1. The Institute Of Finance & Administration INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. 19063@mail.vsfs.cz

2. 2.2. INTERNATIONAL BUSINESS Full-time course = 12 lectures (summer term 2009)  What is international business, what it consists in  International environment  IB importance + influences  Basic IB indicators  Structure of IB  Way of controling IB  INTERNATIONALIZATION: dimensions, motives  Entry modes  International TRADE, CONTRACTUAL and INVESTMENT business activities Within each lecture: - practical discussions on topical economical issues - article: reading + analyses - team knowledge competition INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. / 19063@mail.vsfs.cz

3. 3.3. CREDIT conditions B_IB Full-time course = 12 lectures (summer term 2009) INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. / 19063@mail.vsfs.cz CONDITIONS: PRESENCE at IB lectures: 50% short TEAM PRESENTATION - preparation at home: 8-10 min. presentation on economical topical issue lecture points based on active PARTICIPATION – communication, reading and discussing topical economic issues / team knowledge COMPETITION If unfulfilled: knowledge test / semester elaborated paper

4. 4.4. Session content  INTRODUCTION of each participant  Name & professional interest (aiming)  Experience with IB  What you’d like to LEARN in this subject here  Credit conditions specification  Lecture  Reading + analysing article  Team knowledge competition INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. / 19063@mail.vsfs.cz

5. 5.5. 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 INT business = EXCHANGE across border INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. / 19063@mail.vsfs.cz

6. Barter / Import / Export International TRADE FDI / WOS etc. International INVESTMENT Licensing / Franchising / Management contracts etc. Other forms of int. business ACTIVITY 6.6. INTERNATIONAL BUSINESS CONSISTS IN: INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. / 19063@mail.vsfs.cz

7. 7.7. How IB differs from DOMESTIC business?  currencies - converting  often legal system – laws  culture – behavior  resources  technology – way of producing INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. / 19063@mail.vsfs.cz

8. 8.8. 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 INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. / 19063@mail.vsfs.cz

9. 9.9. International ENVIRONMENT INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. / 19063@mail.vsfs.cz GLOBAL MACRO MICRO

10. 10. 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 INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. / 19063@mail.vsfs.cz

11. Fin. liability of owner’s limited to the extent of investment if comp. fails Inc. = incorporated [USA] Ltd. = Limited, private (Allmakes Ltd.) PLC = Publicly held limited-liability Ltd. / Plc. [UK] AG [Aktiengesellschaft] = publicly held (Volkswagen AG) KGaA [Kommanditgesellschaft] = limited partners + min. 1 unlimited (Henkel KGaA) GmbH [Gesellschaft mit bescharankter Haftung] –private, often smaller AG / KGaA / GmbH [Germany] SpA [la societa per azioni] (Fiat SpA) SA[societe anonyme] (Carrefour SA) SpA / SA [Italy, France] 11. Basic IB terminology Abbreviations: INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. / 19063@mail.vsfs.cz

12. 1. ECONOMICAL 2. POLITICAL 3. CULTURAL 12. IB importance + influences  FREE TRADE (international exchange) = 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 etc.) INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. / 19063@mail.vsfs.cz

13. 13. International business - DISADVANTAGES Weak self- sufficiency (in case of war or political system change) Dependence (the smaller and econ.developed country => the more important IB is for the country) INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. / 19063@mail.vsfs.cz

14. 14. 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 MEZINÁRODNÍ OBCHODNÍ VZTAHY [MOV] Ing. Pavla Břečková, Ph.D. / 19063@mail.vsfs.cz

15. 15. STRUCTURE of IB TERRITORIAL COMMODITY INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. / 19063@mail.vsfs.cz

16. 16. 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 INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. / 19063@mail.vsfs.cz

17. 17. History of Czech IB  Before 2 nd World War: orientation on western markets Czechoslovakia =10 th most industrially developed country with cooperation and trade relations in western countries  After 2 nd World War (communist period): CZ „manufactury“ of the communist bloc with over 70 % of export into these countries  1989 fall of socialism: CZ’s IB shift to the western partners again (Questionable move today)  2004 CZ joins EU: Elimination of trade barriers (duties, quotas and other restrictions) Solid business climate in CZ => inflow of FDI (often based on governmental INCENTIVES) MEZINÁRODNÍ OBCHODNÍ VZTAHY [MOV] Ing. Pavla Břečková, Ph.D. / 19063@mail.vsfs.cz

18. 18. CZ – joining EU CZ member of EU since 1.5.2004 (in the wave of 10 countries – the biggest enlargement in the EU history) 1 st half of 2009 Czech presidency of the EU today 27 countries members are sovereign nations that have agreed to cede certain of their powers to the EU Negotiations about further countries accession INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. / 19063@mail.vsfs.cz

19. 19. EU business principles  single market  non-existence of tariffs (custom duty), quotas and administrative restrictions of import & export  prohibition of EU companies discrimination (tenders, market operations)  no duty checks on the borders within EU members  single business, duty & immigration approach (policy) towards third parties  strict regulations – environment  single currency (EUR) INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. / 19063@mail.vsfs.cz

20. 20. Business Advantages & Disadvantages of Czech accession of EU DISADVANTAGES - stronger competition - less freedom in some of state economical decisions INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. / 19063@mail.vsfs.cz ADVANTAGES - duties elimination - free movement of goods / partly free mov.of labor - larger market (single market)

21. Elimination / removal of business restrictions Cut of bureaucratic cost Custom duties No need for additional certification Mutual approval of norms Low labour cost lower input cost easy access to financial & insurance services release of public orders / commissions Allocation of production units where more effective 21. OPPORTUNITIES for Czech ent. at EU single market INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. / 19063@mail.vsfs.cz

22. Threat of lowering the competitiveness of Czech companies (necessity to find another competitive advantage) Strong competition Pressure on lowering prices & profits SME more vulnerable in competition with MNE Labour market / different social conditions TAX systems 22. THREATS for Czech ent. at EU single market INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. / 19063@mail.vsfs.cz

23. Gradual process INTERNACIONALIZATION Production units abroad MULTINACIONALIZATION Operations in a global scale GLOBALIZATION 23. INTERNATIONALIZATION - various research approaches = kind of „DEVELOPING & evolutional“ process: 3 forms (acc. to the stage of involvement after expanzion) INT = cover for international operations INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. / 19063@mail.vsfs.cz

24. 24. Dimensions of INTERNACIONALIZATION Material purchase / components / technology / goods FDI in a company (impact on competition at a domestic market) INTERNAL dimension (active IB in external flow) Export Ownership of production unit abroad Licence / Contracts EXTERNAL dimension INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. / 19063@mail.vsfs.cz

25. 25. MOTIVES for foreign expansion PROACTIVE motivesProfit advantageUnique product Technological advantage Exclusive informationTax advantageEconomy of scaleREACTIVE motivesStrong competitionOver-productionDomestic revenues declineCapacity (surpluses)Saturated domestic market Customer distance / logistic point distance INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. / 19063@mail.vsfs.cz

26. 26. Entry modes & business activities in IB ENTRY MODES EXPORTING Direct export Indirect export CONTRACTUAL Licence & Franchise AlianceOther INVESTMENT Joint venture Major / Minor / 50-50% Wholly Owned Subsidiary Greenfield Acquisition INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. / 19063@mail.vsfs.cz

27. 27. INT. TRADE EXPORT Quantity of goods and services exported abroad Selling of products made in one’s own country for use or resale in other countries DIRECT x INDIRECT IMPORT Quantity of goods and services imported from abroad buying of products made in other countries for use or resale in one’s own country Internal dimension of internationalisation INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. / 19063@mail.vsfs.cz

28. 28. CONTRACTUAL international business activities LICENCE contractual agreement in which a firm in one countrylcenses the use of its INTELLECTUAL property to a firm in a second country in return for a RAYALTY pay licensor provides its patents, trademarks, know-how, trade secrets x royalty beer breweries, Skoda avoiding restrictions – investment / testing market FRANCHISE Provision of right to make business in a certain – in advance agreed way (recipe, brand names, trademarks, logos, mktg techniques) for a royalty payment unique product, unique conditions high level of standardization (LR, McD. – color, space solution) ALIANCES Cooperation (customers – purch. strength / compet. – cartel, capacity, research, anti- red-tape administration) OTHER agreements Technological / Management INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. / 19063@mail.vsfs.cz

29. 29. INVESTMENT business activities JOINT VENTURE Major [> 50%] Minor [< 50%] 50 / 50 WOS [Wholly Owned Subsidiary] GREENFIELD ACQUISITION MNC / MNE / MNO MNC = buy resources, create goods in a variety of countries & then sell them in a variety of countries. Coordination of activities from headquarters (often). MNE = non-for-profit organizations (Int.Red Cross) and non typical MNC MNO = general term when referring to both non-for-profit and profit- seeking organizations INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. / 19063@mail.vsfs.cz

30. 30. International INVESTMENTS - generally FDI = Foreign Direct Investment investments made for the purpose of ACTIVELY CONTROLLING PROPERTY, assets, or companies located in host countries home x host country Portfolio Investment purchases of foreign financial assets (stock, bonds, certificates, deposits) for a purpose OTHER than CONTROL INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. / 19063@mail.vsfs.cz

31. Barter / Import / Export International TRADE FDI / Portfolio inv. // JV / WOS / MNO etc. International INVESTMENT Licensing / Franchising / Management contracts / Aliances etc. Other forms of int. business ACTIVITY 31. INTERNATIONAL BUSINESS CONSISTS IN: INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. / 19063@mail.vsfs.cz

32. 32. Further IB operations / activities Barter 2 sides agree to accept each other’s goods as pay for transaction Clearing Not convertibility 2 countries agree to exchange products Monetary value in 3 rd currency Switch trading involving 3 or more countries INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. / 19063@mail.vsfs.cz

33. -International exchange -Reasons for IB, advantages x disadvantages -Free trade / Comparative advantage -IB influences and IB indicators -History of Czech international business -Balance of trade, balance of payments -Liberalism, protectionism -Convertibility, trade barriers, free price creation -Structure of IB (territory, commodity) -Corporation abbreviations / Financial liability -Cyclical fluctuation / Product cycle / Conjuncture -Incentives (FDI) -Entry modes (import, export, licence, franchise, alliance, JV, greenfield, acquisition) -Switch, clearing, barter 33. KEY terms INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. / 19063@mail.vsfs.cz

34. 34. Thank you for your attention Ing. Pavla Břečková, Ph.D. 19063@mail.vsfs.cz INTERNATIONAL BUSINESS [B_IB] Ing. Pavla Břečková, Ph.D. / 19063@mail.vsfs.cz