International Business

International Business

11/23/05

International Business Mid-Term

1. International Business is a transaction between two or more countries and is primarily based in a single country, but acquires some meaningful share of its resources or revenues (or both) from other countries. It comprises a large growing portion of the world's total business. Although it's riskier and more expensive it allows for greater variety on different products and services at lower prices.

Domestic Business is a transaction within the home country; it acquires all of its resources and sales, and all of its products or services within a single country. A well functioning domestic economy will allow for smooth operations for International Business.

The difference between international and domestic business is, first, when international business takes place it affects a variety of components such as profits, employment, wages, and security. These important aspects are sometimes negatively impacted and affect the citizens of the home country. On the other hand, domestic business generates jobs and promotes economic security. According to Daniels, Radebaugh, and Sullivan most companies engage in international business to expand sales, acquire resources, and minimize risk.

When a company wants to expands sales it also expands its competitive realm. The company steps outside the boundaries of its origin to maximize profits and also use it as a balancing factor. For example, if sales are down domestically and sales are up internationally the company will not be at a loss. They actually create a competitive advantage to those companies who limit itself to domestic business only. There are policies and regulations on goods that are being shipped internationally. Engaging in domestic business is better for a country than to have a high volume of imports and low volume of exports from other countries. Imports and exports are a form of international business that can affect a countries purchasing power.

When a company engages in international business to acquire resources they search for raw materials, products, and services that are not available in the home country. A finished product that a company produces may have a combination of products shipped from several countries. For example, diamonds shipped from Sierra Leone are made into the finished product of high priced earrings, rings or bracelets. However, some countries aren't aware of the acts, behaviors, and practices that take place in an underdeveloped country to acquire a resource for them. Where as domestic operations are monitored by the home country.

When a company wants to minimize risk it seeks foreign markets to take advantage of the fluctuating business cycle. For example, the product life cycle displays the rise and fall of a product. The stages are birth, growth, maturity, and decline. This cycle may take place for a particular product during different times and different locations. Therefore, if a product dies or a country goes into recession, profits can be recouped in another market.

Exporting means to make a product in a company's domestic marketplace and selling it in another country. To increase revenues is the number one reason companies export goods, it's also less risky than foreign direct investment. Exporting is good for a countries economy moreover; it increases the company's wealth. However, some engage in illegal practices such as dumping. Dumping is the export of goods that are intended to be sold at a price that is lower than what they would have been sold for on their home market.

Importing means to bring a good, service, or capital into the home country from a foreign country. The International Business of Environments and Operations states that there are two different types of imports: (1) those that provide industrial and consumer goods and services to individuals and companies that are not related to the foreign exporter, and (2) those that provide intermediate goods and services to companies that are part of the firm's global supply chain. Companies import goods because they can be supplied to the domestic market at a cheaper price and better quality than competing goods manufactured in the domestic market.

Customs Duties are levies charged when goods are imported into, or exported from, the country, and they are paid by the importer or exporter. Any country that imports and exports needs to be familiar with the other country's procedures and regulations.

Foreign Exchange is foreign currency; any currency other than a country's own. Currency is an important component when conducting business. It is the sole commodity that completes or initiates a transaction. Foreign exchange can be swapped in several different forms such as cash, credit, debit card, travelers checks, and bank deposits to name a few. The rate of currency differs from country to country and is the determinate of the country's purchasing power.

Customs House Broker is a consultant to help an importer minimize import duties. The broker assists with the arrangement and technicalities that come with importing duties. The broker assesses the value for products to help the importer to qualify for more favorable duty treatments. They also qualify the import for duty refunds through drawback provisions. They defer duties by using bonded warehouses and foreign trade zones. Finally, they limit liability by properly marking an import's country of origin. (516, Daniels et al.)

Foreign Direct Investment is the ownership of foreign property in exchange for financial return. Primarily, it is an investment made by a foreign individual or company in the productive capacity of another country; for example, the purchase or construction of a factory in a foreign country. Engaging in FDIs creates and destroys jobs. It creates jobs and opportunities for the citizens of the foreign country and consequently, it can destroy jobs in the home country by substituting jobs that could be employed domestically. FDIs can develop a national coalition between the two countries; this relationship can