Chapter 7.

Government Intervention in International Business

Government involvement in international business is covered in Chapter 7 of "International
Business: Strategy, Management, and the New Realities 2". It emphasizes how governments can
modify the environment for business competition by interfering in trade and investment to
achieve political, social, or economic goals. The chapter discusses many types of governmental
interference, such as protectionism through tariffs, nontariff trade barriers, quotas, investment
barriers, currency controls, subsidies, and investment incentives.
The chapter gives examples of protectionism, such as the 1980s voluntary export limits placed
by the US government on imports of Japanese cars that reduced the competitiveness of the US
auto industry. It discusses the negative effects of protectionism, such as decreased supply, price
inflation, a lack of variety, a decline in industrial competitiveness, and unanticipated negative
outcomes.
The justification for government action is examined, including taxation, worries about safety and
security, general economic goals, lessening foreign competition, safeguarding emerging
industries, and maintaining national identity.
The chapter also covers the existence of nontariff trade barriers like quotas, voluntary
export/import limitations, import permits, government laws, and bureaucratic procedures, as well
as the predominance of tariffs and the World Trade Organization's (WTO) involvement in
reducing tariffs. With examples from various industries and nations, investment barriers, such as
foreign direct investment (FDI) and ownership limitations, are presented.
Examples of how governments utilize currency controls, subsidies, and investment incentives to
limit currency outflow, boost home industries, and draw foreign investment are discussed. The
chapter focuses on China's and India's experiences with market liberalization, as both nations
gradually lessened protectionism and opened their economies to outside trade and investment.
The chapter ends with advice for businesses on how to handle government intrusion. It involves
performing research to comprehend trade and investment barriers in target markets, selecting
suitable entrance methods, leveraging foreign trade zones and customs classifications, applying
investment incentives, and participating in lobbying activities to encourage freer trade and
investment.
In conclusion, Chapter 7 explores government involvement in global business, emphasizing its
nature, forms, effects, and justifications. It offers illustrations and insights on how businesses
might handle and react to governmental interference to improve their global business strategy.
Chapter 10. The International Monetary and Financial Environment
The worldwide monetary and financial environment is covered in Chapter 10 of "International
Business: Strategy, Management, and the New Realities". It covers a wide range of subjects
including currencies, exchange rates, currency risk, convertible and nonconvertible currencies,
capital flight, foreign exchange markets, variables affecting a currency's supply and demand, and
the globalization of finance.
The first sentence of the chapter emphasizes that there are roughly 175 different currencies in
circulation worldwide. It mentions the simplicity of monetary systems, such as the widespread
usage of the dollar and the adoption of the euro by several European countries. The price of one
currency represented in terms of another introduces the idea of exchange rates. Different ways
that fluctuating exchange rates might affect a company's profitability.
The danger brought on by fluctuations in the value of one currency about another is referred to as
currency risk. It makes international business transactions more difficult and has an impact on
things like currency risk, asset valuation, foreign taxation, inflationary pricing, and transfer
pricing. To illustrate currency risk, examples of a supplier's currency appreciation increasing
costs and a foreign buyer's currency depreciation decreasing payment amounts are given.
It explains the differences between convertible and nonconvertible currencies. Nonconvertible
currencies are not accepted for foreign transactions, but convertible currencies are easily
converted into other currencies. Due to their strength and stability, hard currencies like the U.S.
dollar, Japanese yen, Canadian dollar, British pound, and European euro are regarded as the most
convertible.
The quick sale of assets held in a country's currency or conversion into a foreign currency is
known as capital flight. Governments place limitations on currency convertibility to stop capital
flight since it can harm a nation's capacity to pay debt and imports. One instance of capital
leaving Mexico between 1979 and 1983 is provided when international lenders lost faith in the
Mexican economy.
The next section of the chapter covers foreign exchange markets, which include all varieties of
currency that are exchanged worldwide. The international market for buying and selling different
national currencies is known as the foreign exchange market. The influence of currency rate
variations on trade is illustrated using the example of the yen-dollar exchange rate, which is
recognized to move regularly.
The following are listed as the variables affecting a currency's supply and demand: economic
expansion, interest rates, inflation, market psychology, and governmental action. Demand is
fueled by economic growth, which is defined as the annual increase in real GDP. Positive
correlations exist between interest rates and inflation, and generally speaking, high inflation
results in lower currency values. Currency values can be impacted by market psychology,
including herding and momentum trading. China's involvement to keep the yuan undervalued is
an example of how governments use central bank activities to influence the value of their
currencies.
Chapter 17. Marketing in the Global Firm
Marketing in the global firm is covered in detail in Chapter 17 of the book "International
Business: Strategy, Management, and the New Realities 3". The chapter discusses issues
including international pricing strategies, tactics to stop prices from rising, transfer pricing, gray
marketing, worldwide account management, and global market segmentation. It also discusses
standardization and adaptation.
A global marketing strategy is a course of action that directs a company's positioning of itself
and its products, targeting worldwide market segments and creating global marketing program
components. The chapter emphasizes the significance of segmenting the global market, which
allows businesses to focus on groups of clients who share similar traits across numerous national
marketplaces.
Two strategies for worldwide marketing are standardization and adaptability. Standardization
seeks to make marketing program features similar across regions or even the worldwide market,
whereas adaptation entails changing elements of the marketing program to match individual
customer requirements in a certain market. For businesses, it's critical to strike a balance between
local responsiveness and global integration.
As a way to improve marketing efficiency and effectiveness, global branding is addressed. The
ability to charge premium rates, enhanced negotiating power with resellers, brand loyalty, and
consumer confidence are all benefits enjoyed by well-known international companies.
Today, many businesses use the strategy of designing global goods with global teams. Product
development and design now comprise virtual global teams made up of professionals from
subsidiaries all over the world rather than being restricted to a single nation. Collaboration
between these teams is greatly aided by information and communication technologies.
The nature of the product or industry, the location of the manufacturing facilities, the complexity
of the distribution systems, and local market conditions are some of the other elements the
chapter examines that have an impact on international pricing. It offers three pricing options:
incremental pricing, rigid cost-plus pricing, and flexible cost-plus pricing.
Companies can use tactics like shortening the distribution chain, redesigning products to
eliminate pricey features, shipping products unassembled to be eligible for lower import tariffs,
reclassifying products for lower tariffs, or moving production to regions with lower costs or
advantageous exchange rates to combat global price inflation.
The topic of transfer pricing, which entails valuing intermediate or finished goods traded
between affiliates and subsidiaries in several nations, is covered. Profits can be transferred from
nations with high business taxes to those with lower corporation taxes or repatriated.
Gray marketing describes the allowed importation of genuine goods into a nation by unlicensed
middlemen. Price discrepancies between nations or changes in exchange rates are to blame. Gray
markets can present difficulties for producers, including the possibility of a damaged reputation,
strained relationships with distributors, and disruption of marketing initiatives. Standardizing
pricing, prosecuting illegal middlemen, decreasing product flow through gray market channels,
distinguishing products in different nations, and making gray market product restrictions known
are some strategies to deal with gray markets.
Last but not least, global account management is emphasized as a means of offering dependable
and uniform service to important worldwide clients, wherever they may be. To ensure
coordinated marketing support and service globally, this strategy uses cross-functional teams,
specialized coordination activities, and designated global account managers.
Global market segmentation, branding, product design, pricing, gray markets, and global account
management are just a few of the topics that are covered in this chapter as a whole to give
readers an understanding of the intricacies and methods involved in marketing for multinational
companies.
Chapter 19. Financial Management and Accounting in the Global Firm
The topic of financial management and accounting in the multinational corporation is covered in
Chapter 19 of the book "International Business: Strategy, Management, and the New Realities".
The duties required in foreign financial management are highlighted, including choosing a
capital structure, raising money, managing working capital and cash flow, capital budgeting,
managing currency risk, and handling a variety of international accounting and tax procedures.
Financial management at a multinational corporation requires working in risky environments,
transacting in different currencies, and obtaining funding from a variety of international sources.
These are the tasks involved:
Decide on the Capital Structure: Determine the optimal mix of debt and equity financing for
long-term support of international activities.
Raise Funds for the Firm: Acquire funding through equity, debt, or intra-corporate financing
for investments and operational activities.
Working Capital and Cash Flow Management: Effectively manage funds flowing in and out
of the firm's value-adding activities.
Capital Budgeting: Evaluate the financial viability of significant investment projects, such as
expanding into foreign markets.
Currency Risk Management: Mitigate risks associated with multiple-currency transactions and
exposure to exchange-rate fluctuations.
Manage the Diversity of International Accounting and Tax Practices: Operate within a
global environment with varying accounting practices and international tax regimes.
A company's capital structure consists of a mix of long-term stock funding and debt financing.
Debt funding is acquired through bank loans or by the issuance of corporate bonds, whereas
equity financing is achieved through the sale of shares of stock to investors or the retention of
earnings.
Companies raise finance on international money and capital markets. The global capital market
offers intermediate and long-term funding, whereas the global money market delivers short-term
financing. By having access to the global capital market, businesses can obtain funding at
reduced costs from a wider choice of suppliers.
Equity finance, which entails selling stock shares on stock exchanges around the world, can be
used to raise money. Debt financing entails taking out loans from banks or issuing bonds on
global markets to borrow money. Depending on where they are sold and the value of the
currency, bonds can be either foreign bonds or euro bonds.
Financing provided from internal business sources, such as equity, loans, and trade credits, is
referred to as intra-corporate financing. Intra-corporate financing has advantages over other types
of financing since it frequently provides the lowest cost capital, lowers transaction costs, has no
impact on the balance sheet of the company, avoids the hazards of debt financing, and avoids
dilution of ownership from equity financing.
The goal of working capital and cash flow management is to guarantee that cash will be available
when needed. Trade credit, royalty payments, fronting loans, and transfer pricing are all methods
for transferring money inside the company's international operations. By removing offset
financial flows, multilateral netting can help lower cash transfers inside an MNE family.
Managers can assess the economic viability of foreign growth initiatives with the aid of capital
budgeting. Analyzing the necessary initial investment, capital costs, and anticipated project
benefits is all part of the process. Because of its complexity and the large number of factors to
consider, spreadsheet analysis makes this procedure easier.
Managing currency risk entails reducing the risks brought on by unforeseen changes in exchange
rates. Transaction exposure, translation exposure, and economic vulnerability are three different
categories of currency risk. Businesses use hedging methods to proactively control exposure and
foresee exchange rate volatility.
International accounting and tax laws differ from nation to nation, making it difficult to identify,
quantify, and communicate financial information in intricate international organizations.
Financial reporting must be transparent, and international accounting standards are being
standardized. Data from subsidiaries' financial statements must be converted into the functional
currency of the company before consolidation. Direct and indirect taxes, such as sales tax and
value-added tax (VAT), are a part of international taxation. Multinational corporations frequently
set up operations or route transactions through tax havens, which are nations with low corporate
income tax rates, to save taxes.
Global business decision-making, resource allocation, risk management, and adherence to
international tax and financial reporting requirements all depend on sound financial management
and accounting practices. Determining the ideal capital structure, obtaining funding from
overseas markets, controlling working capital and cash flow, assessing investment projects,
minimizing currency risks, and negotiating various international accounting and tax methods are
some of the activities involved. The successful operation of multinational corporations in a
global business environment and the improvement of their financial performance are made
possible by these operations.

Why Global Supply Chains May Never Be the Same | A WSJ Documentary

The WSJ documentary "Why Global Supply Chains May Never Be the Same" provides insight
into the important disruptions and changes that have taken place in global supply networks.
The film investigates how the COVID-19 outbreak served as a catalyst, exposing weaknesses in
international supply systems. The complexity and interconnection of these networks are
emphasized since disruptions in one area might have repercussions throughout the entire world.
The risks of extensively depending on single-source suppliers and just-in-time inventory
management were brought to light by the shortage of essential products and components, such as
medical supplies and semiconductors.
The film also highlights the growing tendency of businesses looking to diversify their supply
chains to lessen their reliance on a particular nation or region. The necessity for resilient and
adaptable supply networks has been further highlighted by geopolitical tensions, trade conflicts,
and natural calamities. To improve supply chain resilience, businesses are looking towards
nearshoring, regionalization, and reshoring methods.
Another important topic explored in the documentary was the impact of technology on changing
supply networks. More visibility, traceability, and efficiency are possible in supply chain
operations because of the development of technologies like artificial intelligence, blockchain,
and sophisticated analytics. These developments increase stakeholder coordination, forecasting
of demand, and risk management, making supply chains more flexible and adaptable.
The documentary also highlights the importance of sustainability in supply chain management.
Environmental concerns, labor practices, and social responsibility are increasingly becoming
focal points for businesses and consumers alike. The need for greener practices, ethical sourcing,
and transparency is pushing companies to incorporate sustainability considerations into their
supply chain strategies.
In conclusion, "Why Global Supply Chains May Never Be the Same" underscores the
transformative impact of various factors on global supply chains. The pandemic, geopolitical
shifts, technology advancements, and sustainability concerns have collectively necessitated a
reevaluation and redesign of supply chain strategies. Companies that adapt and prioritize
resilience, diversification, technology integration, and sustainability will likely thrive in the
evolving global supply chain landscape.

What are your thoughts on the current state of the global supply chain?
There are many difficulties and uncertainties currently affecting the global supply chain. The
COVID-19 epidemic has exposed the system's weaknesses and vulnerabilities, causing
interruptions and shortages of necessities. Factory closures, transportation issues, and labor
shortages, for example, have had a considerable influence on the flow of goods and raised prices.
Global supply chains have been interrupted by geopolitical tensions and trade conflicts, as
nations implement tariffs and trade barriers. Due to this, businesses have had to review their
procurement plans and think about diversifying their supplier base to reduce risks.
The supply chain is transforming thanks to technology. Greater visibility, efficiency, and
predictive capabilities are made possible by digitalization, automation, and sophisticated
analytics. Integrating and optimizing these technologies across various supply chain partners is
still difficult.
The global supply chain is now critically concerned with sustainability. The importance of
environmental concerns, social responsibility, and ethical sourcing is rising. Customers and other
stakeholders are pressing businesses to adopt sustainable business practices and lessen their
environmental impact. They also expect transparency.
Overall, the requirement for increased resilience, adaptability, and sustainability is what
distinguishes the current status of the global supply chain. Businesses are putting greater effort
into expanding their supply networks, diversifying their supplier bases, and utilizing technology
to improve efficiency and responsiveness. Governments and business leaders must work together
to address the issues and enhance the overall condition of the global supply chain.