Firms and

International
Business
Government and
International Business
 GROUP 1 MEMBERS:

MERLA ELREEN MAE ROVELYN

ABAYLE BATAL BAYA
Section C Section C Section D

LYEZA JEAN
BRAZIL
Section D
HANNAH MELROSE THEOS
BEATRICE JEAN JOSHUA
SALES KIKI CABAJON
Section C Section C Section D
 LEARNING OBJECTIVES:
L01 Understand how the political and economic systems of countries differ.
L02 Understand how the legal systems of countries differ.
L03 Explain the implications for management practice of
national differences in political economy.
LO4. Explain why nations and companies participate in international trade.
LO5. Define importing and exporting.
LO6. Discuss the various initiatives designed to reduce international trade
barriers and promote free trade
LO7. Discussed the purpose of international strategic alliances and joint
ventures.
L08. Explain the economic foundations of international business, and the
importance of political, economic, and cultural
L09. Explain what is meant by the culture of a society.
L010. Identify the forces that lead to differences in social culture.
L011. Identify the business and economic implications of
differences in culture.
L012. Recognize how differences in social culture influence
values in the workplace.
L013. Demonstrate an appreciation for the economic and
business implications of cultural change.
Political economy
The political economy of a nation refers to how
the political, economic, and legal systems of a
country are interdependent. They interact and
influence each other and they also affect the level
of economic well-being in the nation.
 Characteristics of Political
Economy
The characteristic of politics can be described by various aspects, including:

1. Diversity - Diversity among individuals or societies is important to

politics, as it can help resolve tensions by invoking collective
discernment for good.
2. Pluralism - As opposed to diversity, which brings people together
based on common interests and doctrine, pluralism recognizes the
strength in differences.
3. Awareness - Politics of awareness invests a sense of togetherness in
people striving for a greater goal, as they are able to understand and
care for each other.
4. Pragmatism - As far as ideals go, politics is not ideological. It is purely
practical. Politics is all about the realization of goals and the
implementation of solutions to various challenges.
 Political Systems
The political system of a country shapes its economic and legal systems.
By political system, we mean the system of government in a nation.
Political systems can be assessed according to two dimensions.

The first dimension is the degree to

which they emphasize COLLECTIVISM
as opposed to INDIVIDUALISM.

The second dimension is the degree

to which they are DEMOCRATIC or
TOTALITARIAN.
COLLECTIVISM AND
INDIVIDUALISM
A political system known as collectivism
emphasizes the superiority of group aims over
individual goals. Collectivism further developed
in the 19th century with the ideas and writings
of Karl Marx.  Marx is one of the most
influential philosophers of the last two
centuries. 

Collectivism values
personal interdependence.
.
  Individualism
The opposite of collectivism, individualism refers to a philosophy that
an individual should have freedom in his or her economic and political
pursuits. It can be traced to an ancient Greek philosopher, Aristotle
(384-322 BC). Individualism is built on two central tenets:

1. The first is an emphasis on the importance of guaranteeing

individual freedom and self-expression.
2. The second tenet of individualism is that the welfare of society is
best served by letting people pursue their own economic self-
interest, as opposed to some collective body (such as government)
dictating what is in society's best interest.

Individualism values
personal independence.
 DEMOCRACY AND
TOTALITARIANISM
However, it is important to remember they all fall under two main systems of rule: rule of law
or rule by law.
Democracy (SUPPORTED BY THE RULE OF LAW) - refers to a
political system in which government is by the people, exercised
either directly or through elected representatives. All people have
the right to:
• Live
• Own and control their own property
• Have access to fair and transparent justice
according to the law at the time
• Follow their own beliefs, religion, and
customs
• Freedom from torture or slavery
To achieve this, a country must put into place a
system where the law of the land protects
human rights and rule society
 Totalitarianism (RULE BY LAW) - is a form of
government in which one person or political
party exercises absolute control over all spheres
of human life, and opposing political parties are
prohibited.
Also known as the state, a totalitarian government imposes a set of
beliefs on its people who must conform or face unpleasant, and often
violent consequences. This is called oppression.

Some examples of totalitarianism include:

STATE RULER PERIOD

Soviet Union Joseph Stalin 1922 – 1943

Nazi Germany Adolf Hitler 1933 – 1945

The People’s Republic of Mao Zedong 1949 – 1976

China
North Korea Kim Dynasty 1948 – present
 THERE ARE FOUR MAJOR FORMS OF
TOTALITARIANISM TODAY:

1. Communist Totalitarianism: advocates achieving

socialism through totalitarian dictatorship
2. Theocratic Totalitarianism: political power is monopolized
by a party, group, or individual that governs according to
religious principles.
3. Tribal Totalitarianism: a political party that represents the
interests of a particular tribe monopolizes power.
4. Right-Wing Totalitarianism: individual economic freedom
is allowed but individual political freedom is restricted in the
belief that it could lead to communism.
Economic
system
 Three types of economic
systems:
1. Market economies - all productive activities are privately
owned and production is determined by the interaction of
supply and demand government encourages vigorous free and
fair competition between private producers.

2. Command economies - government plans the goods and

services that a country produces, the quantity that is
produced, and the prices as which they are sold.

3. Mixed economies - certain sectors of the economy are left to

private ownership and free market mechanisms while other
sectors have significant state ownership and government
planning governments tend to own firms that are considered
important to national security
 Legal
system
 Legal System
• The legal system of a country refers to the rules, or laws, that
regulate behavior along with the processes by which the laws are
enforced and through which redress for grievances is obtained. The
legal system of a country is of immense importance to international
business.

There are three types of legal systems:

1. Common law - based on tradition, precedent, and custom.

2. Civic law - based on detailed set of laws organized into codes.
3. Theocratic law - law is based on religious teachings.
 DIFFERENCES IN
CONTRACT LAW
A contract - is a document that specifies the conditions under
which an exchange is to occur and details the rights and
obligations of the parties involved.

Contract law- is the body of law that governs contract

enforcement. The parties to an agreement normally resort to
contract law when one party feels the other has violated either the
letter or the spirit of an agreement.
 Property Rights and Corruption
(Private Action, Public Action, And Corruption, Foreign
Corrupt Practices Act)

1. PROPERTY- refers to a resource over which an

individual/business holds a legal title, that is a resource
that is owned.
Examples: Land, buildings, equipment, capital, mineral
rights, business, and intellectual property.

2. PROPERTY RIGHTS- refers to the legal rights over

the use to which a resource is put and over the use
made of any income that may be derived from that resource.
It can be violated in two ways through private action and
through public action.
o PRIVATE ACTION- refers to the theft, privacy, blackmail, and the like
by private individuals/groups.

o PUBLIC ACTION- to violate property rights occurs where public officials such
as politicians and government bureaucrats, extort income, resources, or
property itself from property holders.

Example: Levying excessive taxation, requiring expensive licenses/

permits from property holders, taking assets into state ownership without
compensating the owners.

• It can also be done through illegal means/ corruption, by demanding bribes

from businesses in return for the rights to operate in a country, industry/
location.
CORRUPTION- is seen and treated as illegal and when discovered, violators
are punished by the full force of the law.
FOREIGN CORRUPT PRACTICES ACT [ FCPA]
• is a U.S statute that prohibits firms and individuals from paying
bribes to foreign officials to further business deals.
• Both the Securities and Exchange Commission [SEC] and the
Department of Justice [DOJ] are responsible for enforcing the
Foreign corrupt practices.
• The two main component of FCPA are Anti-bribery provision and
maintaining accurate books, records and internal controls so bribes
cannot be hidden.

ORGANIZATION FOR ECONOMIC COOPERATION AND DEVELOPMENT

[OECD]
• an Association of the worlds 30 most powerful economics
adopted the convention on combating bribery of foreign
public officials in International Business Transactions.
 THE PROTECTION OF INTELLECTUAL
PROPERTY (PRODUCT SAFETY AND
PRODUCT LIABILITY)

1. Intellectual property
- refers to property that is the product of Intellectual Activity, such as computer
software, a screenplay, a music score/ the chemical formula for a new drug.
2. Patent - grants the inventor of new product/ process exclusive rights for a
defined period to the manufacture, use, / sales of that invention.
3. Copyrights - are the exclusive legal rights authors, composers, playwrights,
artists, and publishers to publish and disperse their work as they see fit.
4. Trademarks- are designs and names, often officially registered by which
merchants/ manufactures designate and differentiate their products.

• The philosophy behind intellectual property law is to reward the originator for a
new invention, book, musical record, clothes design, restaurant chain, and the
like, for his/her idea and effort.
PRODUCT SAFETY AND
PRODUCT LIABILITY
1. PRODUCT SAFETY LAW - set certain standards to which a
product must adhere.
2. PRODUCT LIABILITY- involves holding a firm and its officers
responsible when a product causes injury, death/ damage.

• Both Civil and criminal product liability laws

exist.
• Civil Law call for payment and monetary
damages.
• Criminal Liability Law results in fines/
imprisonment.
 WHAT IS CULTURE? (VALUES, NORMS,
FOLKWAYS, MORES)
• In the 1870’s, the anthropologist Edward
Tylor defined culture as ‘That complex
whole which includes knowledge, belief, art,
morals, laws, custom, and other capabilities
acquired by man as a member of society.

• Sociologist Zvi Namenwirth and Robert

Weber define culture as a system of ideas
and argue that these ideas constitute a
design for living.

• Both Hofstede and Namenwirth and

Weber viewing culture as a systems of
values and norms that are shared among a
group of people and that when taken
together constitute a design for living.
1. VALUES- means abstract ideas about what a group believes to be good, right and
desirable.
2. SOCIETY- refers to a group of people who share a common set of values and
norms.
3. NORMS- these are the social rules that govern people’s actions toward one
another. Norms means the social rules and guidelines that prescribe appropriate
behavior in particular situations.
Norms can be subdivided further into two major categories, the
folkways, and mores:

• Folkways- are routine conventions of everyday life. Although

folkways define the way people are expected to behave, violation of
them is not normally a serious matter.
• Folkways include rituals and symbolic behavior. Rituals
and symbolic are the most visible manifestation of a
culture and constitute the outward expression of deeper
values.
• For example, upon meeting a foreign business executive,
a Japanese executive will hold his business card in both
hands and bow while presenting the card to the foreigner.
 • The card specifies the rank of the Japanese executive, which is a very
important piece of information in a hierarchical society such as
Japan.
• The bow sign of respect, and the deeper the angle of the bow, the
greater the reverence one-person shows for the other.

Mores- are norms that are seen as central to the functioning of a society and
to its social life.
• Violating mores can bring serious redistribution. Including such
factors as indictments against theft, adultery, incest, and
cannibalism.
• In America example, Drinking alcohol is widely accepted, whereas
in Saudi Arabia the consumption of alcohol is violating important
social mores and is punishable by imprisonment.
 CULTURE, SOCIETY, AND THE NATION-
STATE (THE DETERMINANTS OF
CULTURE)
We defined a society as a group of people that share a common set of
values and norms, that is, people who are bound together by a common
culture.
• Nation- State are political creations. They contain a
single culture/several cultures.
THE DETERMINANTS OF CULTURE:
LANGUAGE • level of education • attitudes of the
Society towards
foreign goods and
services

RELIGION • customer
preferences
 Social Structure
• Refers to its basic social organization.
• Although social structure consists of many different aspects, two
dimensions are particularly important when explaining
differences between cultures.
• First, the degree to which the basic unit of social organization is
the individual, as opposed to the group.
• Second, the degree to which society is stratified into
classes/cases.
 
 
 INDIVIDUALS AND
GROUPS
• A group is an association of two or more individuals who
have a shared sense of identity and who interact with each
other in structured ways on the basis of a common set of
expectations about each other’s behavior.
• In societies where the individual is emphasized. 
 individual achievement and entrepreneurship are
promoted 
 but, this can encourage job switching, competition
between individuals in a company rather than team
building, and a lack of loyalty to the firm.
• Many Western countries emphasize the individual.
• In societies with a strong identification with the group
 cooperation and teamwork are encouraged and lifetime
employment is common 
 but, individual initiative and creativity may be
suppressed.
•  Groups are common in many Asian societies.
 SOCIAL
STRATIFICATION
• All societies are stratified on a hierarchical basis into social
categories, or social strata (usually defined by characteristics such
as family background, occupation, and income).
• Societies differ in two related ways:
 the degree of mobility between social strata.
 the significance attached to social strata in business contexts.

• Social mobility refers to the extent to which individuals can move

out of the strata into which they are born.
 The most rigid system of stratification is a caste system. A
caste system is a closed system of stratification in which
social position is determined by the family into which a person
is born, and change in that position is usually not possible
during an individual's lifetime.
A class system is a less rigid form of social
stratification in which social mobility is possible.
It is a form of open stratification in which the
position a person has by birth can be changed
through his or her own achievements or luck.

Class consciousness refers to a condition where

people tend to perceive themselves in terms of
their class background, and this shapes their
relationships with members of other classes.
 RELIGIOUS AND
ETHICAL SYSTEMS
• Religion is a system of shared beliefs and rituals that
are concerned with the realm of the sacred.
• Ethical systems refer to a set of moral principles, or
values, that are used to guide and shape behavior.
• Religions has four dominate in terms of numbers of
adherents:
1. CHRISTIANITY
(1.9 billion adherents)
2. ISLAM 3. HINDUISM
(1.2 billion adherents) (750 million adherents)
4. BUDDHISM
(350 million adherents)
 1. CHRISTIANITY
• Christianity is the most widely practiced religion in the world and is common
throughout Europe, the Americas, and other countries.
• Two major Christian organizations- the Roman Catholic Church and the
Orthodox Church.

2. ISLAM
• Adherents of Islam, called Muslims, believe that there is
one true omnipotent God.
• Islam is an all-embracing way of life that governs Muslim's
being.
Islamic fundamentalism 
• Islamic fundamentalism is associated in the media with
militants, terrorists, and violent upheavals, however, the
vast majority of Muslims point out that Islam teaches
peace, justice, and tolerance.
• Fundamentalists have gained political power and have used
this to try to make Islamic law (as set down in the Koran,
the bible of Islam) the law of the land.
Economic Implications of Islam
• In Islam, people do not own property, but only act as
stewards for God and thus must take care of that which
they have been entrusted with. While Islam is supportive of
business, the way business is practiced is prescribed.
 3. HINDUISM

• Hinduism, most of them on the Indian subcontinent.

• By perfecting the soul in each new life, Hindus believe that an individual can
eventually achieve nirvana, a state of complete spiritual perfection that renders
reincarnation no longer necessary.

Economic Implications of Hinduism

• Hindus are valued by their spiritual rather than material achievements 

4. BUDDHISM
• suffering originates in people's desires for
pleasure.
• stresses spiritual growth and the afterlife,
rather than achievement while in this
world.

Economic Implications of Buddhism

• Buddhism does not support the caste
system, so individuals do have some
mobility and can work with individuals
from different classes.
 5. CONFUCIANISM
• Teaches the importance of attaining personal
salvation through right action
• High moral and ethical conduct and loyalty to
others is central in Confucianism

Economic Implications of Confucianism

• Three key teachings of Confucianism - loyalty,

reciprocal obligations, and honesty in dealings with
others
• may all lead to a lowering of the cost of doing
business in Confucian societies.
 Language
Countries differ in terms of language.
There are two forms of language:
• spoken 
• unspoken 
Language is one of the defining characteristics of culture.
SPOKEN LANGUAGE UNSPOKEN LANGUAGE
• Countries with more than one spoken • Unspoken language refers to nonverbal
language often have more than one communication
culture

• English is the most widely spoken Many nonverbal cues are culturally bound
language in the world, and is becoming and because they may be interpreted
the language of international business differently, can result in
misunderstandings or communication
failure.
• Knowledge of the local language is
beneficial, and in some cases, critical
for business success
 Cultural Change
• Culture evolves over time, although changes in
value systems can be slow and painful for a society.
• Social turmoil is an inevitable outcome of cultural
change.
• As countries become economically stronger,
cultural change is particularly common.
 Culture and the Workplace
• It is important for companies to understand how a society’s
culture affects workplace values
• Geert Hofstede identified four dimensions of culture: power
distance, uncertainty avoidance, individualism versus
collectivism, and masculinity versus femininity.
1. Power distance focuses on how a society deals with the fact that people
are unequal in physical and intellectual capabilities.
2. Individualism versus collectivism focuses on the relationship
between the individual and his or her fellows.
3. Uncertainty avoidance dimension measures the extent to which
different cultures socialize their members into accepting ambiguous
situations and tolerating ambiguity.
4. Masculinity versus femininity looks at the relationship between
gender and work roles.
Hofstede later expanded his study to include a fifth dimension called
Confucian dynamism which captures attitudes toward time, persistence,
ordering by status, protection of face, respect for tradition, and
reciprocation of gifts and favors.
FIRMS AND
INTERNATIONAL
BUSINESS
The term international business refers to any business that operates across
international borders. As its most basic, it includes the sales of goods and
services between countries. For example, a business that produces
components or products overseas but sells them domestically can be
considered an international business, as can an organization that outsources
services, such as customer services, to locations where labor expenses are
cheaper.

Although an international
business can benefit the Some of the most common
global economy, it also carries challenges of international
inherent risks. The fact that business include:
each country has its own
government, regulations,
inflation rates, and currency
• Language and cultural
barriers
can complicate business • currency exchange rates
models and must be weighed
against the perceived benefits
• foreign politics and policies

of operating internationally.
 TYPES OF
ORGANIZATIONAL
PARTICIPANTS
I. Focal Firm
II. Distribution channel Intermediary
III. Facilitator
IV. Government
 1. Focal Firm
• The initiator of an international business transaction that
conceives, designs, and produces the products/ services
intended for consumption by customers worldwide.
• Primarily MNEs & SMEs

2. DISTRIBUTION CHANNEL
INTERMEDIARY
A specialist firm that provides various logistics and
marketing services for focal firms as part of the international
supply chain.

a. Intermediaries based in the foreign market

b. Intermediaries based in the home country
c. Online intermediaries
 3. FACILITATOR
• A firm or an individual with special expertise in providing
banking, legal advice, custom clearance, or related support
services that assist focal firms in the performance of an
international business transaction.

DIFFERENT TYPES OF

4. Government
FACILITATORS:

a. Logistic service providers

b. Freight providers
c. Governments • Acts as suppliers, buyers, and regulators.
d. Customs brokers • Specialized logistics services provider
e. Commercial banks that arranges international shipping on
f. Trade lawyer behalf of exporting firms.
g. Consultants • Law enforcement providing essential
h. Insurance companies economic security by devising fiscal and
monetary policy.
International Business
and Global Strategy
 Internationalization of a firm’s
value chain:
Research Procurement
Development (sourcing)
R&D centre in Ireland Call centers in India

Marketing Manufacturing A value chain is defined as a

Solution centre in Manufacturing plants series of activities used in the
Singapore in Chins production of goods and
services that make a product
or service more valuable.

Distribution Sales & Service

Partners with various Support centre in
European distributors Australia
Internalization process
theory
 INTERNATIONALIZATION
• It is the geographical expansion of economic activities over
a country’s national border. It refers to the process of how
firms become international.

Internalization Process Theory:

Domestic Pre-export Experimental Active
focus stages involvement involvement

Committed
involvement
INTERNATIONAL
NEW VENTURES
The theory of International New Ventures (INVs)
challenges the Uppsala model and claims that many
firms can internationalize rapidly in today’s globalized
and technologically connected world. (Zámborský,
2016).

• Oviatt & McDougall

(1994) defined
International New
Ventures or simply INVs
as a business that, from
the start of its
establishment, attempts
to gain a considerable
competitive advantage
through the utilization of
resources and the selling
of products across
multiple countries.
NECESSARY AND SUFFICIENT ELEMENTS FOR SUSTAINABLE INTERNATIONAL NEW
VENTURES (OVIATT & MCDOUGALL, 1994)
TYPES OF INTERNATIONAL NEW VENTURES (OVIATT & MCDOUGALL, 1994)
 Example of a business that is an International
New Ventures
Lasa Industries Inc., is a vivid example of an International New venture. LASA Industries, Inc., a
representative of these recent global new companies, marketed an extraordinarily effective
microprocessor prototyping technique, as noted in the research by Jolly et al. (1992). In many ways,
LASA's approach was multinational. French, Swiss, and Americans were its founders. It received
European financing. R&D and the operating headquarters were in the US, but marketing and finance
were run out of France and Switzerland, respectively. Initial sales were made in France and the
United States, but manufacturing was concentrated in Scotland to take advantage of attractive
regional incentives.
• Born globals are firms that internationalize in their operations from the
beginning.
• They are comparable to INVs but frequently have stricter definitions in
terms of many operating nations. They develop large worldwide networks
while learning quickly and fiercely.
• Despite the interchangeability of the phrases "Born Globals" and
"International New Ventures," the key routes of internationalization taken
by each have been distinguished in the literature on internationalization.
• Most 'International New Ventures' have a more regional focus as compared
to a global strategy. Ironically, the two expressions share common
characteristics and yet exhibit different characteristics. 'Born Globals' and
'International New Ventures' are both under new forms of international
firms.
 FIVE KEY
CONCEPTS OF
INTERNATIONAL
BUSINESS
 1. Liability of Foreignness
• It is defined as the inherent disadvantage that
foreign firms experience in host countries
because of their non-native status. (Peng, 2014).
• According to Zaheer (1995), it is all extra
expenses a company that conducts business in a
foreign market incurs that a local firm would not
acquire.

EXAMPLE OF LIABILITY OF
FOREIGNNESS
• Think of a foreign corporation starting operations in a nation
with diverse laws, customs, and cultural norms. In such a
case, businesses would need to adjust their marketing tactics,
adapt their products to local needs, and educate their
personnel to acquire the fundamentals of the foreign language.
 2. Firm-specific Advantage (FSAs)

• also known as Firm-specific assets/resources/capabilities

• are strengths relative to rival companies that are not shared
by competitors in the same environments.
• these advantages can be economies of scale, superior
Example: Firm-Specific Advantages
technology, or marketing and management knowledge
of Starbucks

• Starbucks is a very profitable Corporation, earning in

excess of $600 million annually, although the sales
figure decreased recently. It has at least 32,000
stores worldwide.
• It is a global coffee brand built upon a reputation for
products and services of high quality.
• Starbucks has strong ethical values and contributes
to some ethical missions to society.
 3. Country-specific Advantage
(FSAs)
• Also known as Location-specific advantage
• According to Rugman and Collinson (2012), it is the
assets or advantages that are unique to a nation and
Example: Country-Specific come from factors like its labor force, geographic
Advantages of Starbucks location, government policies, industrial clusters, etc.

• To serve the local needs of the customers in the Asian

regions, Starbucks has implemented several creative
policies. Starbucks mooncakes, for instance, have
been made. Starbucks mooncakes quickly became
popular purchases after being introduced to the
Taiwanese market, and fresh bookings were eagerly
anticipated.
• Starbucks is making every effort to create the most
traditional environments and provide consumers with
the highest caliber services.
 4. Global Integration
• According to Cavusgil (2015), Global Integration is the
coordination of a company's value chain operations across
nations to achieve global effectiveness, synergy, and cross-
fertilization in order to fully capitalize on country similarities.
• is the process through which businesses become more
standardized as they grow. Brands that promote global
integration differ very little from country to country.

The technique of offering standard products

in various parts of the globe is called Global
Integration. Thus, designing numerous
variations of the same basic product for
individual markets will only add to overall Example of Global Integration
costs and should be avoided. Firms in
global industries such as aircraft
manufacturing, credit cards, and
pharmaceuticals are more likely to
emphasize global integration.
 5. Local responsiveness
• According to Peng (2013), it is the requirement to adapt
to various global client demands or to specifically address
the requirements of customers in various nations.
(Cavusgil et al. 2015)
• is the extent to which the business must modify its goods
and processes to suit conditions in other nations.
Local Responsiveness relates to how businesses
meet the demands of a particular market, or
more simply, how much do they vary from
market to market. For instance, the inventory
mix, personnel training, salary, shop hours,
and advertising tactics are all modified by Wal-
Mart store managers in Mexico to fit the local Example of local responsiveness
environment. Because linguistic and cultural
variations significantly affect consumer
behavior in various industries, businesses in
multi-domestic sectors like food, retail, and
book publishing tend to be regionally
responsive.
GOVERNMEN AND
T INTERNATIONAL
BUSINESS
International business do not act without facing
intervention from governments that regulate the
international flow of trade and investment.
Government intervention can take the forms of
trade and investment barriers, as well as
subsidies to local firms.

Why is International Business IMPORTANT-

refers to the trade of goods, services,
technology, capital, and/or knowledge across
national borders and at a global or
transnational scale. It involves cross-border
transactions of goods and services between
two or more countries.
 Trade barriers
• include trade tariffs ( also known as duties), which are
taxes imposed on imported products.

BENEFITS OF INTERNATIONAL BUSINESS

• Gain an International Perspective to be

successful
• Work across International Boundaries and
Culture
• Learn Highly Sought-After Transferable Skills
• Advanced Business Knowledgeable
• English language
• Graduate opportunities
• Post-study work visa opportunities
• HIGH-QUALITY education
 FOUR (4) TYPES OF
INTERNATIONAL BUSINESS
1. EXPORTING – imported goods, goods or services brought from one
country to another
2. LICENSING
3. FRANCHISING
4. FOREIGN DIRECT INVESTMENT

THE GOAL OF INTERNATIONAL BUSINESS each of which allows a

company to improve its performance:
 Utilize technology
 Use of economic resources
 International diversification
 Attract foreign demand; some companies are unable to increase
their market share due to fierce competition within the industry.
 • Non- tariffs barriers:
 are government policies, regulations, or procedures that
impede trade through means other than explicit tariffs.

• Quotas:
 (quantitative restrictions placed on imports of a specific
products over a specific period of time) are common form of
this barrier. Other examples are customs procedures at
checkpoints at the ports of entry in each country and import
licenses.

• Investment restrictions :
 some countries such as India and China still impose
ownership restrictions that restrict the ability of foreign firms
to invest in some industry sectors or acquire local firms. For
example; such restrictions have forced Walmart to enter
India in a joint venture with local Bharti.
 As a general rule, there are no restrictions on the extent of
foreign ownership of export enterprises.

SO, WHY DOES THE

GOVERNMENT RESTRICT OR
DISCOURAGE FOREIGN DIRECT
INVESTMENT?
• In most instances, governments seek to limit or control
foreign direct investment to protect local industries and key
resources (oil, minerals, etc.), preserve the national and
local culture, protect segments of their domestic
population, maintain political and economic independence,
and manage or control economic.
 
 Currency controls
• are restrictions on the outflow of hard currency from a
country and can restrict the ability of MNEs to
repatriate their profits back to their home countries.
• For example, in the Philippines, portfolio investors are
required to hold their profits domestically for 90 days.

LOCAL CONTENT
REQUIREMENTS
• require that some specific fraction of a good be
produced domestically. These became
increasingly popular after the Great Recession.
 WHY WOULD A GOVERNMENT IMPLEMENT A LOCAL
CONTENT REQUIREMENT?
The purposes are to ensure the participation of nationals in the workforce, and
the promotion of local suppliers, goods, and services.

For example, in the wind energy sector, the local content requirement
has grown to over 50% after 2008 in China, Brazil and Spain. This
sector also receives large subsidies in a number of countries.

SUBSIDIES are government payments to producers that can take

many forms including cash grants, low-interest loans, tax breaks and
government equity participation in domestic firms. Agriculture tends
to be one of the largest beneficiaries of subsidies in most countries.
For example: the European Union has been paying out about
44 billion euros annually to domestic producers. Other sectors
benefit from grants as well.
FOURS (4) main types
of subsidies:
 Export subsidies
 Agricultural subsidies
 Housing subsidies
 Healthcare subsidies
 Privatisation
• is the sale of state-owned enterprises to private
investors (Hill &Hult 2016).

Objectives of Privatisation:
1. Providing strong momentum for the inflow of FDI
• Privatisation aims at providing a strong base for the
inflow of FDI
• The increased inflow of FDI improves the financial
strength of the economy.
2. Improving the efficiency of public sector undertakings (PSUs)

• The efficiency of PSUs is improved by giving them the

autonomy to make decisions.
• Some companies were given special categories of
Navratna and Miniratna.
 Implications :
How can firms respond to government intervention?
Cavusgil(2015) suggest they:
• Research to gather • Seek favourable customs
knowledge and intelligence classifications for exported
products
• Choose the most appropriate • Take advantage of
entry strategies investment incentives and
other government support
• Take advantage of foreign • Lobby for freer trade and
trade zones (exempt from investment
customs duties)

EXAMPLE: Hong Kong’s government paid $1.7 billion to Disney to

building a Disneyland park there.
 Country Analysis
Companies expanding abroad often consider country attractiveness
based on these three factors:
1. Benefits (size of economy, likely economic growth)
2. Costs (corruption, lack of infrastructure, legal costs)
3. Risks (political, economic, legal and other risks)

Benefits and costs of operating abroad can be

demonstrated by examining emerging markets. The key
causes of these costs were regulatory violations, loss of
business and fines resulting from bribery, fraud and
reputational damage.
 Risk assessment
• is a crucial part of country analysis. There are number of companies
that provide information on country risk. The Economist Intelligence
Unit, a subsidiary of The Economist Group ,for example assesses risk
across 180 countries around the world with indicators such as:

• Security • Foreign trade & payments

• Political stability • Financial

• Government effectiveness • Tax policy

• Legal and regulatory • Labour market

• Macroeconomic • Infrastructure
 1) “Grexit” (exit of Greece
from the euro zone) is
followed up by a euro zone
break-up

FIVE (5) major risks

2) A commodity price/
investment slump in China
lead to the emerging-market

for the world

slowdown
3) Russia’s intervention in
Ukraine escalates, leading to

economy: cold war-era tensions

4) Global monetary policy
divergence leads to extreme
currency volatility
5) The rising threat of Jihadi
terrorism destabilises the
global economy
 Reference:
• https://drive.google.com/file/d/1DCGEJHd3jYcuplYPcV_dTWXkhnRG-kVg/view
• https://drive.google.com/file/d/1OaR6Mj9RCkedUtj4zv4KyEQDZZLCpboO/view
• https://www.palgrave.com/gp/journal/41267/authors/editorial-policy
• https://lmsspada.kemdikbud.go.id/pluginfile.php/552408/mod_resource/content/2/Session
%201%20Globalization%20and%20Differences%20of%20Political%20and%20Economic%20Sy
stems%20Among%20Countries.pdf

• https://study.com/learn/lesson/political-economy-concept-examples.html
• https://youtu.be/kbnx0Rf1jpE
• https://bookboon.com/en/international-business-and-global-strategy-ebook?mediaType=eboo
k
• http://www.rcmewhu.com/upload/file/20150507/20150507203733_7288.pdf
• https://www.researchgate.net/publication/240162483_Overcoming_the_Liability_of_Foreignn
ess
• https://www.slideserve.com/amy/illycaffe
• https://valutrics.com/global-integration-and-local-responsiveness-strategies/
• https://studylib.net/doc/9465331/chapter-2-national-differences-in-political-economy
• https://worldpopulationreview.com/country-rankings/collectivist-countries
• https://education.nationalgeographic.org/resource/communism
• https://www.britannica.com/topic/totalitarianism
• https://www.thoughtco.com/difference-between-communism-and-socialism-1
95448#:~:text=The%20main%20difference%20is%20that,by%20a%20democrat
ically%2Delected%20government
.
• https://www.annualreviews.org/doi/10.1146/annurev.polisci.2.1.91
• https://www.youtube.com/watch?v=3GzKh1MU1iI
• https://byjus.com/commerce/privatisation/
• https://stats.oecd.org/glossary/detail.asp?ID=3287
• https://www.youtube.com/watch?v=ZWYNPlPEAsU
• https://www.youtube.com/watch?v=nP95Frc0v4k
• https://www.google.com/search?q=country+analysis+example&ei=30gkY8-5C
Km32roP_d6s6AM&oq=country+analysis&gs_lcp=Cgdnd3Mtd2l6EAEYADIKCA
AQRxDWBBCwAzIKCAAQRxDWBBCwAzIKCAAQRxDWBBCwAzIKCAAQRxDWB
BCwAzIKCAAQRxDWBBCwAzIKCAAQRxDWBBCwAzIKCAAQRxDWBBCwAzIKC
AAQRxDWBBCwAzIHCAAQsAMQQzIHCAAQsAMQQ0oECEEYAEoECEYYAFAA
WABgzgtoAXABeACAAQCIAQCSAQCYAQDIAQrAAQE&sclient=gws-wiz
 The end.
Thank you very
much!
(group 1)