EDWIN PATRIASANI

BUSINESS IN A BORDERLESS WORLD

International business is the buying, selling and trading of goods and services across
national boundaries. A company could be called international trader when they are involved
in exporting and importing. Exporting refers to the sale of goods and services to foreign
market. Sometimes, exporting take place through countertrade agreement that involve
bartering products for other products instead of currency. Although a company exports its
product directly, there is an agent that could help to handle international transaction for other
firms. It is called export agent that has responsibility for storage and transportation in export
process. Furthermore, importing is the purchase of goods and services from foreign service. It
could be happened as there are some countries cant produce the product that they need.
Therefore, they have to buy that product from the other countries which able to create it.
A nations balance of trade is the different in values between its exports and imports.
If the imports value is higher than the export has, it would be a negative balance of trade or
trade deficit. It is harmful as it could damage of businesses. Moreover, it causes the loss of
job and a lowered standard of living. Additionally, the difference between the flow of money
into and out of a country is called as balance of payment. There are some aspects that involve
on it. For instance, a countrys balance of trade, foreign investment, foreign aid, loan, military
expenditures and money spent by tourist. We can conclude that a country with a trade plus
has a favorable balance of payment because it receive more money from trade with foreign
country compared to paying out.
When a company decides to extend its business into global trading, it has to concern
about the other countrys legal, social, culture, technological background and especially a
number of basic economics factor, for instance economic development, infrastructure, and
exchange rates. There is no doubt that many countries are in general poorer and economically
advance. Consequently, business people need to recognize that they could not utilize their
business at the same way with industrialized nations. Similarly, exchange rate, the ratio at
which one nations currency can be exchange for another nations currency, is the most
significant aspect of basic economics as it affects the cost of imports and exports.
There are three different aspects when a company desires to enter the international
market. Firstly, law and regulation which are used within partner trading. We realize that
every country has its own law and regulation. It means that a company has to accustom the
rule within operating its business. For example, taking extra steps to protect its product is due
to the local law. Secondly, tariffs and trade restrictions that are established for political
reason. An import tariff refers to a tax levied by a nation on goods imported into the country.
It is commonly imposed for protecting domestic product by raising the price of imported one.
There are two different type of import tariff. Firstly, a fixed tariff reveals about the specific
amount of money levied on each unit of a product brought into the country. Then, an ad
valorem tariff reveals that based on the value of the item. Thirdly, political barriers that affect
international business daily as governments define tariffs, embargoes, or other types of trade
restrictions in response to political events.
Social and cultural barriers are the importance aspect while most businesses usually
ignore them. For instance, cultural differences include difference in spoke and written
language could misinterpret the true meaning that have translated from one language to
another. Additionally, body language and personal space also contribute international trade. In
social aspect, family role influence marketing activities because many countries dont allow
children to be used in advertising. Moreover, the national and religious holidays and local
custom of the host country are the significant aspects that influence companies when they
engaged in foreign trade.

EDWIN PATRIASANI
There are also organizations and agreement beside economics, law, social and culture
issues, which enlarge international trade and could assist companies get involved in and
succeed in global market. Many organizations and agreements concern about foreign trade,
such as General Agreement on Tariffs and Trade, NAFTA, the European Union, APEC, and
many more.
Licensing and franchising are also embroiled in overseas trade. Licensing is a trade
arrangement when one company allows another company to use its company name, product,
patents, brands, trademarks, raw materials, and production process in exchange for fee or
royalty. It is very advantageous for small companies to expand their brand internationally.
Furthermore, franchising refers a form of licensing while a company agrees to provide a
franchisee the name and method of operation with the franchisers business. Plenty of fast
food restaurants and cafes in Indonesia, such as McDonald and Starbucks are the shape of
franchising and licensing from the US firms. Similarly, licensing has to preserve with high
standard quality in order to keep their well image. Therefore, it is important for licensor to
enforce quality standard.
There are two different methods if companies want to enlarge their product overseas.
First of all, they cooperate with local partner that share the costs and operations of the
business which is called joint ventures. Subsequently, direct investment involves the
development and operation of new facilities.
There are two main factors that will affect the strategy a business chooses to use
outside its own borders. To begin with, companies have traditionally used a multinational
strategy which implicate customizing products, promotion, and distribution according to
cultural, technological, regional, and national differences. Moreover, more companies are
moving from this customization strategy to global strategy that involves standardizing
products for the whole world. Secondly, managing the challenges of global business. It means
that manager who can meet the challenges of creating and implementing effective business
strategies for the global marketplace can help lead their companies to success.
Source:
O.C.Ferrel, Geoffrey A.Hirt, and Linda Ferrell, Business: A Changing World (New York:
Mc-Graw Hill,2014), p. 86-110.