International Business

1. Introduction To Business International Business

2. Domestic vs. International Business • Domestic Business: A Company making, buying, and selling goods and services within a country • International Business: Business activities needed for creating, shipping, and selling goods and services across international borders

3. Doing Business in a Foreign Country? Things to consider: • 1. Geography- Location, climate, terrain, seaports, and resources • 2. Cultural Influences- Accepted behaviors, customs and values • 3. Economic Development- Literacy level, Technology, Infrastructure • 4. Political/Legal Concerns- Type of government and policies towards business

4. Entering The Global Market • How does a Company enter the Global Market? • Licensing: A Company allows a foreign manufacture to use their license to produce products and sell in that country for a fee. • Franchising: A Company enters into a contract that allows a business owner to manage a chain Company and the Franchisor is paid a fee. • Examples: Burger King, McDonald’s • Joint Venture: Two Companies come together to to share a business project. Example: Sharks on Shark Tank

5. Multinational Companies • A Company that does business in several different countries • Usually has a “Parent” Company in a home country. • Example: Johnson and Johnson’s headquarters is in New Jersey, but has several manufacturing plants in China and Thailand and sells product world-wide • Firms develop products and strategies that adapt to the customs , tastes and buying habits of a specific national market

6. Absolute Advantage • Occurs when a country can produce a good or service at a lower cost than other countries (usually due to a large supply of natural resources) • Ex. Saudi Arabia producing oil • Ex. Colombia producing coffee

7. Comparative Advantage • Occurs when a country chooses to specialize in the production of a certain good or service • Ethanol, wind, solar

8. Imports vs. Exports • Import- Buying of goods and services produced from foreign countries • bananas, coffee, oil, etc. • Export- Selling of goods and services to foreign countries • McDonald’s, ESPN, Nike, Dell, etc.

9. Balance of Trade • The difference between a country’s total imports vs. total exports • Trade surplus- when a country exports more than it imports • Trade deficit- when a country imports more than it exports

10. Balance of Payments • The difference between the amount of money that comes into a country and the amount of money that goes out • Positive Balance of Payments: A nation receives more money into the country than it pays out in one year. • Negative Balance of Payments: A nation sends more money out of the country than it receives into the country in one year.

11. Trade Barriers • Trade Barriers: are government imposed regulations that increase the cost and/or restrict the number of imported goods

12. Types of Trade Barriers • Tariff: is a tax on imported goods • Ex: You are buying an imported couch for your tv room. The manufacturer charges $2,000, but the government imposes a 20% tariff, which brings the price up to $2,400Quota: A government-imposed trade restriction that limits the number, or in certain cases the value, of goods and services that can be imported or exported during a particular time period. • Export Restraints: are limits on the volume of exported goods to protect domestic interests • The most notable example is when Japan imposed a ER on its auto exports into the U.S. as a result of American pressure in the 1980s Gave the U.S. auto industry some protection against a flood of foreign competition

13. Types of Trade Barriers • Embargo: prohibits the import or export of a product altogether • Ex: Cuba—United States relations dating back to 1960’s • Government Sanctions: government imposed restrictions on foreign trade due to inappropriate business practices • Ex: Burma has the highest rate of inhumane work conditions • Ex: Mexico breaking fishing laws while fishing for tuna

14. International Currency http://www.factmonster.com/ipka/A0769539.html

15. Exchange Rates • The value of a currency in one country compared with the value in another. • https://www.google.com/#q=exchange+rate+converter

16. Factors Influencing Exchange Rates • Supply and Demand: the demand for a nations goods increases the demand for a nation’s currency and exchange rates are higher • Economic Conditions: Inflation, higher interest rates usually lowers the demand for a nation’s currency • Political Stability: The security of the government of a nation affects the currency demand of a nation.

17. Encouraging Trade • Free Trade Zones: where products can be imported into a country without additional fees (duties) paid on the import of the product. • Ex: airports/seaports • Free Trade Agreements: Trading countries agree to remove duties and trade barriers on products traded between the two nations.

18. Reputation - Apple • How important is a business’s reputation? • What happens to your customers when you have a bad reputation? • How are the factories overseas? • How do they keep up with demands? How are employees treated?

19. Apple • Nightline 20 /20: Apple's Chinese Factories: Exclusive • An exclusive look inside Apple's factory in China to see how employees are treated in one of the most successful businesses • http://abcnews.go.com/watch/nightline/SH5584743/VD55173552/nightline-221-apples-chinese-factories-exclusive