CAE 323 Module 1: Introduction to International Business and Trade PDF

MODULE INTRODUCTION TO 1: INTERNATIONAL BUSINESS AND CAE 323 TRADE  INTERNATIONAL TRADE: International trade is an exchange involving a good or service conducted between at least two different countries. The exchanges can be imports or exports. An import refers to a good or...

MODULE INTRODUCTION TO 1: INTERNATIONAL BUSINESS AND CAE 323 TRADE  INTERNATIONAL TRADE: International trade is an exchange involving a good or service conducted between at least two different countries. The exchanges can be imports or exports. An import refers to a good or service brought into the domestic country. An export refers to a good or service sold to a foreign country. International trade allows countries to expand their markets and access goods and services that otherwise may not have been available domestically.  REASON OF INTERNATIONAL TRADE: 1. Reduced dependence on your local market 2. Increased chances of success 3. Increased efficiency 4. Increased Productivity 5. Economic advantage 6. Innovation 7. Growth 8. Uneven Distribution of Natural Resources 9. Division of Labor and Specialization ADVANTAGES OF INTERNATIONAL 1. Increased revenues TRADE: 2. Decreased competition 3. Longer product lifespan 4. Easier cash-flow management 5. Better risk management 6. Benefiting from currency exchange 7. Access to export financing 8. Disposal of surplus goods 9. Enhanced reputation 10. Opportunity to specialize DISADVANTAGES OF INTERNATIONAL TRADE: 1.Shipping Customs and Duties 2.Language Barriers 3.Cultural Differences 4.Servicing Customers 5.Returning Products 6.Intellectual Property Theft  KINDS OF TRADE: 1.Foreign Trade/International Trade - exchange of goods and services between one country to another. 2.Local Trade/Domestic Trade - exchange of goods and services inside the Philippines (only one country).  IMPORTATION AND EXPORTATION: Export - products that are transported as trade to other countries (sold by the country) Import - products that are transported as trade into the country (bought by the country)  INTERNATIONAL TRADE: 1. Local Trade/Domestic Trade - An exchange of goods and services inside the Philippines (in only one country). - for example, Baguio (strawberry) and Davao (durian) 2. Globalization - Crosses international borders and hosts transactions with two or more countries. 3. International Trade -More competitive and allows countries to expand their market and access goods and services that otherwise may not  SUPPLY AND DEMAND: Demand → various commodities that buyers, consumers, and households are willing to buy at different prices at a defined time and place Supply → at the point of view of the producers/sellers. DEMAND CURVE DETERMINANTS: 1. Event or Price expectation 2. Change in number of buyers 3. Change in prices of related goods - Substitution - Complementary 4. Change in consumers income  SUPPLY DETERMINANTS: 1.Change in number of sellers 2.Change in cost of productions 3.Change in technology 4.Change in price expectation 5.Change in calamities 6.Taxes and subsidies  ECONOMICS AND ECONOMICS ACTIVITIES: ECONOMICS- “Economics is a branch of social sciences concerning the allocation of scarce resources in order to achieve the unlimited satisfaction of all consumers.” ECONOMIC ACTIVITIES: 1.) Production- It is the first stage of economic activity. Involves the transformation of inputs (raw materials) into finished goods or products. 2.) Distribution- the systematic way or process of how commodities and incomes are properly allocated among economic resource owners 3.) Exchange- the activity that requires any transfer of money or trading of products between buyers and sellers in a marketplace. 4.) Consumption- an economic activity that involves the utilization of goods and services to provide satisfaction to the consumers or the buyers.  FUNDAMENTAL ECONOMIC PROBLEMS: 1. Unlimited satisfaction- Members of the society are never content with the products/resources they have at hand. 2. Limited resources– People are still searching/looking for/continuously discovering limited resources/scarce resources to be used for the good/satisfaction of the population. If we are able to allocate, proper usage is the solution to make sure there is enough to go around. KINDS OF RESOURCES: 1.Man-made resources 2.Human resources 3.Natural resources  FACTTORS THAT CAUSE SCARCITY: 1. Increase of the number of populations → A higher population means larger consumption of resources. 2. Increase of different businesses → Factories, enterprises, subdivisions, etc. have increased in number over the decades to cater to the population’s needs, leading to scarcity. 3. Increase of the different technologies → The constantly increasing standard of living of the population leads to development and urbanization as well as construction of cell sites on agricultural/forest land. 4. Unlimited satisfaction → Will be solved if people learn to limit their contentment. 5. Illegal activities of men → Crimes performed to unjustly enrich oneself that damages/induces imbalance in the distribution of  ECONOMIC RESOURCES AND ALSO KNOWN AS FACTORS OF PRODUCTION: Economic resources inputs or resources used in the production of goods and called the factors of production. Categories include land, labor, capital, and entrepreneurship. 1. Land → The physical space or area on which production takes place. It also includes the economy natural resources. Farmland, oil deposits, trees, water resources, gold. 2. Labor 3. Capital → The tools and other productive equipment utilized in producing consumer goods and service. Plant, money, industrial robots, machine, computer 4. Entrepreneurship → A human resource responsible for combining or organizing the land, labor, and capital resources into a good or service. Goal of these people is to maximize/gain profit Profit = total revenue - total cost Revenue > cost = profit  TYPES OF INCOME (LABOR): 1. Wages - People who earn income from blue-collar jobs. 2. Salaries - People who earn income from white-collar jobs.  INTERNATIONAL BUSINESS: International business refers to the trade of goods, services, technology, capital and/or knowledge across national borders and at a global or transnational scale. It involves cross-border transactions of goods and services between two or more countries. Transactions of economic resources include capital, skills, and people for the purpose of the international production of physical goods and services such as finance, banking, insurance,  FEATURES OF INTERNATIONAL BUSINESS: Flow of Capital across countries Accurate and timely information required Market Expansion More potential than domestic market Market segmentation Large scale operations Integration of economies  IMPORTANCE OF INTERNATIONAL BUSINESS: it increases the competition in domestic markets and introduces new opportunities to foreign markets. Global competition encourages companies to become more innovative and efficient in their use of resources. For consumers, international business introduces them to a variety of goods and services.  OBJECTIVES OF INTERNATIONAL BUSINESS: 1. To promote social and cultural exchange among the nations. 2. To assist developing countries in their economic and industrial growth by inviting them to the international market thus eliminating the gap between the developed and the developing countries. 3. To assure sustainable management of  FEATURES OF INTERNATIONAL BUSINESS: 1.Large scale Operations 2.Immobility of Factors 3.Heterogeneous Markets 4.Integration of Economies 5.Dominated by developed countries 6.Beneficial to Participating Countries 7.Keen Competition 8.Special Role of Science and Technology 9.International Restriction 10.Sensitive Nature 11.DifferentPoliciesandDifferent Currencies 12.The Removal of Trade Barriers and Development of Trading Blocs  ADVANTAGES OF INTERNATIONAL BUSINESS EXPANSION: 1.Reaching new customers 2.Spreading business risk 3.Accessing new talent 4.Amplifying your brand 5.Securing foreign investment 6.Lowering costs 7.Increased immunity to trends 8.Improved consumer confidence  DISADVANTAGES OF INTERNATIONAL BUSINESS EXPANSION: 1.Foreign rules and regulations 2.Handling logistics 3.Speaking the language 4.Coordinating time zones 5.Monitoring currency fluctuations 6.Mitigating credit risk 7.Following foreign politics 8.Gathering market research DOMESTIC VS. INTERNATIONAL BUSINESS:  INTERNATIONAL BUSINESS APPROACHES: Ethnocentric Approach: Under this approach, the domestic company does not formulate any different marketing strategy for the foreign market. It views foreign market as an extension to domestic market just like a new region. Polycentric Approach: In this approach, the company formulates strategies according to the environment of the foreign country or host country. Regiocentric Approach: In this approach, the company views regions as unique and seek to develop an integrated regional strategy. Geocentric Approach: Under this approach, the company views the entire world as a potential market and tries to develop integrated world market strategies.  ETHICAL ISSUES IN INTERNATIONAL BUSINESS: As political, legal, economic, and cultural norms vary from nation to nation, various ethical issues rise with them. A normal practice may be ethical in one country but unethical in another. Multinational managers need to be sensitive to these varying differences and able to choose an ethical action accordingly. In an international business, the most important ethical issues involve employment practices, human rights, environmental norms, corruption, and the moral obligation of international corporations. Employment Practices and Ethics Human Rights Environmental Pollution Corruption Moral Obligations Any Questions