International Business

Module overview World’s Market place International environment Managing international Business Managing international Business operations

Aim At the end of the lesson students should have a basic understanding of the core elements in international business.

Objectives At the end of the lesson students should be able to. Discuss the meaning of international business. Explain the importance of understanding international business. Identify and describe the basic forms of international business. Discuss the cause of globalization. Comprehend the growing role of emerging markets in the global economy.

International Business What do you think international business is ?

International business deals with business activities (both production and services) that cross national boundaries. This activity includes movement of goods, services capital or personnel, transfer of technology, etc.

Differences in domestic and international business Boundaries Legal systems Resources Currencies Cultures Skills and Knowledge.

Why study International Business Cultural literacy Most companies are foreign or have foreign dealings. Advances in technology Balance of payments Absolute and comparative advantage.

Forms of International Business

Global Village A Canadian writer and educator named Marshall McLuhan came up with the phrase, "the global village" to describe our world.

Is the world a village ? The thought is that each person in the community helps the village to survive and so everyone is dependent on each other. Could we say this about our world? Physically our world is enormous. How can we all be connected to each other?

In the last century, better transportation and communication have allowed people to be in contact with other parts of the world faster than ever before. The world is also connected through global resource use and a world economy. What is grown or made in Asia often is consumed in North America. The products of Europe are found in Australian stores. African produce is found in the kitchens of Europe. The global village, as McLuhan meant it, is an image that shows us to be connected to, and dependent on, other parts of the world.

http://www.youtube.com/watch?v=Vvfzaq72wd0

Absolute and comparative advantage Absolute advantage refers to the ability of a party (an individual, or firm, or country) to produce more of a good or service than competitors, using the same amount of resources. Adam Smith first described the principle of absolute advantage in the context of international trade, using labour as the only input. Since absolute advantage is determined by a simple comparison of labour productivities, it is possible for a party to have no absolute advantage in anything; in that case, according to the theory of absolute advantage, no trade will occur with the other party. It can be contrasted with the concept of comparative advantage which refers to the ability to produce a particular good at a lower opportunity cost

The law of comparative advantage refers to the ability of a person or a country to produce a particular good or service at a lower marginal and cost over another. Even if one country is more efficient in the production of all goods (absolute advantage in all goods) than the other, both countries will still gain by trading with each other, as long as they have different relative efficiencies

Task 1 Give examples of how you as an end consumer are affected daily by international business. List some benefits of trading in the EU. Show how the Olympics may have had an impact on international business.

Benefits of trading in the EU greater competition in services - which is good for businesses and consumers removal of trade barriers reduction of business costs greater business efficiency elimination of anti-competitive practices - such as monopolies and cartels

harmonising standards - eg technical and safety standards The EU has taken measures to reform and make it even easier for countries to trade with each other, such as: reducing paperwork harmonising standards - eg technical and safety standards introducing the euro - allowing a single currency to trade with enforcing the movement of people - allowing member state citizens to move freely between other countries

Task 2 Imagine you sit in the board of directors of a company list of factors that you may wish to consider when entering a new international market.

Review Aim At the end of the lesson students should have a basic understanding of the core elements in international business.

Objectives Discuss the meaning of international business. Explain the importance of understanding international business. Identify and describe the basic forms of international business. Discuss the cause of globalization. Comprehend the growing role of emerging markets in the global economy.

Prep What is international Business? Why is it important for you to study international business? What are the basic forms of international business activity? How do merchandise exports and imports and service imports differ? What is portfolio investment? What are the main reasons for growth in international business activity? Why do some businesses become global while others remain local or regional? What is the impact of Internet on international business?