BMCF I TM I Prague University Of Finance & Administration INTERNATIONAL BUSINESS [NA_IB] Ing. Pavla Břečková, Ph.D.

2.2. INTERNATIONAL BUSINESS Part-time course = 4 guided consultations á 90 mins. (winter term 2010) 1. GLOBAL BUSINESS ENVIRONMENT & EXPORT + Case study setting 2. WORLD BUSINESS TERRITORIES and EMERGING MARKETS + Case study elaboration 3. INTERNATIONAL TRADE & FDI + prezentation of the Case study results 4. EUROPEAN MARKETS & PREDISPOSITIONS for working in IB + oral exam possible

3.3. EXAM terms NA_IB 4 lectures / guided consultations [GC] (per 90 mins) Completion: exam / 6 credits Completion CONDITIONS: Active participation in the guided consultations [active listening, discussing, reading, analyzing & interpreting of economic articles or case study results, presence at GC – 50%] Case study elaboration & it’s prezentation Oral exam [prove of knowledge in IB] If unfulfilled: 1. semester elaborated quality paper (methodics in IS – Study materials) 2. and oral or written exam

CASE study / team work CASE study on one of these topics: 1. BUSINESS TRENDS / opportunities in the next 10 years Largest threats & opportunities from the point of view of international business, where it (IB) is going. Areas where it is likely to find the business opportunities during next 10 years + explain what brought you to such results. 2. EXPORT STRATEGY Mid term view (3-5 years). What it should lie in, generally - how to support export (of CZ enterprises), concrete forms + in which business and industry areas (if in any / if not in all of them) + explain why 3. Finding the COMPETITIVE ADVANTAGE for the Czech Republic (and of the CZ businesses). Competitive advantage + consequently what areas of business and industry should be preferential (if any) + what to do for succeeding in international business from the point of view of competitive advantage (micro and macro view). Possibly also what kind of business environment (or changes in the present one) would help developing the CZ businesses competitive advantage?

CASE study - elaboration CASE study on one of these topics: 1. BUSINESS TRENDS / opportunities in the next 10 years 2. EXPORT STRATEGY 3. Finding the COMPETITIVE ADVANTAGE for the Czech Republic ELABORATION:  Elaboration in teams per 3-4 people  Presentation of the results - ppt possible, cca 10 min., structured way, clear outcomes (solutions, results) PREZENTATION: - 29/11/ up to 10 min. / all the team members should be involved

Import / Export International TRADE FDI / Portfolio inv. // JV / WOS International INVESTMENT Barter, Switch trading, Offset, Buyback etc. Other forms of int. business ACTIVITY (counter-trades) 6.6. INTERNATIONAL BUSINESS CONSISTS IN:

7.7. International INVESTMENTS - generally FDI = Foreign Direct Investment investments made for the purpose of ACTIVELY CONTROLLING PROPERTY, assets, or companies located in host countries home x host country Portfolio Investment purchases of foreign financial assets (stock, bonds, certificates, deposits) for a purpose OTHER than CONTROL

8.8. Further IB operations / countertrades Counter trade = is exchanging goods or services that are paid for, in whole or part, with other goods or services BARTER Exchange of goods or services directly for other goods or services without the use of money as means of purchase or payment SWITCH trading Practice in which one company sells to another its obligation to make a purchase in a given country. Counter PURCHASE Sale of goods and services to a country by a company that promises to make a future purchase of a specific product from the country BUYBACK occurs when a firm builds a plant in a country - or supplies technology, equipment, training, or other services to the country and agrees to take a certain percentage of the plant's output as partial payment for the contract OFFSET Agreement that a company will offset a hard - currency purchase of an unspecified product from that nation in the future.

9.9. FREE TRADE  FREE TRADE (international exchange) = is a system of TRADE POLICY that allows traders to act and transact without interference from government. According to the law of COMPARATIVE ADVANTAGE the policy permits trading partners mutual GAINS from trade of goods and services. = it is an AIM of all the trade economies and consists in:  convertibility (possibility to exchange currency)  free price creation  economical and political barriers elimination (duties, quotas, admin. barriers etc.)

10. STRUCTURE of IB TERRITORIAL COMMODITY

11. International business - THREATS Weak self- sufficiency (in case of war or political system change) Dependence (the smaller and econ.developed country => the more important IB is for the country)

12. TRADE BARRIERS to LIMIT IMPORTS to PROTECT domestic producers from foreign competition Trade barrier = a general term that describes any government policy or regulation that restricts IB PURPOSE:

state decides about their imposition TARIFF x NON-TARIFF state’s intention: either reduce IMPORT or support EXPORT AUTONOMOUS (independent, one-sided) result of negotiations BILATERAL (business agreements, credit / loan agreements etc.) MULTILATERAL (integration unions) CONTRACTUAL 13. State IB policy INSTRUMENTS

14. Tariff & Non-tariff measures NON-TARIFF QUOTA = qty restriction OTHER non-tariff TARIFF - Fiscal - Protective - Retributive - Prohibitive  have important effects on consumption, production & structure of a domestic economy  reason for imposing = e.g. protect infant industries

15. International Business BARRIERS  TARIFFs (duties) = is a tax on imported goods  NON-TARIFF barriers – including 1.QUOTAs = is a limit on the amount of goods that may be imported 2.Lack of intellectual property protection; 3.Testing, labeling, and certification with an unnecessarily restrictive application of standards; 4.Export subsidies that offer export financing on preferential terms and displace your exports in third-country markets; 5.Investment barriers; 6.REGULATIONS regarding product content or quality Both tariffs and quotas raise the price of and lower the demand for the goods to which they apply

16. Effect of IB BARRIERS The EFFECT of tariffs and quotas is the same: to limit imports and protect domestic producers from foreign competition. TARIFF raises the price of the foreign good beyond the market equilibrium price, which decreases the demand for and, eventually, the supply of the foreign good.. QUOTA limits the supply to a certain QUANTITY, which raises the price beyond the market equilibrium level and thus decreases demand..

17. ANTI: dumping and subsidy ANTI-DUMPING = action against dumped imports -Anti-dumping measures counter dumping practices occurring when non-EU manufacturers sell their goods in the EU below the normal value (usually the sales price) on their domestic market. ANTI-SUBSIDY = action against imports of subsidized products - Anti-subsidy measures counteract trade distortive subsidies which make subsidised goods artificially competitive (e.g. cheaper) compared to non-subsidised goods ANTI-SUBSIDY ANTI-DUMPING

18. Summary of basic TRADE BARRIERS WEAK IB Prohibitive TARIFFS QUOTAS IMPORT DUTIES Other PROTECTI- ONIST measures Sanctions & Embargo Dual use / ‘use conditional’ Nationali- zation

19. POLITICAL IB barriers  Sanctions  Embargo  Exchange rate manipulation  Dual-use  Nationalization o expropriation o confiscation  Privatization Political environment: o political system and political stability o influence of interest groups / stakeholders o relation to foreign companies o corruption

20. LEGAL environment / barriers Legal environment:  possibility to control ownership  possibility to buy properties (lands, buildings)  possibility to repatriate the profit abroad  law enforcement  possibility to set up a new company & finishing entrepreneurship

Cases create legal precedents COMMON / CASE law Detailed listing what IS and IS NOT permissible CIVIL law Based on the faith & practice of a particular religion RELIGIOUS law Often in communist and dictatorships is whatever the country’s bureaucrats say it is BUREAUCRATIC law LEGAL environment / law systems

22. Decision making – foreign market evaluation  PEST / STEEP / STEEPLE analysis  Competition analysis (Porter)  SWOT analysis  BENCHMARKING  Emerging market trends DATA collection:  Secondary data = was collected already  Primary data = necessary to obtain it

23. Basic business analysis Analysis of external environm. (market) PEST / STEEP / STEEPLE COMPETITION analysis Analysis of inner environm. (company) SWOT Factors: political, economical, social, technological (PEST), ecological (STEEP), legal and European (STEEPLE) Barriers to entry Threat of substitutes Buyer power Supplier power Rivalry / degree of rivalry of present competitors Strengths Weakness Opportunities Threats

24. CZ – joining EU CZ member of EU since (in the wave of 10 countries – the biggest enlargement in the EU history) 1 st half of 2009 Czech presidency of the EU today 27 countries members are sovereign nations that have agreed to cede certain of their powers to the EU Negotiations about further countries accession

25. EU business principles  single market  non-existence of tariffs (custom duty), quotas and administrative restrictions of import & export  prohibition of EU companies discrimination (tenders, market operations)  no duty checks on the borders within EU members  single business, duty & immigration approach (policy) towards third parties  strict regulations – environment  single currency (EUR)

26. Business Advantages & Disadvantages of Czech accession of EU DISADVANTAGES - stronger competition - less freedom in some of state economical decisions ADVANTAGES - duties elimination - free movement of goods / partly free mov.of labour - larger market (single market)

Elimination / removal of business restrictions Cut of bureaucratic cost Custom duties No need for additional certification Mutual approval of norms lower labour cost (a matter of time) lower input cost (a matter of time) easy access to financial & insurance services release of public orders / commissions Allocation of production units where more effective 27. OPPORTUNITIES for Czech ent. at EU single market

Threat of lowering the competitiveness of Czech companies (necessity to find another competitive advantage) Strong competition Pressure on lowering prices & profits SME more vulnerable in competition with MNE Labour market / different social conditions TAX systems 28. THREATS for Czech ent. at EU single market

29. PERSONAL PRECONDITIONS & social skills show RESPECT, communicate verbally and non-verbally, to have a positive approach to people, to be interested in them and their culture to SETTLE WITH doubts and frustration (usual especialy in an interaction with the culturally different environment) PUT ONESELF IN THE PLACE OF OTHERS and to understand the needs and standpoints of others try to avoid to look on things / situations acc. to your own VALUE SCALE not to say opinions and SUBJECTIVE EVALUATION – they are normally based on your culture and values keep HUMOUR and to avoid frustration – not always things go as we wish

INTERNATIONAL BUSINESS - BMCF / TM - winter term 2010 Thank you for your attention Ing. Pavla Břečková, Ph.D.