Chap 1

International Business is one whose manufacturing and trade occur

beyond the borders of the home country. All the economic activities indulged in cross-
border transactions come under international or external business. It includes all the
commercial activities like sales, investment, logistics, etc., in which two or more
countries are involved.

Cultural knowledge and market:

 You can get more opportunities to experience different cultures, customs, and traditions
=> Develop a more global and open mindset and cultivate a diverse perspective of the
world around you.
 Resilience of living and working outside one’s home country:
 Living abroad is no easy feat, and the challenges you will encounter, both in the office
and beyond, will ultimately make you a much more resilient person.
 Ability to work across multiple perspectives:
 Being in an environment with diversity among the cultures helps you raise your
awareness about what is appropriate to each culture => allows you to understand the
point of views of others, making your work easier.
 See opportunities in new environment:
 New environment also comes with the benefits of having many new opportunities for you
to make use of: Increase your network, better salary, more traveling, etc

Global integration and local responsiveness

Businesses that are highly globally integrated have the objective to reduce costs as much
as possible by creating economies of scale through a more standardized product offering
worldwide.

Businesses that are highly locally responsive have as extra objective to adapt products
and services to specific local needs

Multidomestic: Low Integration and High Responsiveness

Companies with a multidomestic strategy aim to meet the needs and requirements of the local
markets worldwide by customizing and tailoring their products and services extensively. In
addition, they have little pressure for global integration. Consequently, multidomestic firms often
have a very decentralized and loosely coupled structure where subsidiaries worldwide are
operating relatively autonomously and independently from the headquarters. Example :
McDonalds
 

Global: High Integration and Low Responsiveness

Global companies are the opposite of multidomestic companies. They offer a standardized
product worldwide and have the goal to maximize efficiencies in order to reduce costs as much
as possible. Global companies are highly centralized and subsidiaries are often very dependent
on the HQ. Their main role is to implement the parent company’s decisions and to act as
pipelines of products and strategies. This model is also known as the hub-and-spoke model.
Example : Energy corporations around the world.

Transnational: High Integration and High Responsiveness

The transnational company has characteristics of both the global and multidomestic firm. Its aim
is to maximize local responsiveness but also to gain benefits from global integration. Even
though this seems impossible, it is actually perfectly doable when taking the whole value chain
into consideration. Transnational companies often try to create economies of scale more
upstream in the value chain and be more flexible and locally adaptive in downstream activities
such as marketing and sales. In terms of organizational design, a transnational company is
characterised by an integrated and interdependent network of subsidiaries all over the world.
These subsidiaries have strategic roles and act as centres of excellence. Due to efficient
knowledge and expertise exchange between subsidiaries, the company in general is able to meet
both strategic objectives. Example : Apple or maybe automobile companies .

Low global integration and low local responsiveness

An international company has little need for local adaption and global integration. The majority
of the value chain activities will be maintained at the headquarters. This strategy is also often
referred to as an exporting strategy. Products are produced in the company’s home country and
sent to customers all over the world. Subsidiaries, if any, are functioning in this case more like
local channels through which the products are being sold to the end-consumer. Large wine
producers from countries such as France and Italy are great examples of international companies.
Example : Alcohol products such as Whiskey, etc…..

History of International Business

Age of Discovery (15th-18th centuries)

Truly global trade kicked off in the Age of Discovery. It was in this era, from the end of the 15th
century onwards, that European explorers connected East and West – and accidentally
discovered the Americas. Aided by the discoveries of the so-called “Scientific Revolution” in the
fields of astronomy, mechanics, physics and shipping, the Portuguese, Spanish and later the
Dutch and the English first “discovered”, then subjugated, and finally integrated new lands in
their economies.

First wave of globalization (19th century-1914)

This started to change with the first wave of globalization, which roughly occurred over the
century ending in 1914. By the end of the 18th century, Great Britain had started to dominate the
world both geographically, through the establishment of the British Empire, and technologically,
with innovations like the steam engine, the industrial weaving machine and more. It was the era
of the First Industrial Revolution.

The “British” Industrial Revolution made for a fantastic twin engine of global trade. On the
one hand, steamships and trains could transport goods over thousands of miles, both within
countries and across countries. On the other hand, its industrialization allowed Britain to make
products that were in demand all over the world, like iron, textiles and manufactured goods. 

The world wars

It was a situation that was bound to end in a major crisis, and it did. In 1914, the outbreak of
World War I brought an end to just about everything the burgeoning high society of the West had
gotten so used to, including globalization. The ravage was complete. Millions of soldiers died in
battle, millions of civilians died as collateral damage, war replaced trade, destruction replaced
construction, and countries closed their borders yet again.

In the years between the world wars, the financial markets, which were still connected in a
global web, caused a further breakdown of the global economy and its links. The Great
Depression in the US led to the end of the boom in South America, and a run on the banks in
many other parts of the world. Another world war followed in 1939-1945. By the end of World
War II, trade as a percentage of world GDP had fallen to 5% – a level not seen in more than a
hundred years.

Second and third wave of globalization

The story of globalization, however, was not over. The end of the World War II marked a new
beginning for the global economy. Under the leadership of a new hegemon, the United States of
America, and aided by the technologies of the Second Industrial Revolution, like the car and the
plane, global trade started to rise once again. At first, this happened in two separate tracks, as
the Iron Curtain divided the world into two spheres of influence. But as of 1989, when the
Iron Curtain fell, globalization became a truly global phenomenon.

That brings us to today, when a new wave of globalization is once again upon us. In a world
increasingly dominated by two global powers, the US and China, the new frontier of
globalization is the cyber world. The digital economy, in its infancy during the third wave of
globalization, is now becoming a force to reckon with through e-commerce, digital services, 3D
printing. It is further enabled by artificial intelligence, but threatened by cross-border hacking
and cyberattacks.

External forces : 
External Forces are powerful concepts, powerful processes
External Forces influence the success of international business operations, these forces can not
be controlled easily.
Gaining knowledge about these forces grant us abilities to react to them or prepare to react to
them.

 Competition
 Bigger market means a lot more competitors, our business will have to face
products that are born from the market’s nature or compete with a lot more
companies supplying the same products. 
 Distribution
 They supply inputs (money, raw material, fuel, power and other factors of
production) and help in smooth conduct of the business. Firms should remain
aware of the policies of suppliers as increase in prices of inputs will affect their
sales and profits. Shortage of supplies also affects the production schedules.
Firms should have more than one supplier so that change in policies of one
supplier does not affect their production schedules.
 Economic variables
 The economic situation influences every element of daily life, from employee well-
being to a company's ability to prosper.
 Socio-economic situation
 Executives have a duty to keep track of both domestic and global issues,
especially if they conduct business internationally. By learning ab/out social
issues that affect those in other countries and their cultural norms, consumer
trends and economic status, company leaders can provide their teams with
relevant training
 Political environment
 As political officials leave office and new ones replace them, the policies they
implement often affect businesses in relevant industries. Because of the
inconsistent nature of politics, businesses monitor legislative bills closely to
prepare for potential changes.
  Socio-cultural elements
 Where people live, their personal values and their socioeconomic status affect
what, where and why people make purchases. 
 Labour factors
 Population is included in all of its several guises, including gender, age, income,
rate of growth, language, religion, etc. The demand for commercial goods rises as
the population grows, and low-cost labor is also available. A country with a big
population can use labor-intensive technology to keep its workforce employed.
 Technology
 Companies may profit from these innovations as technology develops or may find
it difficult to compete with them.


 International environment : 
International environment : Since many companies trying to expand there businesses
globally  -> Entities engaged in international business often face more difficulties than the
entities which conduct domestic business. Although international business enjoys large
customer base as they operate in multiple countries.

CHAP 2
Mercantilism
Briefly, the mercantilists maintained that the way for a nation to become rich and powerful was
to export more than it imported. The resulting export surplus would then be settled by an inflow
of bullion, or precious metals, primarily gold and silver. The more gold and silver a nation had,
the richer and more powerful it was. Thus, the government had to do all in its power to stimulate
the nation’s exports and discourage and restrict imports (particularly the import of luxury
consumption goods).

E.g.: The England government put restrictions on importing agricultural commodities,

textiles, shoes, steel, and many other products to protect domestic employment. The English
Navigation Act of 1651 is a prime example of mercantilism. Under this law, all colonial
exports to European nations had to pass through England. With that, the English could line
their pockets by becoming middlemen for their colonial goods.

Compare brownfield and greenfield ( Definition, pros

and cons of each type )
greenfield and brownfield investments are two different types of foreign direct
investment. Both involve companies and production facilities in different
countries. But that's primarily where the similarities between the two end.
In a greenfield investment, parent company opens a subsidiary in another country.
Instead of buying an existing facility in that country, the company begins a new
venture by constructing new facilities in that country. Construction projects may
include more than just a production facility. They sometimes also entail the
completion of offices, accommodations for the company's staff and management,
as well as distribution centers.
Brownfield investments, on the other hand, occur when an entity purchases or
leases an existing facility to begin new production. Companies may consider this
approach a great time and money saver since there is no need to go through the
motions of building a brand new building.
Greenfield pros and cons : The primary reason is that a new facility offers design
flexibility along with the efficiency to meet the project's needs. An existing facility
forces the company to make adjustments based on the present design. All capital
equipment needs to be maintained. New facilities are typically much less costly to
maintain than used facilities. If the company wants to advertise its new operation
or attract employees, new facilities also tend to be more favorable.
There are also downsides to constructing new facilities. Building from scratch can
bring more risk as well as higher costs. For example, a company may have to
invest more initially when it decides to build from scratch to fulfill feasibility
studies. There may also be problems with local labor, local regulation, and other
hurdles that come with brand new construction projects.
Brownfield pros and cons : The clear advantage of a brownfield investment
strategy is that the building is already constructed, therefore reducing the start-
up costs. The time devoted to construction can be avoided as well.
Brownfield investments run the risk of leading to buyer's remorse. Even if the
premises had been previously used for a similar operation, it is rare that a company
finds a facility with the type of capital equipment and technology to suit its
purposes completely. If the property is leased, there may be limitations on what
kinds of improvements can be made.

Eclectic theory of international production: Theory that for a

firm to invest overseas, it must have three kinds of advantages: ownership specific,
internalisation, and location specific. The eclectic paradigm:

 
·        Ownership: This is the extent to which a firm has or can develop a firm-specific advantage
through ownership of tangible or intangible assets that are not available to other firms and can be
transferred abroad. 
·        Location: A foreign market must have specific characteristics, of an economic, social, or
political nature that will permit the firm to profitably exploit its firm-specific advantages by
locating to that market rather than from serving the market through exports
·        Internalisation: Firms have various alternatives for entering foreign markets, ranging from
arm’s-length market transactions to the use of hierarchy via a wholly owned subsidiary.

CHAP 3

The United Nations is an intergovernmental organization aiming to maintain

international peace and security, develop friendly relations among nations, achieve international
cooperation, and be a centre for harmonizing the actions of nations. It is the world's largest and
most familiar international organization. The United Nations is an international organization
founded in 1945. Currently made up of 193 Member States, the UN and its work are guided by
the purposes and principles contained in its founding Charter.

The Sustainable Development Goals or Global Goals are a

collection of 17 interlinked global goals designed to be a "blueprint to achieve a better and more
sustainable future for all". The SDGs were set up in 2015 by the United Nations General
Assembly and are intended to be achieved by the year 2030. The UN 2030 Agenda envisages “a
world of universal respect for human rights and human dignity, the rule of law, justice, equality
and non-discrimination”. Leaders from 180 nations participated.
The Bretton Woods system of monetary management established the rules for
commercial and financial relations among the United States, Canada, Western European
countries, Australia, and Japan after the 1944 Bretton Woods Agreement. A key reason for
Bretton Woods' collapse was the inflationary monetary policy that was inappropriate for the key
currency country of the system. The Bretton Woods system was based on rules, the most
important of which was to follow monetary and fiscal policies consistent with the official peg.
The Bretton Woods system was the first system used to control the value of money between
different countries. It meant that each country had to have a monetary policy that kept the
exchange rate of its currency within a fixed value—plus or minus one percent—in terms of gold.

Chap 4
5 levels of regional economic intergration
Economic integration can be classified into five additive levels, each present in
the global landscape:
 Free trade. Tariffs (a tax imposed on imported goods) between member
countries are significantly reduced, and some are abolished altogether. Each
member country keeps its tariffs regarding third countries, including its
economic policy. The general goal of free trade agreements is to develop
economies of scale and comparative advantages, promoting economic
efficiency. A challenge concerns resolving disputes as free trade agreements
tend to offer limited arrangements and dispute resolution mechanisms.
Therefore, they are prone to the respective influence and leverage of the
involved nations, which can lead to different outcomes depending on their
economic size. A large and complex economy having a free trade agreement
with smaller economies is better positioned to negotiate advantageous
clauses and dispute resolution.
 Custom union. Sets common external tariffs among member countries,
implying that the same tariffs are applied to third countries; a common trade
regime is achieved. Custom unions are particularly useful to level the
competitive playing field and address the problem of re-exports where
importers can be using preferential tariffs in one country to enter (re-export)
another country with which it has preferential tariffs. Movements of capital
and labor remain restricted.
  Common market. Services and capital are free to move within member
countries, expanding scale economies and comparative advantages.
However, each national market has its own regulations, such as product
standards, wages, and benefits.
 Economic union (single market). All tariffs are removed for trade between
member countries, creating a uniform market. There are also free
movements of labor, enabling workers in a member country to move and
work in another member country. Monetary and fiscal policies between
member countries are harmonized, which implies a level of political
integration. A further step concerns a monetary union where a common
currency is used, such as the European Union (Euro).
 Political union. Represents the potentially most advanced form of
integration with a common government and where the sovereignty of a
member country is significantly reduced. Only found within nation-states,
such as federations where a central government and regions (provinces,
states, etc.) have a level of autonomy over well-defined matters such as
education.

Free trade area and economic blocs

- European Union – The most integrated trading block. The EU27 have free trade and common
regulations and is part of a customs union.

- NAFTA – North Atlantic Free Trade Association.  A free trade area between Canada, US and
Mexico, is currently to be ratified and substituted by the United States–Mexico–Canada
Agreement (USMCA)

- ASEAN Free Trade Area Free trade area in South East Asia was founded in 1992. Includes:
Brunei, Indonesia, Malaysia, Philippines, Singapore and Thailand, Vietnam, Laos, Myanmar
and Cambodia.

- SAFTA South Asia free trade area based around the Indian sub-continent. Includes
Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka.

- Mercosur – a southern American trading block formed in 1991. Includes full members of
Argentina, Brazil, Paraguay and Uruguay. With associate members including Bolivia, Chile,
Colombia, and Ecuador. Developed from free trade area to become a customs union.

- African Union 55 countries of the continent of Africa. Created to forge closer political and
economic ties. It has aspirations to become a free trade area.

ASEAN and how ASEAN work

-        The Association of Southeast Asian Nations (ASEAN) is a regional grouping that aims to
promote economic and security cooperation among its ten members: Brunei, Cambodia,
Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam.
ASEAN countries have a total population of 662 millions people and a combined gross
domestic product (GDP) of $3.2 trillion. The group has played a central role in Asian
economic integration, joining negotiations to form the world’s largest free trade agreement
and signing six free trade deals with other regional 

European Union (EU) is an international organization comprising 27 European countries and

governing common economic, social, and security policies. The EU was established by the
Treaty of Maastricht in 1993 based on the European Community. Originally confined to western
Europe, the EU undertook a robust expansion into central and eastern Europe in the early 21st
century.

 Aims 
a. Within EU borders:
 promote peace, its values and the well-being of its citizens
 establish an internal market
 achieve sustainable development based on balanced economic growth and price stability
and a highly competitive market economy with full employment and social progress
 b. Within the worldwide:
 uphold and promote its values and interests
 contribute to peace and security and the sustainable development of the Earth
 contribute to solidarity and mutual respect among peoples, free and fair trade,
eradication of poverty and the protection of human rights

The economic and monetary union (EMU) of the European Union is a group of policies aimed
at converging the economies of member states of the European Union at three stages.
There are three stages of the EMU, each of which consists of progressively closer economic
integration. Only once a state participates in the third stage it is permitted to adopt the euro as
its official currency. As such, the third stage is largely synonymous with the eurozone. The euro
convergence criteria are the set of requirements that needs to be fulfilled in order for a country
to be approved to participate in the third stage.

Examples: - The European Union (EU) is an example of an economic union. The

countries of the EU coordinate their respective economic policies, laws and regulations
so they can work together to address economic and financial issues.

- The EU's Impact on International Business 

The EU is in prime position when it comes to global trade. The openness of our trade regime has
meant that the EU is the biggest player on the global trading scene and remains a good region to
do business with.

The EU has achieved a strong position by acting together with one voice on the global stage,
rather than with separate trade strategies.

The EU’s position in global market

 The EU is the largest economy in the world. The EU is the world's largest trading bloc.
The EU is the world’s largest trader of manufactured goods and services.
 The EU ranks first in both inbound and outbound international investments.
 The EU is the top trading partner for 80 countries. By comparison, the US is the top
trading partner for a little over 20 countries.
 The EU is the most open to developing countries. Fuels excluded, the EU imports more
from developing countries than the USA, Canada, Japan and China put together.

The EU benefits from being one of the most open economies in the world and remains
committed to free trade.

 The average applied tariff for goods imported into the EU is very low. More than 70% of
imports enter the EU at zero or reduced tariffs.
  The EU’s services markets are highly open and we have arguably the most open
investment regime in the world.

CHAP 5

Socialization:
 Socialization is a process that introduces people to social norms and customs.
This process helps individuals function well in society, and, in turn, helps society
run smoothly. Family members, teachers, religious leaders, and peers all play
roles in a person's socialization.

It contains three key parts: context, content and process, and results.
Parents who expect their children to work blue-collar jobs are more likely to emphasize
conformity and respect for authority, while those Socio-culture concept

Ethnocentrism and ethnorelativism

Ethnocentrism means to apply one's own culture or ethnicity as a frame of reference to judge
other cultures, practices, behaviors, beliefs, and people, instead of using the standards of the
particular culture involved.

For instance, food is the best example to demonstrate ethnocentrism in our daily lives. Because eating
foods that seem normal to us, we expect everyone else to also do the same. However, very often
people take a few gross, disgusting and criticise of food and do not appeal or foreign to them
because they are unfamiliar with the food, and might label it as inferior.

When you want to expand into a foreign country that is highly ethnocentric, it may help to play
down your ties to your home country as much as you can. You can even establish a subsidiary in
the country that you’re expanding to, with a different name and a different marketing campaign
altogether. That subsidiary can then focus on strengthening ties with the locals and getting them
to accept your products.

Ethnorelativism: people begin to recognize other cultures and accept them as viable alternatives
to their own worldview. ... people accept that their identity is not based in any single culture.
Examples:

Some cultures look at negotiating as a win-win type of process as the Japanese do BUT
countries like Spain typically do not view the negotiation that way. They prefer to win the
negotiation and are not as concerned with the win-win proposition 

Many Asia cultures stress team consensus before a decision can be made and typically in
the U.S. they are looking for the group leader to make the decision

=> Thus, if legal entities doing international business have understanding of each country's
culture, respect and do not judge other cultures based on their own concepts, or they have a
ethnorelativism view,  they can skillfully achieve what they want through negotiation. That’s
also the meaning of ethnorelativism and ethnocentrism's view of international business. It is
basically about the cultures of each part in international business. 

Cultural Iceberg model :

In 1976, Hall developed the iceberg analogy of culture. If the culture of a society was the
iceberg, Hall reasoned, than there are some aspects visible, above the water, but there is a larger
portion hidden beneath the surface

The external, or conscious, part of culture is what we can see and is the tip of the iceberg and
includes behaviors and some beliefs. The internal, or subconscious, part of culture is below the
surface of a society and includes some beliefs and the values and thought patterns that underlie
behavior.
There are major differences between the conscious and unconscious culture.
Hall suggests that the only way to learn the internal culture of others is to actively participate in
their culture.
When one first enters a new culture, only the most overt behaviors are apparent. As one spends
more time in that new culture, the underlying beliefs, values, and thought patterns that dictate
that behavior will be uncovered.
What this model teaches us is that we cannot judge a new culture based only on what we see
when we first enter it. We must take the time to get to know individuals from that culture and
interact with them. Only by doing so can we uncover the values and beliefs that underlie the
behavior of that society.

CHAP 6

ET Hall’s Low and high context cultures

Context 
Hall offers a classification of cultures based upon communication styles and, specifically, on the
role that context plays in the communication patterns. The context of the communication act is
the relevant environment beyond the explicit communication.

For example, part of context may be the speaker's and participants' body language, place
in the room, and who speaks before and after the speaker.
- In a high-context culture, the participants have social ties that are long-standing
and close, so people know what the communication will be from long experience
with the other and from communication signals.
- In a low-context culture, the relationships are of shorter duration and so more of
the communication has to be explicit. In our families, we probably find a higher
context, even though we may be members of low-context cultures.

Hall suggests that in high context (HC), the communication tends to be implicit and indirect.
Context plays an exceedingly strong role, actually carrying much of the meaning

In these cultures, such as Japan, China, Latin America, and the Middle East,
communication is more subtle and inferred. 

Entering High and Low Context Situations:

High contexts can be difficult to enter if you are an outsider (because you don't carry the context
information internally, and because you can't instantly create close relationships).
Space 
Do u feel uncomfortable when some1 stands too close to u ? 
Do very bright colours in a room make u feel distracted ? 
These questions are important to study proxemics.
Proxemics (territoriality): the study of how we use it, how it makes us feel more or less
comfortable, and how we arrange objects and ourselves in relation to space. It was also coined by
Edward Hall, he’s interested in understanding how humans use space in communication.  
4 Different kinds of distance that pp use in communication - realms of personal territory
 Intimate space – 6 to 18 inches (15-45cm)
Personal space – 1.5 to 4 feet (45-120cm)
Social space means we are getting a bit closer – 4 to 12 feet away (1,20m-3,50m)
This is kind of space u’r probably in if u’r talking to a colleague or a customer at
work 
 Public space – 12 to 25 feet (3,50-7,50m

1.1.3.  Time 
Monochromatism and Polychromatism:
 A further attribute to identify different cultures is the handling of time. Hall differentiates
between polychronistic and monochronistic cultures. 
 Hall's work also suggests that LC cultures tend to be monochronic, with time
characterized as linear, tangible, and divisible into blocks consistent with the economic
approach to time. Monochronic time emphasizes planning and the establishment of
schedules, with significant energy put into the maintenance of established schedules. 
 In contrast, HC cultures tend to be polychronic, that is, Two of more activities are carried
out within the same clock block, switching among activities can be both desirable and
productive. We think of this as multitasking 
Germans typified the monochronic  group – people who did one thing at a time, usually well, and
in a planned order.  Italians were classically polychronic, often attempting many tasks
simultaneously, displaying more spontaneity, though less process, than the others

=> Since nations are interculturally diverse, the work of Hall is acted as a foundation of which
leaders are able to navigate intercultural issues. When working across cultures, pay attention to
high and low cultures through the actions of others. For example if people are late for meetings it
may be because they are polychronic, not because they are disrespectful or lazy.

Trompenaars's model of national culture differences

Trompenaars’s model is a framework for cross-cultural differences applied to general business
and management, developed by Fons Trompenaars and Charles Hampden-Turner.
            

   This model is that it won't help you learn cultural etiquette, but its real advantage is that it
helps you step outside of your own biases and your own stereotypes and in doing that you can
see how another culture might approach a problem and that can prompt you with ideas to resolve
any misunderstanding.
1.3.1. Universalism vs Particularism
     This dimension can be summarized by asking what matters more, rules or relationships?
- Cultures based on universalism try to treat all cases the same, even if they involve friends or
loved ones. The focus is more on the rules than the relationship.
- But cultures based on particularism will find relationships more important than rules. You can
bend the rules for family members, close friends, or important people. Each case has to be
examined in light of its special merits.
- Example: When you work in a company where your uncle is the CEO.
+ If you’re in a culture based on universalism, you’ll be treated like many workers here but on
particularism you will have more priorities than other workers.
1.3.2.  Individualism vs Communitarianism
   This dimension can be summarized by asking do we work as a team or as individuals? Do
people desire recognition for their individual achievements, or do they want to be part of a
group?
- Individualistic cultures believe that your outcomes in life are the result of your choices. In these
cultures, people have a trend to work independently and put their interests first. They don’t need
to ask or get advice from other people about their decision so that they can make decisions at
speed.
- Cultures based on communitarianism believe the quality of life is better when we help each
other. Thus, people always work together and share information with each other. They will
decide depending on the vote of the group so that decision-making is slower as everyone gives
input.
 
1.3.3. Specific vs Diffuse
- In a specific culture, people tend to keep their personal and work life separate. These cultures
tend to be schedule focused and direct and to the point in their communications. They focus
more on the goal than the relationship.
- For example, people in Vietnam can talk more different stories with each other about different
subjects but in German people don’t talk about their personal information so when they hang out
with friends, they must talk the whole story that can make their friends visualize about it.
1.3.4.  Neutral vs Affective
  This dimension can be summarized by asking do we show our emotions?
- In a neutral culture, people tend not to share their emotions. Emotions are of course felt by
the individual, but they are kept in check and controlled. Observing these people, you would
consider them cool and rational.
- In an affective culture, people tend to share their emotions, even in the workplace. In an
affective culture, it is considered normal that people share their emotions. In Vietnam, people
can share how they feel about something with other people in comfortable way. But in Germany
is opposite.
1.3.5. Achievement vs Ascription
   This dimension of Trompenaars Cultural Dimensions Model can be summarized by asking do
we prove ourselves to get status or is it given to us?
- In an achievement culture, you earn status through knowledge or skill. Job titles are earned and
reflect this knowledge and skill. Anyone can challenge a decision if they have a logical
argument.
- In an ascription culture, you are given status based on who you are. This could be because of
your social status, your education, or your age. You earn respect in these cultures because of
your commitment to the organization, not your abilities. A decision will only be challenged by
someone with higher authority.
1.3.6 Sequential time vs Synchronous time
- In a sequential time, culture, time is very important. People like projects to be completed in
stages.  Time is money, and so it is important that each stage is finished on time. It is rude to be
late for meetings in these cultures.
- In a synchronous tim culture, people see the past, present, and future as interwoven. Because
of this people do several things at the same time. This results in plans and deadlines being
flexible. It also explains why punctuality is less important.
- That’s why we can see that people in Germany are always on time and do everything in the
perfect time, but Vietnamese people are not like that, they can go to school late. 
 
1.3.7 Internal direction vs external direction
- In an internal direction culture, people believe that they can control their environment to
achieve their goals. The focus is selfish (oneself, one’s team, and one’s organization). Winning is
important in these cultures and aggressive personalities are thus prevalent.
- In an external direction culture, people believe that they must work with their environment to
achieve their goals.
Hofstede’s Cultural Dimensions: Geert Hofstede’s Cultural
Dimensions. Over the years, his study led to six cultural dimensions on which countries
can be ranked: Power
Distance, Individualism/Collectivism, Masculinity/Femininity, Uncertainty Avoidance, Long-
term/Short-term Orientation and Restraint/Indulgence. Each dimension will be elaborated on
below:

Power Distance
This dimension expresses the degree to which the less powerful members of a society
accept and expect that power is distributed unequally: beliefs about the appropriate
distribution of power in society. The fundamental issue here is how a society handles
inequalities among people. People in societies exhibiting a large degree of Power
Distance accept a hierarchical order in which everybody has a place and which needs
no further justification. In societies with low Power Distance, people strive to equalise
the distribution of power and demand justification for inequalities of power. China and
Saudi Arabia are countries with a high Power Distance index.

Individualism
The Individualism/Collectivism dimension is about the relative importance of individual
versus group interests. The high side of this dimension, called individualism, can be
defined as a preference for a loosely-knit social framework in which individuals are
expected to take care of only themselves and their immediate families. Its opposite,
collectivism, represents a preference for a tightly-knit framework in society in which
individuals can expect their relatives or members of a particular in-group to look after
them in exchange for unquestioning loyalty. A society’s position on this dimension is
reflected in whether people’s self-image is defined in terms of “I” or “we.” The USA is
considered as one of the most individualistic countries in the world.

Masculinity
The Masculinity/Femininity dimension is about what values are considered more
important in a society. The Masculine side of this dimension represents a preference in
society for achievement, heroism, assertiveness and material rewards for success.
Society at large is more competitive. Its opposite, femininity, stands for a preference for
cooperation, modesty, caring for the weak and quality of life. Society at large is more
consensus-oriented. In the business context Masculinity versus Femininity is
sometimes also related to as “tough versus tender” cultures. Japan is considered to be
a very masculine country, whereas Scandinavian countries such as Norway and Sweden
are considered highly feminine.
Uncertainty Avoidance
The Uncertainty Avoidance dimension expresses the degree to which the members of a
society feel uncomfortable with uncertainty and ambiguity. In addition its impact on
rule making is taken into account. The fundamental issue here is how a society deals
with the fact that the future can never be known: should we try to control the future or
just let it happen? Countries exhibiting a high Uncertainty Avoidance maintain rigid
codes of belief and behaviour and are intolerant of unorthodox behaviour and ideas.
These countries often need many rules to constrain uncertainty. Countries with a low
Uncertainty Avoidance index maintain a more relaxed attitude in which practice counts
more than principles, tolerance for ambiguity is accepted and the need for rules to
constrain uncertainty is minimal. South American countries such as Chile, Peru and
Argentina are highly uncertainty avoiding countries.

Time Orientation
Every society has to maintain some links with its own past while dealing with the
challenges of the present and the future. Societies prioritize these two existential goals
differently. Countries that score low on this dimension, for example, prefer to maintain
time-honoured traditions and norms while viewing societal change with suspicion. They
are past and present oriented and value traditions and social obligations. Countries
with cultures that scores high on this dimension on the other hand take a more
pragmatic approach: they are future oriented and encourage thrift and efforts in
modern education as a way to prepare for the future. Asian countries such as China
and Japan are known for their long term orientation. Morocco is a short term oriented
country.

Indulgence
The Indulgence dimension is a relatively new dimension to the model. This dimension
is defined as the extent to which people try to control their desires and impulses, based
on the way they were raised. Relatively weak control is called Indulgence and relatively
strong control is called Restraint. Cultures can, therefore, be described as Indulgent or
Restrained. Indulgence stands for a society that allows relatively free gratification of
basic and natural human drives related to enjoying life and having fun. Restraint stands
for a society that suppresses gratification of needs and regulates it by means of strict
social norms.

CHAP 7
Competitive advantage refers to factors that allow a company to produce goods
or services better or more cheaply than its rivals. These factors allow the productive entity to
generate more sales or superior margins compared to its market rivals

Example: Switzerland
 Switzerland is mostly mountainous, with little level land
 Has high transportation costs
 Switzerland has practically no mineral resources
 It is close to the heavily populated lowlands of western Europe
 So they need to do something to improve their international business, instead of
spending billions to develope their tunnel across the mountain, they import small
amounts of raw materials, add high value for them, and export a lightweight finished
product or we can say that they have advantage to sell products with higher value like
watches, cheese, chocolate milk or specific machinery that only Swiss can do.

Competitive advantage: Watches, Precision Machinery &

Pharmaceuticals, Cheese, and Milk Chocolate (p.119-120)
 Watches: Import small volumes of high-quality Swedish steel: 40¢ per ounce => Convert to
watch movements: $60 per ounce
 Precision machinery and pharmaceuticals: Emphasis on the value added by manufacturing,
process that is based on skill, care, and tradition
 Cheese: Fluid milk is bulky in relation to its value and expensive to transport => Convert it to a
concentrated and high-value product
 Milk chocolate: Import the raw chocolate + the milk => Convert into another high-value-per-kilo
product
=> The Swiss product must be perceived to be superior so that it will bring a higher price
to offset the greater costs

Different natural endowments

Topography is the surface features of a region. Surface features such as mountains, plains,
deserts, and bodies of water contribute to differences in economies, cultures, politics, and social
structures wherever they occur, both in nations and in regions of a single country.
Example:
Vietnam has an unique topography, Vietnam's topography is very diverse with
mountains, hills, plains, long coastlines and continental shelf. It's result of tectonic
process in a long time of millions of years in the past. The topography is lower from the
northwest to the southeast. Moreover, almost all the rivers in Vietnam have the stream
following that direction so water transportation is an advantage of Vietnam because most
big rivers lead to the ocean so we can reduce the cost of transportation, ships can go
straight from the rivers to the ocean. Vietnam’s business activities are distributed all
 around the country rather than being concentrated in one geographical area. We have Ho
Chi Minh city, Can Tho, Binh Duong in the South and Ha Noi, Hai Phong in the
North together with Da Nang in the Central region
Bodies of water: Bodies of water is any significant accumulation of water on the surface of
Earth or another planet. The term most often refers to oceans, seas, and lakes, but it includes
smaller pools of water such as ponds, wetlands. As you know, water is necessary for life and
critical for industry, it’s a very important element.
For example, Vietnam is a country which has many bodies of water types such as
lakes, waterfalls, ponds, ocean, sea and rivers. All of this help Vietnam alot on
transportation, drinking water, farming and even defence.
Climate: Climate is meteorological conditions, including temperature, precipitation, and wind, that
prevail in a region Climate is important because it sets the limits on what people can do, physically and
economically.
We will take Greenland as an example, this country is covered by snow
almost everywhere except during the summer months. Entirely covered by the
Arctic climate zone, Greenland enjoys dry and cold weather most of the year. Due
to its climate, the economy of Greenland consists of fishing, whale and seal
hunting, mining and tourism
Climate change  will affect businesses: 
 Increased Risk Due to Extreme Weather
 Changes in Resource Availability and Cost
 Changing Demand
 Harsher Working Conditions
 Changing Regulations
 Increased Public Pressure

Chap 8
Economic forces are the factors that help to determine the competitiveness of the
environment in which the firm operates. These factors include
- Demand and supply
- Recession
- Unemployment
- Inflation rate
- Government policy
...

Unemployment is a term referring to individuals who are employable and actively seeking a job
but are unable to find a job or the people in the workforce who want to work but do not have a
job
 Besides, the workforce excludes people who are disable, retired, the people
children, college,...
  The Unemployment rate is the percentage of unemployed workers in the total
labor force.
Inflation is the rate at which the general level of prices for goods and services is rising and,
consequently, the purchasing power of currency is falling.
 For example, the cost of one bowl of Pho Bo was 20.000 VND last year, but now, the
price rises to 40.000 VND. The inflation has happened. It makes the exchange rate
between VND and USD rise, which does mean that 1 VND now can exchange fewer
goods and services from the USA, and it is what I mean by saying “the purchasing power
of currency is falling”.
The recession is a period of temporary economic decline during which trade and industrial
activity are reduced, generally identified by a fall in GDP in two successive quarters.  Maybe it
lasts years, maybe lasts months, too.

Socioeconomic forces is a branch of economics and a social science that focuses

on the relationship between social behavior and economics. It examines how social norms,
ethics, emerging popular sentiment, and other social philosophies influence consumer
behavior, and thus shape public buying trends.
*Socioeconomics forces** include:
+ Education
+ Income
+ Culture/Ethnicity/Religion
+ Geographic Location

Income refers to the money that a person or entity receives in exchange for their labor or
products.
For most people, income means their total earnings in the form of wages, salaries, profits, rents,
and any flow of earnings received. Income can also come in the form of unemployment or
worker's compensation, social security, pensions, interests or dividends, or other governmental,
public, or family financial assistance. It can also come from monetary winnings, as from lotteries
and other games or contests where money is awarded as a prize.

Income inequality is how unevenly income is distributed throughout a population. The less equal
the distribution, the higher income inequality is. Income inequality is often accompanied by
wealth inequality, which is the uneven distribution of wealth.

Example: Suppose, there are two families. A high-income family can buy all they want, they
own tens of billions of cars. Contrast,  a low-income family, their income is just enough to live
through the day. This is income inequality. Children who live in high-income families will later
inherit huge assets, while  children in low-income families will have nothing. This leads to
income inequality continuing in the next generation and the gap between high-income people
and low-income people is widening.

Geographic Location 
How geographic location effect on international business
Definition: Geography has been considered a decisive factor in different fields of business
performance. Geographic location and business of a country is influenced by 4 following
factors: 
 + Landform
 + Climate
 + Location
 + Transportation

Education and Occupation 

Education is always the core factor promoting the development of any country. It teaches
citizens language, skills, values, and norms. More skilled laborers bring the ability for a - The
knowledge and skills of workers available in the labor supply is a key determinant for both
business and economic growth.
- Industries with higher education and training requirements tend to pay workers higher wages.
- Differences in training levels is a significant factor that separates developed and developing
countries.
- An economy's productivity rises as the number of educated workers increases since skilled
workers can perform tasks more efficiently.

Culture/ethnicity is a way of life of a group of people, the behaviours, beliefs, values, and
symbols that they accept, generally without thinking about them, and that are passed along by
communication and imitation from one generation to the next.

But how does culture affect international business?

In a business context, culture relates to what behaviour is common and accepted professionally
in one location, compared to another. What may be acceptable business practice in one country,
may be very different from the approach that is used by businesses overseas. 
Culture impacts international business in many aspects. It impacts the functional areas of
marketing, human resources, sales, distribution, accounting and finance, ect. Such as in
marketing, the wide variation across cultures in attitudes and values requires that many firms use
different marketing mixes in different markets. 

The key factors for McDonald’s fast food restaurants success in different countries are
adaptation with culture as well as innovation. For example:

1.     Germany
Because Germans love to eat meat, its burgers combine Nürnberger sausages with beef. And it’s
a known fact that Germans love their beer with food, so McDonald’s outlets in Germany also
serve beer.
2.  India
India has a very large consumer base and McDonald’s adapted its menu to cater to the locals’
tastes and preferences. Beef is replaced with chicken. 
  understanding how culture can affect international business is very important  to
avoid misunderstandings between colleagues and clients, and also to make sure
that businesses are presenting themselves to their new market in the best way they
can.

Chap 9 political forces

Race equality
Definition: It is a situation where everyone has rights and chances to be treated with equal
manners despite any difference in physical traits, such as skin color.

This means people will try to look at the good sides of others instead of skin colors or physical
differences, in different cultures or countries to build harmony between people and nations.

Examples: In Vietnam, with the diversity of cultures from all around the world, the citizens are
mostly friendly with people worldwide, they are always willing to give others a hand in certain
situations. This is race equality. Nowadays, there are still racial inequality in some areas around
the world, however People's awareness is increasing day by day

Gender equality
Definition: Gender equality is when people of all genders have equal rights, responsibilities and
opportunities.  Gender inequality has an impact on everyone, including men, women, transgender
and gender nonconforming individuals, kids, and families. People of all ages and ethnicities are
affected.

Children

 Gender stereotypes affect children's sense of self from a young age.

 Boys receive 8 times more attention in the classroom than girls.
 Girls receive 11% less pocket money than boys.
 Children classify jobs and activities as specific to boys or girls.

Due to this reality, when children become adults in the future, they might have the mindset of
gender discrimination and this cycle may continue to the next generation. 

       Example:
An example of this, in Myanmar, women are living under the pandemic and military rule. One
year after the military takeover, it is difficult to foresee any rapid improvement in the divisive
course of events in Myanmar. One out of ten pregnant or breastfeeding women had a pregnancy
or childbirth issue for which public or private health services could not be accessed.

Workforce diversity is the collective mixture of employees' differences and

similarities (including individual characteristics, values, beliefs, experiences, backgrounds,
preferences and behaviors).

#1: Variety of different perspectives

 #2:Diversity in the workplace ensures a variety of different perspectives.

3: Higher innovation

#4: Faster problem-solving

Diversity can create workers who are over-qualified for some jobs.

. If that individual were to lose their job for some reason, then it could become a
struggle for them to find new employment elsewhere.

-   Diversity in the workplace can create too many opinions.

When everyone gets a chance to be heard, then the speed of a project can slow down
just as quickly as it can increase.

Privatization is the process of converting part or all of the assets of a business from a
government-owned nature to private ownership

Nationalization is the process of taking privately-controlled companies, industries, or

assets and putting them under the control of the government. Nationalization often happens in
developing countries and can reflect a nation's desire to control assets or to assert its dominance
over foreign-owned industries.
CRA country risk assessment: CRA is an evaluation, conducted by a bank
or business, that assesses a country's economic situation and its policies to determine the risks
which exist when losing an investment

The risks may come from political changes. Among them are wars, terrorism, and especially
government changes( new government)

The risks may be economic and financial ( high inflation rates, repayment of loans, labor
condition, labor productivities, laws..)

Ex: Donald Trump enacted many policies about economic after becoming president of American

Information that companies need to assess its risk bases on many elements, from nature of its
business to the length of time required, investment, loans..

Nature of business:

Ex: the hotel company in comparison with the manufacturing company

The length of time required: include export financing and bank loans. Exporting financing
usually involves the shortest period of risk exposure. Bank loans can be short, medium and long
term
CHAP 10
International Strategy:is a business plan or strategy created by a company to do
its business in international markets. An international strategy requires analyzing the
international market, studying resources, defining goals, understanding market dynamics &
developing offerings.
Example:Netflix: Streaming giant Netflix uses a robust translation strategy with
subtitles in 62 languages to scale their business without needing to invest in local
infrastructure

Strategic Uncertainty is defined as the Situation where the current state of

knowledge is such that (1) the order or nature of things is unknown, (2) the consequences, extent,
or magnitude of circumstances, conditions, or events is unpredictable, and (3) credible
probabilities to possible outcomes cannot be assigned. manageable uncertainty provides the
freedom to make creative decisions.
The uncertainty that remains after the best possible analysis has been done is what we call
residual uncertainty—for example, the outcome of an ongoing regulatory debate or the
performance attributes of a technology still in development

the residual uncertainty facing most strategic-decision makers falls into one of four broad
levels
Level 1 A clear enough future: managers can develop a single forecast of the future that is
precise enough for strategy development, the forecast will be sufficiently narrow to point to a
single strategic direction. In other words, at level 1, the residual uncertainty is irrelevant to
making strategic decisions.
Level 2:Alternate future:  the future can be described as one of a few alternate outcomes, or
discrete scenarios . Analysis cannot identify which outcome will occur
Level 3:A range future: a range of potential futures can be identified. That range is defined by a
limited number of key variables, but the actual outcome may lie anywhere along a continuum
bounded by that range. here are no natural discrete scenarios
Level 4:True uncertainty: multiple dimensions of uncertainty interact to create an environment
that is virtually impossible to predict. the range of potential outcomes cannot be identified, let
alone scenarios within that range. 

Firm value chain

A value chain is a series of consecutive steps that go into the creation of a finished product, from its initial
design to its arrival at a customer's door. The chain identifies each step in the process at which value is
added, including the sourcing, manufacturing, and marketing stages of its production.
A company conducts a value-chain analysis by evaluating the detailed procedures involved in each step of
its business. The purpose of a value-chain analysis is to increase production efficiency so that a company
can deliver maximum value for the least possible cost.
Components of a Value Chain
In his concept of a value chain, Porter splits a business's activities into two categories, "primary" and
"support," whose sample activities we list below.1 Specific activities in each category will vary according
to the industry.
Primary Activities
Primary activities consist of five components, and all are essential for adding value and creating
competitive advantage:
1. Inbound logistics includes functions like receiving, warehousing, and managing inventory.
2. Operations include procedures for converting raw materials into a finished product.
3. Outbound logistics includes activities to distribute a final product to a consumer.
4. Marketing and sales include strategies to enhance visibility and target appropriate customers—
such as advertising, promotion, and pricing.
5. Service includes programs to maintain products and enhance the consumer experience—like
customer service, maintenance, repair, refund, and exchange.
Support Activities
The role of support activities is to help make the primary activities more efficient. When you increase the
efficiency of any of the four support activities, it benefits at least one of the five primary activities. These
support activities are generally denoted as overhead costs on a company's income statement:
1. Procurement concerns how a company obtains raw materials.
2. Technological development is used at a firm's research and development (R&D) stage—like
designing and developing manufacturing techniques and automating processes.
3. Human resources (HR) management involves hiring and retaining employees who will fulfill
the firm's business strategy and help design, market, and sell the product.
4. Infrastructure includes company systems and the composition of its management team—such as
planning, accounting, finance, and quality control.
Example: Starbucks
Bartlett and Ghoshal typology of multinational companies

International strategy
An international strategy occurs when there are similarities between markets and little gains from globally
integrating. The result is a business operating abroad but run very much from the home country. The head
office and main decisions will be based at home.
Multi-domestic strategy
A multi-domestic strategy occurs when there are considerable variations between market demands and
few benefits from globally integrating. The result will be a portfolio of relatively independent companies
running themselves and producing for their own markets. Example: McDonalds
Global strategy
A global strategy occurs when there are significant economies of scale and where there are similarities in
terms of market demand. The business develops standardized products which are sold globally. The
subsidiaries abroad are likely to be rather weak and the full range of business activities will only exist in
the home market. The products are designed and developed in the domestic country.: Energy corporation

around the world.

Transnational strategy
A transnational strategy occurs when there is pressure to meet local needs and benefits from integrating
globally. The organization is regarded as a network with each subsidiary given responsibility appropriate
to its capabilities. There is a balance of centralization and decentralization and a culture of sharing within
the global organization. Staff move around the business globally, which helps build shared values and
shared knowledge. Example: Apple or maybe automobile companies
CHAP 11

Free on-board shipment terms indicate the seller delivers the goods on board a
designated vessel named by the buyer. The buyer or seller may assume all the
risk and transportation costs depending on whether the goods are sold under the FOB
shipping point or FOB destination point.2

Cost, insurance, and freight (CIF)  terms indicate the seller must deliver the goods to
a designated port and load them on a specified vessel, assuming responsibility for
paying all transportation, insurance, and loading costs. After that, the buyer assumes
the cost and risk associated with transporting the cargo from the designated port to its
warehouse or business

DDP indicates the seller assumes all the risk and transportation costs. The
seller must also clear the goods for export at the shipping port and import at
the destination. Moreover, the seller must pay export and import duties
for goods shipped under DDP.2
Under Incoterm Ex Works (EXW), the seller is only required to make the
goods available for pickup at the seller's business location or another
specified location. Under EXW, the buyer assumes all the risk and
transportation costs.

Pros
 Easily understood terms
 International standardization
 Updated and clarified by an international body (ICC)

Cons
 Differences between buyer and seller preferences when choosing
terms
 Certain terms expose one party to inflated costs

Economic sanction:
 Economic sanctions are penalties levied against a country, its officials, or private citizens,
either as punishment or to provide disincentives for the targeted policies and actions.
 Economic sanctions can range from travel bans and export restrictions to trade embargoes
and asset seizures. Such sanctions apply to parties not readily subject to law enforcement
by the sanctioning jurisdiction.
 Economic sanctions can be imposed unilaterally by a single country or multilaterally by a
group of countries or an international organization.
 Sanctions measures include:
Embargoes 
 An embargo is a government order that restricts commerce with a specified country or the
exchange of specific goods. An embargo is usually created because of unfavorable
political or economic circumstances between nations. It is designed to isolate a country
and create difficulties for its governing body, forcing it to act on the issue that led to the
embargo. 
 An embargo can mean restricting or prohibiting exports or imports, creating quantity
quotas, imposing special tolls, taxes, prohibiting the carriage of goods or vehicles,
freezing, or collecting hold goods, assets, bank accounts, restrict the movement of
specific technologies or products
 Many sanctions and embargoes have greatly affected the global economy and trade,
causing division between countries. The embargoed countries will suffer financial losses
as well as financial revenues from exports, making the balance of economic growth in
deficit, the state budget will also be severely short.

TRADE RESTRICTION
  A tariff is a tax on imports or exports between sovereign states. It is a form of
regulation of foreign trade and a policy that taxes foreign products to encourage or
safeguard domestic industry.
 Import duties will be used more in international trade, and export taxes will be
exempted to promote exports.

A tariff barrier can take several forms:

 Specific Tariffs - a tariff imposes as a cost per unit ( or according to weight or

volume). A fixed fee levied on one unit of an imported good is referred to as a
specific tariff
 For example, a country could levy a $15 tariff on each pair of shoes imported, but
levy a $300 tariff on each computer imported.
 Ad Valorem Duty - The phrase "ad valorem" is Latin for "according to value," and
this type of tariff is levied on a good based on a percentage of that good's value.
 An example of an ad valorem tariff: A consumer purchases a laptop at a major
retailer for $500. The county's sales tax rate is 7 percent. Sales tax on the laptop is
$35, which is 7 percent of $500, for a total purchase price of $535.
 Compound tariff – a combination of ad valorem and specific tariff – a charge per
unit, plus a charge as a proportion of the price

HOW DO TARIFFS AFFECT BUSINESSES:

Tariffs have different effects on different types of businesses and people.

Small Businesses:

 Tariffs can hurt small businesses.

 When tariffs go up, this can often be more damaging to small businesses than large
ones, because:
 Small businesses have smaller margins and are less able to absorb additional costs
 Small businesses have less leverage with suppliers and are less able to force them to
reduce their prices to compensate for tariffs
 Small businesses have fewer resources to dedicate to finding new suppliers.
 However, just as certain large businesses will benefit from the imposition of tariffs,
some small businesses will benefit from tariffs too.

TARIFFS AFFECT MANUFACTURERS

 Tariffs can benefit domestic manufacturers. Tariffs raise prices on imported goods.
Domestic manufacturers can gain a comparative advantage from this.
 Let’s say a US clothing manufacturer makes jeans at a cost price of $10 per pair, and
a Chinese clothing manufacturer makes jeans at a cost price of $8.50 per pair. Tariffs
can hurt domestic manufacturers who source materials from abroad. Manufacturers
sometimes need to source parts and materials from abroad.
  In some situations, this could result in domestic manufacturers being unable to
compete with foreign manufacturers. If there’s a tariff on imports of leather, but not
shoes, domestic shoemakers will be hurt by this.
 Tariffs can also hurt domestic manufacturers who export goods.

Monopoly, oligopoly and polypoly

Monopoly

 A monopoly exists in areas where one company is the only or dominant force to sell a
product or service in an industry. This gives the company enough power to keep
competitors away from the marketplace. This could be due to high barriers to entry such
as technology, steep capital requirements, government regulation, patents or high
distribution costs.
 Once a monopoly is established, lack of competition can lead the seller to charge high
prices. Monopolies are price makers. This means they determine the cost at which their
products are sold. These prices can be changed at any time. A monopoly also reduces
available choices for buyers. The monopoly becomes a pure monopoly when there is no
other substitute available.

Oligopoly

 In an oligopoly, a group of companies (usually two or more) controls the market.

However, no single company can keep the others from wielding significant influence
over the industry, and they each may sell products that are slightly different.
 Prices in this market are moderate because of the presence of competition. When one
company sets a price, others will respond in fashion to remain competitive. For example,
if one company cuts prices, other players typically follow suit. Prices are usually higher
in an oligopoly than they would be in perfect competition.

Polypoly:

 In a polypolistic market, prices are formed by the interaction of supply and demand. As
there are many market participants on both sides, none of the market participants has
market power. For this reason, polypoly is often called the best marketable form. An
example of a polypoly is the used car market, where millions of customers meet private
and commercial suppliers.

CHAP 12
The gold standard:
 Definition: The gold standard is a monetary system where a country's currency
or paper money has a value directly linked to gold. With the gold standard,
countries agreed to convert paper money into a fixed amount of gold. A country
that uses the gold standard sets a fixed price for gold and buys and sells gold at
that price.
 The early 20th century was the great era of the international gold standard. Gold
coins circulated in most of the world; paper money, whether issued by private
banks or by governments, was convertible on demand into gold coins or gold
bullion at an official price, while bank deposits were convertible into either gold
coin or paper currency that was itself convertible into gold.
 

International Reserve Currency

 A reserve currency (or anchor currency) is a foreign currency that is held in

significant quantities by central banks or other monetary authorities as part of
their foreign exchange reserves. The reserve currency can be used in international
transactions, international investments, and all aspects of the global economy.
 The United States dollar has been the world's primary reserve currency for over
60 years. Under the Bretton Woods system, the dollar was pegged to gold and
most other currencies were pegged to the dollar. As a result of this arrangement,
dollars were used as the main intervention currency and, hence, reserve currency.
 A weakening dollar makes foreign goods and services more expensive for
American consumers and businesses, and should the dollar lose the reserve
currency status, it would make our transactions more expensive as well — costs
that businesses would pass on to US consumers

Currency risk
Exchange rate: Firms and individuals that operate in overseas markets are exposed to losing
money due to unfavorable moves in exchange rates. Exchange rates directly affect the
comparetitiveness of goods and sevices in the international market.
For example, the price of goods imported from the US to Canada over the past year under
the impact of the exchange rate.

Foreign Debt
What is foreign debt? Foreign debt is money borrowed by a government, corporation or
private household from another country's government or private lenders.
Foreign debt can become a currency risk for countries and corporations if not managed
properly. We often have a negative view of debt, but actually we have to understand that debt is
essential for economic development. In fact, the world economy runs on debt, or credit.
 Borrowing money abroad helps countries and corporations access economic development
factors that current production capacity cannot afford and increase income in the short term
which are really good. However, borrowing money forms a future payment obligation. If this
obligation is not fulfilled, the company may go bankrupt, and the country may have a debt crisis.

Ex: Debt caused Argentina to fall into a prolonged economic crisis, high inflation, and
increased capital loss. All lead to political and social instability. Protests and riots have taken
place everywhere in the last two decades.
It is important to note that, Argentina's external debt is nowhere near top 10, even top 50
in List of countries with respect to external debt, even with per capital or GDP%. The country's
debt crisis is due to poor debt management, not the size of the debt itself.

Solution for currency risks

Netting:

 Netting is a method of reducing risks in financial contracts by combining or aggregating

multiple financial obligations to arrive at a net obligation amount. Netting is used to
reduce settlement, credit, and other financial risks between two or more parties.
 Netting is used in a number of settings and instances—securities or currency trading,
bankruptcy, and inter-company transactions, among others.

Hedging:

 Hedging is a risk management strategy employed to offset losses in investments by

taking an opposite position in a related asset.
 The reduction in risk provided by hedging also typically results in a reduction in potential
profits.
 Hedging requires one to pay money for the protection it provides, known as the premium.
Hedging strategies typically involve derivatives, such as options and futures contracts.
We can hedge basically everything: stock, bond, commodities…
 Hedging offers profit opportunities even when the market is falling. That's why it attracts
a lot of traders who aim to make a profit instead of using it as insurance for their
business. But in fact, not many people make money from it

The G20 or Group of Twenty, formed in 1999, is an intergovernmental forum comprising 19

countries and the European Union. It works to address major issues related to the global
economy, such as international financial stability, climate change, mitigation, and sustainable
development.

S.W.I.F.T. & CIPS

- The Society for Worldwide Interbank Financial Telecommunication, legally S.W.I.F.T. SC, is a
Belgian cooperative society providing services related to the execution of financial transactions
and payments between banks worldwide

- SWIFT payments, also called international wires, are a type of international transfer sent via
the SWIFT international payment network. The SWIFT international payment network is one of
the largest financial messaging systems in the world. Wise can send or receive certain currencies
via SWIFT payment.
- CIPS or the Cross-Border Interbank Payment System, seen as the Chinese equivalent of the
globally-used SWIFT, or Society for Worldwide Interbank Financial Telecommunication, has
become a buzz word in the domestic capital market and related industries.

CHAP 13

The expatriate
1. Definition of expatriate
An expatriate is a person residing in a country other than their native country. In common usage,
the term often refers to professionals, skilled workers, or artists taking positions outside their
home country. For example, if your employer sends you from your job in its Silicon Valley
office to work for an extended period in its Toronto office, you would be considered an
expatriate or "expat" after you arrive in Toronto.
Pros
 New experiences and maybe a better climate
 Potentially lower cost of living
 Potential access to affordable healthcare

Cons

 Potential for double taxation

 Long way away from friends and family
 Language, cultural, political, and economic barriers
 Potential challenges securing the proper visa

CHAP 14
International negotiation is often a process of power-based dialogue intended to achieve
certain goals or ends, and which may or may not thoroughly resolve a particular dispute
or disputes to the satisfaction of all parties.

What is the role of negotiation in international business?

Good negotiations contribute significantly to business success, as they: help you build
better relationships. deliver lasting, quality solutions—rather than poor short-term
solutions that do not satisfy the needs of either party. help you avoid future problems
and conflicts.