Group 7: LEADERSHIP AND EMPLOYEE BEHAVIOR International Business and Trade IN

INTERNATIONAL BUSINESS

Importance of Information System in International Business

● Store and Analyse Information

● Simplify Business Processes
● Facilitate Decision Making
● Access to Full Data Control

MOST COMMON METHODS OF PAYMENT IN INTERNATIONAL TRADE

● Letters of Credit
- A letter of credit, or documentary credit, is basically a promise by a bank to pay an
exporter if all terms of the contract are executed properly. This is one of the most secure
methods of payment.
● Documentary Collection
- Method of trade financing whereby the bank of the exporter sends documentation to the
bank of the importer and collects money for shipping goods.
● Cash In Advance
- most secure method of payment the buyer pays the full or a significant amount of the
payment before the goods are shipped
- Other cash-in-advance methods include:
1. Debit card payment
2. Telegraphic transfer
3. International cheque
● Open Account
- This is one of the most advantageous options to the importer, but it is a higher-risk option
for an exporter.

Foreign Exchange Risk

- The chance that a company will lose money on international trade because of currency
fluctuations.

Primary Types of Foreign Exchange Risk

1. Transaction Risk
- Occurs when a company buys products from a supplier in another country, and price is
provided in the supplier’s currency.
2. Translation Risk
Group 7: LEADERSHIP AND EMPLOYEE BEHAVIOR International Business and Trade IN
INTERNATIONAL BUSINESS
- Refers to how a foreign exchange transaction will impact financial reporting; i. e., the
risk that a company’s equities, assets, liabilities, or income will change in value as a
result of exchange rate changes.
3. Economic Risk
- Also known as Operating Exposure, this refers to the impact on a company’s market
value from exposure to unexpected currency fluctuations.

Foreign Exchange Trading

- Another currency risk mitigation strategy where companies are trading in the currency of
different countries.

Causes of Foreign Exchange Risk

- Includes political unrest and even a change in government policies, which can impact the
exchange rate and, in turn, affect business transactions.
- Collapse of a foreign government
- Credit risk: that the counterparty will default in making the obligations it owes
- Out of seller’s control as it depends on another party’s commitment to pay its debts
- Counterparty’s business activities must be monitored so business transactions are closed
at the right time without risk of default
- Power your entire partner payouts operations
- Macroeconomic factors such as significant swings in exchange rates
- Government policies
- Can result in a dip or hike market movement
- Changes in inflation, interest rates, import-export duties and taxes impact the exchange
rate
- Sovereign risk: that a government is unable to repay its debt and defaults on its payments
- Can have a direct impact on investment rates as repercussions can trigger other
business-related troubles.

Finally, before agreeing to an importer’s foreign currency requests, you’ll want to consult
with a bank to learn:
➢ When should an exporter consider selling in a foreign country?
➢ How common is it for a small exporter to set prices in a foreign currency?
➢ What type of transactions are most suitable for foreign exchange?
➢ What are the fees for using a forward contract?

3 Ways to Manage Foreign Exchange Risk

1. Establish a forward contract with a bank or exchange service provider.

2. The exporter accepts foreign currency payments only with cash in advance.
Group 7: LEADERSHIP AND EMPLOYEE BEHAVIOR International Business and Trade IN
INTERNATIONAL BUSINESS
3. Match foreign currency receipts with expenditures.

TECHNIQUES USED BY FIRMS TO MANAGE THEIR WORKING CAPITAL

Working Capital Management

- It is the process of ensuring a company is using its financial resources in the most
effective way possible.

5 Working Capital Management Techniques To Use

1. Pay suppliers on time
2. Monitor and control costs
3. Collect customers Payments Faster
4. Improve inventory management
5. Make Smart Financing Decisions

What methods can the firm use to improve its working capital?
1. Asking for deposits or upfront payment.
2. Reducing credit terms and billing as soon as a sale is made.
3. Take a harder look at sales forecasting and demand planning as well.

3 Main Strategies A Firm May Use To Finance Its Working Capital And Fixed Assets
1. Hedging
2. Aggressive
3. Conservative

4 Working Capital Management Practice

1. Cash Management
2. Inventory management
3. Accounts receivables
4. Accounts payables

RECRUITING AND SELECTING STAFF FOR INTERNATIONAL ASSIGNMENTS

Recruitment
- defined as searching for and obtaining qualified job candidates in sufficient numbers to
fill job needs

Selection
- gathering information for the purposes of evaluating and deciding who should be
employed in particular jobs
Group 7: LEADERSHIP AND EMPLOYEE BEHAVIOR International Business and Trade IN
INTERNATIONAL BUSINESS
International Assignment
- an overseas task set by a company to an employee. Companies that engage in
international assignments are mainly multinational corporations (MNCs)

Identifying the Need for International Assignment

Typical reasons for an international assignment include the following:

● Filling a need in an existing operation.
● Transferring technology or knowledge to a worksite (or to a client's worksite).
● Developing an individual's career through challenging tasks in an international setting.
● Analyzing the market to see whether the company's products or services will attract
clients and users.
● Launching a new product or service.

Types Of International Assignments

1. Short Term Assignments

- extended short term assignments that last up to one year.
2. Extended Assignments
- It range from 12 –36 months and require the most rigorous expatriate selection and
training
3. Traditional Long Term Assignments
- often for management development or problem solving and can include roles such as
project supervision until a more long term arrangement can be found in the host country

Three Major Attributes Of Successful Expatriates:

● Intellectual Capital
- Knowledge, skills, understanding and cognitive complexity.
● Psychological Capital
- The ability to function successfully in the host country through internal acceptance of
different cultures and a strong desire to learn from new experiences.
● Social Capital
- The ability to build trusting relationships with local stakeholders, whether they are
employees, supply chain partners or customers.

Selection Criteria:
● Country-cultural requirements
● Technical ability
Group 7: LEADERSHIP AND EMPLOYEE BEHAVIOR International Business and Trade IN
INTERNATIONAL BUSINESS
● Multinational Enterprises requirements
● Cross-cultural suitability
● Language
● Family requirements

Expatriate
- to a professional or skilled worker who intends to return to their country of origin

Expatriate failure
- Premature return of an expatriate
- Now recognized that under-performance during an international assignment, and
retention upon completion, should be included

International Assignments: Factors Moderating Performance

● Inability to adjust to foreign culture
● Length of assignment
● Willingness to move
● Work-related factors
● Psychological contract

The Phases of Cultural Adjustment

Phase 1: Tourist
Phase 2: Crisis/Culture Shock
Phase 3: Pulling up
Phase 4: Adjustment

Repatriation
- the process of placing the international assignee back into the parent organization
following the completion of the overseas mission

Basic Human Managerial Employees Resource Issues Involving Non-Managerial

Employees

Difference between Managerial Employee and Non-Managerial Employee

➢ MANAGERIAL EMPLOYEES
- an employee oversees the job of another person or a group of people. Example:
Operations manager, Accounting manager, Project manager.
➢ NON-MANAGERIAL EMPLOYEES
Group 7: LEADERSHIP AND EMPLOYEE BEHAVIOR International Business and Trade IN
INTERNATIONAL BUSINESS
- they are essential to the company’s mission and vision, though they have less
responsibility, decision-making, and accountability than managers. Example:
Accountants, Executive Assistant, HR Coordinator

HUMAN RESOURCE ISSUES

1. Compliance with laws and regulations

- failure to comply with laws and regulations can lead to serious consequences for a small
company, including audits, lawsuits, and even bankruptcy.
2. Health and Safety
- failure to execute a thorough health and safety program can expose the company to costly
lawsuits and injury claims.
3. Change Management
- when the change management is done poorly it can have an adverse effect on
performance, staff engagement, and morale.
4. Compensation management
- this is the core concern for all employees and has an immense impact on everything from
performance to engagement to productivity.
5. Monitoring Productivity and Performance
- productivity and performance are a shared responsibility between managers and HR
department. Managers are ultimately responsible for their team’s performance, but it will
fall on the HR department to make tough decisions.

Benefits of International Labour Standards

● A path to full and productive employment and decent work for all
● An international legal framework for fair and stable globalization
● A level playing field
● A means of providing economic performance
● A safety net in times of economic crisis
● A strategy for reducing poverty
● The sum of international experience and knowledge

International Labor Issues

● Labor Movements
● Transnational Labor Organizing
● Labor Laws
Group 7: LEADERSHIP AND EMPLOYEE BEHAVIOR International Business and Trade IN
INTERNATIONAL BUSINESS
● Child Labor in Developing Countries
● Labor and Labor Practices
● Labor Force
● Human Trafficking

Key Issues in International Industrial Relations (IIR)

Issue 1: Who should handle labour relations - Headquarter or the Subsidiary in the
concerned Country
Issue 2: Trade Union Tactics
- Strike
- Form International Trade Secretariats (ITSS)
- Lobbing for limited National Legislations
- Intervention from the Global Body
Issue 3: Political
Issue 4: Social and Identity
Issue 5: Power and Knowledge