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.

Growth
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.

Employees
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.

Resources
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.

Ideas
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.

Diversification
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.

Import
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.

Export
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.

Reference:
International Business
http://en.wikipedia.org/wiki/International_business

Why Do Companies Go International?

http://www.ehow.com/facts_5256365_do-companies-go-international.html

Basics of International Business

http://www.mesharpe.com/mall/resultsa.asp?Title=Basics+of+International+Business

Import
http://en.wikipedia.org/wiki/Import

Export
http://en.wikipedia.org/wiki/Exporting

The balance of trade

http://en.wikipedia.org/wiki/Balance_of_trade

Balance of payments
http://en.wikipedia.org/wiki/Balance_of_payments

Barriers to International Business

http://www.infoplease.com/cig/economics/barriers-internationaltrade.html#ixzz1wjWwhw00

Culture & Social barriers

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

Approaches To International Business

http://www.articleclick.com/Article/Approaches-To-Global-BusinessManagement/969758