2.- Why is it important for you to study international business? * Almost any large organization you work for will have international operations or be affected by the global economy. * You start your own business, you may find yourself using foreign-made materials or equipment, competing with foreign, and perhaps even selling in foreign markets. * Keep pace with your future competitors.
5.- What is portfolio investment?
* Foreign portfolio investments (FPI) are purchases of foreign financial assets (stocks, bonds, and certificates of deposit) for a purpose other than control. An example of portfolio investment is the purchase of 1,000 shares of Sony’s common stock by a Danish pension fund.
6.- What are the basic reasons for the recent growth of international business activity? * There are two broad reasons: strategic imperatives, which motivate globalization, and environmental changes, which facilitate it.
Questions for Discussion
5.- What are some of the differences in skills that may exist between managers in a domestic firm and those in an international firm?
* Local workers.
* Legal system.
* Local supply.
* Cultures and new markets.
CHAPTER # 02
2.- How do differences in income levels and income distribution among countries affect international business?
The most important piece of information needed by international business people about a country is its income level because it provides clues to the purchasing power of residents. One important source of income statistics is the World Bank, which divides the world’s countries into high-income, middle-income, low-income categories.
4.- What is keiretsu?
* Japanese industry is controlled by large families of interrelated companies, that is typically centered on a major Japanese bank. The bank takes primary responsibility for meeting the keiretsu’s financing needs. Members are also protected from hostile takeovers by an elaborate system of cross-ownership of shares in which keiretsu members own shares in one another’s companies.
8.- How did import substitution policies affect the economies of Brazil and Argentina? * The companies must pay higher prices for domestically produced inputs than do their foreign competitors. The government must subsidize these firms and often nationalize them to preserve urban jobs. The high costs of doing this are passed on to taxpayers and to consumers through higher prices, but over time the government runs a budget deficit. The result is inflation and destruction of middle-class savings. The continent is still plagued, however, by an inability to create policies that bridge the chasm between the rich and the poor. The lack of economic and social mobility has trapped generation of South Americans in poverty and despairs and created political instability in many of their countries.
Questions for Discussion
3.- Ethnic ties, old colonial alliances, and shared languages appear to affect international trade. Why might this be so? If true, how does this affect international business’ strategies regarding which markets to enter? * It’s easier to do business with people who have same culture, religion, language, and is better for companies to get into these markets first.
CHAPTER # 03
1.- Describe the four different types of legal systems with which international business must deal. * Common law: is based on the cumulative wisdom of judges’ decisions on individual cases through history. These cases create legal precedents, which other judges use to decide similar cases. * Civil Law: is based on a codification, or detailed listing, of what is and is not permissible. * Religious Law: is based on the officially established rules governing the faith and practice of a particular religion. * Bureaucratic Law: the legal system is communist and in dictatorships is often described as bureaucratic law.
9.- What is the impact of differing accounting standards on the international capital market? * Comparing the financial reports of firms from different countries is exceedingly complex, making it more difficult for international investors to assess the performance of the world’s business.
10.-What is political risk? What forms can it take?
* Political risks are many changes in the political environment that many adversely affect the value of a firm’s business activities. * Forms: * Ownership risk, in which the property of a firm is threatened through confiscation or expropriation. * Operating risk, in which the ongoing operations of a firm and/or the safety of its employees are threatened through changes in laws, environmental standards, tax codes, terrorism, armed insurrection, and so forth. * Transfer risk, in which the government interferes with a firm’s ability to shift funds into and out of the country.
Questions for Discussion
2.- What is the impact of vigorous enforcement of intellectual property rights on the world economy? Who gains and who loses form strict enforcement of these laws? * The impact vigorous enforcement of intellectual property rights on the world economy will be very benefits for development countries but for poor countries it will be a big economic problem because they have a habit to live with piracy products, and the familiar economy can’t pay for medium cost products like dvd, books, music, etc. * The real authors publishing companies will gain and mafias of piracy will lose because they live of that kind of work.