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Summary International Business
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Summary of the book International Business. Chapter 2 to 10.
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International Business book by Radha Jethu-Ramsoedh
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2. Political and economic environment 22.1 Free trade 2
2.2 Regional trading arrangements 2
2.3 Economic and Monetary Union2
2.4 Protectionism 3
2.5 International organisations 4
3. Culture 5
3.1 What is culture? 5
3.2 Elements of culture 6
3.3 Classification of cultural differences 6
3.4 Ethics 7
4. Management and organisation in an international environment 8
4.1 Internationalisation? 8
4.2 Strategic management 8
4.3 Value chain analysis 9
4.4 Strategic planning 10
4.5 Internal organisation 10
4.6 Human Resource Management11
5. External analysis in an international environment 11
5.1 What is an external analysis? 11
5.2 Initial analysis 11
5.3 Environmental analysis 11
5.4 Market research 12
5.5 Determining market potential 12
6. Market entry and international marketing 13
6.1 International cooperation 13
6.2 Modes of cooperation 13
6.3 Direct mode of entry 14
6.4 Mergers and acquisitions 14
6.5 Outsourcing & out-tasking 14
6.6 International marketing strategy 15
6.7 International marketing mix 15
7. Intercultural communication and management 15
7.1 Preparing for intercultural communication 15
7.2 Cross-cultural negotiating 15
7.3 Intercultural management 16
8. International commercial law 16
8.1 The principle legal systems 16
8.2 Pre-contract negotiations 16
8.3 International contracts 16
8.4 Applicable law under Rome I 17
8.5 Product liability 17
8.6 Intellectual Property Rights 18
8.7 Arbitration, settlements and jurisdiction 18
9. Risk-management, insurance and finance 18
9.1 Risks18
9.2 Risk management 19
9.3 Insurance 19
9.4 Types of insurance 19
9.5 Finance 20
9.6 International financing 20
10. Logistics and customs 20
10.1 Risks 20
10.2 Risk management 21
10.3 Insurance 21
10.4 Types of insurance 22
10.5 Finance 22
1
,Chapter 2 Political and economic environment
2.1 Free trade
The European Union (EU) is the world’s biggest trader, accounting for 20% of global imports and
exports.
The trade policy of EU members is primarily determined by the Common Trade Policy fo the
European Union.
Free trade = free movement of goods and services.
Free trade is restricted in two ways:
- By reginal trading arrangements among a number of countries;
- By limiting trade to protect the home country (protectionism)
2.2 Regional trading arrangements
There are various forms of economic cooperation. The objective of a regional trading arrangement is
to reduce trade barriers among the member countries.
The most common forms of cooperation are:
Free-trade bloc
Customs union
Common market
Economic and monetary union
2.2.1 Free-trade bloc
In this intrabloc trades area there are no trade restrictions among the participating countries.
Countries strive for free trade because this form of trade offers a number of advantages:
Efficient use of production factors
Stimulation of competition
Prevention of trade wars
Promotion of trade and investment
Promotion of welfare
The European Free Trade association (EFTA) and The North American Free Trade Agreement (NAFTA)
are examples of regional Integration Agreements.
2.2.2 Customs union
A custom union exists when two or more countries abolish all mutual import tariffs. Besides mutual
free trade, the participating counties have a joint external tariff.
2.2.3 Common market
A common market is a customers union supplemented by provisions concerning the stimulation of
mutual trade. In this way, among other things the community strives for:
The harmonious, balanced, and sustainable development of economic activity.
A high level of protection and improvement of standards of living and quality of life.
Solidarity among the member states.
2.3 Economic and Monetary Union
The Economic and Monetary Union (EMU) is composed of EU member states that have adopted the
euro as legal tender. The monetary policy of the EMU is determined by the European Central Bank
(ECB).
2
, The Eurosystem comprises the ECB and the central banks of the countries that have adopted the
euro.
The European System of Central Banks (ESCB) consists of the ECB and the national central banks
(NCBs) of all EU member states, regardless of the fact whether they have the euro or not.
2.4 Protectionism
Protectionism is defined as a set of measures a government of a country takes to protect its own
economy against international competition.
Measures to restrict the import of goods from other countries are taken, e.g., to:
Advance employment in the home country
Counteract dumping (very cheap sales)
Keep the balance of payments in equilibrium
Improve the terms of trade
Provide the government with more revenue
Boycott particular countries for political reasons
There are two ways to protect one’s own economy:
1. measures that cost money (tariff)
2. measures that set requirements for trade (non-tariff) -> these measures are also called ‘new
protectionism’
2.4.1 Tariff measures
The most important tariff measures are:
Import duties (taxes imposed by the government on imported goods and services)
Turnover tax (VAT -> value added tax)
Excise duties (a specific tax on the consumption -> alcoholic, tobacco)
Preferential tariff measures (measures that result in certain product being wholly or partially
exempt from import duties).
o Tariff preferences: a commercial policy measure, so that certain goods from a
developing country can be imported at a reduced or zero tax rate.
o Quotas: described above may be linked to quantities.
o Special destinations
o Anti-dumping duties: the imposition of a dumping duty, thereby reducing the
dumping advantage is taken away.
2.4.2 Non-tariff measures
Non-tariff measures include all measures taken by the government to restrict imports of foreign
goods, such as:
Customs formalities (related to the import, export and transit of goods to and from non-EU
countries)
Administrative procedures
Technical requirements (CE mark and Origin marking)
Quality requirements
Subsidies (to improve the competitiveness in both the home and world market)
Export restrictions
A trade embargo means that there is a bon on trading with a certain country for socio-political
reasons. (Iraq)
3
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