International Business Overview

Study Notes

Globalization

Defined as the widening and deepening interdependent relationships among nations.
Involves reducing barriers to the movement of goods, services, capital, technology, and people.
Enhances global economic integration and expands access to diverse markets and resources.

Global Business

Companies operating facilities like factories and distribution centers in multiple countries.

International Laws

Legal agreements between nations that determine tax liabilities on earnings across jurisdictions.

Reasons for Engaging in International Business (IB)

Sales Expansion: Increases potential sales and profit opportunities.
Resource Acquisition: Can lead to:
- Lower operational costs.
- Access to new or improved products.
- Enhanced operating knowledge.
Risk Reduction: Potential to:
- Smooth sales and profits across different markets.
- Prevent competitors from gaining competitive advantages.

IB Operating Modes

Merchandise Exports and Imports: Involves tangible goods, commonly used by smaller firms for international ventures.
Service Exports and Imports: Involves intangible services, known as "invisibles," with direct financial interactions between providers and recipients.
Turnkey Operations: Construction projects conducted under contract, transferred to owners when completed.
Management Contracts: Provide personnel to manage functions for another entity.
Franchising: Continuous assistance offered to another business, including trademark usage rights.
Dividends and Interest: Financial returns from foreign investments classified as service exports and imports.
Foreign Investment: Ownership of foreign property for financial gains like interest and dividends.

Forms of Investment

Direct Investments: Involves Foreign Direct Investment (FDI) where investors hold a controlling interest in a foreign company.
Portfolio Investment: Refers to non-controlling financial interests, such as shares or bonds purchased in another entity.

Factors Contributing to Increased Globalization

Technology Advancement: Speeds up tasks and improves accuracy, making processes more efficient.
Trade Liberalization: Nations may impose trade restrictions to protect domestic industries but also enhance globalization.
Supporting Services Development: Emergence of services that facilitate international business operations.
Consumer Pressure Growth: Informed and financially capable consumers demand diverse, high-quality, and affordable global products.
Global Competition Increase: Heightened competition compels companies to engage in international trade for survival.
Political Changes and Policies: Governments bolster international trade via infrastructure improvements for efficient delivery.
Cross-National Cooperation Expansion: Enhanced collaboration between governments through treaties and agreements.

Criticisms of Globalization

Threats to National Sovereignty: Concerns over loss of control by nations.
Environmental Stress: Globalization's impact on the environment.
Income Inequality and Personal Stress: Growing disparities in wealth and associated societal pressures.

Description

This quiz delves into the concepts of globalization and international business, exploring the benefits and strategies for engaging in global markets. It covers topics such as economic integration, operating modes, and the importance of international laws in facilitating cross-border trade. Test your understanding of these critical elements in today's interconnected economy.