International Business and

Trade
International business refers to the trade of goods, services,
technology, capital and /or knowledge across national borders
and at a global or transnational scale
Globalization-the shift toward a more interdependent and
integrated global economy-creates greater opportunities for
international business.
Example of International Business firms include Apple, a
company that produces consumer electronics such as
computers, tablets etc.
Strategic Management and
Entrepreneurship
• Strategic Management is the body of knowledge that answers
questions about the development and implementation of good
strategies and is mainly concerned with the determinants of firm
performance.
• SWOT (Strength, Weakness, Opportunities and Threats). The SWOT
helps you stock of an organization’s internal characteristics – to
formulate an action plan that builds on what it does well while
overcoming or working around weaknesses.
 Entepreneurship
• Entrepreneurship is the recognition of
opportunities (i.e., needs, want, problems and
challenges) and the use or creation of resources
to implement innovative ideas. Entrepreneurship
help you think about the opportunities available
when you connect new ideas with new markets.
 Benefits of International Trade to
Nation
• It encourages a nation to obtain foreign exchange that can be utilized
to import merchandize from the global market
• It prompts specialization of a country in the production of
merchandise which it creates inn the best and affordable way.
• Also, it helps a country in enhancing its development prospects and
furthermore make opportunity for employment.
• International business makes it comfortable for individuals to utilize
commodities and services produced in other nations which help in
improving their standard of life
 Benefits of International Trade to
Firms
• It helps in improving profits of the organizations by selling products in
the nations where costs are high.
• It helps the organization in utilizing their surplus resources and
increasing profitability of their activities.
• Also, it helps firms in enhancing their development prospects.
• International business also goes as one of the methods for
accomplishing development in the firms confronting extreme market
conditions in the local market.
• And it enhances business vision as it makes firms more aggressive and
diversified.
B.Topic 2
Topic Title: Global Business Opportunities
Importing and Exporting
Import: a goods and services brought into one country from another
(buying products overseas and reselling them in one’s own country.
Importing is the primary link to the global market.
• Export: a goods or services produced in one country then get
marketed to another country
• (selling domestic products to foreign customer)
Import-Export is the most fundamental and the largest international
business activity
 Importance of Export and Import
• Export and import are important for the development and
growth of national economies because not all countries have
the resources and skills required to produce certain goods
and services
• If a country imports more than it exports, it has a trade
deficit.
• . Importing is not necessary bad thing because it gives us
access to important resources and products not otherwise
available or at a cheaper cost.
• if you import more than you export, more money is leaving
the country than is coming in through export sales.
 Top imports sources of the Philippines 2018
• Electrical machinery and equipment: US$ 27billion
(23.9% of total imports)
• Mineral fuels including oil: $13.6 billion (12%)
• Machinery including computers: $12.5 billion (11.1%)
• Vehicles: $8.5billion (7.5%)
• Iron, steel: $3.9 billion (3.25%)
• Plastics, plastic articles: $3.7 Billion (3.3%)
• Cereals: 2.9 billion (2.6%)
 Barriers to Trade
• Trade barriers are restrictions on international trade imposed by the
government. They are designed to impose additional costs or limits on
imports and/ or exports in order to protect local industries. These
additional costs or increased scarcity result in higher price of imported
products and thereby make local goods and services more competitive
• Formal trade barriers are barriers to trade that are intentionally
created for the express purposes of making it harder for an exporter to
sell goods in a foreign market. Tariff is an example of Formal Trade
Barriers which is a special type of tax that is imposed on imported
goods to make it more expensive
• . Informal Trade Barriers are not necessarily created to hinder imports
of goods but have the effect of doing so.
StrategicManagement and Entrepreneurship
• Strategic Management is the body of knowledge that
answers questions about the development and
implementation of good strategies and is mainly concerned
with the determinants of firm performance.
• SWOT (Strength, Weakness, Opportunities and Threats). The
SWOT helps you stock of an organization’s internal
characteristics – to formulate an action plan that builds on
what it does well while overcoming or working around
weaknesses.
Benefits of International Trade to Nation

• It encourages a nation to obtain foreign exchange

• It prompts specialization of a country
• Enhance its development of a country
• improves nations standard of life.
 Benefits of International Trade to Firms

• Improve profits of the organizations

• Helps in utilizing their surplus resources
• Enhances their development prospects
• Enhances business vision of an organization
 PRELIM QUIZ/ACTIVITY
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 TOPIC 2

GLOBAL BUSINESS OPPORTUNITIES

 GLOBALIZATION
• Globalization is about the interconnectedness of people and
businesses across the world that eventually leads to global
cultural, political and economic integration. It is the ability to
move and communicate easily with others all over the world in
order to conduct business internationally.
• Import-Export is the most fundamental and the largest
international business activity, and it is after the first choice
when the business decide to expand.
• importing is the primary link to the global market.
Globalization in economics
 Importance of Export and Import
Export and import are important for the development and
growth of national economies
Not all countries have the resources and skills required to
produce certain goods and services.
If a country imports more than it exports, it has a trade
deficit as more money is leaving the country than is
coming in through export sales.
Countries want to be net exporter rather than net
importer as export exceeds import it has a trade surplus.
 Philippines Balance of Trade
• In 2019 the trade deficit of the Philippines amounted
to42.5 billion US dollars.

• Philippines has been running annual trade deficits due

to high imports of raw materials and intermediate
goods.
 Top Imports sources of the Philippines
• Electrical machinery and equipment: US$ 27billion
(23.9% of total imports)
• Mineral fuels including oil: $13.6 billion (12%)
• Machinery including computers: $12.5 billion (11.1%)
• Vehicles: $8.5billion (7.5%)
• Iron, steel: $3.9 billion (3.25%)
• Plastics, plastic articles: $3.7 Billion (3.3%)
• Cereals: 2.9 billion (2.6%)
 Barriers to Trade
• Trade barriers are restrictions on international trade
imposed by the government designed to impose
additional costs or limits on imports and/ or exports in
order to protect local industries as a result of higher
price.
• Ex. Black Wing Shoes (Marikina Shoes), the 132 years
shoe industry decline by the flooding of China made
shoes in the late 1990s as a result of trade
liberalization, the local industry began to suffer. From
513 registered shoe manufacturer falls to 153 in 2018.
Marikina Shoes: Black Wing Shoes
 Formal Trade Barriers
Tariff is an example of Formal Trade Barriers which is a special type of tax
that is imposed on imported goods to make it more expensive.
They are sometimes also referred as duties.
The countries affected by those tariffs usually don’t like being
economically disadvantaged, which often leads them to impose their own
tariffs to punish the other country ( retaliatory tariffs)
tariffs are used to protect local industries that could otherwise not
compete with foreign producers (i.e.peril point tariffs)
Tariffs can be implemented to raise the cost of products to consumers in
order to make them more expensive than local goods or services (i.e.
scientific tariffs).
Trade War between US and China (Retaliatory Tariff)
 Non-Tariffs and Quotas
• Non-Tariffs are barriers that restrict trade through the
measures other than the direct imposition of tariffs. This may
include measures such as quality and content for imported
goods or subsidies to local producers.

• Quotas are restrictions that limit the quantity or monetary

value of specific goods or services that can be imported over
a certain period of time. The idea behind this is to reduce the
quantity of competitive products in local markets which
increases the demand for local goods and services.
 Topic 3
Licensing, Franchising and Foreign Direct Investment
• After Topic 3, you are expected to:
• -Understand the business opportunities in the
international market
• -Evaluate the terms and conditions of franchising and
licensing
• -Identify the benefits of Foreign Direct Investment
among countries
 Licensing
• Licensing is the arrangement between a firm called licensor,
the licensor gets benefits in terms of the royalty.
• Advantages of licensing: opportunity for passive income, new
business opportunity, entry to foreign market, self-
employment opportunities
• It has also disadvantages when intellectual property rights is
exposed to theft.
• Franchising is different from the licensing in terms of the
franchisees terms and condition, franchisor is heavily
involved on how the service is provided.
 Advantages of Licensing

• It creates an opportunity for passive income

• It creates new business opportunity
• It reduces risk for both parties
• It creates an easier entry to foreign market
• It creates self-employment opportunities
• It offers a freedom to develop unique marketing
approach
 Disadvantages of Licensing

• It increase opportunities for Intellectual Property (IP) theft

• It creates a dependency upon the licensor
• It creates added competition in the marketplace –
• It is offered for a limited time
• It could damage the reputation
• t is not a guarantee of revenues
• It takes time for royalty payment to arrive
• It may lead to royalty litigation
 Franchising
• Franchising is closely related to licensing.
Franchising is a parent company (franchiser)
gives the right to another company(franchisee)
to do business using the franchiser’s name and
product in a prescribed manner
• licensing is more about the manufacturers wile
franchising is more popular with restaurants,
hotels and rental services.
 Top Global Franchises
• Mc Donald’s
• KFC
• Marriott International
• Pizza Hut
• Burger King
• Domino’s
• Dunkin
• SUBWAY
• Circle K
• Inter Continental Hotels and Resorts
Types of Franchises

1. Business Format Franchise

• the franchisor gives the rights to trademarks,
trade names, business process and the system in
order for the franchisee to sell the product for a
fee.
• The franchisor is heavily involved on how the
service is provided and the business is run.
• There is a long binding contract between the two
parties for a certain period of time.
 2. Product Distribution Franchise
• This franchise concept is similar to a supplier-distributor
relationship. The franchisor is responsible for providing
the product and the distributor is then able to sell the
product.
• The franchisee can be much more independent in terms
of not having the restrictions and guidelines that a
business format has.
• This method is often used for larger products, such as
vending machines and cars.
 3. Management Franchise
• This type of franchise would be ideal for
somebody with previous managing experience
as it allows individuals with transferable skills to
really take ownership of a business and lead it to
success.
• . Management franchising is great for resale
franchises, which are franchises that are bought
from an existing franchisee.
 Strategic Partnerships and Joint Venture
• A strategic partnership or alliance is a positive aspect of
cooperation of two or more companies in different countries
are joined together for mutual gain.

Reasons for entering strategic alliance

• learning partner skills, upgrading and improving skills,
seeking vertical integration, shaping future industry
evolution. resources will be pooled to market advantages
and put the companies in win-win situations
• Example is the joint venture of taxi giant UBER and the heavy
vehicle manufacturer Volvo. The joint venture goal was to
produce driverless cars. The ratio of ownership is 50%-50%.
The business worth was $530 million as per agreement in the
joint venture.
 Foreign Direct Investment
• It means a company’s physical investment such as into
the building and facilities in the foreign country and
acts as a domestic business with a full scale of activity
• Companies practice FDI to get benefits from cheaper
labor cost, tax exemptions, and other privileges in that
foreign country will get benefits by the introduction of
new products, services, technologies and managerial
skills.
PRELIM EXAMINATION