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BUSN 1101 Week 8 Chapter 4 Notes

by: Danielle Murray

BUSN 1101 Week 8 Chapter 4 Notes

Marketplace > University of North Carolina - Charlotte > > BUSN 1101 Week 8 Chapter 4 Notes
Danielle Murray

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This 3 page Class Notes was uploaded by Danielle Murray on Sunday July 31, 2016. The Class Notes belongs to at University of North Carolina - Charlotte taught by in Fall 2016. Since its upload, it has received 4 views.


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Date Created: 07/31/16
Understanding the Global Context of Business OBJ. 1 Discuss the rise of international business and describe the major world marketplaces, trade agreements, and alliances.  Importing and exporting products from one country to another greatly increases the variety of products available to consumers and businesses.  Government and businesses have become aware of the potential for higher standard of living and increased profits.  New technologies make international travel, communication, and commerce faster and less expensive.  Some companies expand into foreign markets just to keep up with their competitors.  North America, Europe and pacific Asia are 3 geographic clusters that are the major marketplaces for international business activity o Include more of the upper-middle and high-income nations but few lower income nations OBJ. 2 Explain how differences in import-export balances, exchange rates, and foreign competition determine the ways in which countries and businesses respond to the international environment  Economists use two measures to assess the balance between imports and exports.  Balance of trade: the total economic value of all products that it sports minus the total economic value of all products that it imports o When a country’s imports exceed its exports, it’s a negative balance of trade and suffers a trade deficit o Positive balance of trade occurs when exports exceed imports, resulting in a trade surplus  Balance of payments: the flow of money into or out of a country  Contributors to balance of payments o Payments for imports and exports o Money spent by tourists o Funding from foreign-aid programs o Proceeds from currency transactions  Exchange rate: the rate at which one nation’s currency can be exchanged for that of another o Major influence on international trade  Floating exchange rates: the value of one currency relative to that of another varies with market conditions  Countries export what they can produce better or less expensively than other countries and use the proceeds to import what they can’t produce as effectively.  Economists once focused on two forms of advantage to explain international trade: absolute advantage and comparative advantage  National competitive advantage is a widely accepted model of why nations engage in international trade o According to this theory, comparative advantage derives from 4 conditions: 1. Factor of production conditions 2. Demand conditions 3. Related and supporting industries 4. Strategies, structures and rivalries OBJ. 3 Discuss the factors involved in deciding to do business internationally and in selecting the appropriate levels of international involvement and international organizational structure  A company wishing to sell products in foreign markets should consider the following: o Is there a demand for its products abroad? o If so, must it adapt those products for international consumption? o Companies may also go international through outsourcing and offshoring  A firm must decide on it level of involvement: o Exporters and importers o International affairs o Multinational firms  The spectrum of international organizational strategies include: o Independent agents  Represents foreign individuals or orgs. that represent an exporter in foreign markets o Licensing arrangements  Represents a contract under which one firm allows another to use its brand name, operation procedures, or proprietary technology o Branch offices  Sending managers overseas to set up a physical presence o Strategic alliances  Occurs when a company seeking international expansion finds a partner in the country in which it wishes to do business o Foreign direct investment  The practice of buying or establishing tangible assets in another country OBJ. 4 Describe some of the ways in which social, cultural, economic, legal, and political differences among nations affect international business.  A country’s culture includes all the values, symbols, beliefs, and language that guide behavior; which are often unspoken  Difficulties can arise when there is little overlap between the home culture of a manager & the culture of the country in which the business is being conducted  Cultural differences between countries can have a direct impact on business practice  Managers in international business also have to understand that there are differences in what motivates people in different cultures.  Social orientation: a person’s beliefs about the relative importance of the individual vs. groups to which that person belongs.  Power orientation: the beliefs that people in a culture hold about the appropriateness o power and authority differences in hierarchies.  Uncertainty orientation: the feeling individuals have regarding uncertain and ambiguous situations  Goal orientation: the manner in which people are motivated to work toward different kinds of goals  Time orientation: the extent to which members of culture adopt a long-term vs. a short term outlook on work, life, and other elements of society. OBJ. 5 Describe some of the ways in which economic, legal, and political differences among nations affect international business.  Economic differences among nations can be fairly pronounced and can affect businesses in a variety of ways.  Legal and political issues include quotas, tariffs, subsidies, local content laws, and business practice laws. o Quotas: restrict the # of certain products that can be imported into a country o Tariff: a tax that country imposes on imported products o Subsidies: gov. payments to domestic companies to help them better compete with international companies o Business practice laws control business activities within their jurisdiction & create obstacles for businesses trying to enter new markets. o Protectionism describes the practice of protecting domestic businesses at the expense of free market competition.  Another obstacle to international business is that business practices that are legal in one country may not be legal in another o Bribery, the formation of cartels and dumping are forbidden in the U.S.


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