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International Business summary
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International businessH1, 2, 3, 4, 5, 6, 7, 10
Hoofdstuk 1 Introduction to International business
Multinationals= Foreign companies that operate worldwide.
- Gradually small companies are venturing across their national borders: e.g., through
web shops which sell goods to foreign customers.
International business= economic activities across borders or actions that are necessary to
do business abroad.
Globalisation= the worldwide coalescence of economies, politics and cultures.
The main emerging economies are:
The BRICS countries: Brazil, Russia, India, China, South Africa
De N11 (Next Eleven) countries: Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria,
Pakistan, Turkey, Vietnam, South Korea
Causes of globalisation:
Opening of international borders
Advent of the internet
Development of low-wage countries
Advantages (voordeel) of globalisation:
It promotes economic growth and welfare
It disseminates technological knowledge
It leads to cultural integration
Disadvantages (nadeel) of globalisation:
Greater risk of wages in developed countries being undermined
Increased exploitation of workers in less developed countries
Provides multinationals with a great deal of power
Due to the disadvantages of globalisation, more and more attention is paid to sustainable
international business. Sustainable international business is based on three pillars:
1. People: It covers people inside and outside the company and aspects such as health
and safety in the workplace, employment laws, human rights, wages, training and
child labour.
2. Planet: Care for the environment. As our natural resources are becoming exhausted,
we shall have to look for alternatives. Much attention has recently been paid to the
process of recycling, in which products are made from components that can be re-
used after the lifetime of the original product is over.
3. Profit: Location policy, profitability, profit appropriation, dividend distribution,
sponsoring and charity policy.
,At the centre is the stakeholder, a group or an individual who influences/ is influenced by an
organization or company.
Import= Buying of foreign products or services.
Reasons for importing are:
Production in other countries is cheaper (in the country of origin the labour costs are
lower than in Europe)
The product/service is not yet available on the domestic market
Export= Selling of foreign products or services.
Motives for exporting are:
Too small a domestics market
New markets
Continuity of the enterprise
Price is competitive
Overcapacity
Foreign direct investment= a company directly invests in the production in another county,
e.g. by building a factory.
Proactive motives Reactive motives
Profit and growth goals Competitive pressure
Managerial urge Small and/or saturated home market
Distinctiveness of the product Utilisation of overproduction/excess
capacity
Anticipating foreign market opportunities Reduced dependence on
customers/suppliers
Economies of scale Stabilisation of seasonal factors
Integration of the supply chain Proximity of customers/suppliers
Tax benefit Perishable products
Proactive motives result from the policy that a company establishes to do business
internationally, whereas reactive motives result from a threat in the home market or the
nature of the product.
Active trade balance or trade surplus= More exports than imports. This is often regarded as
a positive development for a country, because more money comes into the country than is
spent on imports.
Passive trade balance or trade deficit= More imports than exports. As more money goes out
of the country than comes in, this is often regarded as a negative development.
The most important trading partners for the European Union are the United States, China,
Switzerland, Russia and Japan.
, Hoofdstuk 2 Political and economic environment
Doing business in a political and economic environment means that the company must take
into account trade policy around the world.
European Union: is the world’s biggest trader, accounting for 20% of global imports and
exports.
Trade policy: measures that governments may take to influence international specialisation.
Free trade:
Free trade of goods and services
- Competition between imported and local products lowers prices and increases
quality.
Free trade is restricted in two ways:
1. By regional trading arrangements among a number of countries.
2. By limiting trade to protect the economy, protectionism.
Regional trading arrangements
The objective of regional trading arrangement is to reduce barriers to trade among the
member countries. They remove tariffs on intrabloc trade in goods.
Forms of cooperation are:
Free-trade bloc
Customs union
Common market
Economic and monetary union
Protectionism: measures a country takes to protect its own economy against international
competition.
Anti-protectionism: WTO
There are two ways to protect one’s own company:
1. Measures that cost money (tariff)
2. Measures that set requirements for trade (non-tariff)
Tariff measures:
Import duties
Turnover tax
Excise duties
Preferential tariff measures
Non-tariff measures:
Customs formalities
Technical requirements
Administrative procedures
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