4381395 etr chapter 10 english

8/14/2019 4381395 Etr Chapter 10 English

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Chapter 10Chapter 10INTERNATIONALINTERNATIONAL

BUSINESSBUSINESS


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Objectives:Objectives: To explain the importance of international To explain the importance of internationaltrades as one of a business strategies.trades as one of a business strategies.

To explain the methods of entering the To explain the methods of entering the

global market.global market. To explain preparatory steps before To explain preparatory steps beforeexploring into international market.exploring into international market.

To identify barriers to international To identify barriers to internationaltrades.trades.

To discuss some trade agreements & To discuss some trade agreements &

trade blocks & their effects ontrade blocks & their effects on


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IntroductionIntroduction

We are living in the era of We are living in the era of globalization.globalization.Globalization? increasingGlobalization? increasingconnectivity & interdependenceconnectivity & interdependencebetween countries of the world inbetween countries of the world ineconomic, political, social,economic, political, social,technological & cultural matters -technological & cultural matters -


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IntroductionIntroductionIn economic term, globalization isIn economic term, globalization isthe internationalizing of businessesthe internationalizing of businesses

& markets. Through trade& markets. Through tradeliberalization, barriers toliberalization, barriers tointernational trades are removed,international trades are removed,

all countries should open theirall countries should open theirmarkets, so the world will becomemarkets, so the world will becomea single market a market withouta single market a market without

borders, a really big market.borders, a really big market.


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Globalization; Threats &Globalization; Threats &Opportunities?Opportunities?


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International market- the biggest businessInternational market- the biggest business

opportunity to entrepreneuropportunity to entrepreneur

Several factors that encourage theSeveral factors that encourage theinvolvement in global market:involvement in global market:

Abolishing barriers tradeAbolishing barriers trade The existence of Main Trade Block such as The existence of Main Trade Block such asNAFTA, EU and AFTANAFTA, EU and AFTA

The position/location of Asia Continent itself The position/location of Asia Continent itself - Limited concentration in domestic market,

need to expand the market segmentation.- International market-space for entrepreneur

to expand their business.- The entrepreneur starting their

business/engage in international trade knownas Global start-u .


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International EnvironmentInternational EnvironmentEntrepreneur in Borderless world need to haveEntrepreneur in Borderless world need to have

contemporary thinking.contemporary thinking.Example: sophisticated technology of ICT- customersExample: sophisticated technology of ICT- customerscan access product/idea from anywhere.can access product/idea from anywhere.

Global Thinking is important because todaysGlobal Thinking is important because todaysconsumers can select products, ideas and services fromconsumers can select products, ideas and services frommany nations and cultures.many nations and cultures.

Entrepreneurs who expand into foreign markets mustEntrepreneurs who expand into foreign markets mustbe global thinkers in order to design and adoptbe global thinkers in order to design and adoptstrategies for different countries based on social, politicstrategies for different countries based on social, politicand economy of the country.and economy of the country.

Therefore, the customers can made the best selection- Therefore, the customers can made the best selection-types, quality, service level, competitive price, etc.types, quality, service level, competitive price, etc.


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Why Global Business?Why Global Business?To balance the declining sales in local market To balance the declining sales in local market

-Less dependant on local market-Less dependant on local market-Unattractive local market-Unattractive local marketTo increase Sales and ProfitsTo increase Sales and Profits

To extend product life cycleTo extend product life cycle-Product at the last stage of PLC will be extended-Product at the last stage of PLC will be extended

to international marketto international marketProduction Cost Production Cost -Lesser cost by lessen fixed cost. Achieve-Lesser cost by lessen fixed cost. Achieve

economies of scale-> production uniteconomies of scale-> production unitIncreasing competitive ability and quality of Increasing competitive ability and quality of

product product


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Methods of Going InternationalMethods of Going InternationalExportingExporting The shipping of a domestically produced good to a foreignThe shipping of a domestically produced good to a foreigndestination for consumption.destination for consumption.

Simple methodSimple method

Lesser risk compared to othersLesser risk compared to others

ImportingImportingBuying and shipping foreign-produced goods for domesticBuying and shipping foreign-produced goods for domestic

consumption.consumption.> to high technology product> to high technology productBecause of different weather and appropriateness of soil.Because of different weather and appropriateness of soil.

Joint venture Joint venture


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Methods of GoingMethods of GoingInternationalInternational

LicensingLicensing

Is a business agreement in which the

manufacturer of a product (or a firmwith proprietary rights over certaintechnology or trademarks) grants

permission to some other group or individual to manufacture that productin return for specified royalties or other

payments.


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international marketinternational marketexplorationexploration1.1. Documentation procedureDocumentation procedure

due to different language and different legaldue to different language and different legalprocedure, Getting the service from agent or localprocedure, Getting the service from agent or locallawyers to manage the problems.lawyers to manage the problems.

-Appoint agent/lawyer-Appoint agent/lawyer

5.5. Providing & implement planningProviding & implement planning-policy determination that undertake international-policy determination that undertake international

laws and locally, as a guidelines to achievelaws and locally, as a guidelines to achievemission, planning and implementation plan.mission, planning and implementation plan.

The important part is to have the implementation The important part is to have the implementationplan showing the core task and peopleplan showing the core task and peopleresponsible to undertake it.responsible to undertake it.

For example: Gantt Chart.For example: Gantt Chart.


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BarriersBarriersBarriers from within the entrepreneurBarriers from within the entrepreneurLack of confidence- because of behavior,Lack of confidence- because of behavior,financial, thinking, information.financial, thinking, information.

Barriers from Foreign CountryBarriers from Foreign Country

5.5. Multiple of regulations imposed, tax imposed,Multiple of regulations imposed, tax imposed,limited entry, etc.limited entry, etc.

6.6. The reinforcement of those regulations can The reinforcement of those regulations can

make the prices of the imported goodsmake the prices of the imported goodsbecoming expensive and incompetitivebecoming expensive and incompetitivecompared to the local ones.compared to the local ones.


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Trade barriers can be divided into 2 : Trade barriers can be divided into 2 :

Tariff Tariff - direct tax imposed on imported- direct tax imposed on importedgoods. Aim: to increase the price of goods. Aim: to increase the price of that goods.that goods.Specific Tariff Specific Tariff -fixed tax amount-fixed tax amountimposed on each unit of the importedimposed on each unit of the importedgoodsgoodsAd-valerom Tariff Ad-valerom Tariff -Tax imposed on-Tax imposed onvalue of the imported goodsvalue of the imported goods

Non tariff-Non tariff- Quotas, Subsidy,Quotas, Subsidy,govt.standard procedure, politics andgovt.standard procedure, politics and

legalitylegality

Barriers


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International Trade BarriersInternational Trade BarriersQuotas-Quotas- trade barrier in the form of a limit on thetrade barrier in the form of a limit on the

numbers of product can be importednumbers of product can be imported To protect domestic market To protect domestic market

Subsidy-Subsidy- payment by the govt to protect the local firmpayment by the govt to protect the local firmfrom the high competition with foreign firm.from the high competition with foreign firm.

Can be in the form of long term loan at a lower rate,Can be in the form of long term loan at a lower rate,grant, tax examption, etc.grant, tax examption, etc.

Politic and LegalPolitic and Legal Any country can hinder/prevent Any country can hinder/preventgoods to be exported to their country. Example:goods to be exported to their country. Example:Malaysia are not allowed to do any kind of trading withMalaysia are not allowed to do any kind of trading withIsrael.Israel.

Govt standard procedure-Govt standard procedure- To protect the health and To protect the health andsafety of its own people, entry barriers for goods thatsafety of its own people, entry barriers for goods thatdoes not comply with the standard- worried can causedoes not comply with the standard- worried can cause


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International Trade AgreementInternational Trade AgreementIn order to encourage world trade,In order to encourage world trade,several types of agreement have beenseveral types of agreement have beenAGREED UPONAGREED UPON by several country inby several country inthe world.the world.

Among them are:Among them are:GATT, WTO, NAFTA & AFTA.GATT, WTO, NAFTA & AFTA.


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GATT (General AgreementGATT (General Agreementon Tariffs and Trade)on Tariffs and Trade)

Was established in 1947-the first tariff globalWas established in 1947-the first tariff globalagreementagreement

Main objectives: To provide 1 set of basicMain objectives: To provide 1 set of basicregulations for trade agreementregulations for trade agreementAs a mechanism to monitor the implementationAs a mechanism to monitor the implementationof trade regulation that has been agreed.of trade regulation that has been agreed.

Multilateral agreement with the objective of Multilateral agreement with the objective of liberalizing trade by reducing tariffs betweenliberalizing trade by reducing tariffs betweencountry member and encouraging world trade.country member and encouraging world trade.Consist of 124 country and nearly covered up toConsist of 124 country and nearly covered up to

90% trade in the world.90% trade in the world.


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Organization (PertubuhanOrganization (PertubuhanPerdagangan Dunia)Perdagangan Dunia)

Was established on January 1, 1995.Was established on January 1, 1995.

WTO is the umbrella organization governing theWTO is the umbrella organization governing theinternational trading system.international trading system.

Is designed to monitor & enforce trade agreements.Is designed to monitor & enforce trade agreements.

The job is to oversee international trade agreements The job is to oversee international trade agreements

Agreements are based on General Agreement on TariffsAgreements are based on General Agreement on Tariffs& Trade (GATT)& Trade (GATT)

Membership in the WTO is 147 in 2004 that virtuallyMembership in the WTO is 147 in 2004 that virtuallyconsist mostly of developing countries whichconsist mostly of developing countries whichcollectively account for > than 90 % of the worlds tradecollectively account for > than 90 % of the worlds tradeand virtually all of its investment.and virtually all of its investment.


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North American Free TradeNorth American Free TradeAgreement (NAFTA)Agreement (NAFTA)

Is an international agreement among US,Is an international agreement among US,Canada and Mexico.Canada and Mexico. Economic interconnection between US, Mexico, and

Canada

Established in January 1994.Established in January 1994.No trade barriers will exist among the threeNo trade barriers will exist among the threenations.nations.

The countries involved has agreed to The countries involved has agreed toabolish/eliminate trade barriers (tariff andabolish/eliminate trade barriers (tariff andnon-tariff) between them.non-tariff) between them.

To encourage investment among the 3 To encourage investment among the 3countries.countries.However these countries still be allowed toHowever, these countries still be allowed to


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The European Union (EU) The European Union (EU)Founded in 1957.Founded in 1957.

Formerly known as European EconomicFormerly known as European EconomicCommunity (EEC)Community (EEC)In 1992 become a full-fledged economic union.In 1992 become a full-fledged economic union.Objectives of EU:Objectives of EU:

The elimination of custom duties among all The elimination of custom duties among allmember statesmember states

The free flow of goods and services among all The free flow of goods and services among allmembersmembers

The creation of common trade policies toward all The creation of common trade policies toward allcountries outside EUcountries outside EU

The free movement of capital and workers within The free movement of capital and workers withinthe blocthe bloc

The encouragement of economic development The encouragement of economic development


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,,Country (TransitionCountry (TransitionEconomies)Economies)

Rich and developing country such as Japan,Rich and developing country such as Japan,South Korea, Taiwan and ChinaSouth Korea, Taiwan and China

Economies transition country - Hungary,Economies transition country - Hungary,Slovenia, Republic Czech, Poland, Romania Slovenia, Republic Czech, Poland, Romania becomes the potential market to Malaysia.becomes the potential market to Malaysia.

Economic system in these countries having aEconomic system in these countries having atransition from federal to laissez fairetransition from federal to laissez faire

economic system.economic system.


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CONCLUSIONCONCLUSION

International Trade is one of the key toInternational Trade is one of the key tosuccess of an organization. It can besuccess of an organization. It can be

achieved through exports, jointachieved through exports, jointventures, licensing, franchising andventures, licensing, franchising andbarter trading.barter trading.

However, one must consider the tradeHowever, one must consider the tradebarriers such as tariffs, quotas,barriers such as tariffs, quotas,subsidies, health quarantine andsubsidies, health quarantine and

currency exchange that exist in order tocurrency exchange that exist in order toh ith t ti

4381395 etr chapter 10 english

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