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INTRODUCTION

International business happens in our daily life and become our daily experiences.
International business refers to the performance of trade and investment activities by firms
across national borders. Since the most egregious aspect of international business is the
crossing of national boundaries, it is similar to cross-border business. Firms organize, source,
manufacture, market, and conduct other value-adding activities on an international scale.
They seek foreign customers and engage in collaborative relationships with foreign business
partners. While international business is primarily carried out by individual firms,
governments and international agencies also engage in international business transactions.
Firms and nations exchange many physical and intellectual assets including products,
services, capital, technology, know-how, and labor (Cavusgil, Knight & Riesenberger, 2008).
International business is related to any situation where the production or distribution
of goods or services over the country borders and they play role as importer and exporter.
Globalization creates the shift toward a more mutually beneficial and united global economy
and it creates greater opportunities for international business. Such globalization can take
place in terms of markets, where trade barriers are falling and buyer preferences are
exchange. It can also be seen in terms of production, where a company can source goods and
services easily from other countries. International business comprehends a full range of crossborder exchanges of goods, services, technology, managerial knowledge or resources
between two or more countries These can go beyond the exchange of money for physical
goods to include international transfers of other resources, such as people, intellectual
property and contractual assets or liabilities.
International business has existed for centuries and firms found the wide global
opportunities in existing in the lives of billions of people around the world. Daily routines as
shopping and enjoyed activities such as watching movies, uploading pictures in Instagram
and Facebook or listening to music are involving international business transactions in
connecting to the global economy. They give and provide us the access to goods and services
from around the world and affect our quality life and economic well-being.

FACTORS CONTRIBUTE IN DEVELOPMENT OF INTERNATIONAL BUSINESS


According to Singh in his book Global Business Management, there are four factors that
contribute in development of international business. They are;
1. Development and expansion of technology
Technology starting to exist when there is telegraph in 1837, and then followed by the
telephone, the television, the coaxial cable, digital computer and now smartphones. All these
technological advancements have provided the platform for companies to increase the
number of international business activities. In the past few years, the pace of technology has
speed up at an extraordinary rate. The knowledge of products and services is available widely
and quickly due to great developments in communications and transportation technology.
Today, we have Internet, faxing, e-mailing, teleconferencing or overseas direct-dial
telephone service and sales over the Internet, communication available almost
instantaneously. Technology has exercised big impact on international business by increasing
the demand for new products and services. This will increase the number of international
business transactions. However, improved communications and transformation have speed up
interactions and improved managers ability to control foreign operations.
2. Liberalization of cross border activities
The governmental barriers for international business have been lowered after the
Second World War. International business also involving risk as the regulations may change
at any time. In addition, every country restricts the movement of goods and services and the
resources across its borders. Such restrictions make international business more expensive to
undertake. Nowadays, governments are generally imposing fewer restrictions on cross-border
movements of goods and services and the resources than they did it before. With the growth
of World Trade Organization, the restriction likely will continue to lower. Fewer restrictions
allow companies to take better advantage of international opportunities. However, the
increased competition requires people to work even harder.

3. Development of supporting services


Governments and companies have developed services that facilitate into international
business. For example, mail, which is a government monopoly, could be transferred by an
airline other than that of the country of origin, could go through many different countries
before reaching the final destination with the stamp of the country of origin. Banking
institutions also have developed effective and efficient services for companies to receive
payment for their foreign sales. The banks can accept in the payment of any currency through
various international transactions upon the receipt of goods /services. Today, most producers
can be paid easily for the sale of their goods and services abroad.
4. Increase in global competition
The pressure of strong competition not only in domestically but also foreign can
persuade a company to expand its business into international markets. Today companies will
take advantage of many foreign business opportunities. They spread their production and
marketing operations to foreign markets and transport products efficiently from most places.
Once a few companies respond to foreign market and production opportunities, other
companies may perceive the foreign opportunities as well. Many other firms have to become
more global to acquire and maintain the severe competitiveness.

TYPES OF INTERNATIONAL ACTIVITIES


The type of international activities can be categorized into four basic types: importing and
exporting, licensing, strategic alliance and joint venture and direct investment. Businesses can
choose to be among these activities while expanding their operations into international
markets or face these activities of foreign companies in local markets.
1. Importing and Exporting
Importing or exporting or both is the most basic and largest international business
activity. It is the easiest way of entering a market with a small outlay of capital. Exporting is
process of selling a product that made by a company's domestic location in another country.
Importing is a process where by bringing in goods and services into the home country from
other country around the world. For example, Malaysia does import machines, electronics,
vehicles, chemicals, petroleum products from other countries abroad and Malaysia does
export products to abroad such as palm oil, rubber, textiles, petroleum and liquefied natural
gas and wood and wood products.
2. Licensing
Licensing is an agreement between companies of different countries. A company
allows another one to use its brand name, copyright, patent, technology, trademark or other
assets in exchange for an amount (royalty) based on sales. It is based on a contractual
agreement between the owner of the property (or its agent) known as the licensor and
licensee (normally a manufacturer or retailer). Companies may choose to manufacture or sell
their products under licensing when transportation or domestic production costs are too high,
government regulations restrict business activities of foreign companies (usually in
developing countries) or the company wants to simply produce and sell the same quality
everywhere. For example, Starbucks all over the world sell its same-quality beverages in the
same-looking stores under licensing contracts.

3. Strategic Alliance
A strategic alliance is cooperation between two or more companies for mutual benefit.
A special type of this is a joint venture when the partners commonly found a new company.
This cooperation allows companies to share development and production costs, technologies
and sales networks. For example, Motorola and Toshiba formed a strategic alliance to
develop manufacturing processes for microprocessors. General Mills and Nestle formed a
new company, Cereal Partners Worldwide, to produce and sell cereals.
4. Direct Investment
Direct investments allow companies to access foreign markets and be as domestic
businesses in that market with a full scale of activities, from manufacturing to selling. Not
only the investing companies benefit, but also the hosting countries through getting to know
new products, services, technologies and managerial skills. For example, Volkswagen is
building a factory in Tennessee to sell cars in the U.S. market, but it also contributes to
develop new technologies at the local university.

MALAYSIAS INTERNATIONAL BUSINESS


There are several countries that actively involved in international business with Malaysia.
The biggest involvement with Malaysia is Japan, China, India and United States.
Japan
The Japan-Malaysia economic engagement is as old as 1967, the year of formation of
the Association of Southeast Asian Nations (ASEAN). It gained enormous momentum in
1981 when Malaysias Prime Minister Dr. Mahathir Mohammad announced his famous
Look-East Policy with the aim to modernize and expedite his nations development with the
support of Japanese investment and technology and by emulating its work spirit (Lim 1994).
Similarly attachment of high priority to economic engagement with ASEAN and
Malaysia by successive governments of Japan supported the impressive expansion and
growth of trade between the two countries during the 1980s through the 1990s. They signed a
bilateral investment agreement in 1996 (Bernama 2008) and that added further momentum to
this cosy economic relationship and The Japan-Malaysia free trade agreement (FTA) was
signed in 2005 and implemented from 2006 with the expectation that it would further
enhance the trade and investment relationship between the two countries.
Although two years of engagement is not long enough to neither test any rigorous
model nor draw valid conclusions, a FTA is indeed an effective tool as long as partners do not
enter into such arrangements with many countries, which may dilute the anticipated outcome
of an agreement between two countries. During his visit to Malaysia in January 2002,
Japanese Prime Minister Junichiro Koizumi gave the proposal of a Japan-ASEAN
Comprehensive Economic Partnership to his Malaysian counterpart. After eight rounds of
deliberations and negotiations, the Japan-Malaysia Economic Partnership Agreement
(JMEPA) was formally signed in May 2005.

The Agreement has two parts, namely a free trade agreement (FTA) component,
which is intended to be fully realized within a period of ten years, and an economic
cooperation component, to further enhance trade and investment relationships. Although
some of the provisions of this Agreement were in the process of implementation since the
middle of 2005, the agreement was finally ratified in July 2006.
The FTA or simply the trade component covers trade in agricultural and industrial
goods, trade in services, investments in all categories, rules of origin, movement of people,
custom procedures, safeguards, standards and conformance, intellectual property rights,
competition policy, promotion of business environment, and measures to safeguard mutual
interests and settlement of disputes (MITI/Malaysia 2005).
On trading of goods, the agreement provides for elimination of duties on selected
items, progressive reduction/ elimination of duties over a period of ten years, flexible
treatment for sensitive sectors, and collaboration in the automotive sector. On investment, it
includes liberalization of regimes to promote, facilitate, and protect investment. On trade in
services, it introduces forms for liberalization, an initial package of commitments, and
mechanisms for transparency and subsequent negotiations to achieve the ultimate goal of
progressive liberalization (Rahman, Molla & Murad, 2008).
Sources: Rahman, K., Molla, R., & Murad, M. (2008).

Australia
In July 2004, Australia and Malaysia were agreed to conduct parallel scoping studies
of a free trade agreement (FTA). The main focus is the impact of a free trade agreement on
Australia. The study finds solid and worthwhile economic benefits for Australia from
entering into a free trade agreement with Malaysia. Malaysia would benefit even more
strongly. Malaysia gains more as the economy with higher trade barriers and a higher ratio of
trade to GDP. These estimates use generally conservative assumptions about the impact of a
free trade agreement. They do not take into account the gains from greater cooperation in a
wide range of areas, including, for example, standards and customs procedures. They do,
however, assume immediate implementation of a comprehensive agreement ('An AustraliaMalaysia Free Trade Agreement: Australian Scoping Study', 2005).
Welfare gains would be somewhat smaller, particularly for Malaysia, in the event of
slower implementation or negotiation of an agreement with very limited services
liberalization. Malaysias annual GDP, at around US$103 billion, is around one fifth the size
of Australias. But Malaysia is far more significant in regional and global trade than this
would suggest. In 2003, Malaysia ranked 18th as a world exporter and importer of goods. Its
two-way trade in goods and services was bigger than Australia, comprises over 200 per cent
of its GDP. Malaysia is also one of the most dynamic economies in the region, suggesting that
opportunities for trade and investment will grow strongly over time. Australias two way
trade with Malaysia. The trading relationship is highly complementary ('An AustraliaMalaysia Free Trade Agreement: Australian Scoping Study', 2005).
Key Australian merchandise exports reflect Australias strengths in agricultural and
mining commodities, processed foods and metal-based and elaborately transformed
manufactures. They include raw sugar, refined copper, unwrought aluminum, dairy products,
wheat, coal and medicaments. Major services exports include education and tourism.
Australias major merchandise imports from Malaysia reflect Malaysias strengths as an
energy exporter and a major exporter of manufactures. They include crude oil, computers,
integrated circuits, radios, office machine parts and telephone equipment. Major services
imports from Malaysia include transport and travel services ('An Australia-Malaysia Free
Trade Agreement: Australian Scoping Study', 2005).

United States
The United States and Malaysia initiated negotiations on a Free Trade Agreement
(FTA) in June 2006. The last round of negotiations was in Washington, D.C. in July 2008.
While solid progress has been achieved, significant work remains to conclude the agreement.
The issues identified in this report have also been included in the FTA negotiating process.
Malaysia is the United States largest trading partner in South East Asia and our 10 th largest
trading partner in the world. In 2005, U.S. had more than $44 billion in two-way trade with
Malaysia, more than trade with India that is 60 percent and a quarter of our trade with Japan.
With the GDP of almost $250 billion in 2005, Malaysia has been an upper middle income
economy of 27 million people. Malaysias economy has grown of 5 percent a year for the
past ten years on average (Trade Facts, 2006).
Having U.S in Malaysia International Business activities, this agreement have create
new opportunities for U.S. manufacturers, farmers and service providers. The new export
opportunities will result from reducing or eliminating Malaysias applied tariffs, which are
twice as high on average as U.S. applied tariffs. One-third of Malaysias tariffs are bound at
levels more than twice as high as applied rates. Malaysia is also our fourth largest agricultural
market in South East Asia. By eliminating tariffs and other restrictions on these products
under an FTA, current U.S. agricultural exports of nearly $400 million will expand. An FTA
will also provide a strategic foothold for U.S. companies in Malaysias growing hightechnology, telecommunications and financial services sectors (Trade Facts, 2006).
This opportunity also strengthens U.S competitiveness and generates high-paying
jobs. Malaysia is already a critical link in the supply chain of many of Americas most
competitive companies. A U.S.-Malaysian FTA will allow U.S. companies to increase their
efficiency, diversify their production base in East Asia, and lower their costs to compete more
effectively in Asia and other markets. Because most Malaysian products and services already
enter the U.S. market duty-free, an FTA will level the playing field. It will also strengthen
U.S. economic partnerships in the region. With this agreement will build on our FTA with
Singapore, as well as our future FTAs with Thailand and Korea, to solidify the United States
economic partnership with the region (Trade Facts, 2006).

MALAYSIAS PERFORMANCE ON EXPORT AND IMPORT

Malaysia's Trade Performance 2006 - 2013


1600
1400
1200
1000

RM Billion

800
600
400
200
0
2006

2007

2008

2009

2010

2011

2012

2013

Table 1
Sources: Department of Statistic, Malaysia

Malaysias trade performance on import and export can be seen as shown in Table 1.
It was 8 years ago.
First, we look at export performance along these 8 years. In 2006, shown that
performance in import is RM478.1 billion but in 2007, import has increase RM23.9 billion so
make it import performance in 2007 was RM502 billion until 2008 where as it become
RM519.8 billion. It was quite a big achievement for Malaysia. Unfortunately, in 2009, the
performance was dropped drastically to RM434.7 billion. This is because of the global
economy crisis that starting lightens up in 2008 going into chaos and effect around the world.
This crisis have given big problem to Malaysia because of the imported goods have
been stopped supplied for that particular time. In 2010, the trade performance is getting better
till 2013. This shows that Malaysia have a great collaboration in doing importing business.
This good performance could affect the countrys economy performance for a long-term
business.
Those imports from United States have expanded by 3.9 per cent to RM51.0 billion.
The imports from Africa contracted by 17.6 per cent to RM8.9 billion in 2013. This was
mainly due to a decrease in imports of crude petroleum and processed food. Main import
sources within the region were South Africa, Cote dIvoire and Nigeria. Imports increased by
38.8 per cent to RM16.4 billion. India improved its position as Malaysias 10th largest
trading partner from 11th in 2012, with a 3.1 per cent share of Malaysias total trade (Ministry
of International Trade and Industry Report, 2013).
On the other hand, export trade performance has showed good results for Malaysia in
that 8 years past. In 2006, the performance started on RM536.2 billion and continuously
increases till 2008 with the RM663 billion as the performance. Unfortunately, the same result
goes to export in 2009, it has decreased badly to RM552.5 billion. It has lost RM110.5 billion
for a year. It was a big lost for Malaysias economy. Luckily, in 2010, Malaysia have exported
greatly with an amount of RM638.8 billion and starting to increase vigorously until 2013.
This showed that Malaysia do have opportunity to make economy development goes high.

In contributing into export performance, United States have accounted for an 8.0 per
cent share or RM109.0 billion of Malaysias total trade, registering a marginal decrease of 0.8
per cent from 2012. Exports to United States decreased by 4.5 per cent to RM58.1 billion,
particularly for E&E products, rubber products, optical and scientific equipment, palm oil and
wood products. However, an increase in exports was registered for textiles and clothing,
chemicals and chemical products, and machinery, appliances and parts.
In addition, the increase in exports to Australia was due to higher exports of manufactures of
metal, processed food, textiles and clothing, manufactures of plastics, and chemicals and
chemical products (Ministry of International Trade and Industry Report, 2013)
Trade with Africa was valued at RM26.4 billion and recorded a 1.9 per cent share of
Malaysias total trade. Exports were valued at RM17.5 billion, showing an increase of 4.9 per
cent. Significant growth was seen in Benin, Angola and Nigeria. Main exports to the region
were palm oil, refined petroleum products and chemicals and chemical products. Trade with
India was valued at RM42.1 billion, registering an expansion of 2.4 per cent. Exports were
valued at RM25.7 billion. Major exports were crude petroleum, palm oil and E&E products
(Ministry of International Trade and Industry Report, 2013).

INTERNATIONAL BUSINESS TREND IN MALAYSIA


Peter Drucker so simply put it, the purpose of business is to create and keep a
customer, then nothing could have more impact on a business than a large-scale change in its
customer base. There are some trends to unleash by the new next way of globalization. There
are another billion, innovation, social business and global business (Deloitte University,
2014)
In 2013, the United Nations Development Programme called its annual report on
human progress The Rise of the South. It reported: The South is developing at a pace
unprecedented in human history, with hundreds of millions of people being lifted out of
poverty in developing nations and billions more poised to join a new global middle class. In
a 2010 report, it looked at household-level data in 145 countries and found that Asia
accounted for less than a quarter of the global middle class in 2010. Its projections, however,
have that share doubling within a decadewhich will mean that by 2020 the majority of the
worlds middle class will be Asian (Deloitte University, 2014).
Another billion refers to people or citizen growth in a big population. All those people
make themselves a customer and they voice out their demands so that all the market will
provide what customer needs. In a big population, could have enough in giving high
performance to a company to work this international business out.
The second is innovation. Innovation can refer to a few basic elements and conditions. Raw
intellect is required to produce novel ideas. But ideas are only a small first step in the
innovation process; there must also be incentives for inventors to turn those ideas into reality.
Putting them into production and bringing them to market at scale requires substantial
infrastructure. And since that requires investment far in advance of the hoped-for returns,
there also need to be infusions of capital. (Deloitte University, 2014).

All the ideas that can be transform into a product or services can be beneficial to other
people. Capabilities that were once exclusive to large businesses are now available on
efficient open markets. Innovators no longer need to assemble large organizations, let alone
make enormous capital outlays for plant and equipment, because infrastructure is available to
them on an as-needed basis. Open platforms that enable collaboration are the new
infrastructure of innovation (Deloitte University, 2014).
Next is social business and global business. The global economy has reached a tipping
point where emerging markets are no longer simply a rising force but are now taking centre
stage. Even companies with a strong existing market presence must grapple with how to
expand their reach into new countries and segments, including second-tier markets and rural
areas. In these markets, the scale and diversity of social needs provide rich commercial
opportunities but they also present major challenges to service and business operations
(Deloitte University, 2014).
Throughout emerging markets, the gap between aspiration and met needs are often
substantial with regard to issues of poverty, access to clean water, food security, and the
social infrastructure of housing, education, and health care. At the same time, rapid emergingmarket growth is exacerbating resource constraints and environmental challenges such as
water quality, deforestation, and pollution. A business needs capable employees. It needs
reliable suppliers and resilient supply chains. It needs a well governed economy in which
people play by the rules. And it needs consumers with the means and confidence to buy.
Companies that do not address these issues may take on operational risks or have market
share taken by competitors that do (Deloitte University, 2014).
Last but not least, social business and global business. Nowadays, the technology
become the market because people less use to be into the traditional way of business. Now
people have their life in the virtual world. The foundational change driving companies social
engagement is the explosive growth in social media over the past decade, and most recently,
on mobile devices. In just one year, between 2012 and 2013, the total global social media
audience increased by an estimated 18 percent, from 1.47 billion to 1.73 billion meaning
that nearly a quarter of the worlds population is now online using social networks. Facebook
and YouTube are the largest social platforms, while Chinas QZone is third (Deloitte
University, 2014).

An important consequence of this proliferation is the connection of people globally.


While North America and Western Europe are the regions with the highest social media
penetration on a percentage basis, the fastest increases in social user population are occurring
in India, Indonesia, Mexico, China, and Brazil.6 Already, 86 percent of Facebooks users are
outside the United States, while nearly 20 percent of LinkedIns users are in Asia.
Unsurprisingly, given its overall population, Asia-Pacific overall has the highest raw numbers
of active social media users. Within three years, the region comprising the Middle East and
Africa is expected to have the second largest social media user population (Deloitte
University, 2014).
The businesses itself should have known the power of technology can effect
customers and economies nowadays. The one who controlled the technology will be able to
control the user of the technology in their daily life.

REFERENCES
An Australia-Malaysia Free Trade Agreement: Australian Scoping Study. (2005). A Report
Coordinated By Australian Department Of Foreign Affairs And Trade.
Cavusgil, S., Knight, G., & Riesenberger, J. (2008). International business. Upper saddle
River, N.J.: Pearson Prentice Hall.
Deloitte University,. (2014). Business Trends 2014: Navigating the next wave of globalization
(pp. 12-70). Deloitte University.
Economywatch.com,. (2014). Malaysia Trade, Exports and Imports | Economy Watch.
Retrieved 13 November 2014, from
http://www.economywatch.com/world_economy/malaysia/export-import.html
International Business (1st ed., p. 12).
Kozenkow, J. (2014). Four Basic International Business Activities. Business &
Entrepreneurship - azcentral.com. Retrieved 12 November 2014, from
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Ministry of International Trade and Industry Report 2013,. (2013). Driving Transformation,
Powering Growth (pp. 23-27). Kuala Lumpur: Ministry of International Trade and
Industry.
Rahman, K., Molla, R., & Murad, M. (2008). The China Factor Blunts the Cutting-Edge of
the Japan-Malaysia Free Trade Agreement. Global Economy Journal, 8(4).
doi:10.2202/1524-5861.1445
Singh, S. Global Business Management (1st ed., pp. Unit 1, 8-9). Kota: Vardhaman Mahaveer
Open University, Kota.
Trade Facts. (2006) (1st ed., pp. 1-2).