I

nter
nat
ionalbusi
ness
Int
ernati
onal t
radeoccurswhenanexchangeoccursbet weencount
ri
es.Int
ernat
ional
tradehas
manyadv ant
ages,butthi
sacti
vi
tycr
eatesnewpr oblemsifexpor
tsandimport
sarenot
balanced.Indetermini
ngwhetheraful
lbal
anceexi stsbet
weenexport
sandimpor t
s,
economi stsusetwomeasures:thet
radebalanceandt hebal
anceofpayments.

1.Bal
anceoft
rade

Acount
ry'
stradebal
anceisthetotal
economicv
alueofallexpor
tedproductsminust
hetot
al
economi
cvalueofalli
mportedgoods.Whenacountryexceedsitsexpor
ts,i
thasanegat
ive
tr
adebal
ancewhi chr
esul
tsinatradedefi
cit
.Aposit
ivet
radebalanceoccurswhenexpor
ts
exceedi
mports,r
esul
ti
nginat r
adesurpl
us.

2.
Bal
anceofpay
ment
s

Balanceofpaymentsistheflowoffundsint
ooroutofacount
ry.Paymentsf
orimport
sand
exportsspentbytour
ists,f
undsfrom f
orei
gnaidpr
ograms,
andproceedsf
rom cur
rency
tr
ansactionsal
lcontr
ibutetothebal
anceofpayments.

EXCHANGERATE

Exchangeratei
sthet
radi
ngv al
ueofacountr
y'scur
rencywithothercountri
es.Exchanger
ates
areamaj ori
nfl
uencei
nint
ernati
onalt
rade.Mostofthem ar
ef l
oati
ngexchanger at
es,wher
e
theexchangerat
eofonecountryagai
nstanot
hervar
iesbasedonmar ketcondi
ti
ons.

FORM OFCOMPETI
TIVEADVANTAGE

Count r
iesexportwhattheycanpr oducebet
terorcheaperthanothercountr
iesandusethese
exportstoimpor tgoodsthatcannotbeproducedeffecti
vel
y.Economistsfocusonprofi
t
explaini
nginternat
ionalt
rade.Butbecausethisapproachisli
mit
edt ocert
ainfact
ors,
suchas
naturalresourcesandlaborcosts,
recentper
specti
vesonnat i
onalcompetit
iveadvant
agehave
beenr ai
sed.

A.Absol
uteExcel
lence

Theabili
tyofacount
ryt
opr
oducegoodsatamuchcheaperpr
iceorhi
gherqual
i
tycompar
ed
t
oot hercountr
ies.

B.Compar
ati
veadv
ant
age

Theabi
l
ityofacount
ryt
opr
oducesomepr
oduct
smor
eef
fi
cient
lyt
hanot
hercount
ri
es.
C.
Nat
ionalCompet
it
iveAdv
ant
age

I
nternati
onalcompeti
tiv
eadv ant
ageisrootedin:
factorcondi
ti
ons(labor
,capit
al,
entr
epreneurshi
p,phy
sicalresour
ces,andinfor
mationresour
ces),
demandcondi ti
ons,r
elat
ed
i
ndustri
esandsuppor t
ingindustr
ies(
local
,regi
onalindust
rysuppl
ier
s,orcustomers)
,str
ategy
,
str
ucture,andcompetiti
on.

I
nter
nat
ionalbusi
nessmanagement
Several
factor
sneedtobeconsi
deredi
ndeci
dingtogoint
ernat
ional
.Compani
esl
ooki
ngt
o
sel
lproductsonfor
eignmar
ketsshoul
dconsi
derthef
oll
owingquesti
ons:

1.I
sther
eademandf
ori
tspr
oduct
sabr
oad?

2.I
fso,
shoul
dcompani
esadaptt
hei
rpr
oduct
stof
orei
gnconsumpt
ion?

Compani
escanalsogoi nt
ernationalt
hroughout
sour
cingact
ivi
ti
esandjobrel
ocati
on.Aft
er
deci
dingt
ogoint
ernational
,acompanymustdeci deonitsl
evelofi
nter
nati
onali
nvol
vement.
Someofthel
evel
st hatcanbet akenincl
ude:

•Exportersandi
mpor
ter
s(act
ivi
ti
est
odi
str
ibut
eandbuygoodsf
rom abr
oad)

•I
nter
nat
ional
compani
es(
compani
est
hatconductt
hei
rbusi
nessov
erseas)

•Mul
ti
nat
ional
compani
es(
compani
est
hatdesi
gn,
manuf
act
ureandmar
ketpr
oduct
sinmany
count
ri
es)

Dif
ferentl
evel
sofinvol
vementrequi
redif
fer
enttypesoforgani
zat
ional
str
uct
ures.The
spectr
um ofint
ernat
ionalor
gani
zati
onalst
rat
egiesincl
udes:

1.I
ndependentAgent

For
eignpersonsoror
gani
zat
ionst
hatagr
eet
orepr
esentt
hei
nter
est
sofexpor
ter
sinv
ari
ous
f
orei
gnmar kets.

2.Per
missi
onSet
ti
ngs

Anagreementwherebyonecompanyal
lowsanot
hercompanyt
ousei
tsbr
andname,
oper
ati
ngprocedur
es,orappl
iedt
echnol
ogy.
3.Br
anchof
fi
ce

Ov
erseasof
fi
cesest
abl
i
shedbyi
nter
nat
ional
ormul
ti
nat
ional
compani
es.

4.St
rat
egi
cAl
li
ance

Theagr
eementi
salsocal
l
edaJointVent
urei
nwhichthecompanyseeksfor
eignpart
ner
sto
donat
ether
equir
edamountofr
esourcest
obui
ldandrunnewbusinessesi
nthepart
nercount
ry.

5.
For
eignDi
rectI
nvest
ment-FDI

Anagr
eementi
nwhi
cht
hecompanybuy
sorbui
l
dst
angi
bleasset
sinanot
hercount
ry.

Under
standi
ngt
heCul
tur
alEnv
ironment
Thecultureofacount ryincludesval
ues,symbols,
beli
efsandl anguaget hatgui
dei ndi
vi
dual
behavior
.Cul tur
alvalues​
andbel i
efsareusuall
yimpli
ed,bothmandar ahmeatbyt hosewholive
i
nacount ry
.Culturaldif
ferencesbetweencountri
eshaveadi recti
nfluenceonbusi ness
pract
ices.Somecul t
uraldiff
erencesbetweencountri
es,forexample, theimport
anceoft i
meis
notsi
gnificantbuthasabi gimpactonbusi nessacti
vi
ti
es, l
anguagedi ffer
ences,and
di
ffer
encesi nmeani ng.

Manager
sinv
olvedi
nbusi
nessmustalsounderst
andt
hatt
herear
ediff
erencest
hatdr
ive
peopl
e'
sbehavi
oracr
ossdi
ff
erentcul
tur
es.Fiv
edimensi
onsofcul
tur
e

1.Ori
ent
ati
oni
sani
ndi
vi
dual'
sbeli
efi
nthesi
gni
fi
canceofani
ndi
vi
dual
'
srel
ati
vecompar
edt
o
thegr
ouptowhi
cht
hei
ndiv
idualbel
ongs.

2.Poweror
ientati
on,peopl
e'
sbelief
sinacultur
ehav ecer
tai
nviewsaboutthesuitabi
l
ityof
poweranddif
ferencesinauthor
it
yinhier
archi
es,suchasinbusinessor
ganizat
ions.

3.Uncer
tai
ntyor
ient
ati
on,
indi
vi
dual
feel
i
ngsr
elat
edt
ouncer
tai
nandambi
guoussi
tuat
ions.

4.
Goal
ori
ent
ati
on,
anat
ti
tudei
nwhi
chpeopl
ear
emot
ivat
edt
oachi
evedi
ff
erentt
ypesofgoal
s.

5.Ti
meori
ent
ati
on,theatt
it
udeinwhi
chmembersofacul
tur
ehaveashort
-t
ermvi
ew
compar
edtot
heirl
ong-t
ermv i
ewofwork,
li
fe,
andot
herel
ement
sofsocial
li
fe.
I
nter
nat
ionalTr
adeBar
ri
ers
1.Economi
cDi
ff
erences

Economi
cdif
fer
encesbet
weencount
ri
escanbev
erysi
gni
fi
cantandaf
fectbusi
nessi
na
numberofways.

2.Legal
andPol
i
tical
Dif
fer
ences

Legal
andpol
i
tical
probl
emscommonl
yencount
eredi
nint
ernat
ional
busi
nessi
ncl
ude:

 Quotas,l
imi
tthenumberofproductsofacert
aintypethatcanbeimportedint
oa
countr
y.Anextremef or
m ofquot
asisanembar go,agovernmentinst
ruct
ionthat
prohi
bit
stheexportorimpor
tofanyorall
productsfrom apart
icul
arcountr
y.

 Tar
if
fs,
taxesi
mposedoni
mpor
tedpr
oduct
s.

 Subsi
dies,
gov
ernmentpay
ment
stohel
pdomest
icbusi
nessescompet
ewi
thf
orei
gn
companies.

3.Anotherlegalst
rategyistosupportdomesti
cbusinessesbyimpl ement i
nglocalcontent
wregulat
ionsthatrequir
epr oduct
ssoldinacountr
yt obeatleastpar t
iall
ymadei nthatcount
ry.
Businesspracti
ceregulati
onscontrolbusi
nessact
ivit
iesi
nrelevantjurisdi
cti
onsandcr eat
e
barr
iersforbusi
nesseswi shingtoenternewmarkets.

4.Theterm prot
ectioni
sm descr
ibesthepr
acti
ceofprotect
ingdomest i
cbusi
nessesfr
om fr
ee
mar ketcompetit
ion.Whileeconomistsar
guethatl
egalstr
ategiessuchasquotas,
tar
if
fsand
subsidiesarenecessaryt
opr ot
ectdomesti
cfi
rms,othersarguethatprot
ect
ioni
sm ul
ti
matel
y
hurtsconsumer sbecauseofhighpri
ces.

5.Thef i
nalobstacl
etoi
nternati
onal
busi
nessisthatlegal
businesspract
icesinonecountr
ycan
beil
legalinanother
.Bri
bery,cart
elf
ormati
onanddumpi ngareprohi
bitedintheUnit
edStates,
butlegali
nothercountr
ies,
posingachall
engeforU.S.companies.tr
yingtoenterot
her
countri
es'markets.