Reviewer Finals (Int'l Trade) PDF

**Module 6** **International commerce-** encompasses exchanging goods, services, capital, technology, and intellectual property across borders between companies, organizations, and governments in different countries. **Challenges in international commerce include** inequalities Cultural diff...

**Module 6** **International commerce-** encompasses exchanging goods, services, capital, technology, and intellectual property across borders between companies, organizations, and governments in different countries. **Challenges in international commerce include** inequalities Cultural differences, and Legal complexities **Key players in international commerce include:** multinational corporations, governments, and international organizations International Commerce encompasses a broad spectrum of commercial activities, including: 1**. Import and export of products and services-** Companies directly buying and selling goods, software, media, designs, R&D, consulting, or professional services outside their home country. 2.**Foreign direct investment (FDI)-**Foreign direct investment involves an investor company buying up a significant, lasting position in a foreign business. 3**.Cross-border logistics and transportation -**Providers of sea, air, and road freight ferry goods across continents using vast fleets of container ships, aircraft, and railroad, and delivery trucks. 4.**Trade finance-** Global banks fund exporters and importers conducting international trade through loans, credit guarantees, and insurance to mitigate risks like currency fluctuations and payment default. 5.**Licensing intellectual property-** Companies license patents, trademarks, franchises, media rights, and proprietary knowledge like industrial processes to overseas partners to commercialize intellectual property (IP) in foreign markets for licensing fees without undertaking full FDI. 6**.Contract manufacturing- Hiring** overseas third-party factories to produce branded merchandise through licensing agreements helps companies cost-effectively serve foreign markets without directly operating abroad. **Benefits of International Commerce** 1\. **Economic Growth and Development -** One of the most apparent benefits of international commerce is its ability to drive economic growth. 2\. **Access to a Broader Range of Goods and Services-** International commerce breaks down geographical barriers, allowing countries to access a wider range of goods and services not available domestically. 3.**Encouragement of Innovation and Technology Transfer** -Exposure to international markets fosters innovation as businesses strive to compete in a global marketplace. **4.Economies of Scale** -Engaging in international trade allows businesses to expand their operations and achieve economies of scale, reducing the cost per unit of production. **5.Risk Diversification-** International commerce enables businesses to diversify their markets, reducing dependency on a single economy or region. **Diversification-** act as a buffer against local economic downturns, providing a more stable revenue stream. **6.Cultural Exchange and Understanding** -Beyond economic benefits, international commerce has the potential to foster cultural exchange. 7**.Employment Opportunities-** The expansion of international trade creates numerous employment opportunities, both directly within the trade sector and indirectly in supporting industries. **Drawbacks of International Commerce** Economic Dependence on Developed Nations Exploitation of Labor Job Losses in Certain Sectors Trade Imbalances Cultural Homogenization Environmental Impact Vulnerability to Global Economic Shifts Intellectual Property Risks Complex Regulatory Challenges Currency Fluctuations Lax Quality Control and Standard **Key Players in International Commerce:** Multinational corporations Governments International economic organizations Logistics & shipping companies Global Financial institutions **International Trade Agreement** Major types include: **Unilateral Trade Preference Schemes** - Allow preferential duty-free or reduced duty access to imported products from certain developing countries. This stimulates trade from poorer nations. **Regional Trade Blocs**- Enable increased integration on regulatory policies, product standards and customs procedures between member states to ease cross-border flows within the bloc. Largest blocs include the **United States-Mexico-Canada Agreement (USMCA), the European Union (EU), the African Continental Free Trade Area (AfCFTA), and the Regional Comprehensive Economic Partnership (RCEP)** in Asia. **Bilateral / Multilateral Trade Agreements**- Typically involves reciprocal lowering of tariffs on goods traded between two or more signatory countries. **International Trade Policies and Regulations** **Import Policies:** ** Tariffs:** Import taxes levied by customs authorities make foreign goods more expensive against comparable domestic products. Governments can raise tariffs on commodities traded with specific countries for political disputes. I**mport Quotas:** Quotas impose certain limits on quantities of designated products allowed to be imported. This is meant to protect domestic import-competing sectors. **Regulatory compliance:** Goods must meet destination country technical and safety standards. Requirements span product testing, labeling, packaging, and certifications regulations. **Export Policies:** **Export licenses:** Government approvals required before exporting controlled items like defense equipment, certain chemicals, minerals or information technology overseas, for reasons spanning national security, trade compliance to foreign policy. **Export subsidies:** Subsidies in the form of special incentives like tax breaks, export financing, or insurance offered domestically to boost local companies' overseas exports in specific sectors. ** Export quotas:** Quantitative limits set on certain goods allowed to be exported for reasons ranging from preventing domestic shortages to conservation efforts. **Trade Remedies (to counter unfair practices):** **Anti-dumping duties**: Anti-dumping duties are effectively retaliatory import tariffs applied when foreign companies export products at unfairly low prices to compete against domestic production. **Countervailing duties:** Similarly, countervailing duties are charges levied on subsidized imports that hurt domestic industries competing against the cheap, subsidized overseas goods. **Emerging Trends in International Commerce** Environmental, Social, and Governance (ESG) Focus Cybersecurity Concerns Shift Towards Friend-shoring and Onshoring Diversification of Manufacturing Locations Adoption of Real-time Data Analytics Technology Investment Acceleration Retail and Distribution Supply Chain Transformation **The Preferred Payment Methods Used in International Commerce** **1. Letters of Credit (LCs)** are one of the oldest and widely used payment methods. Issued by the buyer\'s bank, they guarantee payment to the seller upon meeting the terms and conditions specified in the LC, typically proof of shipment or delivery of goods. **2. Wire Transfers** For faster transactions, wire transfers are commonly used. They involve the direct transfer of funds from the buyer\'s bank account to the seller\'s bank account. While quick, they offer less protection, especially for the seller, since payment is usually made after shipment. **3. Documentary Collections** involves the use of a bank as an intermediary without the bank guaranteeing payment. Documents that control the possession of goods are sent through the banking system, but the buyer only receives them upon fulfilling certain conditions, like payment or acceptance of a bill of exchange. 4**. Advance Payment** Here, the buyer pays the seller before the goods are shipped. This is the most secure method for the seller but the riskiest for the buyer, as they pay upfront without any guarantee of receiving the goods. **5. Online Payment Platforms** With the rise of e-commerce, online payment platforms have become increasingly popular for smaller transactions. These platforms can facilitate quick and secure payments, though they may not be suitable for larger B2B transactions. **Global supply chain management**- is the set of processes used for coordinating transnational shipment of goods, services, and information needed to supply and distribute products **What are the three things all successful supply chain management needs?** **1. People -** are key to supply chain management because they are the core of organizations. 2**. Processes -** the actions taken with the aim of satisfying customers. They include all functions involved in the supply chain: A\) Sourcing B) Distribution C) Transportation D) Warehousing E) sales and customer service **3. Technology -** is used in the supply chain to connect people and processes. **These cost-effective strategies include the following:** ** Just-in-time (JIT) manufacturing**- reducing inventory levels, overall costs, product variability and production times, and also improving product quality. ** Lean manufacturing-** producing goods using less manpower, raw materials, time and space. **Total quality management-** embedding awareness of quality in all operational strategies. **Importance of International Human Resource Management** 1\. Emphasis on Core Competency. Post-liberalization, many organizations have started focusing on their core competence and businesses are being organized around that. **Core competence- is** a unique strength of an organization that may not be shared by others. This may be in the form of: a. **a) unique financial resources (finance available at a much lower cost)** b. **manpower resources** c. **marketing capability** d. **technological capability** **2. Reorganization.** **3. Competition for Human Resources.** **4. Technological Changes.** **5. Need for Workforce Empowerment.** **5 phases** Planning, Sourcing, Manufacturing, Delivery , Return **MODULE 7- CULTURE AND INTERNATIONAL BUSINESS** **Culture- is a set of ideas, customs, and social behavior of a particular person, society, or region.** **Culture affects international business in several ways, including:** 1. **Communication-** It plays a vital role in international business, and sometimes effective communication can be the only reason for succeeding or failing in a new market. Any organization involved in international business need to make sure that its messages aren't getting lost in translation. **The language barrier-** is the most common element which hinders communication in international business. 2. **Organizational Hierarchy** 3. **Workplace etiquettes** 4. **Negotiation Styles** 5. **Punctuality** 6. **Group Dynamics** 7. **Emotionalism** 8. **Risk-Taking behavior** **Common Cross-Cultural Barriers** **Cultural conflicts-** primarily arising from cultural differences among your international staff members **Parochialism-** meaning your staff might (mistakenly) believe at-home rules and ways of doing business apply equally (and literally) abroad **Individualism-** meaning your staff members who are used to working independently might find working in teams hard to do in your foreign markets **Cultural distance-** meaning your staff --- whose culture is vastly different from your foreign market\'s --- might be unable to adapt to new ways of doing business according to local cultural customs. **Culture shock-** is an extreme case of culture difference where your staff assigned abroad cannot adapt to local culture and habits so much that your final output as a business declines instead of grows. **Corporate social responsibility (CSR)-** is a self-regulating business model that helps a company be socially accountable to itself, its stakeholders, and the public. **TYPES OF CSR:** Environmental responsibility Ethical responsibility Philanthropic responsibility Financial responsibility Companies That Practices Csr 1.**Starbucks (SBUX) In** its 2022 Environmental and Social Impact Report, Starbucks (SBUX) highlights taking care of its workforce and the planet among its CSR priorities through stock grants and additional medical, family, and educational benefits. The company\'s goals include achieving 50% reductions in greenhouse gas emissions, water consumption, and waste by 2030. 2.**Home Depot (HD)** has invested more than 1 million hours per year in training to help front-line employees advance in their careers, aims to produce or procure 100% renewable energy to operate its facilities by 2030, and has plans to spend \$5 billion per year with diverse suppliers by 2025. 3.**General Motors** won the Sustainability Leadership Award from the Business Intelligence Group in 2022. The automaker provided \$60 million in grants to more than 400 U.S. nonprofits focusing on social issues, and it has agreements in place to use 100% renewable electricity at its U.S. sites by 2025. **the International Organization for Standardization (ISO) released ISO 26000** - a set of voluntary standards to help companies implement corporate social responsibility. - ISO 26000 provides guidance rather than requirements because the nature of CSR is more qualitative than quantitative, and its standards cannot be certified. ISO 26000 clarifies social responsibility and helps organizations translate CSR principles into practical actions.. In 2023, the top-ranked companies include **Hewlett-Packard Enterprise Company, Accenture, and Hasbro.\>\> best csr** Module 8 **Market entry strategy** - is a comprehensive plan for entering a new market or industry, considering the target market, competitive landscape, and the company's strengths and weaknesses. The strategy aims to minimize risk while maximizing the chances of success. -are methods companies use to plan, distribute and deliver goods to international markets. **The three primary factors that affect a company\'s choice of international market entry strategy are:** **Marketing:** Companies consider which countries contain their target market and how they would market their product to this segment. **Sourcing:** Companies choose whether to produce the products, buy them or work with a manufacturer overseas. **Control:** Companies decide whether to enter the market independently or partner with other businesses when presenting their products to international markets. **Market entry strategies-** are important because selling a product in an international market requires precise planning and maintenance processes. -These strategies enable companies to stay organized before, during and after entering new markets. \- Since every company has its own goals for entering an international market, having the option to choose from various types of strategies can give a company the opportunity to find one that fits its needs. **10 Market Entry Strategies for International Markets:** **1. Exporting-** involves marketing the products you produce in the countries in which you intend to sell them. \- Some companies use direct exporting - in which they sell the product they manufacture in international markets without third-party involvement. \- Companies that sell luxury products or have sold their goods in global markets in the past often choose this method. **2. Piggyback**- If your company has contacts who work for organizations that currently sell products overseas, you may want to consider piggybacking. \- This market entry strategy involves asking other businesses whether you can add your product to their overseas inventory**.** **3. Countertrade** is a common form of indirect international marketing. \- it functions as a barter system in which companies trade each other\'s goods instead of offering their products for purchase. \- is a cost-effective choice for many businesses because the practice may exempt them from import quotas. **4. Licensing**- occurs when one company transfers the right to use or sell a product to another company. \- A company may choose this method if it has a product that\'s in demand and the company to which it plans to license the product has a large market. For example, a movie production company may sell a school supply company the right to use images of movie characters on backpacks, lunchboxes and notebooks. **5. Joint ventures-** Since joint ventures often function like large, independent companies rather than a combination of two smaller companies, they have the potential to earn more revenue than individual companies. \- This market entry strategy carries the risk of an imbalance in company involvement, but both parties can work together to establish fair processes and help prevent this issue. **6. Company ownership**- Company ownership costs more than most market entry strategies, but it has the potential to lead to a high ROI. **7. Franchising-** is a chain retail company in which an individual or group buyer pays for the right to manage company branches on the company\'s behalf. \- Franchising typically requires strong brand recognition, as consumers in your target market should know what you offer and have a desire to purchase it. **8. Outsourcing-** involves hiring another company to manage certain aspects of business operations for your company. \- it refers to making an agreement with another company to handle international product sales on your company\'s behalf. **9. Greenfield investments- are** complex market entry strategies that some companies choose to use. \- These investments involve buying the land and resources to build a facility internationally and hiring a staff to run it. \- Greenfield investments may subject a company to high risks and significant costs, but they can also help companies comply with government regulations in a new market. **10. Turnkey projects-** apply specifically to companies that plan, develop and construct new buildings for their clients. \- **The term \"turnkey\"** - refers to the idea that the client can simply turn a key in a lock and enter a fully operational facility. **The foreign exchange market (also known as forex, FX, or the currencies market)** - is an over-the-counter (OTC) global marketplace that determines the exchange rate for currencies around the world. **Types of Foreign Exchange Markets:** - **Spot Forex Market-** The spot market is the immediate exchange of currencies at the current exchange. On the spot. This makes up a large portion of the total forex market and involves buyers and sellers from across the entire spectrum of the financial sector, as well as those individuals exchanging currencies. - **Forward Forex Market-** The forward market involves an agreement between the buyer and seller to exchange currencies at an agreed-upon price at a set date in the future. No exchange of actual currencies takes place, just the value. The forward market is often used for hedging. - **Futures Forex Market**- The futures market is similar to the forward market, in that there is an agreed price at an agreed date. The primary difference is that the futures market is regulated and happens on an exchange.5 This removes the risk found in other markets. Futures are also used for hedging. **What Are the Functions of Foreign Exchange?** - to facilitate currency conversions - manage foreign exchange risk through futures and forwards, and - for speculative investors to earn a profit on FX trading **Forex Terms** There are a number of terms that are used by Forex traders. Here are some of the basics. **Going long**: Buying a currency on the belief that its value will increase in a matter of hours. Then it can be sold for a profit. **Going short**: Selling a currency on the belief that its value will decrease. It can then be repurchased at a lower price. **Currency pair:** Every Forex transaction is an exchange of one currency for another. A currency pair quote looks like this: USD/GBP = \$1.15. In this example, the U.S. dollar is the base currency, and the British pound is the quote currency. A trader who wishes to buy British pounds will pay \$1.15 for each. **The ask**: The price the trader will pay to buy a currency pair. **The bid**: The price the trader will pay to sell a currency pair. **The spread: The** difference between the buying price and the selling price. **Major Currency Codes on the Forex:** Seven currency pairs represent the majority of trades on the Forex. They are: **EUR/USD (Euro/U.S. dollar)** **USD/JPY (U.S. dollar/Japanese yen)** **GBP/USD (British pound/U.S. dollar)** **AUD/USD (Australian dollar/U.S. dollar)** **USD/CAD (U.S. dollar/Canadian dollar)** **USD/CHF (U.S. dollar/Swiss franc)** **NZD/USD (New Zealand dollar/U.S. dollar)** **Module 9** **Electronic commerce (e-commerce**)- refers to companies and individuals that buy and sell goods and services over the internet. E-commerce operates in different types of market segments and can be conducted over computers, tablets, smartphones, and other smart devices. Nearly every imaginable product and service is available through e-commerce transactions, including books, music, plane tickets, and financial services such as stock investing and online banking. As such, it is considered a very disruptive technology. - E-commerce is the buying and selling of goods and services over the internet. - It is conducted over computers, tablets, smartphones, and other smart devices. - Almost anything can be purchased through e-commerce today, which makes e-commerce highly competitive. - It can be a substitute for brick-and-mortar stores, though some businesses choose to maintain both. - E-commerce operates in several market segments including business-to-business, business-to-consumer, consumer-to-consumer, and consumer-to-business. **Advantages of E-commerce:** **Convenience**: E-commerce can occur 24 hours a day, seven days a week. Although eCommerce may take a lot of work, it is still possible to generate sales as you sleep or earn revenue while you are away from your store. **Increased Selection:** Many stores offer a wider array of products online than they carry in their brick-and-mortar counterparts. And many stores that solely exist online may offer consumers exclusive inventory that is unavailable elsewhere. **Potentially Lower Start-up Cost:** E-commerce companies may require a warehouse or manufacturing site, but they usually don\'t need a physical storefront. The cost to operate digitally is often less expensive than needing to pay rent, insurance, building maintenance, and property taxes. **International Sales:** As long as an e-commerce store can ship to the customer, an e-commerce company can sell to anyone in the world and isn\'t limited by physical geography. **Easier to Retarget Customers:** As customers browse a digital storefront, it is easier to entice their attention towards placed advertisements, directed marketing campaigns, or pop-ups specifically aimed at a purpose. **Disadvantages of E-commerce:** Limited Customer Service: If you shop online for a computer, you cannot simply ask an employee to demonstrate a particular model\'s features in person. And although some websites let you chat online with a staff member, this is not a typical practice. Lack of Instant Gratification: When you buy an item online, you must wait for it to be shipped to your home or office. However, e-tailers like Amazon make the waiting game a little bit less painful by offering same-day delivery as a premium option for select products. Inability to Touch Products: Online images do not necessarily convey the whole story about an item, and so e-commerce purchases can be unsatisfying when the products received do not match consumer expectations. Case in point: an item of clothing may be made from shoddier fabric than its online image indicates. Reliance on Technology: If your website crashes, garners an overwhelming amount of traffic, or must be temporarily taken down for any reason, your business is effectively closed until the e-commerce storefront is back. Higher Competition: Although the low barrier to entry regarding low cost is an advantage, this means other competitors can easily enter the market. E-commerce companies must have mindful marketing strategies and remain diligent on SEO optimization to ensure they maintain a digital presence. **Types of E-commerce** **1.Business-to-Consumer (B2C)-** B2C e-commerce companies sell directly to the product end-user. Instead of distributing goods to an intermediary, a B2C company performs transactions with the consumer that will ultimately use the good. - **Kylie Cosmetics'** ecommerce store is powered by Shopify. - the beauty company founded by reality television celebrity and influencer Kylie Jenner, is an example of a B2C ecommerce business. It manufactures its own products and sells them through its online store. - **Allbirds-** Sneaker brand Allbirds is a direct-to-consumer (DTC) brand that sells shoes to its customers through an ecommerce website. It also has a handful of retail stores to provide shoppers with an in-store experience. - **Bombas** is an apparel brand that manufactures its own clothing. Instead of selling products to other businesses, it sells them direct to customers through its ecommerce site. 2\. **Business-to-Business (B2B)-** When one business sells to another business online, it's known as business-to-business (B2B) ecommerce. **Examples of B2B ecommerce** - Costco- Product page of bestselling Costco products ranging from exercise equipment and doorbells. Costco is an example of a B2B business. The wholesaler purchases items from its suppliers to resell to other businesses in one of its more than 800 trade-only warehouses. - Alibaba- Alibaba is an online marketplace that connects buyers and sellers. Suppliers list their products at a lower price and sell items in bulk. DTC brands can buy their inventory from the marketplace to resell with a higher markup on their own website. - HubSpot- HubSpot sells customer relationship management (CRM) software to other businesses. Because the general public doesn't use HubSpot, it's considered a B2B ecommerce business. **3.Business-to-Government (B2G)-**Some entities specialize as government contractors providing goods or services to agencies or administrations. **4. Consumer-to-Consumer (C2C)** E-commerce platforms such as digital marketplaces connect consumers with other consumers who can list their own products and execute their own sales. **Examples of C2C ecommerce:** - **Vinted** is a mobile app that connects buyers with sellers. However, businesses can't use the platform to sell products. Only individuals can list their products and sell them to other people. - **Poshmark** is another mobile marketplace that specializes in fashion. People can upload their old clothes to Poshmark and sell them to buyers. - **Craigslist** was one of the first online marketplaces to become popular. It has local forums to connect buyers and sellers in specific areas, and covers the entire US---making it a great option if you want to sell your old things to people within the community. **5.Consumer-to-Business (C2B)** A consumer may solicit bids or interact with companies that need particular jobs done. Examples of C2B ecommerce - **Upwork** Services for hire on Upwork including development and IT, finance and accounting, and sales and marketing. **Upwork** is an online marketplace that specializes in professional services. It's used by businesses that want to hire freelance talent. Individuals sell their skills---be that design, writing, engineering, or photography---on the C2B platform. - **Airbnb** is a letting company that doesn't own the majority of its properties. Instead of buying properties from other businesses, people choose to list their home with Airbnb. This makes it a C2B business. - **Shutterstock is** a stock photography website that pays contributors to upload their images. The exchange of money and services is in the reverse order of a traditional ecommerce company. **6.Consumer-to-Government (C2G)-** Less of a traditional e-commerce relationship, consumers can interact with administrations, agencies, or governments through C2G partnerships. **Types of E-commerce Revenue Models:** **1.Dropshipping-** Often considered one of the easier forms of e-commerce, dropshipping allows a company to create a digital storefront, generate sales, then rely on a supplier to provide the good. 2\. **White Labeling**- White-label e-commerce companies leverage already successful products sold by another company. 3.**Wholesaling-** A more capital-intensive approach to e-commerce, wholesaling entails maintaining quantities of inventory, keeping track of customer orders, maintaining customer shipping information, and typically having ownership of the warehouse space to house products. 4**.Private Labeling-** Private labeling is a more appropriate e-commerce approach for companies that may not have large upfront capital or do not have their own factory space to manufacture goods. **5.Subscription**- E-commerce companies can also leverage repeating orders or loyal customers by implementing subscription services.