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International Business

International Business
International business is a term used to collectively describe all commercial transactions (private and governmental, sales, investments, logistics and transportation) that take place between two or more regions, countries and nations beyond their political boundary. Usually, private companies undertake such transactions for profit; governments undertake them for profit and for political reasons. It refers to all those business activities which involve cross border transactions of goods, services, resources between two or more nations. Transaction of economic resources include capital, skills, people etc. for international production of physical goods and services such as finance, banking, insurance, construction etc. International business is the performance of business activities across national boundaries. Every nation in the world participates in international business to some extent large companies as well as smaller firms sell their products throughout the world. Business is the exchange of goods, services and money for mutual profit or benefit.

International business is the performance of business activities

across national boundaries. Every nation in the world participates in the international business to some extent. Large companies as well as smaller firms sell their products throughout the world.

Example: Coca-Cola, Exxon Mobile, IBM and Prime Computer.

Why Do Companies Go International?

Companies go international for a variety of reasons, but the goal is typically company growth or expansion. Whether a company hires international employees or searches for new markets abroad, an international strategy can help diversify and expand a business.

Many companies look to international markets for growth. Introducing new products internationally can expand a company's customer base, sales and revenue. For example, after Coca-Cola dominated the U.S. market, it expanded their business globally starting in 1926 to increase sales and profits.

Companies go international to find alternative sources of labor. Some companies look to international countries for lower-cost manufacturing, technology assistance and other services in order to maintain a competitive advantage.

Some companies go international to locate resources that are difficult to obtain in their home markets, or that can be obtained at a better price internationally.

Companies go international to broaden their work force and obtain new ideas. A work force comprised of different backgrounds and cultural differences can bring fresh ideas and concepts to help a company grow. For example, IBM actively recruits individuals from diverse backgrounds because it believes it's a competitive advantage that drives innovation and benefits customers.

Some companies go international to diversify. Selling products and services in multiple countries reduces the company's exposure to possible economic and political instability in a single country.

Basics Concept of International Business

The field of international business is dynamic, complex, and challenging, vulnerable to fast-breaking events such as economic shifts, political turmoil, and natural disasters. This concise and affordable textbook will help future international business executives acquire the skills to function effectively under these challenging conditions. Basics of International Business incorporates coverage of the ongoing turmoil in the world financial markets. It's designed to familiarize students with the external environments that affect international businesses, to show them how to recognize the processes in identifying potential foreign markets, and to help them understand the functional strategies that can be developed to succeed in this highly competitive environment.

The term import is derived from the conceptual meaning as to bring in the goods and services into the port of a country. The buyer of such goods and services is referred to an "importer" who is based in the country of import whereas the overseas based seller is referred to as an "exporter". Thus an import is any good (e.g. a commodity) or service brought in from one country to another country in a legitimate fashion, typically for use in trade. It is a good that is brought in from another country for sale. Import goods or services are provided to domestic consumers by foreign producers. An import in the receiving country is an export to the sending country.

Imports, along with exports, form the basis of international trade. Import of goods normally requires involvement of the customs authorities in both the country of import and the country of export and are often subject to import quotas, tariffs and trade agreements. When the "imports" are the set of goods and services imported, "Imports" also means the economic value of all goods and services that are imported.

Importing is purchasing goods made in another country.

International trade is the exchange of capital, goods, and services across international borders or territories. In most countries, such trade represents a significant share of gross domestic product (GDP). While international trade has been present throughout much of history its economic, social, and political importance has been on the rise in recent centuries. Industrialization, advanced transportation, globalization, multinational corporations, and outsourcing are all having a major impact on the international trade system. Increasing international trade is crucial to the continuance of globalization. Without international trade, nations would be limited to the goods and services produced within their own borders. International trade is, in principle, not different from domestic trade as the motivation and the behavior of parties involved in a trade do not change fundamentally regardless of whether trade is across a border or not. The main difference is that international trade is typically more costly than domestic trade. The reason is that a border typically imposes additional costs such as tariffs, time costs due to border delays and costs associated with country differences such as language, the legal system or culture.

Exporting is selling domestic-made goods another country.

The Balance of Trade

The balance of trade forms part of the current account, which includes other transactions such as income from the international investment

position as well as international aid. If the current account is in surplus, the country's net international asset position increases correspondingly. Equally, a deficit decreases the net international asset position. The trade balance is identical to the difference between a country's output and its domestic demand (the difference between what goods a country produces and how many goods it buys from abroad; this does not include money re-spent on foreign stock, nor does it factor in the concept of importing goods to produce for the domestic market).

Balance of Payments
Balance of payments accounts are an accounting record of all monetary transactions between a country and the rest of the world. These transactions include payments for the country's exports and imports of goods, services, financial capital, and financial transfers. The Balance of payments accounts summarize international transactions for a specific period, usually a year, and are prepared in a single currency, typically the domestic currency for the country concerned. Sources of funds for a nation, such as exports or the receipts of loans and investments, are recorded as positive or surplus items. Uses of funds, such as for imports or to invest in foreign countries, are recorded as negative or deficit items. A countrys balance of payments is total flow of money into and out of the country

Exchange rate
In the retail currency exchange market, a different buying rate and selling rate will be quoted by money dealers. Most trades are to or from the local currency. The buying rate is the rate at which money dealers will buy foreign currency, and the selling rate is the rate at which they will sell the currency. The quoted rates will incorporate an allowance for a dealer's margin (or profit) in trading, or else the margin may be recovered in the form of a "commission" or in some other way. Different rates may also be quoted for cash (usually notes only), a documentary form (such as

travelers cheques) or electronically (such as a credit card purchase). The higher rate on documentary transactions is due to the additional time and cost of clearing the document, while the cash is available for resale immediately. Some dealers on the other hand prefer documentary transactions because of the security concerns with cash.

Barriers to International Business

Firms desiring to enter international business face several obstacles. Some much more severe then others . In this section, we examine the most common barriers to effective international business: cultural, social and political barriers and tariffs and trade restrictions.

Culture and Social Barriers

Culture is one of the biggest barriers while communicating on an international level. Effective communication indulging the audience of different cultures is challenging. The cultures provides the people with the way of seeing things, way of thinking, hearing and interpreting the world. So that means, the same words could be having different meanings to people from different culture even when the language used is common. If the language is different, that worsens the situation because of the process of translation used to communicate which leads to a greater potential misunderstanding. As a matter of fact, the struggle with language and insufficient adjustments have led to few international students actively participating in student societies at the universities and other American social life. Except the language and culture barriers, shyness is another factor that hinders international students to be more actively involved in American social life. Sometimes, when finding Americans roaming and discussing within their groups, international students would feel a little bit hard to catch up with them and awkward to join the talking.

Political Barriers
The figure below summarizes information on political barriers for European cities. It suggests that road building and pricing are the two policy areas which are most commonly subject to acceptability constraints, with around 50% of cities stating that acceptability was a significant constraint on road building and pricing measures. Public transport operations and information provision were the least affected by acceptability constraints. Generally, large and small cities were more likely than medium sized cities to identify political barriers. Large cities were much more likely to perceive such barriers for road and rail infrastructure projects; small cities were more likely to identify them for pricing measures.

Tariffs and Trade Restriction

A tariff is a tax on imports, which is collected by the federal government and which raises the price of the good to the consumer. Also known as duties or import duties, tariffs usually aim first to limit imports and second to raise revenue. A quota is a limit on the amount of a certain type of good that may be imported into the country. A quota can be either voluntary or legally enforced. Scientific tariffwhich to an economist is anything buthas the stated goal of equalizing the price and, therefore, leveling the playing field, between foreign and domestic producers. In this game, the consumer loses. A peril-point tariff is levied in order to save a domestic industry that has deteriorated to the point where its very existence is in peril. An economist would argue that the industry should be allowed to expire. That way, factors of production used by that inefficient industry could move into a new one where they would be better employed. A retaliatory tariff is one that is levied in response to a tariff levied by a trading partner. In the eyes of an economist, retaliatory tariffs make

no sense because they just start tariff wars in which no oneleast of all the consumerwins. Non-tariff barriers include quotas, regulations regarding product content or quality, and other conditions that hinder imports. One of the most commonly used non-tariff barriers are product standards, which may aim to serve as barriers to trade. For instance, when the United States prohibits the importation of unpasteurized cheese from France, is it protecting the health of the American consumer or protecting the revenue of the American cheese producer?

Approaches to International Business

Global business management can be defined as the interaction of people from different cultures, societies, and various backgrounds in undertaking various business activities with the aim of achieving their goals for example earning profits from their investments. Because of invention of advanced technology the world has increasingly become a village and as a result global business is the modern form of business in this 21st century. Because of globalization there have been great disregard to national borders, governments have lower hand in controlling the flow of their economies and MNC's are now not restricted to only one particular country as it was before. The reality and existence of globalization can be witnessed when patterns of trade are considered, for example the general level of imports and exports in several countries have magnificently increased over the past few years. Also globalization have led to significant increase in production of business services for example firms dealing with Just-in-Time (JIT) ideas have led to customers getting information .e.g. of accounting and auditing conveniently. Also due to globalization financial systems organizations have now been integrated and they work as one unit thus enhancing the chances of conducting business globally for example through the use of Credit Cards and the existence of flexible exchange control systems in many countries.

Any company may invest in another country and there are different approaches that a manager can employ depending on the factors that the respective organizations are considering, for example; the cost of entering the new market, existing policies in the country of choice, the rate of technology, foreign currency exchange rate control systems among others. According to John Tomlinson in globalization and culture he argues that, globalization lies at the heart of modern culture and cultural practices lies at the heart of globalization. He says that business globalization has led firms that operate and invest in a global scale to transform patterns of trade and shape the interactions between them for example through mergers. Under this case that we want to create subsidiaries and invest in the UK, Africa, and China as a senior manager, I can recommend the following strategies of entering the market to be suitable. The first approach to be considered is that of exporting and depends on a number of factors that includes the following; the available resources that a firm is capable of spending, the size of the company, if the company posses any past export experience and expertise or it is trying it for the first time, conditions of conducting business in the selected abroad market and products nature for example if the products are perishable or durable. Under exporting there are two methods namely; direct exporting and Indirect exporting. Direct exporting involves the producer of the products or services dealing directly with a buyer in the foreign country and often regarded as the difficult method of entry because the owner or the exporter of the product is entirely responsible for the business undertaking for example researching the suitable market for the products and establishing the suitable distribution channels to be used. Therefore this method requires much attention in terms of management and the resources to be used in the entire exporting process. It is also arguably the best method because the exporter may benefit from reaping maximum profits and may enjoy long-term growth thus the company can maintain its base in those countries.

Generally joint ventures are common where government conditions demand so in order to ensure control, nationalism and reduced repartition of profits. It will be an ideal situation if the company that am working for is still young and wish to exploit other markets for their products since it require fewer resources. However, it has potential problems and includes sharing of profits, employment issues, market coverage and decision making due to different long-term interest in partners. Another relationship based partnership that I can use is licensing method of entry, whereby they can be termed as contracts in which a foreign licensor provides a local license with access to know-how in exchange for financial compensation. Strategic alliance method of entry can also be employed under relationship based partnership in going international which involves formal partnership between two or more parties to undertake a common business with the view of attaining same objective but the parties involved always remains independent to each other. Business resources to be shared may include common distribution, channel, knowledge, products or expertise. The local people will always feel respected when one of their own is doing the management job and that will lead to success of the subsidiaries started. Another case to show that the locals in Africa have developed a negative attitude towards foreigners is when the local residents in Kenya boycotted to buy Delayer products when the owner was accused of murder. In fact they demonstrated and demanded that the business be changed to local owners. Another good example is that, in China history shows that they are very conservative people and will always promote local investors rather than foreigners. It is for these reason that I will prefer the local people to be managers in order to attract more customers and hence success of the company. We can therefore conclude that globalization has led to prosperity to all and the main ingredient to it has been international marketing which have been employed by firms in order to increase their market share and profits. Due to modernization and advancement in technology, most businesses are beginning to explore international markets for better profits and opportunities.

International Business

Why Do Companies Go International?


Basics of International Business




The balance of trade


Balance of payments

Barriers to International Business


Culture & Social barriers

http://www.blurtit.com/q3209778.html http://plaza.ufl.edu/ffgao/mmc5015/final/social.html

Approaches To International Business