CHAPTER 3Business in a Borderless World

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Role of International Business

• Most of the world’s population and two-thirds of its total purchasing power are outside the U.S.

• Global marketing requires balancing global brands with the needs of local consumers

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Role of International Business

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Role of International Business

Exporting – the sale of goods and services to foreign markets

Importing – the purchase of goods and services from foreign markets

2011 U.S. exports = $2.1 trillion+

2011 U.S. imports = $2.6 trillion+

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Role of International Business

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International Trade Barriers

Completely free trade seldom exists, due to:

• Economic barriers

• Ethical, legal and political barriers

• Social and cultural barriers

• Technological barriers

AT&T has made inroads with consumers who don’t want their cell phones to stop working when they go abroad

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Economic Barriers

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Economic Barriers

Level of development is determined in part by a country’s

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Economic Barriers

• Exchange rates vary daily and affect the cost of imports and exports

• A government may intentionally alter the value of its currency through fiscal policy

Another economic trade barrier is the

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International Trade Barriers

When entering the international marketplace, companies must contend with potentially complex relationships

Different laws of its own nation, international laws and the laws of the nation with which its trading

Various trade restrictions

Changing political climates

Different ethical values

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Legal Barriers

A firm doing business abroad must understand and obey the laws of the host country

Some countries have restrictions on how much local currency can be taken out of its borders

Other countries may forbid foreigners from owning property

Some countries fail to honor U.S. laws and/or fail to enforce their own laws

In some parts of the world, copyright and patent laws are less strict than in the U.S.

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Tariffs and Trade Restrictions

• Fixed tariff is a specific amount of money levied on each unit of product brought into the country

• Ad valorem tariff is based on the value of the item

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Tariff and Trade Restrictions

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Tariff and Trade Restrictions

Dumping can spark trade wars

The Obama administration imposed stiff tariffs on Chinese-made tires, allegedly

dumped on the U.S. market

China retaliated by slapping tariffs on U.S. chicken

products exported to China

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Political Barriers

Seldom in writing & change rapidly

Political unrest may create a hostile or even dangerous environment for foreign business

OPEC is an example of a cartel

Political considerations affect international business daily

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Social and Cultural Barriers

Research can help minimize the problems associated with social and cultural differences

Differences in the spoken and written language

Appropriate body language, posture, facial expressions and personal space may vary by nation

Family roles may differ in different societies

Other nations often have a different perception of time

National customs and holidays must be respected

Most nations use the metric system

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Technological Barriers

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Trade Agreements and Organizations

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Trade Agreements and Organizations

CANADA

MEXICO

USA

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Trade Agreements and Organizations

While controversial, NAFTA has become a positive factor for U.S. firms

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Trade Agreements and Alliances

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Trade Alliances and Organizations

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Getting InvolvedExporting and Importing

Countertrade agreement is a foreign trade agreement that involves bartering products for other products instead of currency

Export agents are middlemen that help companies by handling their international transactions

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Getting Involved

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Getting Involved

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Getting Involved

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Getting Involved

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Getting Involved

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International Business Strategies

A plan used by international companies that involves customizing products,

promotion and distribution according to cultural

technological, regional and national differences

A strategy that involves standardizing products

(promotion and distribution) for the whole world as if it

were a single entity

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