COMMERCE 4SA3 Study Guide - Final Guide: International Development Association, Foreign Exchange Market, Foreign Direct Investment
21 Feb 2017
School
Department
Course
Professor
4SA3 Studying
Week 1
Introduction to international business
- Corruption – between the demander and the supplier and has an influence on the
allocation of resources immediately or in the future and involves use and abuse of
public responsibility for private ends
o Originates from developing countries that have weak legal systems, weak
infrastructure and inadequate enforcement and high level of government
involvement with industry and business and low public sector payment
amount
o Culture is also attributable to corruption → receptivity towards masculinity,
uncertainty avoidance, masculinity
o Disadvantages
o Slows down progress
o Undermines trade and FDI
o Undermines trade liberation
o Causes misallocation of resources
o Obstructs firm growth
o Produce distorted information
o Corruption practices
o Money laundering
o Smuggling
o Piracy/Counterfeiting
o Bribery paying
- International business involves international trade and international investment
o International business activities
o FDI (direct investment in business activities in foreign country)
o International trade (export and import)
o Foreign sourcing (overseas buying of RM, components and products)
- How to tell a developing country
o High GINI – income inequality
o Technology dualism
o Regions dualism
o Political instability
o Disguised underemployment and unemployment
o Widespread malnutrition and health problems
o High rate of illiteracy and insufficient facilities
o High dependence on few products
o High population growth
- GNI/capita as an indicator
o GNP/capital does not capture underground economy that involves;
o Undeclared legal production
o Production of illegal goods and services
o Concealed income – barter
find more resources at oneclass.com
find more resources at oneclass.com
o Larger of there is higher level of taxation and oppression government
red tape
o Currency conversion
o Local currency converted to the dollar by using exchange rate
o Conversions do not reflect domestic purchasing powers of currencies,
must use purchasing power parity (PPP)
o Difference between international and domestic business
o Culture
o Currency conversion
o Legal system
o Availability of resources
o Physical forces (geography, climate)
- International managers have to deal with 3 environments
o Domestic
o Uncontrollable factors in home country that influence firm
o Managers are familiar with these forces
o Can influence foreign operations
o Foreign
o Uncontrollable forces same as domestic but occur in foreign nation
o Different force values
o Changes are difficult to access
o Forces are interrelated
o International
o Interaction between the domestic environmental forces and foreign
environmental forces
o Interaction between foreign environmental forces of two countries
when an affiliate does business in one country and does business with
customers in another
Ethics and social responsibility (read only)
Week 2
Introdution to international usiness ont’d – putting Canada in the picture
- Globalization
o Trend towards greater economic, political, cultural and technological
interdependence among national economies and institutions
o Globalization of markets (convergence of buyer preferences in markets
around the world) and globalization of production (dispersal of production
activities worldwide to minimize cost or maximize quality
o National economies are less isolated now because of
o Lower cross-border barriers
o Fewer investment barriers
o salle geogaphi distae ad tie zoes
o less individualistic business systems
o lower impact of national cultural differences
find more resources at oneclass.com
find more resources at oneclass.com
o fewer national government regulations
o Benefits of globalization
Globalization of markets
Globalization of production
- reduce market cost
- access low-cost labour
- new market
opportunities
- acquire technical
expertise
- levels of income stream
- obtain production inputs
o Globalization forces (drivers lead to globalization of operations)
o Political
• Trend is now towards unification of global community – WTO
• NAFTA, EU create opportunities
• Privatization
• Tax and investment incentives
o Technology
• Advancement in tech.
o Market
• Spread out the risk
• Because some countries grow faster than others
• Saturation of home market send companies into foreign
markets
• Companies follow customers abroad to avoid competitors
stealing accounts
o Cost
• Economies of scale – lower production cost in other countries,
can reduce development and inventory cost to get economies
of scale
o Competitor
• Companies defend home market from competitors by
distracting them through entry into opetitos home
market
o How firms expand internationally
o Strategic motives, market motives and economic motives
o Why go international?
o More profitable markets
o Acquire useful ideas for home market
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
International business involves international trade and international investment. International business activities: fdi (direct investment in business activities in foreign country) International trade (export and import: foreign sourcing (overseas buying of rm, components and products) Interaction between the domestic environmental forces and foreign environmental forces. Interaction between foreign environmental forces of two countries when an affiliate does business in one country and does business with customers in another. Introdu(cid:272)tion to international (cid:271)usiness (cid:894)(cid:272)ont"d(cid:895) putting canada in the picture. New market opportunities levels of income stream. Trade theories read only (determine why production at lower price (global economic efficiency) with international trade than with no trade is higher. International organizations un, nato, the world bank, gatt or wto, oecd, the imf, opec (why is it important to know them?) Un: facilitates peacekeeping in the world and work to develop friendly relations between countries, has 5 main bodies, general assembly all member countries, each one equal vote regardless of size, power or wealth.
