International Law comes from legal norms that are widely accepted.

Legal Concerns in Global Business

• Extraterritoriality is when some countries apply their laws abroad (e.g., U.S. FCPA banning bribery in foreign nations).

Intellectual Property Rights (IPR)

• Patents refer to exclusive rights to an invention.
• Patent trolls exploit loopholes by suing companies for infringement.
• Trademarks protect brands, including logo, colors, and phrases.
• A Madrid Agreement streamlines trademark protection internationally.
• Trade Secrets cover confidential business information (e.g., the Coca-Cola formula).
• Trade Secrets are the most common IP protection since patents expire.

Module 7: Economic and Socioeconomic Forces

• Economic Analysis for Multinational Firms are needed to assess economic impacts and data.
• Trade can happen in a key environment such as a foreign or international one.

Types of Economies

• Developing ones are low income with weak infrastructure and reliance on agriculture.
• Developedones are high living standards with advanced industries and strong financial markets.
• Emerging Market Economies transition from developing to developed (e.g., China, India).

Key Economic Indicators for International Business

• Purchasing Power Parity (PPP) adjusts exchange rates to equalize purchasing power across countries.
• Underground Econony contains unreported transactions, but does not reflect GDP.

Socioeconomic Dimensions of Economic Development

• Developed nations have aging populations and higher retirement costs.
• Developing nations have younger populations and large workforces.
• Ethnic diversity and localized marketing may be required.

UAE (United Arab Emirates)

• The UAE was formed on December 2, 1971, to consolidate resources, enhance security, and create a unified government.
• Its importance lies in its political stability where, unlike neighboring countries, the UAE has remained politically stable, and has instead focused on fostering a stable environment for investment and development.
• Access to emerging markets in the UAE occurs because It serves as a gateway to the Middle East, Africa, and South Asia

Ports Like Salalah - Free Trade & MFN Status

• Ports like Salalah, Oman are vital in global trade networks and help to enhance trade efficiency, lower costs, and create economic opportunities due to free trade and Most Favored Nation (MFN) principles.
• A strategic advantage is that Salalah is located on the Indian Ocean - making it a key transshipment hub for cargo moving between Europe, Middle East, Africa, and Asia.

China business overview

.China is seeing a decline is birth rates, due factors such as the legacy of the one-child policy and changing societal norms.

• The nation's economic strength is partly from a long-term vision, but western businesses may find it more difficult to have an impact due to shorter contract lengths.

India Business Summary

• Due to it's labor force, English language, and time zone advantages , India has become a global hub for services, including it However, the country lacks a stable government and reliable power grid