International Business

What is International Business?

• Dealing with all commercial transactions (private and governmental, sales, investments, logistics, and transportation) that take place between two or more regions, countries and nations beyond their political boundaries.

• Example: Buying/selling from China

Why is it important?

• More and more companies are moving their headquarters to an international destination.

• Why?• Cheaper labor, avoid taxes, cheaper

products, eliminate the middle man….

• Where would you want to move your company?

Risk Factors

• Political Risk

• Social Risk

• Economic Risk

Political Risk• Country leaders (government)

• New/different taxes

• Currency exchange rates

• Trade tariffs or barriers

• Terrorism, riots, civil wars, even political elections

• New regulations

• Example: Move all operations to India then Prime Minister is killed. Country is in mourning and riots begin

Social Risk• Working conditions/labor laws

• Environmental quality

• Health

• Economic opportunity

• Religious differences/traditions

• Wages of workers

• Example: Coca-Cola opened a bottling plant in India. That area had a sever drought at the time and Coca-Cola continued to deplete the water supply for it’s bottling effort.

Economic Risk

• Employment rates drop

• Value of currency is reduced

• Import/export increases/decreases

• Changes in buying power

• Debt/surplus

• China(where you moved your business) lends the U.S. money, then the U.S. defaults on that loan. China’s buying power has been reduced.

Foreign Exchange Rates

• The price of a nation’s currency in terms of another currency.

• Two components…• Domestic currency: accepted form of

money but not necessarily exclusive currency

• Foreign currency: foreign money not accepted

• Investopedia.com Video

**Change the direction.

How would a country’s currency

be affected??• A nation imports more than it exports

• INCREASE• DECREASE• ?? NOT SURE ??

How would a country’s currency

be affected??• Interest rates in a country rise.

• INCREASE• DECREASE• ?? NOT SURE ??

How would a country’s currency

be affected??• A new president is elected in a country.

• INCREASE• DECREASE• ?? NOT SURE ??

How would a country’s currency

be affected??• A nation’s inflation rate drops.

• INCREASE• DECREASE• ?? NOT SURE ??

How would a country’s currency

be affected??• The exports for a country increase as a

result of technology.• INCREASE• DECREASE• ?? NOT SURE ??

How would a country’s currency

be affected??• The military seizes control of the

government and takes over major industries.• INCREASE• DECREASE• ?? NOT SURE ??

How would a country’s currency

be affected??• New tourist attractions and

international publicity increase international tourism by over one million people.• INCREASE• DECREASE• ?? NOT SURE ??