International business involves the exchange of products and services across national borders. Companies pursue international expansion to increase profits, take advantage of product life cycles, and achieve economies of scale, or to respond to competitive pressures and saturated domestic markets. When considering international expansion, companies must gauge demand abroad, adapt products to foreign customer needs, and determine their entry strategy into foreign markets such as exporting, licensing, franchising, foreign direct investment, or establishing a foreign subsidiary. Barriers to international business include cultural, legal, political, and economic barriers like tariffs and trade restrictions.

2. International business International Business The exchange of products and services among countries Transaction that are carried out across national borders to satisfy the objectives of individuals and organization

3. Motivation to do international Business

4. Motivation to do international Business Proactive: to increase profit to take advantage of product life cycle to achieve Economies of scale Reactive: Competitive pressures Overproduction and excess capacity Declining domestic sales saturated domestic markets

5. Considering International Expansion Gauging international demand Is there any demand for the company’s products abroad? Adapting to customer needs If so, must those products be adapted for international consumptions? Entry strategies How to entry into foreign markets?

6. Going international

7. Gauging international demand Preliminary screening for attractive country markets Assessment of industry market potential Identify the potential demand for the company products and services Forecasting the company selling Assessment of the company market share

8. Adapting to customer needs Products and Services should meet to foreign market Price adjustments by considering the cost of foreign trade, such as transportation, taxes, exchange rate Distribution system through existing transportation system, suppliers and stores Promotion should be modified based on different languages, law, and culture from country to country

9. Barriers to International Business Cultural and social barriers Legal and political barriers Economic barriers: Tariff and trade restrictions Quotas and embargo Exchange control Subsidy

10. Entry strategies Exporting – firms that distributes and sells products to foreign countries indirect - through an intermediary direct - deal with foreign customer and firms Licensing an agreement in which a licensor gives to a licensee the right in using the licensor’s patent, trademark, copy right, technology, production processes, and product in return for licensee’s fee

11. Entry strategies 2. Franchising the granting of the right by franchisers to franchisee in prescribed manner; selling its products using its name, production, brand, marketing approaches 3. Foreign Assembly a firm exports components parts to subsidiary for local assembly into finished products

12. Entry strategies 4. Turnkey Operation an arrangement in which a supplier designs, builds, and trains the staff of an operating facility for foreign buyer 5. Foreign production subsidiary a subordinate company established in another country by parents company for the purpose of production

13. Entry strategies 6. Foreign production subsidiary a subordinate company established in another country by parents company for the purpose of production 7. International Firm Conduct a significant portion of its business In foreign countries

14. Entry strategies 8. Multinational Corporation a firm that is based in one country (parent country) has production and marketing activities spread in one or more foreign country (host country) 9. Joint Venture a partnership of two or more parties who share ownership and control for the venture’s operations and property rights

15. Entry strategies 10. Foreign Direct Investment Arrangement in which a firm buys or establishes tangible assets In another country Through direct investment By buying a company stock in capital markets

16. International Organization General agreement on Tariff and trade (GATT) – an international organization formed to reduce or eliminate tariff and other barrier to international trade International Monetary Fund (IMF) – an international financial organization that lend money to countries in conducting international trade

17. International Organization World Bank – an international financial organization that lend money to underdeveloped and developing countries for development Economic Communities – the creation of common economic policies World Trade Organization (WTO) European Community (EC) North American Free Trade Agreement (NAFTA) Asian Free Trade Agreement (AFTA)