International Business Risks and Theories

Study Notes

Political instability can disrupt international business operations, leading to uncertainty.
Trade barriers hinder free trade and increase costs for companies.
Economic fluctuations can affect profitability and planning for international ventures.
Currency exchange rate changes impact the financial results of international transactions.

Managing cross-border supply chains is complex and may incur high costs.
Delays and regulatory issues can complicate the movement of goods internationally.

Mercantilism: Prioritizes exports to achieve a favorable trade balance.
Absolute Advantage: Countries should focus on producing goods they can make more efficiently than others.
Comparative Advantage: Nations should specialize in producing goods where they are relatively more efficient, regardless of their absolute efficiency.
Heckscher-Ohlin Theory: Countries export products that utilize their abundant resources.

Encompasses activities like exporting, importing, foreign direct investment (FDI), and licensing.
Involves transferring goods, services, technology, and knowledge across borders.

Exporting: Selling domestically produced goods or services to foreign markets.
Importing: Purchasing foreign-produced goods or services for domestic use.
Foreign Direct Investment (FDI): Investing directly in foreign markets through asset acquisition or business establishment.

Job Loss: Globalization may lead to outsourcing and job displacement in certain sectors.
Income Inequality: The gap between developed and developing nations can widen as globalization progresses.
Environmental Concerns: Increased trade and economic activity can lead to pollution and resource degradation.
Cultural Homogeneity: Dominance of Western culture can threaten local cultural identities.
Political Instability: Greater interdependence among countries can lead to regional instability.

Benefits are unevenly distributed, requiring careful policymaking to address inequalities.
International cooperation is essential for sustainable development.

Involves exchanging goods and services across borders, crucial for the global economy.
Drives economic growth, innovation, and cultural exchange.

Economic Growth: Facilitates market expansion and cost reductions, promoting specialization.
Job Creation: Generates employment in sectors related to trade.
Innovation: Encourages development through exposure to diverse markets.
Cultural Exchange: Promotes understanding and collaboration among nations.