AN OVERVIEW OF INTERNATIONAL BUSINESS
Discuss the meaning of international business Explain the importance of understanding international business Identify and describe the basic forms of international business activities Discuss the causes of globalization Comprehend the growing role of emerging markets in the global economy
What Is International Business?
Business transactions between parties from more than one country Buying
& Selling raw materials, inputs / finished products across borders, operating plants in other countries to take advantage of local resources & borrowing money in one country to finance operations in a second country.
Parties may include
individuals Individual companies Groups of companies Governmental agencies
How Does International Business Differ from Domestic?
Currency conversion Legal systems Culture Availability of resources (natural resources, skill & knowledge)
Why Study International Business?
/affected by the global economy)
basic business conducted by them)
more active in IB, buying & selling compete with foreign markets) Need to develop the skills & understand the culture so that won’t loose to competitors
Competitors Business techniques and tools Cultural literacy
way of life & doing business )
International Business Activities
Exporting and Importing International Investments Licensing, Franchising, and Management Contracts
Exporting and Importing
Exporting: selling of products made in one’s own country for use or resale in other countries Importing: buying of products made in other countries for use or resale in one’s own country
Visible and Invisible Trade
Trade in Goods
exports and imports Visible trade/ tangible product (clothing) Malaysia Malaysia
export palm oil TO Thai import electrical appliance FROM China
Trade in Services
exports and imports Invisible trade/ intangible products (banking & tourism) 1-8
Capital supplied by residents of one country to residents of another Two categories: Foreign
direct investments: investments made for the purpose of actively controlling property, assets, or companies located in host countries. Ford’s
investment in Sweden’s Volvo Corporation is a foreign direct investment.
investments: are purchases of foreign financial assets (stocks, bonds, cds) for a purpose other than control. example, a Danish pension fund purchased 1,000 shares of Sony common stock. 1-9
Other Forms of International Business Activity
Licensing is a contractual arrangement in which a firm in one country licenses the use of its intellectual property to a firm in another country in exchange for a royalty payment Coco Cola & F &N
Franchising Franchising is a specialized form of licensing which occurs when a firm in one country authorizes a firm in another to utilize its operating systems as well as its brand names, trademarks, and logos for a royalty payment. Eg: Mc.Donalad
Management Contracts A management contract is an arrangement wherein a firm in one country agrees to operate facilities or provide other management services to a firm in another country for an agreed-upon fee. Examples include Marriott and Hilton which do not own all of the hotels that bear their brand names 1-10
Variations of Organizations
Multinational Corporation Have extensive involvement in international business. Typically own and control foreign assets, buy resources in a variety of countries, create goods or services, and then sell those goods and services in a variety of countries. Eg: Sony, McD,...
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