The Exchange of Goods or Services

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International business exam questionsSession 11.In a short essay, explain themeaning of international trade. Describe thetwo major formsthroughwhich international trade takes place.The exchange of goods or services along international borders. This type of trade allows fora greater competition and more competitive pricing in the market. The competition resultsin more affordable products for the consumer. The exchange of goods also affects theeconomy of the world as dictated by supply and demand, making goods and servicesobtainable which may not otherwise be available to consumers globally.In terms of ease of doing business internationally, two major forces are important:1. Technological developments which make global communication and transportationrelatively quick and convenient; and2. The disappearance of a substantial part of the communist world, opening many of theworld's economies to private business.The Various Forms/Types of International Business are:1. Import trade2. Export trade3. Licensing4. Franchising5. Foreign Direct Investment (FDI)6. Management Contract
2.What is international business, and how has ittransformed the worldeconomy? +International business is the study of transactions taking place across national borderswith the goal of satisfying individual and organization needs. It consists of import andexports, and FDI in other countries. 80% of FDI is done by the 500 largest firms in theworld.-Greater collaboration among nations through multilateral regulatory agencies.-Development of sophisticated global financial systems and mechanisms thatfacilitate cross border flow of goods and services, tech and knowledge.-Promotes the growth of the world economy.3.Discusshow international firms manage the four types of internationalbusiness risk. Provide an example that illustrates the process of riskmanagement.As we all know, doing business on an international scale comes with several risks. Thefollowing are ways and examples of how these risks can be managed-Cross-cultural risk: cross-cultural risks can be managed by providing adequatetraining to both employees and managers on how to deal with foreign cultures. It isalso important to create cross-cultural tolerance. An example is how Americans aretrained to know Chinese workers personally before going straight to business, inAmerica, it is fine to go straight to business but in china you need to build arelationship first-Commercial risk: international firms manage this by creating or developinginternalization strategies to make it easier for things to get done. It can also bemanaged by positioning the firm to have an edge over competitors. Example isChinese mobile companies offering lower prices in America with more value-Currency risk: currency risk can be avoided by having cash reserves in a stablecurrency like the USD that could use to balance cash flows if the currency losesvalue.-Country risk: country risk involves a harmful or unstable political system and otherthings related to this. It could be managed by collaborating with existing companies,which in turn will lead to less red tape. If the risk is higher than the benefit, thecountry should be avoided. An example is companies going out of Venezuela due tothe instabilityAn example that illustrates the process of risk management is by1. Identifying the risk
2. Analyzing the risk3. Ranking the risk4. Solve the risk5. Monitor the risk ----use a company example4.Why might firms choose to pursue internationalization strategies? In ashort essay, identify five major motivations for expanding overseas.Classify these motivations as strategic or reactive and provide anexample of eachA truly international firm configures its sourcing, manufacturing, marketing and othervalue adding activities on a global scale to save costs, increase efficiency, productivity, andflexibility of value chain activities, access customers, inputs, labor or technology andbenefit from foreign partner capabilities. Firms choose to pursue internalization strategiesto expand their business and ultimately increase profit. Firms seek opportunities forgrowth through market diversification. Big numbers of large and small companies obtainmore than 50 % of their sales from abroad.Five major motivations for expanding overseas are-Competitive advantages- a firm sees other companies going to a location so they decide togo based on the fact that they can make more money or cost of production and labor ischeaper. E.g. apple expansion in china- this is a reactive motivation-Less government regulation- a firm will decide to internationalize if governmentalregulations hampers their activities. Example is when a Chinese company movesproduction from south USA to Mexico due to less governmental regulations. Strategicmotivation-Diversifying suppliers: a company will internationalize if it needs more suppliers andwould like to lower procurement costs. Example is Samsung manufacturing in China due toproximity to component suppliers. This is a strategic motivation-Acquire resources: a company will internationalize with the goal of acquiring newresources. Example is when a company internationalizes to India due to man power andcheap labor. Strategic motivation-Market demand: if a company is selling a product and discovers that there is high demandin a certain area, companies that sell the same product will flock to that location – this is areactive motivation5.What is meant by the internationalization of a firm's value chain?A truly international firm configures its sourcing, manufacturing, marketing and othervalue adding activities on a global scale to save costs, increase efficiency, productivity, and
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