International Business Overview

International Business Overview

• Modernization creates global interconnectedness, eliminating purely domestic businesses.
• War, natural disasters, politics, trade ease, and growing demand drive international business.
• International business occurs in 3 forms: trade, intellectual property production/licensing, and foreign direct investment (not mutually exclusive).

Trade

• Involves importing and exporting goods/services across borders.
• Exporting: Shipping goods/services overseas.
• Importing: Bringing goods/services into one's country.
• Trade in services involves services provided by one party to another.
• Exporting is the first step in international business, requiring significant involvement and responsibility.
• Direct exporting: Selling to a foreign buyer directly without a third party. Requires managing all aspects of the transaction.
• Indirect exporting: Using an intermediary (e.g., export management companies, international trading companies, distributors) for sales.
• Export Specialists/International Sales Representatives: represent the company directly in foreign markets and builds a relationship with buyers.
• Foreign Distributors: purchase, store, and resell goods/services to foreign retailers.
• Export Trading Companies (ETCs): Support other firms involved in exporting with services like coordination, market research, or joint ventures.
• Legal protections exist (e.g., Export Trade Certificate of Review) for ETCs to prevent lessening of US competition.
• Important documents include Certificates of Origin for verifying legitimate import/export.
• Successful small businesses focus on experience and a defined export strategy.

Intellectual Property Licensing

• Protects creative work (patents, trademarks, copyrights, trade secrets).
• Essential for firms with IP assets to protect their rights globally (often through contracts/licensing).
• International Licensing Agreements: Contracts granting IP rights to another party (licensee).
• Licensing enables the transfer of a valuable asset.
• IP laws are often governed on federal levels.
• International organizations (e.g., World Intellectual Property Organization (WIPO)) support international IP protection and enforcement.

Foreign Direct Investment (FDI)

• Active investment by a firm in another country's business.
• Aims for long-term involvement and management.
• FDI offers potentially high market penetration, but also significant risk.
• Forms: foreign branch offices, foreign subsidiaries, joint ventures, affiliates.
• Joint Ventures: partnerships with local firms, often required by host country laws, and are necessary for local involvement.
• Multinational Corporations (MNCs) generate revenue from multiple countries.
• Transnational Corporations have an international structure via parent companies and foreign affiliates.

Developing and Newly Industrialized Countries

• Definitions of "developing" and "newly industrialized" lack universal consensus.
• Characteristics of developed vs. developing countries (income, standard of living, industrialization, economic dependence, demographics) are varied but can help business strategizing.
• Business in developing nations presents particular challenges concerning: trade and investment policies (tariffs and regulations).
• Access to information, regulations, and transparency can be problematic to international businesses.
• Businesses should be aware of regulations and potentially changing policies.

Risks of International Business

• Distance and Logistics: Shipping delays, payment issues, damage to goods, currency risk.
• Cultural Differences: Language barriers, cultural misunderstandings. Important to have local personnel/understanding.
• Trade Controls: Export restrictions, sanctions, tariffs (taxes on imported goods), quotas (limitations on imports).
• Currency Risk: Fluctuation in exchange rates can impact profits.
• Political Risk: Instability, hostile regulations, nationalization (government takeover), or expropriation (taking over land/property).
• Legal Risk: Difficulty in navigating foreign laws and court systems.

Obtainment of Professional Assistance

• Enlisting firms/individuals who can assist international businesses.
• International lawyers, freight forwarders, and custom brokers, and international banking specialists can help negotiate and comply with the rules of foreign countries.