Ita Reviewer

INTERNATIONAL TRADE AND AGREEMENTS o Advantage: Customer satisfaction
(ITA) REVEIEWER (1ST SEM) o Disadvantage: Costly

• Regiocentric – a company that is operating
LESSON 1: Introduction to International Business
successfully in a foreign country thinks of
➢ DEFINITION – exchange of goods and exporting other neighboring countries of the
services, resources, and knowledge & skills host country
among individuals & businesses in two or more • Geocentric – company analyses the tastes,
countries preference and needs of the customer in all
➢ NATURE/ CHARACTERTISTICS foreign the tastes, preferences and needs of
• Accurate information & timely the customer in all foreign markets and then
• The size of the international business adopts a standardized marketing mix for all
• Market segmentation the foreign markets.
• International markets have more potential o Disadvantage: Can’t adjust to its
than domestic markets country
➢ SCOPE ➢ PROBLEMS
• International marketing • Political factors
• International finance and investments • High foreign investments and high cost
• Foreign exchange • Exchange instability
• Global human resource • Entry requirements
➢ FEATURES • Tariffs, quota, etc.
• Large scale operations • Competition and bureaucracy
• Integration of economics • Technological policy
• Dominated by developed countries and • Quality management
MNCs
LESSON 2: Entry Strategies
• Benefits to participating countries
• Keen competition ➢ DEFINITION – influenced by the firm and
• Special role of science and technology product characteristics and the domestic and
• International restrictions international market characteristics
➢ IMPORTANCE ➢ EXPORTING
1. Earn foreign exchange • Direct Exporting – firm itself performs the
2. Optimum utilization of resources can export (packaging and certificates)
import it o Implementation
3. Achieve its objectives ▪ Sending international sales
4. To spread business risks representatives into the foreign
5. Improve organization’s efficiency market
6. Get benefits from Government ▪ Selecting local representatives or
7. Expand and diversing agents to prospect the market
8. Increase competitive capacity ▪ Using independent local distributors
➢ APPROACHES OF INTERNATIONAL who will buy the products to resell
BUSINESS them in the local market
• Ethnocentric – target market is own country ▪ Creating a fully owned commercial
o Advantage: Supplies cannot be out of subsidiary to have a greater control
stock in over foreign operations
o Disadvantage: No international o E.g., Powerfreight Logistic Servives Inc.
recognition – has direct and consolidated air
• Polycentric – adjusting the products to meet services from main airports to the world
the preferences of their consumer in each including pick up, export preparation &
international market
customs clearance, assembly, and •Joint Ventures – firm is formed and creating
distribution a third firm
• Indirect Exporting – firm is not engaging in o Ford Motor Company and Jiangling
international marketing Motors
o Methods ➢ MERGERS AND ACQUISITIONS
▪ Deal with foreign sales through the • Mergers – legal consolidation of two
domestic sales organization companies into one entity, e.g, Bayo and
▪ Use of international trading Unica Hija
companies with local offices all • Acquisitions – one company takes over
over the world another, e.g., Emperador and Fundador
▪ Export management company
located in the same country as the LESSON 3: Incoterms
producing firm, and which plays the ➢ DEFINITION – standard sets of trading terms
role of an export department and conditions designed to assist traders when
o E.g., Galley Support – use indirect goods are sold and transported
exporting to sell its product into the ➢ THE ELEVEN RULES ARE DIVIDED
market of the Asia Pacific region INTO TWO MAIN GROUPS
➢ CONTRACTUAL AGREEMENT • Rules for any Transport Mode (land)
• Licensing and Franchising – licensing is o Ex Works
firm in one country permits a firm in another o Free Carrier
country to use the products or trademarks, o Carriage Paid To
e.g., universal music publishing group; o Carriage & Insurance Paid To
franchising allows entrepreneurs to use the o Delivered at Place Unloaded
company’s business plan and process in o Delivered at Place
exchange of initial fees and revenues, e.g., o Delivered Duty Paid
big brew • Rules for Sea & Inland Waterway Only
o RISK – in licensing, foreign may begin o Free Alongside Ship
to act on its own and may therefore lose o Free on Board
that market o Cost and Freight
• Strategic Alliance – two companies typically o Cost Insurance and Freight
pool resources to create a separate business ➢ SPECIFICATIONS: COST
entity • Packaging – responsibility of seller
o E.g., BTS and Samsung • Loading from warehouse – loaded in the
• Contract Manufacturing – firm’s product is delivery truck
produced in the foreign market by local • Pre-carriage – from warehouse to customs
producer under contract with the firm and needs requirements to pass
o E.g., Foxconn – manufacturer of iPhone • Export Customs Clearance – package will be
for Apple and Xbox One for Microsoft cleared after the requirements are passed;
➢ PRODUCTION FACILITY AND FOREIGN advisable to be responsibility of the seller
MARKET
• Handling at Departure – will be handled at
• Assembly Operations – firm produces most the port
of the components or ingredients of its
• Main Transportation – can be land, water, or
product and ships them to foreign markets to
air
be put together as a finished product
• Transportation Insurance – depends on who
o E.g., Mercedez-Benz
will pay the insurance
• Wholly Owned Manufacturing Facility – the
• Handling at Arrival – package arrived at
firm will be the one who will be
country of buyer
manufacturing or completing the product
o E.g., Wrangler
• Import Customs Clearance – will be approve ➢ FREE ALONGSIDE SHIP (FAS)
by customs ❖ Obligations of Seller
• Post-carriage – unloaded from the por and - Packaging
will be load in the truck to deliver it to the - Loading from warehouse
warehouse - Pre-carriage
• Unloading into warehouse – package - Export customs clearance
accepted ▪ Obligations of Buyer
➢ FREE ON BOARD (FOB) - Handling at departure
❖ Obligations of Seller - Main transportation
- Packaging - Transportation insurance
- Loading from warehouse - Handling at arrival
- Pre-carriage - Import customs clearance
- Export customs clearance - Post-carriage
- Handling at departure - Unloading into warehouse
▪ Obligations of Buyer ➢ EX WORKS (EXW)
- Main transportation ❖ Obligations of Seller
- Transportation insurance - Packaging
- Handling at arrival ▪ Obligations of Buyer
- Import customs clearance - Loading from warehouse
- Post-carriage - Pre-carriage
- Unloading into warehouse - Export customs clearance
➢ COST OF FREIGHT (CFR) - Handling at departure
- Main transportation ➢ FREE CARRIER (FCA)
▪ Obligations of Buyer ❖ Obligations of Seller
- Transportation insurance - Packaging
- Handling at arrival - Loading from warehouse
- Import customs clearance ▪ Obligations of Buyer
- Post-carriage - Pre-carriage
- Unloading into warehouse - Export customs clearance
➢ COST INSURANCE AND FREIGHT (CIF) - Handling at departure
- Main transportation ➢ CARRIAGE PAID TO (CPT)
- Transportation insurance ❖ Obligations of Seller
▪ Obligations of Buyer - Packaging
- Handling at arrival - Loading from warehouse
- Import customs clearance - Pre-carriage
- Post-carriage - Export customs clearance
- Unloading into warehouse - Handling at departure
- Main transportation - Post-carriage
▪ Obligations of Buyer - Unloading into warehouse
- Transportation insurance ➢ DELIVERED AT PLACE (DAP)
- Handling at arrival ❖ Obligations of Seller
- Import customs clearance - Packaging
- Post-carriage - Loading from warehouse
- Unloading into warehouse - Pre-carriage
➢ CARRIAGE & INSURANCE PAID TO - Export customs clearance
(CIP) - Handling at departure
- Loading from warehouse ▪ Obligations of Buyer
- Pre-carriage - Handling at arrival
- Export customs clearance - Import customs clearance
- Handling at departure - Post-carriage
- Main transportation - Unloading into warehouse
- Transportation insurance ➢ DELIVERED DUTY PAID (DDP) – all are
▪ Obligations of Buyer obligations of seller
- Handling at arrival
LESSON 4: Trade and Development
- Import customs clearance
- Post-carriage ➢ DEFINITION – trade feres to the exchange of
- Unloading into warehouse goods and services across borders; development
➢ DELIVERED AT PLACE UNLOADED encompasses improvements in a nation’s living
(DPU) standards, economic well-being, and overall
❖ Obligations of Seller quality of life
- Packaging ➢ BENEFITS OF INTERNATIONAL TRADE
- Loading from warehouse FOR DEVELOPMENT
- Pre-carriage • Can lead to economic development
- Export customs clearance ➢ TRADE BARRIERS AND THEIR IMPACT
- Handling at departure • Trade barriers are obstacles that restrict or
- Main transportation impede the free flow of goods and services
▪ Obligations of Buyer between countries
- Transportation insurance • Tariffs, quotas, and non-tariff barriers can
- Handling at arrival hinder trade and have adverse effects on a
- Import customs clearance nation’s development, potentially leading to
- Post-carriage economic inequality and reduced access to
- Unloading into warehouse foreign markets
➢ DELIVERED AT TERMINAL (DAT) ➢ TARIFFS – taxes or duties imposed by a
❖ Obligations of Seller government on imported or, in some cases,
- Packaging exported goods; based on the value or quantity
- Loading from warehouse of the imported goods
- Pre-carriage ➢ QUOTAS – numerical limits imposed by a
- Export customs clearance government on the quantity of specific goods
- Handling at departure that can be imported or exported during a
- Main transportation specified period
- Transportation insurance ➢ NON-TARIFF BARRIERS (NTBSs) – various
▪ Obligations of Buyer measures that countries use to restrict or regulate
- Handling at arrival international trade
- Import customs clearance
➢ TRADE POLICIES AND THEIR
IMPLICATIONS
• Types of Trade Policies
1. Protectionism – involves imposing
barriers to trade, such as tariffs, import
quotas, and subsidies, to protect
domestic industries from foreign
competition
2. Free Trade – promote open markets and
minimal government intervention,
fostering international cooperation and
economic growth
• Economic Implications
1. Economic Growth – expanding market
access and fostering competition
2. Trade Deficits/ Surpluses – can affect
trade balance, leading to trade deficits
(import > export) or surpluses (export >
import)

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INTERNATIONAL TRADE AND AGREEMENTS o Advantage: Customer satisfaction

(ITA) REVEIEWER (1ST SEM) o Disadvantage: Costly

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