University Of Finance & Administration

INTERNATIONAL BUSINESS[N_IB]

INTERNATIONAL BUSINESS

Full-time course = 12 lectures Summer term 2013)

1-2What is international business. Comparative advantage.Protectionism x Liberalism.

3-4Internationalisation and Globalisation. Foreignexpansion. Entry modes.

5-6 Culture and its role in IB. Culture differences.Negotiation and presentation of business results.

7-8 Presentations on selected TOPICS elaborated in teams (2 – 3 members)9-10 Czech IB. European Union. International marketresearch (analysis). Data collection.

11-12 International trade barriers. Economic integration.Personal preconditions for working in IB. SWOT of Czechcompanies.

Within each lecture:- practical discussions on topical economical issues

2.

CREDIT conditions N_IB

Full-time course = 12 sessions (summer term 2012)

CONDITIONS: PRESENCE at IB lectures: 75%

TEAM PRESENTATION - preparation at home:up to 30 min. presentation on the selected IB topics

active PARTICIPATION during the course + Qs and Ans session with the lecturer incl.written test if requested.

3.

TEAM PRESENTATION

Up to 30 mins. team (normally in ppt, each teammember talks/presents, preparation at home necessary)

Following topics:

Date : TBDMarket entry for selected product/service into selected market

4.

Common session STRUCTURE

IB NEWS - small talk / discussion - topical businessissues

LECTURE

READING - analyzing - interpretation of an article

(team work) / Presentation of the materials prepared at

home if relevant.

Team PRESENTATION + audience discussion

5.

INTERNATIONAL BUSINESS [E_IB] PhDr. Karel Eliáš, CSc. 18303@mail.vsfs.cz

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=

EXCHANGEacross border

6.

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

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 productswhich are effective under given conditions (= theory ofcomparative advantage)

Free economy= stage of involvement in the international trade

9.

Principle of COMPARATIVE ADVANTAGE

Absolute advantage= a country has an absolute advantage over it trading partners if it is able toproduce more of a good or service with the same amount of resources orthe 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 orservice that it produces at a lower opportunity cost than its tradingpartners (relativity).

= units of production (people/machines) will be employed in thoseprocesses 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 pickedbetween several mutually exclusive choices- opportunity costs are not restricted to monetary or financial costs: the realcost of output forgone, lost time, swag, pleasure or any other benefit

10.

International ENVIRONMENT

GLOBAL

MACRO

MICRO

11.

INTERNATIONAL BUSINESS [E_IB] PhDr. Karel Eliáš, CSc. 18303@mail.vsfs.cz

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.

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 toInc., 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.

IB importance + influences

1. ECONOMICAL2. POLITICAL3. CULTURAL

FREE TRADE (international exchange)= is a system of TRADE POLICY that allows traders to act and transact withoutinterference from government. According to the law of COMPARATIVEADVANTAGE the policy permits trading partners mutual GAINS from trade ofgoods 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 - THREATS

Weak self- Dependencesufficiency (the smaller and

(in case of war or econ.developedpolitical system country => thechange) more important IB

is for the country)

15.

IB INDICATORS [basic]

BALANCE OF TRADE

= review of export & import volume in certain periodof time

A) ACTIVE = export > importB) PASSIVE = export < import

BALANCE OF PAYMENTS= review of currency / exchange receipts andexpenditures

A) ACTIVE = payments abroad < receipts from abroadB) PASSIVE = payments abroad > receipts from abroad

16.

IB indicators - details

Balance of Trade= EXPORT - IMPORT, the difference between a nation's exports of goodsand 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 moneyleaving the same country

-In economics, the balance of payments (BOP) measures the paymentsthat flow between any individual country and all other countries- It is used to summarize all international economic transactions for thatcountry 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.

STRUCTURE of IB

TERRITORIAL

COMMODITY

18.

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 foreigncurrency purchases for free trade / exchange

19.

PROTECTIONISM

= economic policy of RESTRAINING trade betweenstates

• This policy is closely aligned with anti-globalization, andcontrasts with free trade, where government barriers to tradeand movement of capital are kept to a minimum.

• The term is mostly used in the context, where protectionismrefers to policies which protect businesses and workers withina country by restricting or regulating trade with foreign

nations.

20.

PROTECTIONISM - history

= economic policy of restraining trade betweenstates

• Historically, protectionism was associated witheconomic theories such as MERCANTILISM (that

believed that it is beneficial to maintain a positive tradebalance), and import substitution.

• During that time, ADAM SMITH famously warnedagainst the 'interested sophistry' of industry, seeking to

gain advantage at the cost of the consumers

• Most modern economists agree that protectionism isharmful in that its costs outweigh the benefits, and that itimpedes economic growth

21.

PROTECTIONISM - methods

• Tariffs on imported goods

• restrictive Quotas - to reduce the quantity and thereforeincrease the market price of imported goods

• Administrative Barriers: using various administrativerules (eg. regarding food safety, environmentalstandards, electrical safety, etc.)

• Exchange Rate manipulation: government mayintervene in the foreign exchange market to lower the

value of its currency by selling its currency in the foreignexchange market.

… and a variety of other government regulations designed todiscourage imports, and prevent foreign take-over of native

markets and companies. 22.

PROTECTIONISM - arguments FOR

= economic policy of restraining trade betweenstates

1) Saving jobs for citizens of country

2) Promoting / Protecting infant industries

3) Promoting / Protecting domestic & economic

development

4) Offsetting economic distortions

23.

PROTECTIONISM - arguments AGAINST

= economic policy of restraining trade betweenstates

Harming the freedom and free market1. Gains from free trade outweigh any losses; as

free trade creates more jobs than it destroysbecause 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, eventhough they are not subject to the strict healthand labour standards of developed countries

3. Protectionism has also been accused of beingone of the major causes of war.

24.

INTERNATIONAL BUSINESS [E_IB PhDr. Karel Eliáš, CSc. 18303@mail.vsfs.cz

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 foreigncurrency purchases for free trade / exchange

26.

LIBERALISM

= economic policy that opposes governmentintervention in the FREE MARKET, and supports themaximum of free trade and competition

= is an economic philosophy that supports andpromotes laissez-faire capitalism (= to let create/be)

-it contrasts with mercantilism, Keynesianism andsocialism

- ADAM SMITH (1776) Wealth of Nations - advocatesminimal interference of government in a marketeconomy

27.

LIBERALISM - arguments FOR

1. Higher economic freedom has a strongcorrelation with higher LIVING STANDARDS

2. Higher economic freedom leads to INCREASEDINVESTMENTS, TECHNOLOGY TRANSFER,INNOVATION and a responsiveness to consumerdemand

3. Many government attempts to micro-manage theireconomies using things like tariffs, public investment, etc.

were often misdirected, poorly timed, poorly implementedand brought undesirable consequences = governmentis incapable of managing a social system as hugeas a national economy4. Government-owned enterprises and publicentitlements were losing a lot of citizens' money

28.

LIBERALISM - arguments FOR

5. During the 1970s, state-controlled economiesproved unresponsive to economic shocks, andmuch of the world endured a sustained, high-inflation recession until markets were liberalized

(though proponents still note that liberalization itself isonly one of several factors in the recent return toprosperity; other factors include technological

developments and the end of the Cold War)

29.

LIBERALISM - arguments AGAINST

Globalization and liberalization spoils nations'ability for self-determination

Exploitation: critics consider capitalist economicsto be exploitive

Environmental costs: critics argue thatneoliberalism leads to more transportation, andunregulated markets lead to more industrial

production

Increase in corporate power: some anti-corporateorganizations believe neoliberalism changeseconomic and government policies to increase thepower of corporations and large business

30.

KEY terms

- International Business = Int. trade / Int. investment / Otherbusiness activities

- Reasons for IB, advantages x disadvantages- Free trade

- Comparative advantage / Absolute advantage / Opportunitycost

- 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

31.