Chapter 3 Discussion Questions

Explore the methods by which a firm can organize for and enter into international markets.

(Several methods) License a foreign firm to produce and market its products. Export its products and sell them through foreign intermediaries or its own sales organization abroad, or it may sell its exports outright to an export-import merchant. Joint venture with another firm. Establish own foreign subsidies, or develop into a multinational enterprise.

When should a firm consider expanding from stickler domestic trade to international trade? When should it consider becoming further involved in international trade? What factors might affect the firms decisions in each case?

A domestic firm should consider expanding into international trade when it wants to penetrate new options and when its present domestic market becomes saturated with its products along with other homogeneous products. Factors that affect the firm's decision are mainly based on the comparative advantage over foreign firms, social and cultural differences, and market attractiveness.

How can a firm obtain the expertise needed to produce and market its products in, for example the EU.

A firm can achieve expertise by becoming a member of the WTO, helping firms develop trade. The business practices that can help a firm have better international growth include licensing, exporting joint venture totally owned facilities strategic alliances, trading companies, counter-trade and multinational business.

The United States restricts imports but, restricts imports but at the same time supports the WTO and international banks whose objective is to enhance world trade. As a member of congress, how would you justify this contradiction to your constituents?

As a member I would like to justify that the WTO and international banks take use of the various export promotion & assistance programs of the US to gather trade finance and optimize asset utilization for financial stability.

What effects might the devaluation of a nation's currency have on its business firms, it's consumers, and the debts it owes to other nations?

Business firms- Exported goods will become cheaper, imported will raise. The increase in export happens because the goods become more competitive and imports decreases because the good become less competitive due to increase in price.

Discuss international economic organizations working to foster trade.

The General Agreement on Tariffs & Trade (GATT) was former to dismantle barriers and provide an environment where international business can grow. Today, the World Trade Organization (WTO) and various economic communities carry on this mission. These world economic communities include the European Union, the NAFTA, the CAFTA, the association of southeast Asian Nations, the Pacific Rim, the Caribbean Basin Initiative, the common market of the southern cone, The organization of petroleum exporting countries and the organization for economic cooperation and development.

Identify the institutions that help firms and nations finance international business.

The financing of international trade is more expensive than that of domestic trade. Institutions like the International Monetary Fund have been created to increase world trade for American and international firms.

Outline the extent of international business and the world economic outlook for trade.

World trade is generally increasing. Trade between the united states and other nations is increasing in dollar value, but decreasing in terms of our share of world market.

Should imports to the US be curtailed by, day 20% to eliminate our trade deficit? What might happen if this were done?

Imports should not be curtailed because it will lead to loss for the United States. (Reasons) 1. Will led to barrier between US and other countries as World market will act in retaliation. 2. The dollar value of country will decrease, as the trust on the way the US trade will be lost due to barriers. 3. To reduce imports, several tariffs will have to be imposed which will lead to the tariff wars similar to that of the 1970's. 4.The reduction in imports will lead to producing high cost raw materials, which for the country is not good at all. Increased price for customers. 5. Putting up barrier is against the WTO code which can cause the US to become a closed country like Myanmar.

Explain the economic basis for international business.

International business encompasses all business activities that involve exchanges across national boundaries. International trade is based on specialization, whereby each country produces the goods and services that it can produce more efficiently than any other goods and services. A nation is said to have a comparative advantage relative to these goods. International trade develops when each nation trades its surplus products for those in short supply. A nation's balance of trade is the difference between the value of its exports and the value of its imports. Its balance of payments is the difference between the flow of money into and out of the nation. Generally, a negative balance of trade is considered unfavorable.

Describe the various sources of export assistance.

Many government and international agencies provide export assistance to U.S. and foreign firms. Sources of export assistance include U.S. Export Assistance Centers, the International trade Administration, U.S. and Foreign commercial Services, Export Legal Assistance Network.

Discuss the restrictions nations place on international trade, the objectives of these restrictions, and their results.

Even though there are many benefits to world trade, nations still tend to limit trade. Trade is limited by the use of tariffs and non-tariff barriers. A tariff (import duty) is a tax levied on a particular foreign product entering a country. A non-tariff barrier is a non-tax measure imposed by a gov't to favor domestic over foreign suppliers. Ex. import quota, embargo, foreign-exchange control, and currency devaluation. These restrictions are usually justified as being put in place to protect a nation's economy, industries, citizens or security. They can result in a loss of jobs, higher prices, fewer choices in the marketplace and the mis-distribution of resources