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University Of Finance & Administration

University Of Finance & Administration. INTERNATIONAL BUSINESS. [ E _IB]. PhDr. Karel Eliáš, CSc. 18303@mail.vsfs.cz. INTERNATIONAL BUSINESS. Full-time course = 12 lectures ( Winter term 201 1 ). 1-2. What is international business. Comparative advantage. Protectionism x Liberalism. 3-4.

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University Of Finance & Administration

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  1. University Of Finance & Administration INTERNATIONAL BUSINESS [E_IB] PhDr. Karel Eliáš, CSc. 18303@mail.vsfs.cz

  2. INTERNATIONAL BUSINESS Full-time course = 12 lectures (Winter term 2011) 1-2 What is international business. Comparative advantage. Protectionism x Liberalism. 3-4 Internationalisation and Globalisation. Foreign expansion. Entry modes. 5-6 Culture and its role in IB. Culture differences. Negotiation and presentation of business results. 7-8Presentations on selected TOPICS elaborated in teams (2 – 3 members) 9-10 Czech IB. European Union. International marketresearch (analysis). Data collection. 11-12 International trade barriers. Economic integration.Personal preconditions for working in IB. SWOT of Czechcompanies. Within each lecture: - practical discussions on topical economical issues 2. PhDr. Karel Eliáš, CSc. 18303@mail.vsfs.cz INTERNATIONAL BUSINESS [E_IB]

  3. CREDIT conditions E_IB Full-time course = 12 sessions (winter term 20011) CONDITIONS:  PRESENCE at IB lectures: 50%  TEAM PRESENTATION - preparation at home:up to 30 min. presentation on the selected IB topics  active PARTICIPATION during the course + Qs and Answers session with the lecturer on Exam,s Topics List 3. PhDr. Karel Eliáš, CSc. 18303@mail.vsfs.cz INTERNATIONAL BUSINESS [E_IB]

  4. TEAM PREZENTATION Up to 30 mins. team (normally in ppt, each teammember talks/presents, preparation at home necessary) Following topics: Date : TBD Globalisation: influence on business, examples Date : TBD CSR (Corporate Social Responsibility): opportunity ornecessity, examples Date : TBD EU (European Union): influence on Czech businesses,examples Date : TBD Personal preconditions for working in IB (International Business) 4. PhDr. Karel Eliáš, CSc. 18303@mail.vsfs.cz INTERNATIONAL BUSINESS [E_IB]

  5. Common session STRUCTURE  IB NEWS - small talk / discussion - topical businessissues  LECTURE  READING - analyzing - interpretation of an article(team work) / Presentation of the materials prepared athome if relevant.  Team PRESENTATION + audience discussion 5. PhDr. Karel Eliáš, CSc. 18303@mail.vsfs.cz INTERNATIONAL BUSINESS [E_IB]

  6. INTERNATIONAL BUSINESS  What is international business? = exchange of goods and services undertaken by business bodies across the national border with theforeign business bodies INT business = cross-border commercialtransactions = EXCHANGEacross border 6. PhDr. Karel Eliáš, CSc. 18303@mail.vsfs.cz INTERNATIONAL BUSINESS [E_IB]

  7. INTERNATIONAL BUSINESS •CONSISTS IN: 7. PhDr. Karel Eliáš, CSc. 18303@mail.vsfs.cz INTERNATIONAL BUSINESS [E_IB]

  8. How IB differs from DOMESTIC business?  currencies - conversions, risks, rates securing often legal system - laws  culture - behavior, business practice resources  technology - way of producing 8. PhDr. Karel Eliáš, CSc. 18303@mail.vsfs.cz INTERNATIONAL BUSINESS [E_IB]

  9. INTERNATIONAL BUSINESS  Reasons for participation in IB? = the fact that almost no country is able to SATISFY its’needs by own goods and base materials -> countries concentrate on manufacturing products which are effective under given conditions (= theory ofcomparative advantage)  Free economy = stage of involvement in the international trade 9. PhDr. Karel Eliáš, CSc. 18303@mail.vsfs.cz INTERNATIONAL BUSINESS [E_IB]

  10. Principle of COMPARATIVE ADVANTAGE  Absolute advantage = a country has an absolute advantage over it trading partners if it is able toproduce more of a good or service with the same amount of resources orthe same amount of a good or service with fewer resources (copper, oil)  Comparative advantage (David Ricardo 1772-1823) = a country has a comparative advantage in the production of a good orservice that it produces at a lower opportunity cost than its tradingpartners (relativity). = units of production (people/machines) will be employed in thoseprocesses in which they are relatively more productive (productivity)  Opportunity cost (John Stuart Mill) = is the value of the next-best choice available to someone who has pickedbetween several mutually exclusive choices - opportunity costs are not restricted to monetary or financial costs: the realcost of output forgone, lost time, swag, pleasure or any other benefit 10. PhDr. Karel Eliáš, CSc. 18303@mail.vsfs.cz INTERNATIONAL BUSINESS [E_IB]

  11. International ENVIRONMENT GLOBAL MACRO MICRO 11. PhDr. Karel Eliáš, CSc. 18303@mail.vsfs.cz INTERNATIONAL BUSINESS [E_IB]

  12. Why to study IB?  interaction inevitable (business abroad, multinationalteams etc.)  success in larger arena  need for understanding principles of IB (time ofglobalization)  work opportunities  to stay abreast of the latest business techniques 12. PhDr. Karel Eliáš, CSc. 18303@mail.vsfs.cz INTERNATIONAL BUSINESS [E_IB]

  13. Basic IB terminology •Abbreviations: Inc. = incorporated [USA] • Fin. liability of owner’s limited to the extent of investment if company fails Ltd. / Plc. [UK] • Ltd. = Limited, private (Allmakes Ltd.) • PLC = Publicly held limited-liability AG / KGaA / GmbH [Germany] • AG [Aktiengesellschaft] = publicly held (Volkswagen AG) • KGaA [Kommanditgesellschaft] = limited partners + min. 1 unlimited(Henkel KGaA) • GmbH [Gesellschaft mit bescharankter Haftung] - private, analogy to Inc., Ltd. (or „s.r.o.“ in CZ) SpA [Italy] / SA [France] • SpA [la societa per azioni] (Fiat SpA) • SA [societe anonyme] (Carrefour SA) = analogy to „a.s.“ in CZ 13. PhDr. Karel Eliáš, CSc. 18303@mail.vsfs.cz INTERNATIONAL BUSINESS [E_IB]

  14. IB importance + influences 1. ECONOMICAL 2. POLITICAL 3. CULTURAL  FREE TRADE (international exchange) = is a system of TRADE POLICY that allows traders to act and transact withoutinterference from government. According to the law of COMPARATIVEADVANTAGE the policy permits trading partners mutual GAINS from trade ofgoods and services. = it is an AIM of all the trade economies and consists in: convertibility (possibility to exchange currency) free price creation  economical and political barriers elimination (duties, quotas, admin. barriers etc.) 14. PhDr. Karel Eliáš, CSc. 18303@mail.vsfs.cz INTERNATIONAL BUSINESS [E_IB]

  15. International business - THREATS Weak self- Dependence sufficiency (the smaller and (in case of war or econ.developed political system country => the change) more important IB is for the country) 15. PhDr. Karel Eliáš, CSc. 18303@mail.vsfs.cz INTERNATIONAL BUSINESS [E_IB]

  16. IB INDICATORS [basic]  BALANCE OF TRADE = review of export & import volume in certain periodof time A) ACTIVE = export > import B) PASSIVE = export < import  BALANCE OF PAYMENTS = review of currency / exchange receipts andexpenditures A) ACTIVE = payments abroad < receipts from abroad B) PASSIVE = payments abroad > receipts from abroad 16. PhDr. Karel Eliáš, CSc. 18303@mail.vsfs.cz INTERNATIONAL BUSINESS [E_IB]

  17. IB indicators - details  Balance of Trade = EXPORT - IMPORT, the difference between a nation's exports of goodsand services and its imports of goods and services, if all financial transfers,investments and other components are ignored. A nation is said to have a trade DEFICIT = if it is importing more than it exports.  Balance of Payments = difference between the money coming into a country and the moneyleaving the same country -In economics, the balance of payments (BOP) measures the paymentsthat flow between any individual country and all other countries - It is used to summarize all international economic transactions for thatcountry during a specific time period, usually a year. - the BOP is determined by the country's exports and imports of goods,services, and financial capital, as well as financial transfers 17. PhDr. Karel Eliáš, CSc. 18303@mail.vsfs.cz INTERNATIONAL BUSINESS [E_IB]

  18. STRUCTURE of IB TERRITORIAL COMMODITY 18. PhDr. Karel Eliáš, CSc. 18303@mail.vsfs.cz INTERNATIONAL BUSINESS [E_IB]

  19. Ways of controlling IB  PROTECTIONISM - state intervenes in IB - protects the inner market against foreign competition - supports own products at the foreign markets  LIBERALISM - state limits the interventions in IB - export & import without restrictions - currency convertibility enables access to foreigncurrency purchases for free trade / exchange 19. PhDr. Karel Eliáš, CSc. 18303@mail.vsfs.cz INTERNATIONAL BUSINESS [E_IB]

  20. PROTECTIONISM = economic policy of RESTRAINING trade between states • This policy is closely aligned with anti-globalization, and contrasts with free trade, where government barriers to tradeand movement of capital are kept to a minimum. • The term is mostly used in the context, where protectionismrefers to policies which protect businesses and workers withina country by restricting or regulating trade with foreign nations. “No policy has failed as often, or been as widely applied andenthusiastically believed, as economic protectionism.” (Bob McTeer, Federal Reserve Bank of Dallas) 20. PhDr. Karel Eliáš, CSc. 18303@mail.vsfs.cz INTERNATIONAL BUSINESS [E_IB]

  21. PROTECTIONISM - history = economic policy of restraining trade between states • Historically, protectionism was associated with economic theories such as MERCANTILISM (that believed that it is beneficial to maintain a positive tradebalance), and import substitution. • During that time, ADAM SMITH famously warned against the 'interested sophistry' of industry, seeking to gain advantage at the cost of the consumers • Most modern economists agree that protectionism is harmful in that its costs outweigh the benefits, and that itimpedes economic growth 21. PhDr. Karel Eliáš, CSc. 18303@mail.vsfs.cz INTERNATIONAL BUSINESS [E_IB]

  22. PROTECTIONISM - methods • Tariffs on imported goods • restrictive Quotas - to reduce the quantity and thereforeincrease the market price of imported goods • Administrative Barriers: using various administrativerules (eg. regarding food safety, environmentalstandards, electrical safety, etc.) • Exchange Rate manipulation: government may intervene in the foreign exchange market to lower the value of its currency by selling its currency in the foreign exchange market. … and a variety of other government regulations designed todiscourage imports, and prevent foreign take-over of native markets and companies. 22. PhDr. Karel Eliáš, CSc. 18303@mail.vsfs.cz INTERNATIONAL BUSINESS [E_IB]

  23. PROTECTIONISM - arguments FOR = economic policy of restraining trade between states 1) Saving jobs for citizens of country 2) Promoting / Protecting infant industries 3) Promoting / Protecting domestic & economicdevelopment 4) Offsetting economic distortions 23. PhDr. Karel Eliáš, CSc. 18303@mail.vsfs.cz INTERNATIONAL BUSINESS [E_IB]

  24. PROTECTIONISM - arguments AGAINST = economic policy of restraining trade between states Harming the freedom and free market 1. Gains from free trade outweigh any losses; as free trade creates more jobs than it destroys because it allows countries to specialize in the production of goods and services in which they have a comparative advantage. 2. Free trade helps third world workers, even though they are not subject to the strict healthand labour standards of developed countries 3. Protectionism has also been accused of being one of the major causes of war. 24. PhDr. Karel Eliáš, CSc. 18303@mail.vsfs.cz INTERNATIONAL BUSINESS [E_IB]

  25. PROTECTIONISM - conclusion „Let me just be blunt. Protectionism is the crackcocaine of economics. It may provide a high. It's addictive and it leads to economic death.“ Richard Fisher President of Dallas Federal Reserve Bank 25. PhDr. Karel Eliáš, CSc. 18303@mail.vsfs.cz INTERNATIONAL BUSINESS [E_IB]

  26. Ways of controlling IB  PROTECTIONISM - state intervenes in IB - protects the inner market against foreign competition - supports own products at the foreign markets  LIBERALISM - state limits the interventions in IB - export & import without restrictions - currency convertibility enables access to foreigncurrency purchases for free trade / exchange 26. PhDr. Karel Eliáš, CSc. 18303@mail.vsfs.cz INTERNATIONAL BUSINESS [E_IB]

  27. LIBERALISM = economic policy that opposes government intervention in the FREE MARKET, and supports themaximum of free trade and competition = is an economic philosophy that supports and promotes laissez-faire capitalism (= to let create/be) -it contrasts with mercantilism, Keynesianism andsocialism - ADAM SMITH (1776) Wealth of Nations - advocatesminimal interference of government in a marketeconomy 27. PhDr. Karel Eliáš, CSc. 18303@mail.vsfs.cz INTERNATIONAL BUSINESS [E_IB]

  28. LIBERALISM - arguments FOR 1. Higher economic freedom has a strong correlation with higher LIVING STANDARDS 2. Higher economic freedom leads to INCREASED INVESTMENTS, TECHNOLOGY TRANSFER, INNOVATION and a responsiveness to consumer demand 3. Many government attempts to micro-manage their economies using things like tariffs, public investment, etc. were often misdirected, poorly timed, poorly implementedand brought undesirable consequences = governmentis incapable of managing a social system as hugeas a national economy 4. Government-owned enterprises and public entitlements were losing a lot of citizens' money 28. PhDr. Karel Eliáš, CSc. 18303@mail.vsfs.cz INTERNATIONAL BUSINESS [E_IB]

  29. LIBERALISM - arguments FOR 5. During the 1970s, state-controlled economiesproved unresponsive to economic shocks, andmuch of the world endured a sustained, high-inflation recession until markets were liberalized (though proponents still note that liberalization itself isonly one of several factors in the recent return toprosperity; other factors include technological developments and the end of the Cold War) 29. PhDr. Karel Eliáš, CSc. 18303@mail.vsfs.cz INTERNATIONAL BUSINESS [E_IB]

  30. LIBERALISM - arguments AGAINST  Globalization and liberalization spoils nations'ability for self-determination  Exploitation: critics consider capitalist economicsto be exploitive  Environmental costs: critics argue that neoliberalism leads to more transportation, andunregulated markets lead to more industrial production  Increase in corporate power: some anti-corporateorganizations believe neoliberalism changeseconomic and government policies to increase thepower of corporations and large business 30. PhDr. Karel Eliáš, CSc. 18303@mail.vsfs.cz INTERNATIONAL BUSINESS [E_IB]

  31. KEY terms - International Business = Int. trade / Int. investment / Other business activities - Reasons for IB, advantages x disadvantages - Free trade - Comparative advantage / Absolute advantage / Opportunity cost - Balance of trade, Balance of payments - Liberalism x Protectionism - Convertibility, trade barriers, free price creation - Structure of IB (territory, commodity) - Corporation abbreviations / Financial liability - FDI / Portfolio investment - Home x Host country - Economies of Scale 31. PhDr. Karel Eliáš, CSc. 18303@mail.vsfs.cz INTERNATIONAL BUSINESS [E_IB]

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