1. University Of Finance & Administration INTERNATIONAL BUSINESS
[E_IB]
Mgr. Jiří Amler

2. COMPLETION conditions E_IB
PRESENCE at IB lectures: min. 50%
TEAM PRESENTATION – (market study) preparation at home: min. presentation on international business issue
lecture marks based on active PARTICIPATION: communication, reading and discussing topical economic issues
KNOWLEDGE TEST
INTERNATIONAL BUSINESS [E_IB]

3. LITERATURE Mandatory:
Charles W. L. Hill: Global Business Today, McGraw-Hill/Irwin, 7th edition, 2011
Optional / Recommended:
Allan Sitkin, Nick Bowen: International Business, January 2010.
Woods, M.: International business. Basingstoke, Palgrave, ISBN:
Wild, J., Wild, K., Han, J.: International business: the challenges of globalization. 4th ed. – Pearson, Upper Saddle River, ISBN:
Griffin, R.W., Pustay, M.W.: International business: a managerial perspective. 5th int. ed. - Upper Saddle River, Prentice Hall, ISBN:
INTERNATIONAL BUSINESS [E_IB]

4. INTRODUCTION of each participant Name & professional interest (aiming)
Session content
INTRODUCTION of each participant
Name & professional interest (aiming)
Experience with IB
What you’d like to LEARN in this subject here
Completion conditions specification
Lecture
Reading and analyzing IB articles
Within each session:
practical discussions on topical economical issues
lecture
article: reading + analyses
INTERNATIONAL BUSINESS [E_IB]

5. Common session STRUCTURE
IB NEWS – small talk / discussion – topical business issues
LECTURE
READING – analyzing – interpretation of an article (team work) / Presentation of the materials prepared at home
INTERNATIONAL BUSINESS [E_IB]

6. INTERNATIONAL BUSINESS EXCHANGE across border
What is international business?
= exchange of goods and services undertaken by business bodies across the national border with the foreign business bodies
= cross-border commercial
transactions
includes PURCHASE and SALES
INT business =
EXCHANGE across border
INTERNATIONAL BUSINESS [E_IB]

7. INTERNATIONAL BUSINESS
CONSISTS OF:
Barter / Import / Export
International TRADE
FDI / WOS / Portfolio investment etc.
International INVESTMENT
Licensing / Franchising / Management contracts etc.
Other forms of int. business ACTIVITY 7.
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8. How IB differs from DOMESTIC business?
currencies – conversions, risks, rates securing
often legal system – laws
culture – behavior, business practice
resources
technology – way of producing
INTERNATIONAL BUSINESS [E_IB]

9. INTERNATIONAL BUSINESS
Reasons for participation in IB?
= the fact that almost no country is able to SATISFY its’ needs by own goods and base materials
> countries concentrate on manufacturing products which are effective under given conditions (= theory of comparative advantage)
Free economy
= stage of involvement in the international trade
INTERNATIONAL BUSINESS [E_IB]

10. Principle of COMPARATIVE ADVANTAGE
Absolute advantage
= a country has an absolute advantage over it trading partners if it is able to produce more of a good or service with the same amount of resources or the same amount of a good or service with fewer resources (copper, oil)
Comparative advantage (David Ricardo )
= a country has a comparative advantage in the production of a good or service that it produces at a lower opportunity cost than its trading partners (relativity).
= units of production (people/machines) will be employed in those processes in which they are relatively more productive (productivity)
Opportunity cost (John Stuart Mill)
= is the value of the next-best choice available to someone who has picked between several mutually exclusive choices
- opportunity costs are not restricted to monetary or financial costs: the real cost of output forgone, lost time, swag, pleasure or any other benefit
INTERNATIONAL BUSINESS [B_IB]

11. International ENVIRONMENT
GLOBAL
MACRO
MICRO
INTERNATIONAL BUSINESS [E_IB]

12. interaction inevitable (business abroad, multinational teams etc.)
Why to study IB?
interaction inevitable (business abroad, multinational teams etc.)
success in larger arena
need for understanding principles of IB (time of globalization)
work opportunities
to stay abreast of the latest business techniques
INTERNATIONAL BUSINESS [B_IB]

13. Basic IB terminology Inc. = incorporated [USA] Ltd. / Plc. [UK]
Abbreviations:
Fin. liability of owner’s limited to the extent of investment if company fails
Inc. = incorporated [USA]
Ltd. = Limited, private (Allmakes Ltd.)
PLC = Publicly held limited-liability
Ltd. / Plc. [UK]
AG [Aktiengesellschaft] = publicly held (Volkswagen AG)
KGaA [Kommanditgesellschaft] = limited partners + min. 1 unlimited (Henkel KGaA)
GmbH [Gesellschaft mit bescharankter Haftung] – private, analogy to Inc., Ltd. (or „s.r.o.“ in CZ)
AG / KGaA / GmbH [Germany]
SpA [la societa per azioni] (Fiat SpA)
SA [societe anonyme] (Carrefour SA) = analogy to „a.s.“ in CZ
SpA [Italy] / SA [France]
13.
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14. 1. Economical 2. Political 3. CUltural
IB importance + influences
1. Economical 2. Political 3. CUltural
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.)
INTERNATIONAL BUSINESS [E_IB]

15. 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)
INTERNATIONAL BUSINESS [E_IB]

16. IB INDICATORS [basic] BALANCE OF TRADE
= review of export & import volume in certain period of time A) ACTIVE = export > import B) PASSIVE = export < import
BALANCE OF PAYMENTS
= review of currency / exchange receipts and expenditures A) ACTIVE = payments abroad < receipts from abroad B) PASSIVE = payments abroad > receipts from abroad
INTERNATIONAL BUSINESS [E_IB]

17. IB indicators - details
Balance of Trade
= EXPORT – IMPORT, the difference between a nation's exports of goods and services and its imports of goods and services, if all financial transfers, investments and other components are ignored. A nation is said to have a trade DEFICIT = if it is importing more than it exports.
Balance of Payments
= difference between the money coming into a country and the money leaving the same country
In economics, the balance of payments (BOP) measures the payments that flow between any individual country and all other countries
It is used to summarize all international economic transactions for that country during a specific time period, usually a year.
the BOP is determined by the country's exports and imports of goods, services, and financial capital, as well as financial transfers
INTERNATIONAL BUSINESS [E_IB]

18. BALANCE OF PAYMENTS (BOP)
IB INDICATORS [basic]
BALANCE OF PAYMENTS (BOP)
A/ Current Account – trade, services, services of capital, unilateral
B/ Capital Account – portfolio, FDI
C/ Official Reserve Account –gold, convertibles, SDR, IMF borrowings
D/ Errors and Omissions
18.
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19. TERRITORIAL COMMODITY
STRUCTURE of IB
TERRITORIAL
COMMODITY
INTERNATIONAL BUSINESS [E_IB]

20. Ways of controlling IB
PROTECTIONISM – state intervenes in IB - protects the inner market against foreign competition - supports own products at the foreign markets
LIBERALISM – state limits the interventions in IB - export & import without restrictions
currency convertibility enables access to foreign currency purchases for free trade / exchange
INTERNATIONAL BUSINESS [B_IB]

21. = economic policy of RESTRAINING trade between states
PROTECTIONISM
= economic policy of RESTRAINING trade between states
This policy is closely aligned with anti-globalization, and contrasts with free trade, where government barriers to trade and movement of capital are kept to a minimum.
The term is mostly used in the context, where protectionism refers to policies which protect businesses and workers within a country by restricting or regulating trade with foreign nations.
“No policy has failed as often, or been as widely applied and enthusiastically believed, as economic protectionism.” (Bob McTeer, Federal Reserve Bank of Dallas)
INTERNATIONAL BUSINESS [B_IB]

22. PROTECTIONISM - history
= economic policy of restraining trade between states
Historically, protectionism was associated with economic theories such as MERCANTILISM (that believed that it is beneficial to maintain a positive trade balance), and import substitution.
During that time, ADAM SMITH famously warned against the 'interested sophistry' of industry, seeking to gain advantage at the cost of the consumers
Most modern economists agree that protectionism is harmful in that its costs outweigh the benefits, and that it impedes economic growth
INTERNATIONAL BUSINESS [E_IB]

23. PROTECTIONISM - methods
Tariffs on imported goods
restrictive Quotas - to reduce the quantity and therefore increase the market price of imported goods
Administrative Barriers: using various administrative rules (eg. regarding food safety, environmental standards, electrical safety, etc.)
Exchange Rate manipulation: government may intervene in the foreign exchange market to lower the value of its currency by selling its currency in the foreign exchange market.
… and a variety of other government regulations designed to discourage imports, and prevent foreign take-over of native markets and companies.
INTERNATIONAL BUSINESS [B_IB]

24. International Trade Barriers
Duty or tariff – export import - ad valorem - specific
- compund
Quota – numerical limitation
Voluntary export restraint
Product & testing
Restricted access to distribution
Public sector procurement
Local-purchase
Regulatory/Currency/Investment Ctrl
24.
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25. PROTECTIONISM – arguments FOR
= economic policy of restraining trade between states
1) Saving jobs for citizens of country
2) Promoting / Protecting infant industries
3) Promoting / Protecting domestic & economic development
4) Offsetting economic distortions
INTERNATIONAL BUSINESS [B_IB]

26. PROTECTIONISM – arguments AGAINST
= economic policy of restraining trade between states
Harming the freedom and free market
Gains from free trade outweigh any losses; as free trade creates more jobs than it destroys because it allows countries to specialize in the production of goods and services in which they have a comparative advantage.
Free trade helps third world workers, even though they are not subject to the strict health and labour standards of developed countries
3. Protectionism has also been accused of being one of the major causes of war.
INTERNATIONAL BUSINESS [B_IB]

27. PROTECTIONISM – conclusion
„Let me just be blunt. Protectionism is the crack cocaine of economics. It may provide a high. It's addictive and it leads to economic death.“
Richard Fisher
President of Dallas Federal Reserve Bank
INTERNATIONAL BUSINESS [B_IB]

28. it contrasts with mercantilism, Keynesianism and socialism
LIBERALISM
= economic policy that opposes government intervention in the FREE MARKET, and supports the maximum of free trade and competition
= is an economic philosophy that supports and promotes laissez-faire capitalism (= to let create/be)
it contrasts with mercantilism, Keynesianism and socialism
ADAM SMITH (1776) Wealth of Nations - advocates minimal interference of government in a market economy
INTERNATIONAL BUSINESS [B_IB]

29. LIBERALISM – arguments FOR
Higher economic freedom has a strong correlation with higher LIVING STANDARDS
Higher economic freedom leads to INCREASED INVESTMENTS, TECHNOLOGY TRANSFER, INNOVATION and a responsiveness to consumer demand
Many government attempts to micro-manage their economies using things like tariffs, public investment, etc. were often misdirected, poorly timed, poorly implemented and brought undesirable consequences = government is incapable of managing a social system as huge as a national economy
Government-owned enterprises and public entitlements were losing a lot of citizens' money
INTERNATIONAL BUSINESS [B_IB]

30. LIBERALISM – arguments FOR
5. During the 1970s, state-controlled economies proved unresponsive to economic shocks, and much of the world endured a sustained, high-inflation recession until markets were liberalized
(though proponents still note that liberalization itself is only one of several factors in the recent return to prosperity; other factors include technological developments and the end of the Cold War)
INTERNATIONAL BUSINESS [B_IB]

31. LIBERALISM – arguments AGAINST
Globalization and liberalization spoils nations' ability for self-determination
Exploitation: critics consider capitalist economics to be exploitive
Environmental costs: critics argue that neoliberalism leads to more transportation, and unregulated markets lead to more industrial production
Increase in corporate power: some anti-corporate organizations believe neoliberalism changes economic and government policies to increase the power of corporations and large business
INTERNATIONAL BUSINESS [B_IB]

32. KEY terms
International Business = Int. trade / Int. investment / Other business activities
Reasons for IB, advantages x disadvantages
Free trade
Comparative advantage / Absolute advantage / Opportunity cost
Balance of trade, Balance of payments
Liberalism x Protectionism
Convertibility, trade barriers, free price creation
Structure of IB (territory, commodity)
Corporation abbreviations / Financial liability
FDI / Portfolio investment
Home x Host country
Economies of Scale
INTERNATIONAL BUSINESS [E_IB]

33. Thank you for your attention
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