Introduction to International
Business
Renzitelo Alf P. Carpio, MBA
Faculty, College of Business and
Management
Learning Outcome:
• Exploring the Different Forms of International Business Which
Will Help in Assuming Risks of International Business.
Schaffer, Agusti, Dhooge (2015), International Business Law and Its Environment, Cengage Learning, 9th Edition
Topic Outline
• Forms of International Business
• Conducting Business in Developing and Newly
industrialized Countries
• Common Risks of International Business
Schaffer, Agusti, Dhooge (2015), International Business Law and Its Environment, Cengage Learning, 9th Edition
Introduction:
• Today most people agree that no business is purely
domestic and that global competition and world events
affect even the smallest local firms. The realities of the
modern world make all business international.
Schaffer, Agusti, Dhooge (2015), International Business Law and Its Environment, Cengage Learning,
9th Edition
Forms of International Business
• Trade
• Licensing
• Foreign Direct Investment
Schaffer, Agusti, Dhooge (2015), International Business Law and Its Environment, Cengage Learning, 9th Edition
Trade
• Is the import or export of goods and services across
national borders, usually as part of an exchange.
Schaffer, Agusti, Dhooge (2015), International Business Law and Its Environment, Cengage Learning, 9th Edition
Activities of Trading
• Exporting – is the shipment of goods out of a country
or the rendering of services to a foreign buyer located in
a foreign country.
• Importing– is the entering of goods into the customs
territory of a country or the receipt of services from a
foreign provider.
Schaffer, Agusti, Dhooge (2015), International Business Law and Its Environment, Cengage Learning, 9th Edition
Activities of Trading
• Trade in Services – refers to the providing of services
to a customer or the operation of service companies in a
foreign country.
Schaffer, Agusti, Dhooge (2015), International Business Law and Its Environment, Cengage Learning, 9th Edition
Types of Exporting
• Direct Exporting
• Foreign Sales Representative
• Foreign Distributors
• Indirect Exporting
Schaffer, Agusti, Dhooge (2015), International Business Law and Its Environment, Cengage Learning, 9th Edition
Types of Exporting
1. Direct Exporting– refers to a type of exporting in
which the exporter, often a manufacturer, assumes
responsibility for most of the export function, including
marketing, export licensing, shipping and collecting
payment.
Schaffer, Agusti, Dhooge (2015), International Business Law and Its Environment, Cengage Learning, 9th Edition
Types of Exporting
2. Foreign Sales Representative– are independent sales
agents who solicit orders on behalf of their principals and
receive compensation on a commission basis.
Schaffer, Agusti, Dhooge (2015), International Business Law and Its Environment, Cengage Learning, 9th Edition
Types of Exporting
3. Indirect Exporting– firm use specialized intermediaries
that can take on many of the export functions– marketing,
sales finance, and shipping.
Schaffer, Agusti, Dhooge (2015), International Business Law and Its Environment, Cengage Learning, 9th Edition
Types of Exporting
4. Foreign Distributors– are independent firms, usually
located in the country or region to which a firm is
exporting , that purchase and take delivery of goods for
resale to their customers.
Schaffer, Agusti, Dhooge (2015), International Business Law and Its Environment, Cengage Learning, 9th Edition
Types of Intermediaries
• International Trading Companies
• Export Management Companies
Schaffer, Agusti, Dhooge (2015), International Business Law and Its Environment, Cengage Learning, 9th Edition
Types of Intermediaries
• International Trading Companies– these are firms that
specialize in all aspects of import or export transactions
by either buying goods on their own accounts for resale
or by acting as middlemen to bring other buyers an sellers
together.
Schaffer, Agusti, Dhooge (2015), International Business Law and Its Environment, Cengage Learning, 9th Edition
Types of Intermediaries
• Export Management Companies– these are
independent firms that assume a range of export-related
responsibilities for manufacturers, producers, or other
exporters.
Schaffer, Agusti, Dhooge (2015), International Business Law and Its Environment, Cengage Learning, 9th Edition
Certificate of Origin
• One of the most important legal documents used in
import/export transactions.
Schaffer, Agusti, Dhooge (2015), International Business Law and Its Environment, Cengage Learning, 9th Edition
Licensing and Protection of Intellectual
Property Rights
• Intellectual Property is a legal right which result from the
intellectual activity in the industrial, scientific, literary, and artistic
fields.
• Common forms are patents, trademarks, copyrights, and trade
secrets.
• Thus, IP owner has the right to use, reproduce, distribute and profit
from its property to license its use or distribution for others. And to
protect it from unauthorized infringement.
Schaffer, Agusti, Dhooge (2015), International Business Law and Its Environment, Cengage Learning, 9th Edition
Licensing and Protection of Intellectual
Property Rights
• International Licensing Agreements
• Intellectual Property is a valuable asset that can be transferred
by the owner or holder to licensee through a grant of rights in
that property called a license.
Schaffer, Agusti, Dhooge (2015), International Business Law and Its Environment, Cengage Learning, 9th Edition
Licensing and Protection of Intellectual
Property Rights
• International Licensing Agreements
• Licensing Agreements– are contracts by which the holder of
intellectual property will grant certain rights (the license) in
that property to another party under specified conditions and a
for a specified time, in return for consideration, such as a fee
or royalty as a part of a larger business arrangement.
Schaffer, Agusti, Dhooge (2015), International Business Law and Its Environment, Cengage Learning, 9th Edition
Licensing and Protection of Intellectual
Property Rights
• World Intellectual Property Organization (WIPO)
• Specialized agency of the United Nations. Ideally, it
administers an arbitration center to resolve IP disputes
between private parties, such as individual inventors,
corporation, and universities (including patent, trademark,
industrial design, and domain name).
Schaffer, Agusti, Dhooge (2015), International Business Law and Its Environment, Cengage Learning, 9th Edition
Licensing and Protection of Intellectual
Property Rights
• Infringement, Piracy, or Counterfeiting
• Infringement refers to the violation of the IP rights of
another, and often occurs in the unauthorized use,
distribution, or appropriation of those rights. It is often
referred to as piracy or counterfeiting.
Schaffer, Agusti, Dhooge (2015), International Business Law and Its Environment, Cengage Learning, 9th Edition
Licensing and Protection of Intellectual
Property Rights
• Transfer of Technology
• it is the process of sharing scientific information, technology,
and manufacturing know-how between firms, universities, or
other institutions.
Schaffer, Agusti, Dhooge (2015), International Business Law and Its Environment, Cengage Learning, 9th Edition
Licensing and Protection of Intellectual
Property Rights
• International Franchising
• Franchising is a business arrangement that uses an agreement
to license, control, and protect the use of franchisor’s patents,
trademarks, copyrights or business-know-how, combined with
a proven plan of business operation in return for royalties,
fees, or commissions.
Schaffer, Agusti, Dhooge (2015), International Business Law and Its Environment, Cengage Learning, 9th Edition
Some Legal Aspects of Franchising
• Regulation of Federal Trade Commission
• Enacted Franchise Disclosure Laws
• Restrictions on the amount of money the franchisor can remove
from the country and others might have restrictions on importing
supplies.
Schaffer, Agusti, Dhooge (2015), International Business Law and Its Environment, Cengage Learning, 9th Edition
Foreign Direct Investment
• Refers to the ownership and operation of effective control of the
productive assets of an ongoing business by an individual or
corporate investor who is a residential or national of another
country.
Schaffer, Agusti, Dhooge (2015), International Business Law and Its Environment, Cengage Learning, 9th Edition
Forms of Investment
• Foreign Branch
• Foreign Subsidiary
• Joint Venture
• Local Participation
Schaffer, Agusti, Dhooge (2015), International Business Law and Its Environment, Cengage Learning, 9th Edition
Forms of Investment
• Foreign Branch – a business presence by the investor in the host
country. Host country refers to that country under whose laws the
investing corporation was created or
• Foreign Subsidiary– it is a foreign company organized under the
laws of a foreign host country but owned and controlled by the
parent corporation in the home country.
Schaffer, Agusti, Dhooge (2015), International Business Law and Its Environment, Cengage Learning, 9th Edition
Forms of Investment
• Joint Venture – is s cooperative business arrangement between
two or more companies for profit. It may take the form of a
partnership or a corporation.
• Local Participation – it means that the share of the business is
owned by nationals of the host country.
Schaffer, Agusti, Dhooge (2015), International Business Law and Its Environment, Cengage Learning, 9th Edition
Forms of Investment
• Multinational Corporations – are firms that have significant
foreign direct investment assets or that derive a significant
position of their revenues from more than one country.
• Transnational Corporations – is often used in the United
Nations system, reflecting that the corporation’s operations and
interests transcend national boundaries.
Schaffer, Agusti, Dhooge (2015), International Business Law and Its Environment, Cengage Learning, 9th Edition
Conducting Business In Developing
And Newly Industrialized Countries
Schaffer, Agusti, Dhooge (2015), International Business Law and Its Environment, Cengage Learning, 9th Edition
Developed Countries
• have high per capita income, have a high standard of living,
and are in the later changes of industrialization.
• characterized by advanced technology, modern production,
and management methods, and advanced research facilities.
• composed of diversified economies not dependent on oil,
agriculture or mining alone.
Schaffer, Agusti, Dhooge (2015), International Business Law and Its Environment, Cengage Learning, 9th Edition
Developing Countries
• have lower per capita income, a lower standard of living,
higher foreign debt, more rapid population growth, and a
history of greater state control over their economy.
• Some rely on petroleum exports as their source of
income.
Schaffer, Agusti, Dhooge (2015), International Business Law and Its Environment, Cengage Learning, 9th Edition
The Newly Industrialized Countries
• Are developing countries that have made rapid progress
toward becoming industrialized or technology-based
economies. They are located in all regions of the world
including Latin America, Middle East and Southern and
Southeast Asia
Schaffer, Agusti, Dhooge (2015), International Business Law and Its Environment, Cengage Learning, 9th Edition
The Least Developed Countries
• Are those defined by the United Nations the basis of several
socioeconomic criteria.
• Many of these countries have inadequate roads and bridges,
inadequate public utilities and telephone systems, poor
educational and healthcare facilities, lack of plentiful drinking
water and any other economic and societal issues.
Schaffer, Agusti, Dhooge (2015), International Business Law and Its Environment, Cengage Learning, 9th Edition
Some Common Risks of International
Business
Schaffer, Agusti, Dhooge (2015), International Business Law and Its Environment, Cengage Learning, 9th Edition
Common Risks of International Business
• Distance and Logistics
• Language and Cultural Differences
• Cross-Border Trade Controls
• Currency Risk
Schaffer, Agusti, Dhooge (2015), International Business Law and Its Environment, Cengage Learning, 9th Edition
Common Risks of International Business
• Distance and Logistics
• It is one of the concerns in which the risk of refusing to pay for a
particular credit can be done in international business.
• Language and Cultural Differences
• In this are the language disparity is one of the issues since most of
the successful business people are not fluent in English.
Schaffer, Agusti, Dhooge (2015), International Business Law and Its Environment, Cengage Learning, 9th Edition
Common Risks of International Business
• Cross-Border Trade Controls
• The movement of goods is governed by the laws and regulations
of the countries to which they pass.
• Currency Risk
• A firm is exposed to currency risk whenever it transacts business in
a foreign currency or makes an investment in a host country whose
currency is different from a home country.
Schaffer, Agusti, Dhooge (2015), International Business Law and Its Environment, Cengage Learning, 9th Edition
Common Regulations for Trade Control
• Export Controls and Sanctions
• Export control is a restriction on export of goods, services or
technology to a country or group of countries imposed fro
reasons of national security or foreign policy.
• Sanctions are broader and more comprehensive restrictions
on trade and financial transactions with countries, who engage
in proliferation of weapons of mass destruction.
Schaffer, Agusti, Dhooge (2015), International Business Law and Its Environment, Cengage Learning, 9th Edition
Business Risk
• Political Risk
• The risk to a firm’s business interest resulting from political instability
of civil unrest, political change, war, or terrorism in a country in which
the firm is doing business.
• Political Risk: Loss of the Investor’s Property
• The transfer of private sector firms to government ownership and
control, usually with payment to shareholders and pursuant to a larger
plan to restructure a national economy or nationalization.
Schaffer, Agusti, Dhooge (2015), International Business Law and Its Environment, Cengage Learning, 9th Edition
Types of Currency Risk
• Exchange Rate Risk
• It results from the fluctuation in the relative value of two currencies
when one is exchanged for the other.
• Currency Control
• Are restrictions on foreign currency transactions used by some
developing countries that do not have large reserves of foreign
currency.
Schaffer, Agusti, Dhooge (2015), International Business Law and Its Environment, Cengage Learning, 9th Edition
Types of Losing Investor’s Property
• Expropriation
• Is the taking by a government of privately owned assets such as real
estate, factories, farms, mines, oils, etc.
• Confiscation
• Is expropriation without payment of any compensation.
Schaffer, Agusti, Dhooge (2015), International Business Law and Its Environment, Cengage Learning, 9th Edition
Conclusion
• The primary objective of this topic is to set stage for
knowing he basic tips and tactics in engaging
international business. Thus, it is very essential that
greater awareness of the possible risks in engaging
international business should be carefully studied and
examined.
Schaffer, Agusti, Dhooge (2015), International Business Law and Its Environment, Cengage Learning, 9th Edition
Reference
• Schaffer, Agusti, Dhooge (2015), International Business
Law and Its Environment, Cengage Learning, 9th
Edition
Schaffer, Agusti, Dhooge (2015), International Business Law and Its Environment, Cengage Learning, 9th Edition
