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Questions and Answers
What type of firms are characterized by extensive resources allowing them to conduct business activities worldwide via a network of subsidiaries and affiliates?
Which type of firms are newer, entrepreneurial SMEs that initiate substantial international business early after their founding?
What is a common motivation for firms to engage in international business?
What percentage of all existing firms do small and medium-sized enterprises (SME) usually constitute in most countries?
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Which type of organizations pursue special causes and serve as advocates for social issues, education, politics, & research across borders?
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Which type of firms often find foreign markets more profitable, leading to their participation in international business?
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What do multinational enterprises often aim for through market diversification globally?
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Which motivation leads firms such as Harley-Davidson, Sony, and Whirlpool to engage in international business?
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Study Notes
International Trade and Companies
- Boeing and Airbus export billions annually in commercial aircraft products.
- Toyota imports parts from China for vehicle manufacturing in Japan.
Key Concepts in International Trade and Investment
- International investment involves passive ownership of foreign securities (stocks and bonds) for financial returns.
- Foreign Direct Investment (FDI) refers to transferring or acquiring assets abroad, including capital, labor, land, and equipment.
Differences Between International and Domestic Business
- International business is conducted across national borders and often involves higher costs and unique methods.
- Companies must adapt to cultural, linguistic, political, legal, economic, and infrastructural differences in foreign markets.
Major Risks in International Business
- Companies face four primary types of risk when venturing abroad:
- Cross-Cultural Risk: Challenges stemming from cultural differences, including language, lifestyle, and customs.
- Country Risk: Risks associated with the political and economic stability of a country.
- Currency Risk: Fluctuations in exchange rates that can affect profitability.
- Commercial Risk: Potential for loss due to market dynamics and competition.
Understanding International Business
- International Business encompasses value-adding activities like sourcing, manufacturing, and marketing on a global scale.
- Firms aim for foreign customers and partnerships with international businesses.
Definitions and Frameworks
- International Business: Trade or investment activity across national borders.
- Globalization of Markets: Increasing economic integration and interdependence among countries.
- International Trade: Exchange of goods and services across borders, primarily through exporting and importing.
Key Activities in International Trade
- Exporting involves selling products or services to customers in foreign markets from the home country or a third nation.
- Important for firms to understand and navigate various international trade frameworks and economic conditions.
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Description
Test your knowledge on key concepts in international trade and investment, including exporting, importing, global sourcing, and foreign direct investment. Learn about how companies like Boeing, Airbus, and Toyota engage in global business practices.
