9.2 Forms of International Business

• GOALS
• Distinguish between the different forms through which international business is conducted.
• Describe the policies, rules, and laws that governments use to affect international trade and investment.

Forms of International Business

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• Exporting: selling products/services to buyers in another country
• Boeing airplanes - sells from the U.S. to Australia
• Importing: buying products/services from sellers in another country
• U.S. buying Darjeeling tea from India

International licensing

• occurs when one company allows an international company to make and sell products according to certain specifications
• costs more and is risky compared to exporting

Joint ventures

• Business arrangement in which two or more firms share the costs of doing business and also share the profits

Wholly owned subsidiary

• type of business in which a firms sets up a business abroad on its own without any partners
• expensive and riskier

Strategic alliances

• firms agree to cooperate on certain aspects of business while remaining competitiors on other aspects
• saves them money
• 2 pharmaceutical companies - cancer medicines

Multinational firm

• a firm that owns or controls production or service facilities in more than one country
• Home country: headquarters (Parent Firm)
• Host country: foreign location (Subsidiaries)

List the different forms of international business

Government Policies

Tariffs

• taxes on foreign goods to protect domestic industries and to earn revenue

Dumping

• refers to the practice of selling goods in a foreign market at a price that is below cost or below what it charges in its home country
• competitors go out of business
• tariffs can prevent dumping

Quota

• limits the quantity or value of units permitted to enter a country
• U.S. allows only 10,000 tons of salmon from Chile

Nontariff barriers

• nontax methods of discouraging trade
• protects domestic producers
• steering wheel on cars

Embargo

• government block preventing companies from doing business with particular countries
• U.S. government prevents business with Cuba

Sanctions

• a milder form of embargo that bans specific business ties with a foreign country
• Illegal for U.S. to sell nuclear technology to Pakistan

Currency Values

• exchange rate: the value of one country's currency expressed in the currency of another country
• Mexican pecos
• Japanese yen

Cultural Differnces

• Culture: customs, beliefs, values, and patterns of behavior
• Low-context culture: people communicate directly and explicitly U.S.
• High-context culture: communication is nonverbal signs and indirect suggestions Japan

Describe the government polices that can be used