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Chapter 1

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Chapter 1: Overview of Intl Business
- international business: consists of business transactions b/w parties from
more than one country (buying materials in one country 7 shipping them to
another for processing…) any org. that engages in cross border commercial
transactions w/ individuals, private firms &/or public org.
o currencies, legal systems, cultures & availability of resources differ by
country for intl. business
o Reasons to study IB:
Small business you may own one
Keep pace w/ your future competitors
Stay abreast of the latest business techniques & tools
Obtain cultural literacy
- Just-In-Time (JIT) systems: suppliers are expected to deliver necessary
inputs just as they are needed
- Exporting: the sellin products make in one’s own country for use or resale in
other countries
- Importing: the buying of products made in other countries for use or resale
in one’s own country
- Merchandise exports & imports: trade in goods tangible products such as
clothing, computers & RM (visible trade)
- Service exports & imports: trade in services intangible products such as
banking, travel & accounting (invisible trade)
- International investments: capital supplied by residents of one country to
residents of another
o Foreign Direct Investments (FDI): investments made for the
purpose of actively controlling property, assets or companies located
in host countries
The country in which the parent company’s HQ’s is located is
called the home country; any other country in which the
company operates is known as a host country)
Ex: the purchase of all the common stock of Sweden’s Volvo
Corp by Ford Motor Co.
1980 = 2.4%, 2006 = 25% of tat year’s GDP
o Foreign Portfolio Inv (FPI): purchases of foreign financial assets
(stocks, bonds, certificates of deposit) for a purpose other than
Ex: the purchase of 1,000 share of Sony’s common stock by a
Danish pension fund
- International licensing: a contractual arrangement in which a firm in on
county licenses the use of its intellectual property (patents trademanrts,
brand names…) to a firm in a second country in return for a royalty payment
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