International Business. What is International Business? Dealing with all commercial transactions...
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Transcript of International Business. What is International Business? Dealing with all commercial transactions...
International Business
What is International Business?
• Dealing with all commercial transactions (private and governmental, sales, investments, logistics, and transportation) that take place between two or more regions, countries and nations beyond their political boundaries.
• Example: Buying/selling from China
Why is it important?
• More and more companies are moving their headquarters to an international destination.
• Why?• Cheaper labor, avoid taxes, cheaper
products, eliminate the middle man….
• Where would you want to move your company?
Risk Factors
• Political Risk
• Social Risk
• Economic Risk
Political Risk• Country leaders (government)
• New/different taxes
• Currency exchange rates
• Trade tariffs or barriers
• Terrorism, riots, civil wars, even political elections
• New regulations
• Example: Move all operations to India then Prime Minister is killed. Country is in mourning and riots begin
Social Risk• Working conditions/labor laws
• Environmental quality
• Health
• Economic opportunity
• Religious differences/traditions
• Wages of workers
• Example: Coca-Cola opened a bottling plant in India. That area had a sever drought at the time and Coca-Cola continued to deplete the water supply for it’s bottling effort.
Economic Risk
• Employment rates drop
• Value of currency is reduced
• Import/export increases/decreases
• Changes in buying power
• Debt/surplus
• China(where you moved your business) lends the U.S. money, then the U.S. defaults on that loan. China’s buying power has been reduced.
Foreign Exchange Rates
• The price of a nation’s currency in terms of another currency.
• Two components…• Domestic currency: accepted form of
money but not necessarily exclusive currency
• Foreign currency: foreign money not accepted
• Investopedia.com Video
**Change the direction.
How would a country’s currency
be affected??• A nation imports more than it exports
• INCREASE• DECREASE• ?? NOT SURE ??
How would a country’s currency
be affected??• Interest rates in a country rise.
• INCREASE• DECREASE• ?? NOT SURE ??
How would a country’s currency
be affected??• A new president is elected in a country.
• INCREASE• DECREASE• ?? NOT SURE ??
How would a country’s currency
be affected??• A nation’s inflation rate drops.
• INCREASE• DECREASE• ?? NOT SURE ??
How would a country’s currency
be affected??• The exports for a country increase as a
result of technology.• INCREASE• DECREASE• ?? NOT SURE ??
How would a country’s currency
be affected??• The military seizes control of the
government and takes over major industries.• INCREASE• DECREASE• ?? NOT SURE ??
How would a country’s currency
be affected??• New tourist attractions and
international publicity increase international tourism by over one million people.• INCREASE• DECREASE• ?? NOT SURE ??