INTERNATIONAL BUSINESS TRADE

• Different nations all over the world are experiencing an essential change in the way they deliver and market various items, products and services
• The national economies that were accomplishing the objectives of self-sustainability are currently developing route towards International Business
• International business


  The trade of goods, services, technology, capital and /or knowledge across national borders and at a global or transnational scale
• Globalization


  The shift toward a more interdependent and integrated global economy, creating greater opportunities for international business
• Important types of globalization

  • Social Globalization
  • Economic Globalization
  • Cultural Globalization
  • Environmental Globalization
  • Political Globalization
• International trade


  The exchange of goods, services, and capital across national borders, involving the buying and selling of products and services between different countries or regions
• Specialization


  When an entity focuses on the production of a limited scope of goods to gain a greater degree of efficiency
• Comparative Advantage


  Countries should focus on producing goods and services in which they have a lower opportunity cost compared to other countries
• Absolute Advantage


  A country has an absolute advantage in producing a good or service if it can produce more output using the same amount of resources as another country
• Trade Surplus and Deficit

  A trade surplus occurs when a country exports more goods and services than it imports, resulting in a positive balance of trade. A trade deficit occurs when a country imports more than it exports, resulting in a negative balance of trade.
• Balance of Payments


  A record of a country's economic transactions with the rest of the world, including the trade balance, foreign investments, remittances, and tourism
• Trade Barriers


  Obstacles that restrict the free flow of goods and services across borders, such as tariffs, quotas, or non-tariff barriers like regulations and technical standards
• Free Trade


  The absence of trade barriers and restrictions, allowing goods and services to flow freely between countries
• Trade Agreements


  Formal arrangements between countries that outline the terms of trade, including tariff reductions, quotas, and regulatory standards
• Trade Liberalization


  The removal or reduction of trade barriers to promote freer trade, often leading to increased competition, efficiency gains, and improved consumer welfare
• Protectionism


  The use of trade barriers to protect domestic industries from foreign competition
• Global Value Chains (GVCs)


  The process of producing goods across different countries, where each country specializes in specific stages of production
• Factors affecting international trade

  • Competitiveness
  • Distribution
  • Variables that impact the economy
  • Socio-economic characteristics and distribution of human population
  • Finance
  • Legal Factors
  • Physical
  • Politics
  • Sociocultural
  • Technology
• Benefits of international trade to a nation

  • Obtain foreign exchange
  • Prompts specialization
  • Enhancing development and employment
  • Improving standard of living
• Benefits of international trade to firms

  • Improving profits
  • Utilizing surplus resources
  • Enhancing development prospects
  • Facing extreme market conditions
  • Enhancing business vision
• Global business opportunities


  • Import
  • Export
• Trade Barriers


  Restrictions on international trade imposed by the government to protect local industries
• Types of tariffs


  • Scientific Tariff
  • Peril point tariffs
  • Retaliatory tariffs
• Non-Tariff Barriers


  Barriers that restrict trade through measures other than the direct imposition of tariffs, such as quality and content requirements for imported goods or subsidies to local producers
• Quotas


  Restrictions that limit the quantity or monetary value of specific goods or services that can be imported over a certain period of time
• Licensing


  An arrangement where a firm (licensor) allows another (licensee) to use its intellectual property such as brand name, copyright, patent, technology, or trademark for a specific period of time
• Advantages of Licensing


  • Passive income
  • New business opportunity
  • Reduced risk
  • Easier entry to foreign market
  • Self-employment opportunities
  • Freedom to develop unique marketing approach
• Disadvantages of Licensing


  • Increased opportunities for IP theft
  • Dependency on licensor
  • Added competition
  • Limited time
  • Potential damage to reputation
  • No guarantee of revenues
  • Delayed royalty payments
  • Royalty litigation
• Franchising


  A business model that allows individuals (franchisees) to operate their own businesses using the branding, products, and support of an established company (franchisor)
• Key factors in franchising

  • Choosing a franchise
  • Franchise models
  • Franchise Disclosure Document (FDD)
  • Franchise fees and costs
• Disadvantages of licensing


  • Limited control over the product or service
  • Potential for competition in the marketplace
  • It is offered for a limited time
  • It could damage the reputation
  • It is not a guarantee of revenues
  • It takes time for royalty payment to arrive
  • It may lead to royalty litigation
• Key Factors in Franchising

  • Choosing a Franchise: Research and identify industries and franchises that align with your interests, skills, and financial capabilities
  • Franchise Models: Understand the different types of franchise models, and decide which suits your goals
  • Franchise Disclosure Document (FDD): Familiarize yourself with the FDD, a legal document that provides detailed information about the franchise opportunity, including costs, obligations, and the franchisor's history
  • Franchise Fees and Costs: Explore the initial franchise fee, ongoing royalties, advertising fees, and other expenses involved in setting up and operating the franchise
  • Franchise Territory: Understand the territory rights granted by the franchisor and whether the territory is exclusive or shared with other franchisees
  • Training and Support: Learn about the training programs, operational support, and resources the franchisor provides to help you successfully run the business
  • Legal and Regulatory Compliance: Familiarize yourself with the legal requirements and regulations related to franchising in your jurisdiction, including contracts, licensing, and disclosure obligations
  • Financial Planning: Develop a comprehensive business plan that outlines your budget, projected expenses, revenue expectations, and potential return on investment
  • Location and Site Selection: If applicable, understand the importance of choosing the right location for your franchise and the support the franchisor provides in this process
  • Marketing and Branding: Explore the franchisor's marketing strategies, advertising support, and branding initiatives to attract customers and promote the business
  • Operations and Processes: Gain insights into the day-to-day operations, processes, and best practices of the franchise to ensure smooth and efficient business management
  • Supply Chain and Inventory: Understand how the supply chain and inventory management work within the franchise system
  • Franchisee-Franchisor Relationship: Learn about the expectations, responsibilities, and communication channels between franchisees and the franchisor
  • Performance Metrics and Reporting: Explore the key performance indicators (KPIs) that determine the success of your franchise and how performance is tracked and reported
  • Exit Strategy: Consider your long-term plans for the franchise, including potential exit strategies like selling the business or passing it on to family members
  • Local Market Analysis: Evaluate the local market conditions, competition, and potential customer base to determine the viability of the franchise in your chosen location
  • Franchisee Success Stories: Connect with existing franchisees to learn about their experiences, challenges, and insights into running the franchise
  • Legal and Financial Consultation: Seek advice from legal and financial professionals experienced in franchising to ensure you make informed decisions
• Three Types of Franchises

  • Business Format Franchise – the franchisor gives the rights to trademarks, trade names, business process and the system in order for the franchisee to sell the product for a fee
  • Product Distribution Franchise – The franchisor is responsible for providing the product and the distributor is then able to sell the product. The main thing given by the franchisor is the product whereas the business format includes training support
  • Management franchising is great for resale franchises, which are franchises that are bought from an existing franchisee
• Strategic Partnership or Alliance


  A positive aspect of cooperation of two or more companies in different countries are joined together for mutual gain
• Reasons for Entering into Strategic Alliance

  • Learning partner skills
  • Upgrading and improving skills
  • Seeking vertical integration
  • Shaping future industry evolution
• Joint Venture


  A special type of strategic alliance, where the partners across globe collectively found a company to produce goods and services
• Advantages of Joint Venture

  • Shared Costs and Risks: Joint ventures allow companies to distribute the financial burden and risks associated with a particular project or market entry strategy among the collaborating parties
  • Access to Local Expertise: When entering foreign markets, a local partner in a joint venture can provide valuable insights into the local business environment, culture, and regulations
  • Combining Complementary Strengths: Joint ventures often bring together companies with complementary strengths and resources, creating synergies that can lead to enhanced competitiveness and innovation
  • Market Expansion: Joint ventures can be an effective means of expanding into new markets or sectors, especially when regulatory or cultural barriers exist
  • Risk Mitigation: In volatile industries or markets, joint ventures can help spread and manage risks more effectively by sharing the financial and operational burdens
  • Access to New Technology: Joint ventures can facilitate the acquisition or development of new technologies and intellectual property through collaboration
• Business Partnership


  A specific kind of legal relationship formed by the agreement between two or more individuals to carry on a business as co-owners
• Advantages of Partnership


  • Ease of Formation: Partnerships are relatively easy to establish. They typically require fewer formalities and less paperwork than corporations
  • Shared Management and Decision-Making: Partnerships allow for shared management responsibilities and decision-making among partners, which can lead to a diversity of skills and expertise
  • Access to Capital: Partnerships can benefit from the pooled financial resources of multiple partners, making it easier to secure funding for business operations and growth
  • Tax Benefits: In many countries, partnerships offer pass-through taxation, where business profits and losses are passed through to the individual partners, avoiding double taxation at the corporate and individual levels
  • Flexible Business Structure: Partnerships can adapt to changing circumstances more easily than corporations. They can be dissolved or restructured with relative simplicity
• Foreign Direct Investment (FDI)

  Investment made by individuals, businesses, or entities from one country (the home country) into assets or enterprises located in another country (the host country)