MST 111 Introduction to Business Imports International trade

MST 111 Introduction to Business

Imports � International trade is exchange of capital, goods, and services across international borders or territories. In most countries, it represents a significant share of gross domestic product (GDP). � Goods produced somewhere else and sold domestically. ◦ Chemicals ◦ Technology Expertise) (Machinery, Software & Hardware,

Factors to be considered while importing � Identification � Procedures, of products to be imported. � methodologies, � technical processes and � documents for imports.

Exports � In economics, an export is any good or commodity, transported from one country to another country in a legitimate fashion, typically for use in trade. Export goods or services are provided to foreign consumers by domestic producers. � Goods produced domestically and sold in some other country. � Advantages of Exports ◦ Support of Government. ◦ High Profits. ◦ Pride for the country. ◦ Utilization of production capacity.

Per Capita Income � Per Capita = Total income of the country Total population

Tools for measuring economies of the world � Income group: Economies are divided according to 2012 � � � GNI per capita, calculated using the World Bank Atlas method. The groups are: low income, $1, 035 or less; lower middle income, $1, 036 - $4, 085; upper middle income, $4, 086 - $12, 615; and high income, $12, 616 or more.

North South

� Bangladesh is exporting ◦ Sports items ◦ Agricultural products (shrimp, tea etc. ) ◦ Textile products

Import and Export Balance: Balance of trade � Gap between imports and exports is called surplus and deficit. � It varies from country to country. � Its another name is Balance of trade. � A country’s balance of trade is the difference (in monetary terms) between the amount it exports and the amount it imports. � A nation that exports more than it imports maintains a favorable balance of trade.

Balance of Payment � Balance of payment = Total receipts - Total payments � If receipts are greater, balance of payment is favorable. � If payments are greater, balance of payment is unfavorable.

Exchange rates � The rate at which one country’s currency can be exchanged for that of another country is called the exchange rate. � Example: 1 USD = 78 Taka

Level of involvement in international business � Imports or Exports ◦ We can be importer and exporter. ◦ We try to see opportunity in international market to consume surplus products. ◦ This is called exports.

Level of involvement in international business � International Firms ◦ International firms have operations world wide. ◦ These firms are also called multinationals. ◦ Multinationals design products separately for each country.

Level of involvement in international business � Global Organizations ◦ Those organizations which consider the whole country as single market are called global organizations. ◦ These organizations have standardized products all over the world.

International Organizational Structure � Independent Agent ◦ A person or an organization that works for an exporter or importer. � Appointment of representative abroad. � Licensing agreement, � Independent Branch Office. � Strategic Alliance. � Direct Foreign Investment.

Barriers to International Trade/ Business � Social and Cultural Changes. ◦ Different countries have different life styles. � Religion. ◦ Every religion has its own set of rules for its followers. ◦ Religion asks for spending on certain things and stops from spending on certain things.

Barriers to International Trade � Climate � Laws ◦ There are different laws in different parts of the world. ◦ These include laws related to: �Health �Safety �Customer Relationship �Pricing �Packing

Barriers to International Trade � Environment � Economic Differences ◦ Per Capita Income is different in different countries. ◦ Different people have different economic systems. ◦ People preference for a particular product � Political System � Tariff ◦ Tax levied on goods entering into a country. ◦ It is also used as a measure to reduce imports in a country.

Barriers to International Trade � Quota ◦ Limit imposed by one country on importing commodities from another country. � Subsidies ◦ Concessions provided by a country to its producers in order to protect economy.

Regulation of International Business ◦ As business between nations has grown, so has the number of laws and organizations involved in the regulation of international trade. Like as: ◦ General Agreement on Tariffs and Trade (GATT) ◦ World Trade Organization (WTO) ◦ European Community (EC) ◦ European Free Trade Association (EFTA) ◦ Organization of Petroleum Exporting Countries (OPEC) ◦ International Monetary Fund (IMF) ◦ World Bank (WB)

� GATT – General Agreement on Tariff & Trade. ◦ An agreement between the countries that encourages international trade.

� WTO – World Trade Organization The WTO is an international organization and a forum of multilateral negotiations of its � � � Members on global trade liberalization rules, their administration and application. Mainly, the WTO system is understood as the set of external trade rules or "traffic rules" in external trade, which all Members must follow. The WTO was established in 1995, as the result of the Uruguay round negotiations. With the establishment of the organization, a set of WTO agreements was also concluded – with regard to goods, services, intellectual property, dispute settlement, multilateral agreements. Until the establishment of the WTO multilateral trade relations were governed by General Agreement on Tariffs and Trade (GATT), concluded on 1947 and which opened the trade liberalization and reduction of tariff barriers. The main goal of the WTO is a free and facilitated trade, governed by equal rules, while similarly taking into account also the potential of developing countries. In the WTO are represented almost all countries of the world – currently the WTO has 147 Members Scope of WTO ◦ WTO insists on removing the artificial barriers to encourage international trade. ◦ WTO was organized on January 01, 1995. ◦ 147 member country

� International Monetary Fund (IMF): � It was founded in 1944 � An international financial organization that lends money to countries to conduct international trade. � World Bank (WB) � It was formed in 1946 � An international organization that lends money to underdeveloped and developing countries for development.

Approaches to international business �A firm that decides to enter international trade must select an approach. ◦ Exporting: The simplest way to enter international business is exporting, selling domestic goods to a foreign country. ◦ Licensing: An agreement in which one firm allows another firm to sell its product and use its brand name in return for a commissions or royalty. ◦ Joint Venture: Firms may also conduct international business through a joint venture, in this case a partnership between a domestic firm and a firm in a foreign country

◦ Trading companies: A firm that buys products in one country and sells in an other without being involved in manufacturing. ◦ Countertrading: Complex bartering agreements between two or more countries are involved in countertrading. (Bartering refers to the exchange of merchandise between countries. ) ◦ Direct ownership: The purchase of one or more business operations in a foreign country. ◦ Multinational corporations: A firm that operates on a global basis, committing assets to operations or subsidiaries in foreign countries.

Adapting to foreign markets � Because of differences from country to country, a firm engaged in international trade must generally adapt to foreign markets. In this section, we examine how a firm gears its product offerings, prices, distribution systems , and methods of promotion to foreign markets. �Product: Example: GM faced problems selling refrigerators in Japan because they were too large to fit into most Japanese homes. �Price: The price of a product is usually different in domestic and foreign markets. The cost of foreign trade, such as taxes, tariffs, and transportation, often result in higher prices in the foreign country.

� Distribution: Example: Manufacturers typically do not make deliveries to stores and other outlets. Both Coca cola and Pepsi have invested heavily in trucks and refrigeration for store owners to use to obtain and sell Coke and Pepsi products in China. � Promotion: Promotion often must be modified because language, laws and culture differ from country to country.

Business Ethics � Ethics are basic beliefs, a company decides to pursue and implement during a course of action. ◦ A system that confirms the beliefs of the society. ◦ Business is being run within that system. ◦ Corporate Citizenship is a practice of the company confirmed by the society.

Ethical Behavior � Ethical Behavior in Managerial Practices include: ◦ ◦ ◦ Responsibility towards employees. Relationship with other organizations. Interaction with Government. Plans to initiate ethical behavior towards people. To initiate ethical programs.

Corporate Social Responsibilities � To think about benefiting the society and avoid harmful activities for the society is called Corporate Social Responsibilities. � These include: ◦ Ethical attitude towards customers. ◦ Dealing with employees. ◦ Ethical communication with Government and local bodies. ◦ Ethical behavior towards stake holders.

Social business � � � Social business, as the term had once been commonly used, was first defined by Nobel Peace Prize laureate Prof. Muhammad Yunus and is described in his books Creating a world without poverty—Social Business and the future of capitalism and Building Social Business— The new kind of capitalism that serves humanity's most pressing needs. In these books, Yunus defined a Social Business a business: ◦ Created and designed to address a social problem ◦ A non-loss, non-dividend company, i. e. ◦ It is financially self-sustainable and ◦ Profits realized by the business are reinvested in the business itself (or used to start other social businesses), with the aim of increasing social impact, for example expanding the company’s reach, improving the products or services or in other ways subsidizing the social mission.

Seven Principles of Social Business � These were developed by Prof. Muhammad Yunus and Hans Reitz, the co-founder of Grameen Creative Lab: 1) Financial an. Business objective will be to overcome poverty, or one or more problems (such as education, health, technology access, and environment) which threaten people and society; not profit maximization 2) d economic sustainability 3) Investors get back their investment amount only; no dividend is given beyond investment money 4) When investment amount is paid back, company profit stays with the company for expansion and improvement 5) Environmentally conscious 6) Workforce gets market wage with better working conditions 7) Do it with joy

Sustainable business or green business � � Sustainable business, or green business, is an enterprise to be that has minimal negative impact on the global or local environment, community, society, or economy. Often, sustainable businesses have progressive environmental and human rights policies. In general, business is described as green if it matches the following four criteria: 1. It incorporates principles of sustainability into each of its business decisions. 2. It supplies environmentally friendly products or services that replaces demand for nongreen products and/or services. 3. It is greener than traditional competition. 4. It has made an enduring commitment to environmental principles in its business operations.