International Business Motivations Quiz

Study Notes

International Business

International business encompasses all commercial activities that carry across national borders.
It involves firms engaging in production, marketing, and distribution of goods and services in more than one country.
Key motivations for firms engaging in international business often include access to new markets, reduced costs (e.g., labor, raw materials), access to resources/technologies.

Motivations for International Business

Market seeking: Expanding into new markets to tap into consumer demand beyond the domestic market.
Resource seeking: Accessing raw materials, natural resources, and other essential inputs not readily available domestically. This includes seeking lower production costs due to lower wages or access to specialized skills in other countries.
Efficiency seeking: Optimizing the production process through international specialization, leveraging global supply chains, and attaining economies of scale.
Strategic asset seeking: Acquiring valuable technologies, management skills, or intangible assets not available domestically. This could be through mergers, acquisitions, or licensing agreements.

Forms of International Business

Exporting/importing: The simplest form, involving selling goods and services in other countries (exporting) and buying goods and services from other countries (importing).
Licensing: Granting a foreign company the right to use a company's intellectual property, trademarks, or patents in exchange for royalties.
Franchising: Similar to licensing, but with more extensive transfer of management systems and processes.
Foreign direct investment (FDI): Setting up or acquiring facilities in another country to gain control over operations. Examples include establishing a manufacturing plant or acquiring a local company.
Joint ventures: Establishing a new business entity with a partner in a foreign market. This allows sharing resources, expertise, and risks.
Foreign subsidiaries: A wholly owned branch or entity of a company in a foreign country.

Elements of International Trade

Tariffs: Taxes imposed on imported goods to protect domestic industries and generate revenue.
Quotas: Limits on the quantity of imported goods.
Trade agreements: Formal accords between countries aiming to reduce or eliminate trade barriers (e.g., NAFTA, EU).
Embargoes: Complete restrictions on trade with specific countries due to political or security reasons.
Exchange rates: The value of one currency relative to another, significantly impacting international trade costs and competitiveness.
Balance of trade: The difference between a country's total exports and imports. A surplus exists when exports exceed imports, and a deficit when imports exceed exports.

Impact of International Trade and Business

Economic growth: International trade fosters competition, innovation, and efficiency, boosting economic growth for participating nations.
Job creation: Opening new markets and production facilities usually accompanies international trade, generating new jobs.
Consumer benefits: Access to a wider variety of products and services at potentially lower prices.
Increased competition: Domestic firms are exposed to competition from foreign companies, sometimes spurring innovation and improvement within a country.
Cultural exchange: International trade often leads to the exchange of ideas, customs, and traditions between nations.
Political relations: International trade can foster stronger political relationships and alliances between countries.

Description

Test your knowledge on the key motivations behind international business activities. Understand market seeking, resource seeking, and efficiency seeking strategies that companies use to expand beyond their domestic markets. This quiz explores the various factors influencing firms to engage in global commerce.