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University Of Finance & Administration
INTERNATIONAL BUSINESS
[N_IB]
Mgr. Jiří Amler
[email protected]
INTERNATIONAL BUSINESS
Full-time course = 12 sessions á 90 mins. (winter term 2016)
1-2/
What is international business (IB). IB basic indicators - balance of trade / payment.
Territorial / commodity structure of IB. Comparative advantage, free trade / economy.
Protectionism x Liberalism.
3-4/
Culture and its role in international business. Cultural elements and multi-culture
communication. Hofstede’s five dimensions of culture differences.
Entry modes and business activities in IB. Foreign market analyses.
5-6/
Individual TEAM work on the MARKET STUDY. The individual consultations on the
chosen topic of the foreign market study, preparation of the semester presentation of the
market study results.
7-8/
Globalization – microeconomic and macroeconomic view. Drivers of globalization,
pros & cons. International trade barriers. Forms of economic integration.
International market research (PEST/STEEP), and linkage to Competition analysis
(Porter) and SWOT. Data collection and their selection in the international environment.
9-10/
EXPORT - microeconomic and macroeconomic view. Export risks and their
elimination / securing. Emerging markets, prospective territories.
Prerequisites and personal preconditions for working in international business,
recruitment.
11-12) TEAM work presentations: foreign market study. Summary of the IB knowledge,
review.
INTERNATIONAL BUSINESS
2.
[E_IB]
COMPLETION conditions E_IB
CONDITIONS:
 PRESENCE at IB lectures: min. 50%
 TEAM PRESENTATION – (market study)
preparation at home: 15-20 min. presentation on
international business issue
 lecture marks based on active
PARTICIPATION: communication, reading and
discussing topical economic issues
If unfulfilled:
knowledge test will be undertaken
3.
INTERNATIONAL BUSINESS [E_IB]
Session content
 INTRODUCTION of each participant
 Name & professional interest (aiming)
 Experience with IB
 What you’d like to LEARN in this subject here
 Completion conditions specification
 Lecture
 Reading and analyzing IB articles
Within each session:
- practical discussions on topical economical issues
- lecture
- article: reading + analyses
4.
INTERNATIONAL BUSINESS [E_IB]
Common session STRUCTURE
 IB NEWS – small talk / discussion – topical business
issues
 LECTURE
 READING – analyzing – interpretation of an article
(team work) / Presentation of the materials prepared at
home
5.
INTERNATIONAL BUSINESS [E_IB]
INTERNATIONAL BUSINESS
 What is international business?
= exchange of goods and services undertaken by
business bodies across the national border with the
foreign business bodies
= cross-border commercial
transactions
 includes PURCHASE and SALES
INT business
=
EXCHANGE
across border
6.
INTERNATIONAL BUSINESS [E_IB]
INTERNATIONAL BUSINESS
•CONSISTS OF:
International TRADE
• Barter / Import / Export
International INVESTMENT
• FDI / WOS / Portfolio investment etc.
Other forms of int. business ACTIVITY
• Licensing / Franchising / Management contracts etc.
7.
INTERNATIONAL BUSINESS [B_IB]
How IB differs from DOMESTIC business?
 currencies – conversions, risks, rates securing
 often legal system – laws
 culture – behavior, business practice
 resources
 technology – way of producing
8.
INTERNATIONAL BUSINESS [E_IB]
INTERNATIONAL BUSINESS
 Reasons for participation in IB?
= the fact that almost no country is able to SATISFY its’
needs by own goods and base materials
-> countries concentrate on manufacturing products
which are effective under given conditions (= theory of
comparative advantage)
 Free economy
= stage of involvement in the international trade
9.
INTERNATIONAL BUSINESS [E_IB]
Principle of COMPARATIVE ADVANTAGE
 Absolute advantage
= a country has an absolute advantage over it trading partners if it is able to
produce more of a good or service with the same amount of resources or
the same amount of a good or service with fewer resources (copper, oil)
 Comparative advantage (David Ricardo 1772-1823)
= a country has a comparative advantage in the production of a good or
service that it produces at a lower opportunity cost than its trading
partners (relativity).
= units of production (people/machines) will be employed in those
processes in which they are relatively more productive (productivity)
 Opportunity cost (John Stuart Mill)
= is the value of the next-best choice available to someone who has picked
between several mutually exclusive choices
- opportunity costs are not restricted to monetary or financial costs: the real
cost of output forgone, lost time, swag, pleasure or any other benefit
10.
INTERNATIONAL BUSINESS [B_IB]
International ENVIRONMENT
GLOBAL
MACRO
MICRO
11.
INTERNATIONAL BUSINESS [E_IB]
Why to study IB?
 interaction inevitable (business abroad, multinational
teams etc.)
 success in larger arena
 need for understanding principles of IB (time of
globalization)
 work opportunities
 to stay abreast of the latest business techniques
12.
INTERNATIONAL BUSINESS [B_IB]
Basic IB terminology
•Abbreviations:
Inc. = incorporated [USA]
• Fin. liability of owner’s limited to the extent of investment if company
fails
Ltd. / Plc. [UK]
• Ltd. = Limited, private (Allmakes Ltd.)
• PLC = Publicly held limited-liability
AG / KGaA / GmbH [Germany]
• AG [Aktiengesellschaft] = publicly held (Volkswagen AG)
• KGaA [Kommanditgesellschaft] = limited partners + min. 1 unlimited
(Henkel KGaA)
• GmbH [Gesellschaft mit bescharankter Haftung] – private, analogy to
Inc., Ltd. (or „s.r.o.“ in CZ)
SpA [Italy] / SA [France]
• SpA [la societa per azioni] (Fiat SpA)
• SA [societe anonyme] (Carrefour SA)
= analogy to „a.s.“ in CZ
13.
INTERNATIONAL BUSINESS [E_IB]
IB importance + influences
1. ECONOMICAL
2. POLITICAL
3. CULTURAL
 FREE TRADE (international exchange)
= is a system of TRADE POLICY that allows traders to act and transact without
interference from government. According to the law of COMPARATIVE
ADVANTAGE the policy permits trading partners mutual GAINS from trade of
goods and services.
= it is an AIM of all the trade economies and consists in:
 convertibility (possibility to exchange currency)
 free price creation
 economical and political barriers elimination
(duties, quotas, admin. barriers etc.)
14.
INTERNATIONAL BUSINESS [E_IB]
International business - THREATS
Weak selfsufficiency
(in case of war or
political system
change)
Dependence
(the smaller and
econ.developed
country => the
more important IB
is for the country)
15.
INTERNATIONAL BUSINESS [E_IB]
IB INDICATORS [basic]
 BALANCE OF TRADE
= review of export & import volume in certain period
of time
A) ACTIVE = export > import
B) PASSIVE = export < import
 BALANCE OF PAYMENTS
= review of currency / exchange receipts and
expenditures
A) ACTIVE = payments abroad < receipts from abroad
B) PASSIVE = payments abroad > receipts from abroad
16.
INTERNATIONAL BUSINESS [E_IB]
IB indicators - details
 Balance of Trade
= EXPORT – IMPORT, the difference between a nation's exports of goods
and services and its imports of goods and services, if all financial transfers,
investments and other components are ignored. A nation is said to have a
trade DEFICIT = if it is importing more than it exports.
 Balance of Payments
= difference between the money coming into a country and the money
leaving the same country
-In economics, the balance of payments (BOP) measures the payments
that flow between any individual country and all other countries
- It is used to summarize all international economic transactions for that
country during a specific time period, usually a year.
- the BOP is determined by the country's exports and imports of goods,
services, and financial capital, as well as financial transfers
17.
INTERNATIONAL BUSINESS [E_IB]
IB INDICATORS [basic]
 BALANCE OF PAYMENTS (BOP)
A/ Current Account – trade, services, services of capital,
unilateral
B/ Capital Account – portfolio, FDI
C/ Official Reserve Account –gold, convertibles, SDR, IMF
borrowings
D/ Errors and Omissions
18.
INTERNATIONAL BUSINESS [E_IB]
STRUCTURE of IB
TERRITORIAL
COMMODITY
19.
INTERNATIONAL BUSINESS [E_IB]
Ways of controlling IB
 PROTECTIONISM – state intervenes in IB
- protects the inner market against foreign competition
- supports own products at the foreign markets
 LIBERALISM – state limits the interventions in IB
- export & import without restrictions
- currency convertibility enables access to foreign
currency purchases for free trade / exchange
20.
INTERNATIONAL BUSINESS [B_IB]
PROTECTIONISM
= economic policy of RESTRAINING trade between
states
• This policy is closely aligned with anti-globalization, and
contrasts with free trade, where government barriers to trade
and movement of capital are kept to a minimum.
• The term is mostly used in the context, where protectionism
refers to policies which protect businesses and workers within
a country by restricting or regulating trade with foreign
nations.
“No policy has failed as often, or been as widely applied and
enthusiastically believed, as economic protectionism.” (Bob McTeer, Federal
Reserve Bank of Dallas)
21.
INTERNATIONAL BUSINESS [B_IB]
PROTECTIONISM - history
= economic policy of restraining trade between
states
• Historically, protectionism was associated with
economic theories such as MERCANTILISM (that
believed that it is beneficial to maintain a positive trade
balance), and import substitution.
• During that time, ADAM SMITH famously warned
against the 'interested sophistry' of industry, seeking to
gain advantage at the cost of the consumers
• Most modern economists agree that protectionism is
harmful in that its costs outweigh the benefits, and that it
impedes economic growth
22.
INTERNATIONAL BUSINESS [E_IB]
PROTECTIONISM - methods
• Tariffs on imported goods
• restrictive Quotas - to reduce the quantity and therefore
increase the market price of imported goods
• Administrative Barriers: using various administrative
rules (eg. regarding food safety, environmental
standards, electrical safety, etc.)
• Exchange Rate manipulation: government may
intervene in the foreign exchange market to lower the
value of its currency by selling its currency in the foreign
exchange market.
… and a variety of other government regulations designed to
discourage imports, and prevent foreign take-over of native
markets and companies.
23.
INTERNATIONAL BUSINESS [B_IB]
International Trade Barriers
 Duty or tariff – export import
- ad valorem
- specific
- compund
 Quota – numerical limitation
 Voluntary export restraint
 Product & testing
 Restricted access to distribution
 Public sector procurement
 Local-purchase
 Regulatory/Currency/Investment Ctrl
24.
INTERNATIONAL BUSINESS [B_IB]
PROTECTIONISM – arguments FOR
= economic policy of restraining trade between
states
1) Saving jobs for citizens of country
2) Promoting / Protecting infant industries
3) Promoting / Protecting domestic & economic
development
4) Offsetting economic distortions
25.
INTERNATIONAL BUSINESS [B_IB]
PROTECTIONISM – arguments AGAINST
= economic policy of restraining trade between
states
Harming the freedom and free market
1. Gains from free trade outweigh any losses; as
free trade creates more jobs than it destroys
because it allows countries to specialize in the production of
goods and services in which they have a comparative advantage.
2. Free trade helps third world workers, even
though they are not subject to the strict health
and labour standards of developed countries
3. Protectionism has also been accused of being
one of the major causes of war.
26.
INTERNATIONAL BUSINESS [B_IB]
PROTECTIONISM – conclusion
„Let me just be blunt. Protectionism is the crack
cocaine of economics. It may provide a high. It's
addictive and it leads to economic death.“
Richard Fisher
President of Dallas Federal Reserve Bank
27.
INTERNATIONAL BUSINESS [B_IB]
LIBERALISM
= economic policy that opposes government
intervention in the FREE MARKET, and supports the
maximum of free trade and competition
= is an economic philosophy that supports and
promotes laissez-faire capitalism (= to let create/be)
-it contrasts with mercantilism, Keynesianism and
socialism
- ADAM SMITH (1776) Wealth of Nations - advocates
minimal interference of government in a market
economy
28.
INTERNATIONAL BUSINESS [B_IB]
LIBERALISM – arguments FOR
1. Higher economic freedom has a strong
correlation with higher LIVING STANDARDS
2. Higher economic freedom leads to INCREASED
INVESTMENTS, TECHNOLOGY TRANSFER,
INNOVATION and a responsiveness to consumer
demand
3. Many government attempts to micro-manage their
economies using things like tariffs, public investment, etc.
were often misdirected, poorly timed, poorly implemented
and brought undesirable consequences = government
is incapable of managing a social system as huge
as a national economy
4. Government-owned enterprises and public
entitlements were losing a lot of citizens' money
29.
INTERNATIONAL BUSINESS [B_IB]
LIBERALISM – arguments FOR
5. During the 1970s, state-controlled economies
proved unresponsive to economic shocks, and
much of the world endured a sustained, highinflation recession until markets were liberalized
(though proponents still note that liberalization itself is
only one of several factors in the recent return to
prosperity; other factors include technological
developments and the end of the Cold War)
30.
INTERNATIONAL BUSINESS [B_IB]
LIBERALISM – arguments AGAINST
 Globalization and liberalization spoils nations'
ability for self-determination
 Exploitation: critics consider capitalist economics
to be exploitive
 Environmental costs: critics argue that
neoliberalism leads to more transportation, and
unregulated markets lead to more industrial
production
 Increase in corporate power: some anti-corporate
organizations believe neoliberalism changes
economic and government policies to increase the
power of corporations and large business
31.
INTERNATIONAL BUSINESS [B_IB]
KEY terms
-
International Business = Int. trade / Int. investment / Other
business activities
Reasons for IB, advantages x disadvantages
Free trade
Comparative advantage / Absolute advantage / Opportunity
cost
Balance of trade, Balance of payments
Liberalism x Protectionism
Convertibility, trade barriers, free price creation
Structure of IB (territory, commodity)
Corporation abbreviations / Financial liability
FDI / Portfolio investment
Home x Host country
Economies of Scale
32.
INTERNATIONAL BUSINESS [E_IB]
Thank you for your attention
33.
INTERNATIONAL BUSINESS [B_IB]