International Business

Prepared by: MATHIVANNAN JAGANATHANBPME1013 Basic Entrepreneurship


At the end of this chapter, students will be able to:1. Understand why an entrepreneur needs to develop business into international markets.2. Understanding the importance and benefits of international business.3. Understand and discuss the methods that can be used to enter the international market.4. Understand the necessary steps to be taken before enter the international market.5. Understand and discuss the obstacles in international business.6. Understanding the constraints of the international market.


Extend the product life cycle an entrepreneur can still continue the age of the product lifecycle by

introducing products in international markets. For example, the white products such as televisions, refrigerators

can still be sold in developed countries.Improve sales and profits local market and overseas market, the entrepreneur can increase

sales and profits more lucrative.Reduce production cost increase in the rate of production for international markets to reduce

the average production cost per unit product.


Balancing sales decline in local marketIf businesses in the local market is not so good, entrepreneurs can accommodate this loss of business sales in overseas markets.

Improving the quality of productsTo enter the international markets such as Japan, the United States and the EU (European Union), an entrepreneur needs to ensure that the products meet stringent quality requirements.


a) The method of importation (import)grocery shopping and bring foreign products to be sold in local markets to get products that are not produced by local production.

b)Method of exports (export)exportation, transmission and sale of products from a country to foreign countries.important to entrepreneurs because it would increase the potential market for his company's products.

c) Method of forming strategic alliances (strategic alliance)no formal agreement to share information and collaboration.Strategic alliances give the company access to additional resources and capabilities to share high costs and business risks.


d) export management companies (export management company)export activities is through the export management company, also known as house trade (trading house).can help manage the process of exporting the items need to start by making shipping up to find the customer.

e) Foreign distributor (foreign Distributors)Distributors appointed by the entrepreneurs or companies from outside the country will carry out all the marketing, sale and delivery.

f) foreign agents (foreign agents)producers retain the rights to the product until it is delivered to the buyer or its customers.Foreign agent commission will be paid by the manufacturer.


g) The establishment of local office (setting up a local office)manufacturers will send one or two people who have foreign language ability or expertise to establish a foreign culture.

h) production contract (contract manufacturing)a manufacturer would allow a local company to produce it under contract or agreement signed by both parties.i) Joint venture (joint venture)a partnership of international business (international business collaboration) in which two or more parties to establish a business entity.


j) Foreign direct investment (foreign direct investment)Direct investment is typically involve ownership of 10 percent to 25 percent equity or voting stock of the foreign companySelected as one of the methods for conducting business in foreign countries due to certain factors.The first factor, the existence of trade restrictions or prohibitions the importation of certain products.The second factor - the possibility of foreign countries to provide incentives to foreign firms that invest in the country.The first way is through the purchase of part of the equity of the companies operating in international markets.The second way - through the purchase of the majority or recruitment company. the parent company.The third way is through the purchase of a foreign company in order to establish a direct investment.


k) subsidiary (subsidiary)when a multinational company to invest directly in terms of capital and personnel to set up branches overseas or buy facilities from other foreign companies.The holding company has full control of the company's travel operations.

l)Licensing (licensing)give permission to issue or sell a brand or using copyright, patent and how the process for manufacturing a product.The licensor will get a reward in the form of fee and royalty from the sale of products or services produced by licensees.


Licensing (licensing)Advantagesusing a low-capital, and easy to enter the international market.as an extension of the life of the product in the maturity stage of product life cycle.royalties for the license was secured and the term overcome the high transportation costs.The risk level is low in licensing business.Weaknessthe applicant may lose interest to renew the contract unless thelicensor to maintain interestthe licensor must have a unique technology, its own copyright and brand that could attract the attention of international consumers.


m) International FranchiseFranchisees or the company granted the franchise rights to provide a number of franchise fees, royalties, management fees, as well as a certain percentage of all sales made to parent companyExamples of such franchise Malaysia Nelsons, Smart Reader, MarryBrown Fried Chicken and England Optical


Step 1: Conduct Preliminary (Conduct Initial Research)make an early assessment of the international market, how the actual situation in specific countries, are or are not doing business in the countryFacts or preliminary information about a country can be found through the embassy if there are embassies

Step 2: Conduct Feasibility Studyaspects of entry strategy, government and legal system factors, characteristics such as size and market profile of the population, major cities, socio-economic, cultural, language, climate, exchange rates, tax rates, and risk factors of labor.

Step 3: Provide Adequate Financial (Secure adequate financing)

Adequate financing to penetrate markets that were carried out research and evaluation shows that it is a potential


Step 4: Procedure Documentationdocumentation procedures for the purpose of doing business in that country.One can use a local agent or lawyer to manage lo procedure documents.

Step 5: Prepare and implement PlanTo achieve the firm into the international market, the establishment of policies needed to be a guideline.conducted in accordance with the prescribed timetable or plan showing the implementation of certain works and who is responsible for doing it.


a)Tariffs (tariffs) business restrictions in the form of tax on imported goods

used to increase the prices of goods imported and locally manufactured products to maintain

Specific tariffs - fixed a number of tax imposed on each unit of imported goods.

ad-valerom rates - the tax on the value of imported goods.

b) Quota (quota) restrictions on the amount of imported goods in the total

quantity of goods imported. Quotas imposed by a country to restrict the quantity of

goods imported but does not increase government revenue.


c) export subsidies (export subsidy)payments made by the government to exporters in order to reduce their production costs and thus to reduce their export prices

d) Control of foreign exchange (foreign exchange control)A country's currency will purchased by importers if they want to import goods from these countries to the importer.

e) EmbargoEmbargo imposed by some countries over whether a country imports or exports of all product categories, regardless of destination.


f) Prevent the accumulation (anti-dumping)Goods such as clothes, clothing, shoes and other necessities can be produced by many users, and cheap in China, Vietnam, India and others.These items can be sold cheaply in international markets such asUnited States, Great Britain and Canada.

g) Trading BlockEstablishment of the North American Free Trade Area (NAFTA) and the European Union (EU) by the number of countries is intended to safeguard the common interest of creating a block of business.


a) Socio-cultural Culture, religion, customs, cuisine and other factors pertaining to the

community in the country skills, social perception, efficient work habits and good relations between individuals is needed in international management.

For example, the issue of whether a product is halal or not is a important matter to the market in Muslim countries like Malaysia and Middle East countries

b) Lack of capital or limited requires huge capital and total capital varies according to the

strategy used Levels of capital required in international business is export, contract

agreements, licensing, franchising, joint ventures, subsidiaries and manufacturing plants


c) political and legalEnsure that you have adopted a political system whether based systems of communism (China), socialist (Cuba), a full democracy (United States), etc.need to know such things as the type and scope of the act, taxation and other regulations on the management of human resources, etc.

d) economic changesChange the world economy will provide a significant impact on the company's operations depend on the countries involved with the business operationsThe decline of the currency will lead to inflation and adversely affect business.


e) patriotismpeople in a country more interested in the products of their own country.For example, the people of Iran and Muslim countries that has sentiment "anti-American" is definitely would not allow products from U.S. firms

f) TechnologyEvery country has the capacity and capability to achieve technological advances of its own.If a company is bringing in technology that have a low level of technology or the lack of conformity with the existing level of technology in the country, this would give a bad impression to the company


International market provides the greatest opportunity for an entrepreneur to expand its business

an entrepreneur who has been successful in the local market should review and think about the business expansion into international markets.

Documents

International Business