Yonetim Bilisim Sistemleri Ders Notları - Mgmt - 101 Chapter - 3

International Business

International business – the buying, selling, and trading of goods and services across national boundaries.

Why Nations Trade

International trade allows for the acquisition of raw materials and goods at favorable prices.

Absolute advantage – a monopoly that exists when a country is the only source of an item, the only producer of an item, or the most efficient producer of an item.

Outsourcing – the transferring of manufacturing or other tasks—such as data processing—to countries where labor and supplies are less expensive

Comparative advantage – the basis of most international trade, when a country specializes in products that it can supply more efficiently or at a lower cost than it can produce other items.

Trade Between Countries

Exporting – the sale of goods and services to foreign markets.

Importing – the purchase of goods and services from foreign sources.

The difference in the value between what a nation exports and imports is its balance of trade.

A trade deficit is also called a nation’s negative balance of trade.

International Trade Barriers

A nation’s balance of trade, foreign investments, foreign aid, loans, tourists dollars, and military expenditures comprise its balance of payments

Balance of payments – the difference between the flow of money into and out of a country.

Barriers to International Trade –

•Economic

•Legal, Ethical, Political

•Social and Cultural

•Technological

•Economic development

•Infrastructure

•Exchange rates

LDC’s – less-developed countries

•Low per-capita income

•Less economically advanced

•Potentially huge & profitable markets

Infrastructure: -- The physical facilities that support economic activities, including railroads, highways, ports, airfields, utilities, power plants, schools, hospitals, and commercial distribution systems.

Exchange Rates: -- The ratio at which one nation’s currency can be exchanged for another nation’s currency.

Ethical, Legal, & Political Barriers:

•Complex relationships

•Different laws

•International laws

•Trade restrictions

•Changing political climates

•Different ethical values

Tariff & Trade Restrictions – part of a nation’s legal structure – may be established or removed for political reasons.

Import Tariff – a tax levied by a nation on goods imported into the country

Exchange controls – regulations that restrict the amount of currency that can be bought or sold

Quota – a restriction on the number of units of a particular product that can be imported into a country

Embargo– a prohibition on trade in a particular product

Dumping – the act of a country or business selling products at less than what it costs to produce them

Political Barriers

•Seldom in writing & change rapidly

•Relative stability of countries is a factor

Cartel – a group of firms or nations that agrees to act as a monopoly and not compete with each other, in order to generate a competitive advantage in world markets.

Technological Barriers

•Technological advances are creating
global marketing opportunities

Trade Agreements, Alliances, & Organizations

General Agreement on Tariffs and Trade (GATT)

•Signed by 23 nations in 1947

•Forum for tariff negotiations

•Place for international trade issue discussion and resolution

World Trade Organization (WTO) – International organization dealing with the rules of trade between nations.

North American Free Trade Agreement (NAFTA)– agreement that eliminates most tariffs and trade restriction on agricultural and manufactured products to encourage trade among Canada, the U.S., and Mexico.

European Union (EU)– a union of European nations established in 1958 to promote trade among its members; one of the largest single markets today.

Asia-Pacific Economic Cooperation (APEC)– an international trade alliance that promotes open trade and economic and technical cooperation among member nations.

World Bank –

(International Bank for Reconstruction and
Development)

Organization established in 1946 by industrialized nations to loan money to underdeveloped and developing countries.

International Monetary Fund (IMF)–

Organization established in 1947 to promote trade among member nations by eliminating trade barriers and fostering financial cooperation

Getting Involved in International Business

Exporting & importing

Trading Companies

Licensing & franchising

Contract manufacturing

Joint ventures

Direct investment

Multinational corporations
Exporting can take place through countertrade agreements – foreign trade agreements that involve bartering products for other products instead of for currency.

A firm that buys goods in one country and sells them to buyers in another country is a trading company.

Licensing -- A trade agreement in which one company (licensor) allows another company (licensee) to use its company name, products, patents, brands, trademarks, etc. in exchange for a fee or royalty.

Franchising is a form of licensing where a company (franchiser) agrees to provide a franchisee a name, logo, operational guidelines, products, etc, in return for a financial commitment and the agreement to conduct business in accord with the franchiser’s standard of operations.

Contract Manufacturing -- The hiring of a foreign company to produce a specified volume of the initiating company’s product to specification; the final product carries the domestic firm’s name

Joint Ventures & Alliances

Joint venture – the sharing of the costs and operation of a business between a foreign company and a local partner

Strategic alliance – a partnership formed to create competitive advantage on a worldwide basis.

Direct investment – the ownership of overseas facilities

Multinational Corporation –operates worldwide with no significant ties to any nation or region

International Business Strategies

Multinational strategy– a plan used by international companies that involves customizing products, promotion, and distribution according to cultural technological, regional and national differences.

Global strategy (globalization)– a strategy that involves standardizing products (promotion and distribution) for the whole world as if it were a single entity.