Final Alternative Assessment

INTERNATIONAL BUSINESSES - BUS 510

Section – 2
Summer 2021

Submitted by:
MOHIB BILLAH SIDDIQUEE; ID – 20164044

Submitted to:
K.M. Jamshed uz Zaman
Adjunct Professor, BRAC Business School
BRAC University

Submission date:
19th September
 Answer no: 2

What is export?

Export means goods and services produced in one country and sold in other countries. Exports are
astonishingly prominent to modern economies because they offer people and firms many more
options. For example, if we want to buy a washing machine the Bangladeshi brands are Walton
and Vision. But we can see more famous brand like Samsung, LG, and Panasonic etc. which are
not manufactured in Bangladesh. We are getting this just because those company are exporting
their product. Exports are fabulously key to modern economies because they provide people and
firms many more markets for their goods and services.

Reason for exporting:

To obtain more consumers and more profit

When a company enters into new market of

new country, it gets new consumers.
Sometimes the new consumer’s number is
greater than the company’s homeland
consumer. This is one of the main reason for
exporting. For example, when RFL group
entered into Kolkata’s market it gained the opportunity to be accepted and consumed by 1.5 corer
of new consumers. Exporting goods can lessen business risks by developing possible markets
which is a slow process in domestic market. If there are more customers there will be more sales
and profit will be increased. Exporting benefits a firm or a company and others and also the local
markets that a firm operate in, region and the nation. Exports are a well-known driver of many
positive economic indicators. If we look in apples profit growth graph given here, it’s clearly
showing how exporting electronic goods is helping Apple to increase profit drastically. Moreover,
exporting means new market and new market means new consumer as well as chance for profiting.
To manage seasonal slowdown

Exporting goods allows to sell to other markets which are complementary with the domestic
market. It’s like something is not selling in domestic country just because of any natural or seasonal
reason but the sells will rise again during the proper season. For example, Walton Bangladesh is
producing heater for winter. When its summer or any other season without winter the sell for heater
is very low. At that time they are exporting heater in countries with low temperature. Though they
should expect loss, they are getting profit just for exporting. The main focusing point here is
Walton is getting this opportunity just for exporting. They are able to generate profit during low
sell’s season in domestic country as they had broaden customer base. They can roll on their
company operation even in low season without having losses.

Ensuring betterment for technically behind countries

World’s most famous and reliable technology companies are mostly belongs to USA. Those
companies are helping other countries with their advanced technology. For example, Google is
from USA. Here in Bangladesh people using google home devices to make their home smarter and
secure. Similarly most of the houses of Bangladesh now we can see Wi-Fi router. Almost all of
them come from china. These countries are exporting their goods to other countries who don’t
have capable manpower or technology to make it. In addition, firms are exporting to make life
comfortable for technologically behind countries.

To test foreign market and competition

To test foreign markets and foreign competition cheaply. This is a common strategy for firms that
want to test a product’s acceptance before investing in local production facilities. Exports may also
enable firms to test market strategies and make adjustments with reduced risk in a smaller market.
If the strategy or product fails, the firm can withdraw without having a costly and sometimes
damaging failure to the entire firm. There is, however, a downside to this strategy: whatever the
firm does in the outside market may be seen by a rival. This is especially true for large, global
firms such as Tommy and Procter & Gamble. Former Samsung CEO Lee Kun-Hee changed the
company’s strategy for introducing new products. Rather than postpone a global launch until the
firm accumulated marketing experience in a country, Samsung began to introduce products on a
worldwide basis early in their development to avoid giving competitors time to react in other
markets.

Problem areas of exporting:

Foreign market screening

Market screening is a method of market analysis and assessment that permits management to
identify a small number of desirable markets by eliminating those judged to be less attractive. This
is accomplished by subjecting the foreign markets to a series of screenings based on the
environmental and need screening. Environmental scanning, from which market screening is
derived, is a procedure in which a firm scans the world for changes in the environmental forces
that might affect the need of people. So, environment and market screening is the main process to
enter a market and to know the people’s need. Firms usually conduct survey of market before
exporting their goods to know what kind of goods will make more profit and what actually people
prefers. Firms have to face problem during this market screening and need analysis process.
Sometimes they even don’t get permission to do it.

Payment and financing procedure

Companies sometimes have to pay hidden Fees here Trade companies have to pay far more than
they should to receive their own payments. In export and import companies face some payment
and financing procedure those are Exchange Rates, Payment Tracking, Payment Identification,
exporters Can't Easily Pay. Exporters also may face fraudulent. Even some countries have strict
rules that can take longer time to pass. These kind of payment and financial procedure are very
problematic for exporting.
Profit Remittance Barriers

Profit remittance barriers can create problematic situation for exporters. When there are no
objectionable requisites for entry, a nation may still be excluded if there are what management
believes to be undue restrictions on the repatriation of earnings. Limits linked to the amount of
foreign investment or other criteria may be set, or the nation may have a history of inability to
provide foreign exchange for profit remittances.

Policy Stability

Another factor of disturbance to exporter is studying the possibilities of investing in a country is

the stability of government policy. Is there continuity in policy when a new leader takes office, for
example? What is the political climate? Is the government stable, or is there infighting among
government leaders? How about the public? Is there visible unrest? Do the armed forces have a
history of intervention when there are public disturbances? Business can adapt to the form of
government and thrive as long as the conditions are stable. But instability creates uncertainty, and
this complicates planning. An often-heard complaint is, “They’ve changed the rules again.” This
kind of unstable situation can cause harm for exporters. Sometimes they even have to face losses.
Every country should maintain a fixed set of rules for exporters to attract good quality exporters.
It is important to make a distinction between political stability and policy stability. Rulers may
come and go, but if the policies that affect businesses do not change very much, these political
changes really may not be important.

Types of payment term offered by exporters to foreign buyers:

Open account

Open account transaction in international business is a process where the goods are shipped and
delivered before payment is done. Open accounts are risky for exporters. Exporters should
consider two factors before having open account payment system. One is ,the exporters have to
know about the importers country whether the country is economically stable county or not .If
that country is economically stable the exporters will able to know that their importers is reliable
or not .
Consignment

Consignment is one type of open account in which payment is sent to the exporter after the goods
have been sold by the foreign buyers. It is the riskiest of all method of payments. Central bank
doesn't like consignment basis import and export. For example exporters have sold some
readymade garments to Spain. The condition is that as far as the importers can sell the products
then they will pay. Unless they sell the exporters won't ask for money. It is risky in a sense that
there is no guarantee Bangladeshi assets will come back or not. But there are some goods
Bangladesh Bank permits to sell in consignment basis.

Cash in advance

Cash in advance is one of the safest and easiest way for the exporters. It is a thing in export
financing which guarantees exporters but not importers. Importers may not like it because it can
creates doubt about the exporters that the exporters may get the money and not send the goods.
With cash in advance, the exporter can eliminate credit risk or the risk of non-payment since
payment is received before to the transfer of the goods. Requiring payment in advance is not
popular to the buyer as it creates unfavorable cash flow. Foreign buyers are also worried that the
goods may not be sent if payment is done in advance.

Airway bill

When the career presents a proof that the shipment has been made then the exporters and importers
have to pay. It is very easier and short term. In Bangladesh some of the vegetables or food are sent
to the Middle East countries. The people from London also want some hilsha fish vegetables from
our country. This kind of payment is made when we export vegetable or hilsha in other countries.
When they have proof of shipment they just pay.

Letter of credit

International letters of credit are a fidelity by a bank on behalf of the foreign buyer that payment
will be made to the exporter provided the terms and conditions stated in the LC have been met, as
proved by the presentation of specified documents. It is one of the most reliable and preferable
methods of payment for exporters.

Two types of LC is available-

One is confirmed and it is the system of confirming to each other.one bank and the other bank they
confirm between them that they will honor the letter of credit.

Second system is, irrevocable. Once the seller has accepted the credit the customer won't cancel
or alter it at any condition, how much to pay , when to pay , what to pay , what are the documents
need it, if delayed what will be the fine , everything is written. The customer can't change any
conditions or they can't cancel the letter of credit. If exporters and importers, then the exporting
bank and importing countries bank, central bank of exporting country and central bank of
importing countries total 6 authorities agree only then customer can change the condition of
irrecoverable letter of credit.

Exporting draft

An unconditional order drawn by the exporter to the buyer which instructs the buyer to pay the
amount of the order on presentation. If the exporter give a time by which the buyers have to pay
that is draft. This process is called exporting draft for payment.

Pro forma invoice

This is the exporter’s formal quotation containing a description of the merchandise, price, delivery
time, proposed method of shipment, ports of exit and entry, and terms of sale. It is more than a
quotation, however. Generally, the bank will use it when opening a letter of credit and in countries
requiring import licenses or permits to purchase foreign exchange, government officials will insist
on receiving copies. Exporters have to write everything in detail here.
 Answer no: 3

Impact of climate on global business management

Climate is important because it sets the limits on what people can do, physically and economically.
Where the climate is harsh, there are few human settlements, and where it is permissive, there
tends to be population density. Climate is not deterministic—it allows certain developments to
occur, but it does not cause them. Climate can cause differences in human habit and business
development. Switzerland is likely to continue to be a mountainous country with long, snowy
winters on a heavily populated plain at the foot of the Alps. Holland, situated below the North Sea
level, has protected itself through a system of dykes. Singapore has greatly increased its landmass
by reclaiming land from the surrounding sea, as have the Japanese in their landfill expansion into
Tokyo Harbor. Al most every country have a different specification in its climate. This thing
changes their product producing capacities. Climate also controls crops or fruits growing capacity.

When climate of a county enables it to grow something on a large scale after fulfilling domestic
demand the global trade happens then. For example, World Bank studies have shown that many
of the factors responsible for underdevelopment in tropical nations are present because of the
tropical climate. Continuous heat and the lack of winter temperatures offer no constraints for
reproduction and growth of weeds, insects, viruses, birds, and parasites, and this results in
destroyed crops, dead cattle, and people infected with debilitating diseases. They can grow coffee
been in tropical climate. Tropical Africa will give it advantages over the temperate zones in
agriculture. The resulting income is anticipated to create a market in tropical Africa that could
easily surpass that of the Middle East. African nations are exporting huge amount of vegetables to
Middle East as Middle East has very small capacity to grow vegetables. Similarly the climate of
Canada allows it to grow wheat, canola, barley, corn and soybeans. Canada is exporting wheat and
soybean in Bangladesh from a long ago. Even in some cases some countries are producing some
crops in a large scale but it’s not preferred in their country. They are just growing as they can
export. It’s easy to assume that the top countries exporting cannabis are the countries with the
largest legal markets. But in fact, some of the world’s greatest cannabis exporters are based in
nations that still prohibit their own citizens from using the drug. Australia is the largest producer
of cannabis but it’s not legal for them in their country to use. In January 2018, the Australian
government legalized the overseas export of cannabis products for medical use. The law
dramatically reduces trade obstacles for Australia’s domestic producers. Moreover, climate is one
of the key factor which controls business of one country with the global market. Changing climate
patterns may cause the most dramatic risk to businesses large and small. Climate change converts
consumer behavior, to the harm of some businesses and the benefit of others. When public demand
changes with climate, the business course also changes. Many companies have already started to
adjust, and all companies that hope to succeed in the future will have to do the same.

Impact of culture on global business management

Culture affects how we are thinking and how we act as an individuals. Cultural aspects represent
the values, norms, beliefs, rituals, concepts and social action of a society or of a country.
Understanding the cultural factors is essential for doing business internationally. For operating in
the global market and to become successful we have to know the cultural aspects of international
market. There is a well-known expression “when in Rome, do like the Romans do”. When we are
dealing with people from another culture, we have to find that their business practices and
communication are different from what we are accustomed to. Understanding the culture of the
people we are dealing with is important to successful business interactions as well as to
accomplishing business objectives. For example-

 How they are communicating

 How culture impacts on their holiday and time management
 How people make their verbal and sign communication
 How people are negotiating and taking decision

Even if we want to succeed in any business in own country we have to understand our own culture
deeply and have to do research about the cultural trigger points. For example, homemade food
delivery is very common in Dhaka city. Now it’s a part of Dhaka’s busy life. But the things is not
same in rural areas. If someone starts a homemade food business targeting own rural people, there
is a high chance he will be in loss. On the other hand in Dhaka this is a profitable business as
people has accepted it as part of culture. In rural areas people are not used to with it. Similarly for
international business. When we have to start a business we have to research about people and
their life style from that particular area. Suppose, we can think about Nestle. Nestle is a multi-
national company. When nestle choose flavor for Maggi to be launched all over the America, they
put totally different than Asia. Just because they researched about American culture and then
choose flavor. The flavor of Maggi we have in Bangladesh is different than USA but similar to
India as they researched Indian and Bangladeshi culture have some similarities. All large business
enterprise do culture research before they enter in market. Even if we can see the reflection in
advertise also. They try to reflect the culture of that country by ads. Otherwise people won’t accept
it. For example, we can see ads of Coca-Cola. When they prepare ads for Bangladesh they always
try to reflect Bangladeshi culture and if we see American ads of Coca-Cola, it’s related to their
culture. To conclude, culture has a very strong effect on business. To start any successful global
business companies should analyze culture of that particular country.

Impact of natural resources on global business management

Natural resources are anything supplied by nature on which people depend. The principal natural
resources important to business productive capacity are those from which we can source energy.
Countries with more natural resources can change their economy fast. Even if they don’t have
enough infrastructure to extract them they can gain foreign direct investment to use it. In today’s
world global business is affected very much by natural resources. For example, Dubai was not as
it is today before 30-40 years ago. It started to sell its oil and petroleum products all over the world.
Dubai changed position globally by doing business with their natural resources. Natural resources
have a double-edge effect on economic stability, in that the efficiency of its use raises business
output, but increases its depletion rate. Natural resource is a key input in the production process
that stimulates economic growth. However, the depleting character of natural resources coupled
with diminishing returns of factor input implies that dependence on natural resource utilization is
not an optimal strategy for sustainable growth. By extension, intensive utilization of natural
resources undermines sustainable development. For example, Bangladesh gas an electric power
plant in Bhola which is run by natural gas. This power plant supply electricity to various industries
located in Bhola. One of those industries is a large leather factory which produces bag, shoes, belt,
money bag etc. That company directly delivers those product to Italy for a corporation. They are
getting this opportunity just because of that power plant. Before setting up that power plant it was
impossible to get an industrial connection of electricity. Similarly, if the country is not doing any
business with natural resources, there is high chance it can attain interest for foreign direct
investment. In oil production Saudi Arabia is second in the world. Saudi Arabia has developed a
lot by trading with their natural resources. Now a days another major idea is sustainable business.
All large corporation and companies want to invest in those countries who has natural resources
as they can use them.

Impact of environment on global business management

A business does not exist in a vacuum, separate from the rest of the society. It is an important part
of the socio-economic and political environment of modern life and, as a result, any kind of
changes in this external setting can have mild to severe issues for business. Every business need a
suitable environment to grow large and flourish. After analyzing environment for business we get
several kind of environment. Most two important from those are political environment and
economic environment for business.

Political environment

Political issue can affect business many ways. A prime example of this would be Myanmar. As a
result of growing anger at the ruling regime, the country is experiencing widespread civil unrest;
the economy has tanked, and earlier thriving businesses are unable to survive under such
circumstances. Similar stories can be found out in other areas such as Afghanistan, Yemen, Haiti,
and several African nations, where cycles of political crisis, violence, and general instability have
made it virtually impossible for businesses to prosper and investment to arrive. The most important
impact is in the form of changes in laws and regulations that affect business. Taxes, can have a
massive effect on overhead and profit margins. In most democratic countries, changes in
government often bring notable changes related to taxation, with these changes often hinging on
the political ideologies of the party in power. To elucidate, the Republican Party of US and the
Conservative Party of UK are proper illustration of parties who support tax cuts as a route to
helping businesses growth. After election wining of Donald Trump the US history has resulted in
some of the biggest tax cuts, which is a great news for enterprises of that region. Governments also
have the power to change laws related to business operations, such as environmental sustainability,
social responsibility, labor laws etc. An increase in consent regulations can affect the overall
facility of doing business. For example, after financial crisis od 2008 Dodd-Frank Wall Street
Reform and Consumer Protection Act passed in the US in 2010 by Barack Obama. Designed to
govern recklessness and preserve financial stability, it was targeted by critics who claimed it would
make US firms less competitive. Later in 2018 it was revoked by Trump administration,
demonstrating how the political will of the day can severely impact day-to-day business operations
one way or the other.

Economic environment

International investors will be more likely to invest in a country based on the economic
environment and previous success story. International trade and technological improvement are
the two main reason which contribute to the economic growth. The economic environment is
influenced by gross domestic product or GDP, per capital income levels, material prices,
manpower availability and is infrastructure. Countries can be divided into three categories based
on economic condition, countries which are more industrialized are known as developed countries,
less developed countries and countries which are industrializing or improving their economic
condition known as developing countries.
 Answer no: 4

Brexit

Brexit was the nickname British exit from the EU, the economic policy union that the U.K. had
been a member of since 1973. It happened on June 23, 2016, when the U.K. voted to leave the EU.
The residents decided that the benefits of free trade weren't enough to offset the costs of free
movement of immigration. 17.4 Million People voted to leave and 16.1 million who voted to
remain. In 2015, the Conservative Party called for the vote. People who voted for it mostly were
older, working-class residents of England's countryside. Free movement of immigrants and
refugees, claiming in the process that citizens of poorer countries were taking jobs and benefits
made them afraid and to vote for it. They believed UK paid more into the EU than it received.

European nations can do well even after Brexit

Brexit is actually a poll which is reacting against globalization. As a result, it has infirmed forces
in the EU that favor mutually inclusion. The European Union (EU) is a family of European
countries which are democratic, and they are committed to work together for peace and prosperity.
It is not a State projected to replace prevailing states, but it does epitomize a greater concession of
sovereignty than any other international organization. The EU is exclusive; its Member States have
set up communal institutions to which they envoy some of their sovereignty so that decisions on
precise matters of joint interest can be made democratically at European level. This pooling of
sovereignty is also entitled as European integration. Furthermore, the euro is the currency of 19 of
the 27 member states of the European Union and that are all official. This group of states is
identified as the Eurozone or euro area and comprises about 343 million citizens as of 2019.

First of all, Eurozone makes profit by reasonable administration. It also advances monetary
strength and development such as EU’s financial and fiscal guideline which includes stability and
growth part, and also other parts of Economic and Monetary union. Moreover, the euro is the
vibrant instrument for heightening the advantages of the single market, exchange strategy and
political contribution. As such, it is a necessary part of the political, social and financial
constructions of the present European Union.
Brexit as well created new freedoms for the European defense association, as the UK reliably
excluded moves toward this path, contending it would subvert NATO. It attempted to do so again
even after its withdrawal submission, conforming to the foundation of a military HQ. With the
UK’s extraction and an inclination that the US under Donald J. Trump may not respect NATO
responsibilities, the European Council has put safeguard participation as a momentous task in its
Bratislava and Rome declarations and pushed ahead with setting up a European Defense Fund and
originating everlasting Structured Cooperation.

For comparison we can analyze the graph. If we check the growth rate comparison graph of GDP
we can see UK was not in good position in previous years also in comparison with other EU
countries (Figure 1). After leaving the EU, they has a record GDP fall in history but EU’s GDP
increased (Figure 2). Though at the middle of 2020 they recovered but at the beginning of 2021
their GDP was again low. Still UK is trying to overcome the BREXIT affect while EU is in stable
condition.

Figure 1. GDP growth rate of EU

Those who voted to stay in the EU primarily lived in London, Scotland, and Northern Ireland. They
liked free trade with the EU, and claimed most EU immigrants were young and eager to work.
Most felt that leaving the EU would damage the U.K.’s global status.6 Small businesses were
also frustrated by EU fees. Others felt leaving the EU would create jobs. Many felt the U.K
 Figure 2. UK'S GDP fall after Brexit

Single monetary policy for the EU

Advantages

Encouraging Investment- The euro also provisions cross-border investments within the
Eurozone. Investors in countries using foreign currencies face significant foreign exchange risk,
which can lead to an ineffective allocation of capital. People are encouraged to invest more to their
business.

Mutual Support- In theory, the euro should help countries that accept that they will support each
other during an emergency or crisis moment. The currencies of countries with bigger economies
incline to be more stable because they can spread risk more efficiently.

Lower interest rates- because Euro enjoy monetary stability of the European Central Bank (ECB)
and the absence of premium due to elimination of exchange rate fluctuations.

Encouraging International Trade- It also promotes international trade by connecting with

divergent countries.
Lessen Transaction Cost- A solitary cash would invigorate travel industries in the single money
region. A traveler to the European nations in the Euro money territory (12 of them in 2002) would
not need to stress over trading numerous monetary forms and disaster in exchange costs
(commission and time) as she or he travel.

Stabilization of money-The Euro would be steadier, which is, happenstances less exchange rate
fluctuations. It occurs when contrasted with the public monetary forms. That means money or the
value of money becomes stable day by day.

Solution to exchange rate problem- Organizations who work inside the European Currency
territory would currently don't need to stress over conversion scale uncertainties. With a
solitary cash like Euro, both our German and Italian firms can get rid of exchange rate fluctuations
and they create bonding by supporting expenses.

Disadvantages

Chance of uneven development in a single currency area

Confirmation of national regulations and the starting of a single currency called Euro in principle
create a single market for all the different national economies that join this currency union. In the
word of European central bank, accreditation of Euro increase the liquidity of capital and financial
services within the Euro area. For external economies of scales, businesses have the tendency to
concentrate in certain areas. This indicates some peripheral areas within the Euro zone would lack
behind on employment and growth.

Losing of autonomous monetary policy

After formation of EU the ECB is setting all monetary policies. National central banks just have
to follow those rules. For example, setting the interest rate for the Euro area. ECB also controls
the money supply within the Euro area. As a result all countries central bank is losing all authority
over the monetary policy.

The impacts on Bangladesh exports to Europe countries against these situations

Bangladesh is a least developed country and as a result it gets more trading benefit from the
European Union. The EU works closely with Bangladesh in the framework of the EU-Bangladesh
co-operation agreement signed in 1976. The European Community has been a foremost trade
partner for Bangladesh for several decades. Enhanced market access to the EU and a developed
trading environment, Generalized System of Preference (GSP) was given by EU for Bangladesh.
Although the pattern of trade has changed expressively over the years, but they did not stop
transaction. The EU used to be a significant import source for Bangladesh. Since the mid-1990s
the EU as a group has become the foremost terminus for Bangladeshi exportable, especially the
main product was apparels. Truncated labor costs, a near self-sufficiency in knit fabrics, duty-free
access and mass production in basic garments are the chief competitive features for Bangladesh.

Many years back, exporters said if the UK keeps on giving Bangladesh obligation free benefit even
after its exit from the EU, Bangladesh wouldn’t challenge any test concerning send out. Since
Bangladesh is a less developed country, it has been escalating without any kind of exporting
taxation since 1971 under everything but Arms arrangement of the EU, an exchange partnership
of 28 European countries. The EU is the biggest fare exchange combination for Bangladesh.
Bangladesh had the choice to arrive at its present situation of the second major readymade
garments exporter worldwide only for EU’s liberal exchange assistances or benefits since 1971.

When UK leaves the EU, crucial decisions will be given by UK without depending on EU. At this
point, the trade opportunities may be reduced, as there are no country to oppose the decisions. The
UK is not only an export destination but also home country for many international companies.
This country is very precious to Bangladesh. To conclude, it is clear that there are some impacts
on Bangladesh exports to Europe countries against these situations. The affects are observed from
many years ago and now these impacts are observed clearly.