Module 1 Lesson 2
INTERNATIONAL BUSINESS
DR. ROWEL E. ANTONIO
School of Accountancy & Management
Graduate School
International Business Basics
Goals:
-Describe basic international business
activities.
-Explain the components of the international
business environment.
-Name important skills for international
business and describe the importance of
international business for workers, consumers
and citizens.
What happens when a country has too
much of a good thing?
Perhaps the country produces more grain
than it can consume, mines more coal than it
needs, or produces more furniture than it
can use.
When a country has an abundance of goods
or services, businesses look for trade
opportunities.
That’s what happens when companies in
different countries trade goods and services.
These foreign trades usually are not an
exchange of items for items.
Instead, cash payments are usually made
for the items bought or sold.
For example, a manufacturing company in
Korea can sell radios to an electronics store
in the US.
A computer company in the US might sell its
products to a retailer in Russia.
The activities can be viewed from two sides-
the buyer and the seller.
For the buyer, products bought from
businesses in other countries are called
imports.
US is importing radios.
Russia is importing computers.
For the seller, exports are products sold in
other countries.
Korea is exporting radios.
US is exporting computers.
Although the process sounds simple,
obstacle can arise.
These obstacles are called Trade Barriers.
They are restrictions that reduce free trade
among countries.
Several Forms of Trade Barriers:
-Import taxes increase cost of foreign
products.
-Quotas restrict the number of imports.
-laws prevent certain products from coming
into a country.
The International Business Environment
Buying and selling goods and services is
similar in most parts of the world.
Consumers try to satisfy their needs and
wants at a fair price.
Business try to sell products at a price that
covers costs a fair profit.
So, why is international business any
different from local business?
International Business Environment
Factors
In many parts of Iran, the exchange of
goods and services takes place in an open-
air market.
Consumers in Japan buy meals that non-
Asians might not enjoy.
In Cuba, office workers have been required
to work several weeks in the fields to
increase the country’s food supply.
These are some examples of factors that
make up the international business
operating environment.
Four Major Categories of the International
Conditions:
1.Geographic Conditions
-Climate
-Terrain and Seaways
-Natural resources
-Agricultural products
2. Cultural and Social Factors
-Language
-Education
-Religion
-Values and Customs
-Social Realtionships
3. Political and Legal Factors
-Type of Government
-Political Stability
-Government Policies toward business
4. Economic Conditions
-Type of economic system
-Education level
-Type of Industries
-Technology
Geographic Conditions
The climate, terrain (territory), seaports and
natural resources of a country influence
business activities.
Very hot weather limits the types of crops
that can be grown.
It also restricts the types of businesses that
can operate in that climate.
A hot, sunny climate is critical for growing
tropical fruit, but not suitable for a ski resort.
Mountainous terrain offers opportunities for
mining but limits the amount of land
available for crops.
A nation with many rivers or seaports is able
to easily ship products for foreign trade.
Countries with few resources must depend
on imports.
Cultural and Social Factors
In some societies, hugging is an appropriate
business greeting.
In other societies, a handshake is the
custom.
These differences represent different
cultures.
Culture is the accepted behaviors, customs,
and values of society.
A society’s culture has a strong influence on
business activities.
Example, in Spain, and parts of Latin
America, businesses were closed for several
hours in the middle of the day for a long
lunch or a period of rest.
The main cultural and social factors that
affect international business are language,
education, religion, values, customs, and
social relationships.
These relationships include intercations
among families, labor unions, and other
organizations.
Political and Legal Factors
Each day, we encounter examples of
government influence on business.
Regulation of fair advertising, enforcement
of contracts, and safety inspections of foods
and medications are a few examples.
In general, however, people in the Us have
a great deal of freedom when it comes to
business activities.
However, not all countries are like the US.
In many places, government restricts the
activities of consumers and business
operators.
The most common political and legal factors
that affect international business activities
include the type of government, the stability
of the government, and government policies
toward business.
Economic Conditions
Every one faces the problem of limited
resources to satisfy numerous needs and
wants.
This basic economic problem is present for
all of us.
We continually make decisions about the
use of our time, money, energy.
Similarly, every country plans the use of its
land, natural resources, workers, and wealth
to best serve the needs of its people.
Factors that influence the economic situation
of a country include the type of economic
system, the availability of natural resources,
and the general education level of the
country’s population.
Other economic factors include the types of
industries and jobs in the country and the
stability of the country’s money supply.
Available technology for producing and
distributing goods and services also
influences a nation’s economic situation.
