Introduction to International Business & Trade - Lecture Notes PDF

Chapter 1 Introduction To International Business & Trade Chriselda Saniata G. Niala  International Business International business is defined as all business activities, including the creation and transfer of resources, goods, services, know-how, skills, and information, which transc...

Chapter 1 Introduction To International Business & Trade Chriselda Saniata G. Niala  International Business International business is defined as all business activities, including the creation and transfer of resources, goods, services, know-how, skills, and information, which transcend national boundaries. International Business and Trade | CSGNiala  International Business The resources may be raw materials, energy, technological know-how and patents, capital, and organizational skills. Goods include manufactured parts, sub-assemblies, and assemblies. Services may include accounting, financial, legal, consulting, import and export, health care, and transportation. Know-how may include product and process technological innovations, copyrights, trademarks, and brands. Skills may include organizational and managerial skills. Information includes databases as well as information networks. Source: http://www.sagepub.com/menipaz/Chapter%201.pdf International Business and Trade | CSGNiala  International Business International Business is a business whose activities involves crossing national boarders. This definition includes not only International trade and foreign manufacturing, but also the growing service industry in such areas as transportation, tourism, banking, advertising, construction, retailing, wholesaling and mass communication. - Don B. and Wendell M. (1999) International Business and Trade | CSGNiala  Domestics Business The business transaction that occurs within the geographical limits of the country is known as domestic business. It is a business entity whose commercial activities are performed within a nation. Alternately known as internal business or sometimes as home trade. The producer and customers of the firm both reside in the country. In a domestic trade, the buyer and seller belong to the same country and so the trade agreement is based on the practices, laws and customs that are followed in the country. International Business and Trade | CSGNiala International Business versus Domestic Business International Business and Trade | CSGNiala  Domestic International Business with MEANING Business which is engaged in economic economic transaction with one transactions or more nations in the world. conducted within the geographical boundaries of a single country. International Business and Trade | CSGNiala  Domestic International Area of Operations Within the home country. Any one or more countries outside its home country. International Business and Trade | CSGNiala  Domestic International Relatively Low Quality Standards Very High Limited to the standards Dealing with different implemented within the nations may require country. It varies from the kind different standards which of product/services. needs to be followed International Business and Trade | CSGNiala Domestic International Single Use of Currency Multiple Less Capital Investment Huge Physical Assets Monetary Assets Intangible Assets International Business and Trade | CSGNiala  Domestic International Few Restrictions Many Tariffs Quotas Embargo Homogeneous Nature of Customers Heterogeneous Standardization? International Business and Trade | CSGNiala Domestic International Easy Business Research Complicated Free FMobility Restricted HRM BC 211 – International Business and Trade | CSGNiala  Domestic International Skills and knowledge required are basically the same. Risks and uncertainties make IBT more difficult to operate and manage. Need to understand different systems – culture, legal, political, social Home/foreign country considerations in terms of production International Business and Trade | CSGNiala  International Trade versus International Business International Business and Trade | CSGNiala  Int’l. TRADE Int’l. BUSINESS Narrower SCOPE Broader Focus on exchange of goods Includes all business activities and services across borders Narrower Activities Broader Import and Export Import and Export, FDI, licensing, franchising, joint ventures, global sourcing Narrower Focus Broader Primarily on transactions Encompasses operations, strategy, and investment International Business and Trade | CSGNiala  Int’l. TRADE Int’l. BUSINESS Imagine: A company that makes shoes. Exports shoes to stores in other The company not only exports BUT: opens own countries shoe store in other countries; partners w/ leather supplier in another country; and licenses its shoe-making technology to a company in another country International Trade is a key component of International Business INTERNATIONAL INTERNATIONAL TRADE BUSINESS International Business and Trade | CSGNiala  The Advantages of International Business International Business and Trade | CSGNiala Advantages of International Business Earning valuable foreign currency: A country is able to earn valuable foreign currency by exporting its goods to other countries. International Business and Trade | CSGNiala Advantages of International Business Division of labor: International business leads to specialization in the production of goods. Thus, quality goods for which it has maximum advantage International Business and Trade | CSGNiala Advantages of International Business Increase in the standard of living of people: Sale of surplus production of one country to another country leads to increase in the incomes and savings of the people of the former country. This raises the standard of living of the people of the exporting country. International Business and Trade | CSGNiala Advantages of International Business Benefits to consumers: Consumers are also benefited from international business. A variety of goods of better quality is available to them at reasonable prices. Hence, consumers of importing countries are benefited as they have a good scope of choice of products. Encouragement to industrialization: Exchange of technological know-how enables underdeveloped and developing countries to establish new industries with the assistance of foreign aid. Thus, international business helps in the development of the industry. International Business and Trade | CSGNiala Advantages of International Business International peace and harmony: International business removes rivalry between different countries and promotes international peace and harmony. It creates dependence on each other, improves mutual confidence and good faith. Cultural development: International business fosters exchange of culture and ideas between countries having greater diversities. A better way of life, dress, food, etc. can be adopted from other countries. Creating employment opportunities: International business boosts employment opportunities in an export-oriented market. It raises the standard of living of the countries dealing international business International Business and Trade | CSGNiala  The Disadvantages of International Business International Business and Trade | CSGNiala Disadvantages of International Business Adverse effects on the economy: One country affects the economy of another country through international business. Moreover, large-scale exports discourage the industrial development of importing country. Consequently, the economy of the importing country suffers. Competition with developed countries: Developing countries are unable to compete with developed countries. It hampers the growth and development of developing countries unless the international business is controlled. Colonization: Sometimes, the importing country is reduced to a colony due to economic and political dependence and industrial backwardness. International Business and Trade | CSGNiala Disadvantages of International Business Exploitation: International business leads to exploitation of developing countries by the developed countries. The prosperous and dominant countries. The prosperous and dominant countries regulate the economy of poor nations. Publicity of undesirable fashions: Cultural values and heritages are not identical in all countries. There are many aspects which may not be suitable for our atmosphere, culture, tradition, etc. This indecency is often found to be created in the name of cultural exchange. Shortage of goods in the exporting country: Sometimes, traders prefer to sell their goods to other countries instead of in their own country in order to earn more profit. This results in the shortage of goods within the home country. International Business and Trade | CSGNiala