Order ID 6463784949 Type Essay Writer Level Masters Style APA/MLA/Harvard/Chicago Sources/References 6 Number of Pages 5-10 Pages Description/Paper Instructions Introduction to International Business
QB2506
Revision
Topic 1 – World Trade
World trade benefits should be discussed in detail with examples.
- Promotes World Peace
- Disputes are handled constructively (WTO)/Rules make life easier
- Freer trade cuts the cost of living
- International trade raises incomes
- The basic principles make life more efficient
- Governments are shielded from lobbying
- Trade stimulates economic growth
- The system encourages good government
- It provides more choice of products and qualities
- Cost benefits – economies of scale and scope
- Timing benefits – what is the ‘’shopping caddy’’ approach?
- Learning benefits – avoid re-inventing the wheel
- Arbitrage benefits – buying and selling globally.
Factors that work against it
- Cultural factors – attitudes, tastes, behaviour, social codes. Examples.
- Commercial factors – distribution systems
- Technical factors – standards, language, transport
- Legal factors – national security, regulation, protectionism
- Political factors.
Benefits of localisation:
- Proximity – close to the market, understand customers’ needs
- Flexibility and customisation
- Quick response time.
Arguments against world trade and trading blocs:
- Job losses in local markets, sweatshops, child labour
- Standardises customer tastes – reduces diversity
- Induces concentration of power in a few global corporations
- Domination of strong multinationals
- Harms the environment
- Countries cannot protect national interests and culture.
Topic 2 – Trading Blocs
A description of the major trading blocs will be expected NAFTA/USMCA, EU Zone and China.
A regional trading bloc is a group of countries within a geographical region that allow free trade between members i.e. movement of goods, services and labour. The trade bloc can protect themselves from imports from non-members and other trading blocs. Trading blocs are a form of economic integration, and increasingly shape the pattern of world trade.
There are several types of trading bloc:
Preferred trading partners
Free trade areas i.e. trade within the bloc
Market access and trade creation
Economies of scale, scope and learning
Job creation
Protection and stability
Disadvantages include:
Loss of benefits of open international, tariff free trade and global supply chain.
Distortion of trade
Inefficiencies and trade diversion
Retaliation
Topic 3
Globalisation
- Growing worldwide interconnections e.g. e-commerce; trading platforms e.g. Amazon, eBay, Tencent, Alibaba, Baidu; global distribution, English established as the international business language, international banking system.
- Rapid discontinuous change
- Increased number and diversity of participants
- Growing complexity
- A global mind-set
- Know the business and the environment
- Create and convey a clear global vision with integrity
- Develop self-awareness and self-understanding
- Be able to manage diversity
- Continuously learn
Benefits
- Cost benefits – economies of scale, scope and learning
- Timing benefits – what is the ‘’shopping caddy’’ approach?
- Learning benefits – avoid re-inventing the wheel
- Arbitrage benefits – buying and selling globally
Factors that work against it
- Cultural factors – attitudes, tastes, behaviour, social codes. Examples?
- Commercial factors – distribution systems
- Technical factors – standards, language, transport
- Legal factors – national security, regulation
Benefits of Localisation
- Proximity – close to the market, understand customers’ needs
- Flexibility and customisation
- Quick response time
Global
- Standardisation versus Customisation
- Localisation versus Globalisation
- Cultural standardisation versus national and regional culture.
- Treating the customer as the same versus customer as unique individual.
Arguments in Favour
- Creates overall wealth – specialisation increases wealth (comparative advantage)
- Reduces inflation (cost efficiencies)
- Benefits customers – cheaper products
- Better allocation of natural, financial, human resources
- Reduces corruption or increases corruption.
- Are these all true?
Arguments Against
- Job losses v Sweatshops, child labour
- Standardises customer tastes – reduces diversity
- Induces concentration of power in a few global corporations
- Domination of strong multinationals
- Harms the environment
- Countries can’t protect national interests and culture
Opponents
Opposition may vary but can include:
- Small businesses
- Trade unions
- Environmentalists
- Anarchists/ Anti-Government
- Governments
- Anti-poverty charities
Topic 4
Market Entry Strategy
The question is related to market entry evaluation. The student is expected to critically evaluate the pros and cons of FDI, franchising, licencing and joint ventures. Better answers will consider other concept that are most commonly used i.e. BERI index, McKinsey GE Matrix and Hierarchy of Segments model.
FDI, advantages and disadvantages should be discussed in terms of control, risk, resources etc. An equity investment to create or expand a permanent interest in a foreign enterprise. Protection of the total business system, company expertise and intellectual property.
FDI disadvantages include high levels of investment, high risk, lack of local knowledge, e.g. cultural differences, different legal, political, social and business norms. Negotiation difficulties, lack of existing customer base and longer timeframe to breakeven. Lack of brand/product awareness, barriers to market entry, different competitors.
The benefits of licensing agreements. For example, the licensor permits the licensee to use its intellectual property (an intangible) in exchange for a royalty payment.
Advantages of licensing:
No capital investment, knowledge, or marketing strength.
Huge profit potential, recovered costs.
Minimal risk of government intervention.
A stage in internationalisation.
Pre-empt market entry before competition.
Increasing intellectual property rights protection.
Disadvantages of licensing:
- loss of control (partially or fully) over your product or service.
- relying on the licensee’s ability to effectively market your patent, product or service
- risk of poor strategy or execution damaging the product success.
- poor quality management damaging your brand or product reputation.
- Licensees commitment to the product/service
- Distribution and logistics
- Dispute resolution
- Dependency on single company
- International legal disputes
- Termination of contract
- Corporate and national culture differences
The pros and cons of franchise agreements could be evaluated. In 2012 global franchise sales by almost 16,000 franchisors and more than 1 million franchisees were estimated. A licensing arrangement where the licensor grants the licensee the right to do business in a prescribed manner.
The franchisee benefits from the reduced risk of implementing a proven concept.
Joint venture advantages and disadvantages
A joint venture is a business entity created by two or more parties, generally characterized by shared ownership, shared returns and risks, and shared governance. Companies typically pursue joint ventures for one of four reasons: to access a new market, particularly emerging markets; to gain scale efficiencies by combining assets and operations; to share risk for major investments or projects; or to access skills and capabilities.
A joint venture is a common way of combining resources and expertise of two otherwise unrelated companies. There are many benefits to this type of partnership, but it is not without risks – arrangements of this sort can be highly complex.
Advantages of joint venture
One of the most important joint venture advantages is that it can help your business grow faster, increase productivity and generate greater profits.
Shared resources and knowledge.
Synergistic effects.
Benefits of joint ventures include:
- access to new markets and distribution networks
- increased capacity
- sharing of risks and costs (i.e. liability) with a partner
- access to new knowledge and expertise, including specialised staff
- access to greater resources, for example technology and finance
- Joint ventures often enable growth without having to borrow funds or look for outside investors.
You may be able to:
- use your joint venture partner’s customer database to market your product
- offer your partner’s services and products to your existing customers
- join forces in purchasing, research and development
Another benefit of a joint venture is its flexibility. For example, a joint venture can have a limited lifespan and only cover part of what you do, thus limiting the commitment for both parties and the business’ exposure.
Joint ventures are especially popular with businesses operating in different countries, e.g. within the transport and travel industries.
Disadvantages of joint venture
Joint ventures can pose significant risks relating to liabilities and the potential for conflicts and disputes between partners. Problems are likely to arise if:
- the objectives of the venture are unclear
- the communication between partners is not great
- the partners expect different things from the joint venture
- the level of expertise and investment isn’t equally matched
- the work and resources aren’t distributed equally
- the different cultures and management styles pose barriers to co-operation
- the leadership and support is not there in the early stages
- the venture’s contractual limitations pose a risk to a partner’s core business operations
Partnering with another business can be complex. It takes time and effort to build the right business relationship and, even then, it can be difficult to completely avoid all the issues.
Success depends on careful planning and communication. A clear agreement is an essential part of building a good joint venture relationship.
China
According to a report of the United Nations Conference on Trade and Development 2003, China was the recipient of US$53.5 billion in direct foreign investment, making it the world’s largest recipient of direct foreign investment for the first time, to exceed the USA. Also, it approved the establishment of nearly 500,000 foreign-investment enterprises. The US had 45,000 projects (by 2004) with an in-place investment of over 48 billion
Chinese requited Joint Ventures are a mechanism for forced technology transfer. In many cases, technology transfers are effectively required by China’s Foreign direct investment (FDI) regime, which closes off important sectors of the economy to foreign firms. In order to gain access to these sectors, China forces foreign firms to enter into Joint ventures with Chinese entities they do not have any connection.
Until recently, no guidelines existed on how foreign investment was to be handled due to the restrictive nature of China toward foreign investors. Following the death of Mao Zedong in 1976, initiatives in foreign trade began to be applied, and law applicable to foreign direct investment was made clear in 1979, while the first Sino-foreign equity venture took place in 2001 The corpus of the law has improved since then.
Companies with foreign partners can carry out manufacturing and sales operations in China and can sell through their own sales network. Foreign-Sino companies have export rights which are not available to wholly Chinese companies, as China desires to import foreign technology by encouraging JVs and the latest technologies.
Under Chinese law, foreign enterprises are divided into several basic categories. Of these, five will be described or mentioned here: three relate to industry and services and two as vehicles for foreign investment. Those five categories of Chinese foreign enterprises are: the Sino-Foreign Equity Joint Ventures (EJVs), Sino-Foreign Co-operative Joint Ventures (CJVs), Wholly Foreign-Owned Enterprises (WFOE), although they do not strictly belong to Joint Ventures, plus foreign investment companies limited by shares (FICLBS), and Investment Companies through Foreign Investors (ICFI). Each category is described below.
Equity joint ventures
The EJV Law is between a Chinese partner and a foreign company. It is incorporated in both Chinese (official) and in English (with equal validity), with limited liability. Prior to China’s entry into WTO – and thus the WFOEs – EJVs predominated. In the EJV mode, the partners share profits, losses and risk in equal proportion to their respective contributions to the venture’s registered capital. These escalate upwardly in the same proportion as the increase in registered capital.
The JV contract accompanied by the Articles of Association for the EJV are the two most fundamental legal documents of the project. The Articles mirror many of the provisions of the JV contract. In case of conflict the JV document has precedence. These documents are prepared at the same time as the feasibility report. There are also the ancillary documents (termed “offsets” in the US) covering know-how and trademarks and supply-of-equipment agreements.
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