Module: BHS 0003 - International BusinessTerm 1 Lecture 1

Tutor: Dr. Kalim SiddiquiRoom: BS2/03e-mail: k.u.siddiqui@hud.ac.uk

Learning Outcomes:Study Pack – Reading ListAccess to unilearnScheme of workCourse Assessment, Module Specs.Survey of the material to be coveredClassical Trade theories

• Module Code BHS 0004• MODULE TITLE International and Pacific Asian Business• Module Leader Dr. Kalim Siddiqui• Module Scheme HUBS Undergraduate Scheme• School involved in delivery Huddersfield University Business School• Name of Pathway (s) BABS Part time & 33.24 pathways• Module Status Transferable• Module Type Optional• Module Rating Honours 20 credits• Learning Methods Lectures: 24 hours• Tutorials: 24 hours• Self directed study 152 hours• Pre-requisites BFE116 : Introduction to Economics• Recommended Prior Study None• Co-requisites None• Professional Body Requirements None• Barred Combinations International and Pacific Asian Business• Module Aims• To develop the students’ understanding of the developments in International Business which

have led to international specialisation and the growth of international firms.• To increase the students’ awareness of the international context within which international

companies operate and to appreciate the impact of foreign direct investment on the international economy.

• Module Synopsis• The module develops the economics of trade and location, examines the growth of multinational

corporations, and considers methods of market entry.• The module considers the significance of the international environment for international

business and the responses to and impact on that environment by international firms.

• Outline Syllabus• The foundations of international business and trade, Theories of trade and location,

Models of trade and location, Barriers to trade and an introduction to customs Unions, The international company and internalisation, Models of international company strategy, Methods of international market entry: Exporting, licensing, joint ventures and foreign direct investment, The structure of the world economy, classifying countries

• National business environments, opportunities for and impact of international business, Developments in the international trading environment, the impact of protection, the importance of G.A.T.T and the W.T.O., the impact of trading blocs, the response of international business, The international financial environment and its implications for international business: the determination of exchange rates, currency areas, European monetary union

• Learning Outcomes• Knowledge and Understanding • On completion of the module the students will be able to demonstrate understanding

of:• The importance of international trade and location• The main theories which explain international trade and the nature of international

specialisation• Generic international business strategies• The nature and significance of the international environment for international

business• The impact of international business on the international environment• Potential conflicts between international businesses and national governments and

the role of international institutions

Ability On completion of the module the student will be able to:Compare and analyse international competitive environmentsInterpret, evaluate and apply appropriate theoriesPropose and defend international business strategies and methods of entry, based upon analysis of the environment and the firm specific advantages of the company

Assessment StrategyEvidenceBy coursework and exam the weighting will be:Coursework (2,500-3000 words) 50%Open book examination (2 hours) 50%

Learning StrategyLectures will be used to provide basic information. Tutorials will be used to extend student knowledge of theory and its relation to practice. Case studies will be used where appropriate to facilitate understanding.

Indicative ReferencesHill, C., International Business (2nd Ed) McGraw Hill 2001Grimwade, N., International Trade (2nd Ed) Routledge 2001Daniels, J D, Et al, International Business: Environments and Operations (9th Ed) Prentice Hall 2000Meier, G M., The International Environments of Business, Oxford 1998Other Informations-

• Course Structure

• 1 Lecture per week and

• 1 Tutorial per week (review questions and case studies)

• Assessment –

– 1 assignment 2500 words and also – 2 hours Exam based on term 2 materials

• Why International business is different?• International business differs from domestic business

in that a firm operating across borders must deal with the forces of three kinds of environment:– Domestic– Foreign &– International

• Forces in the environments:• All the forces surrounding and influencing the life and

development of the firm.• Uncontrollable forces:• External forces over which management has no direct

control, although it can exert an influence

• International business is the conducting of business activities that involve the transfer of resources, goods, services, knowledge, skills or information across national boundaries.

• International business is more complex than domestic business owing to differences in environments & operational requirement

• If an international business is not run effectively, the benefit of doing business internationally may turn into a drawback because of the costs & difficulties of managing activities in multiple locations.

• Firms activities & exchanges that involve the crossing of national boundaries are called international transactions.

• International trade occur when a company export & import to/from other country.

• International investment occurs when the company invest resources in business outside home country.

• International trade:

• Intention is to provide an overview of current thinking about international trade.

• Why do countries engage in trade?• What benefits does trade bring to countries?• What product will a country exports and import?• What determines the products in which a country

specialises?

• We will identify some of theories which economists have developed in an attempt to answer these questions.

• Firms engage in foreign markets because it is profitable to do so.

• Why do nations trade?• This question is important proposition of

predicting the direction, composition and volume of goods traded.

• International trade theory attempt to address.• The period leading up to industrial revolution,

international trade was largely conducted under the authority of the governments.

• The goals of trade were, therefore, the goals of government.

• As early as in the 15th century the benefits of trade were clearly established in Europe.

• As nation state expanded their influence across the globe in the creation of colonial system.

• To maintain and expand European control over colonies, the European governments needed large armies, fleets and huge military spending.

• Trade was seen quick way to make huge profit needed for the expanding armies.

• Colonialism associated with the exploitation of occupied people.

• Colonialism also later on provided the supply of raw materials needed for new industries in Europe.

• For example, Once India became British colony, only after that India was forced to become supplier of raw cotton for newly growing textile industries in Lancashire &also

• Colonies became market for British manufactured goods, which was essential component for the successful development of modern industries in UK

• Trade is the voluntary exchange of goods/services between organizations and countries.

• Parties must believe they will gain from the exchange.• International trade has important direct & indirect

effects on national economies.– exports spark additional economic activity in the domestic

economy (creates jobs, income etc.) – imports can pressure domestic suppliers to cut their prices

and improve their quality.– Failure to respond to foreign competition may lead to shut-

down companies & job losses– important to consumers, businesses, workers and scholars,

who have attempted to develop theories to design policies they hope to benefit their countries.

Classical Trade Theories –

• The first theories of international trade developed with the rise of European nations in the 16th Century.

• Mercantilism – it is a 16th century economic ideas that maintains that a country’s wealth measured by its holdings of gold & silver.

• Mercantilists argue that a country’s goal should be to enlarge holdings of gold and silver.

• It was popular with manufacturer. They were given export subsidies.

• However, subsidies are paid by tax payers. • Government import restrictions hurt consumers in the

form of higher prices.• During the age of colonization, burden of

mercantilism were often shifted onto their colonies.

• Great Britain’s mercantilists policy was a major contributor to the political unrest in its North American colonies in 1770s.

• Merchants in the colonies resented British tax and regulations that hindered the growth of American firms & protected British industries.

• Boston tea party and similar incidents led to arm conflict and ultimately to independence of American colonies.

• Mercantilism –• Mercantilists ideas were developed during the 15th -

16th century, they argued that a country wealth is measured by the holdings of precious metals such as gold and silver.

• They said that a country’s goal should be to enlarge these holdings by promoting exports and discouraging imports.

• These ideas were practised by the European governments in the 16th century.

• The logic was if foreigners buy more goods and pay in gold then the difference may enable you to amass more treasure.

• Mercantilism – an economic ideas based on belief that a nation’s wealth depends on accumulated treasure (e.g. gold).

• Mercantilists say that country should export more and import less.

• These trade theories were formed 1500-1800

• Mercantilism holds that a government can improve the economic well being of the country by encouraging exports and stifling imports.

• The result is a positive balance of trade that leads to wealth (gold) flowing into the country.

• For instance, a country suffered as “unfavourable” balance of trade – that is, its exports were less than its imports

• By hoarding to gold and silver means, according to Mercantilists, the kings could afford to hire large armies and increase military spending to fight other countries there by expand their territories.

• Mercantilists ideas were popular and. The export-oriented industries favoured such trade policies.

• Domestic firms threatened by foreign imports endorsed mercantilists trade policies such as imposing import tariff or quotas.

• Business owners, workers, suppliers and local politicians all supported and were benefited by such promotion of export policies.

• For example, under the Navigation Act of 1660 all European goods imported by the American colonies had to be shipped from Great Britain.

• The British government prohibited colonial firms from exporting certain goods that might compete with those from British factories such as iron goods, finished woolen goods.

• British government also ensured the supplies of raw materials at low prices for their producers.

• The British admin forced colonial industries to sell their output only to British firms. These outputs were rice, tobacco, forests products.

• Mercantilist policies ultimately backfired – it contributed to the grievances that led to the overthrow British colonial rule in North American colonies.