Globalization Importance of Global Trade

- Interconnectedness, integration, and

interdependence of economies, markets, and Economic Growth:
societies around the world Market Expansion: Access to larger markets
- Allows exchange of goods and services, ideas, fosters business growth and expansion.
and technology Increased Productivity: Specialization and
Supply Chain Integration comparative advantage boost productivity and
- Collaboration of countries to produce goods and resource allocation efficiency​​.
services
International Trade Access to Resources:
- Trading internationally Resource Optimization: Specialization in
Foreign Direct Investment production for comparative advantage optimizes
- Investing overseas to do business resource use.
Market Adaptation Diversification: Global markets allow
- Adapting to current market trends diversification of raw material sources, reducing
Technological Innovation dependency on specific regions​​.
- Innovation, research and development
Geopolitical Considerations Job Creation:
- Changes in trade tariffs, exchange rates, and Export-Driven Employment: Export-oriented
political instability industries create jobs.
Supply Chain Employment: Global supply
Advantages chains generate various employment
- Expanded market access opportunities​​.
- Economies of scale
- Access to resources and talents Technological Transfer and Innovation:
- Technological Innovation Knowledge Exchange: Facilitates transfer of
- Cost Efficiency technology, skills, and knowledge.
- Diversification and Risk Reduction Research and Development: Encourages
- Job Creation investment in R&D to stay competitive​​.
Disadvantages Consumer Benefits:
- Increased competition
- Job displacement Variety and Quality: Consumers access a wider
- Environmental impact variety of products at competitive prices.
- Cultural homogenization(one country dominates) Lower Costs: International competition can
- Inequality reduce prices, improving affordability​​.

International Business Reduction of Poverty:

- International business involves the exchange of Income Growth: Global trade links to income
goods, services, and capital across national growth and poverty reduction through job
borders, incorporating trade, investment, and creation and improved living standards.
technology transfer. Foreign Aid: Trade revenue supports social
- The scope extends beyond trade and investment development programs​
to include cultural exchange, global supply
chains, and economic integration. This dynamic
force shapes economic development, cultural
exchange, and global cooperation​
 - Simplified, Comparative advantage is when
International Trade Theories one person, company, or country can
- The purposes of international trade theories are produce something at a lower opportunity
to provide frameworks for understanding the cost than others. It means focusing on what
patterns, determinants, and effects of trade you're best at and trading with others for the
between countries. These theories help things they're better at making. This helps
economists, policymakers, businesses, and everyone get more of what they want at a
individuals make sense of the complexities of lower cost.
international trade by explaining why countries Heckscher-Ohlin Theory
engage in trade, what they trade, and how trade - Factor Proportions Theory
patterns evolve over time. - Developed by Eli Heckscher and Bertil
- emerge over time in response to changes in Ohlin, this model explains international
economic conditions, technological trade patterns based on countries' relative
advancements, policy developments, and shifts in factor endowments (e.g., labor, land,
academic thought. The development of new capital).
international trade theories is driven by the need - Countries export goods that utilize their
to better understand and explain the complexities abundant and cheap factors of production
of global trade patterns and their effects on and import goods that require factors that
economies. are scarce and expensive

Mercantilism
New Trade Theory.
- Dominant theory in Europe during 16th and
17th century
- based on the belief that a nation's wealth - Paul Krugman and other economists in the
and power were determined by its late 20th century introduced this theory,
accumulation of precious metals, focusing on the role of economies of scale
particularly gold and silver. Mercantilist and network effects in international trade.
policies aimed to increase a country's - It addresses the limitations of traditional
exports while limiting imports in order to theories by explaining the prevalence of
achieve a favorable balance of trade and intra-industry trade and the dominance of
accumulate bullion. certain firms in global markets.
Absolute Advantage
- Adam Smith 18th Century Porter’s Diamond
- Specialize in producing goods they have an
absolute advantage, meaning they can
produce more efficiently with fewer - Porter's Diamond Model, developed by
resources compared to other countries. This Michael Porter, focuses on the
leads to increased overall efficiency and competitiveness of nations and identifies
benefits from trade. four key factors that shape a country's
- Oil in Saudi ability to compete in international markets:
- Mangga in Guimaras factor conditions, demand conditions,
Comparative Advantage related and supporting industries, and firm
- The comparative advantage theory, strategy, structure, and rivalry.
developed by economist David Ricardo, is - According to Porter, a favorable
an economic principle that states that combination of these factors can create a
countries, individuals, or businesses benefit competitive advantage for industries within
from specializing in the production of goods a country, leading to export success and
or services where they have a lower economic prosperity.
opportunity cost relative to others.
 Economic Systems generation to generation. In a traditional
economy, production methods, consumption
patterns, and resource allocation are
- World economic systems in international
determined by longstanding cultural
business and trade refer to the different
practices and rituals rather than by market
models or frameworks that govern the
forces or government intervention.
production, distribution, and consumption
of goods and services on a global scale.
These systems encompass various Exchange Rates
economic ideologies, policies, institutions,
and practices that shape the interactions
- An exchange rate is the price of one
between countries and influence
currency in terms of another. It indicates
international trade and business activities.
how much of one currency needs to be
exchanged to obtain a unit of another
Market Economy currency.

- a market economy is an economic system Foreign Exchange Markets

where decisions regarding production,
investment, distribution, and pricing are
- Where currencies are traded globally
primarily determined by the interactions of
supply and demand in the market
Hedging

Command Economy
- Businesses use currency markets to hedge
against exchange rate risk by locking in
- A command economy, also known as a
future exchange rates through financial
planned economy, is an economic system
instruments like forward contracts and
where the government or a central authority
options.
controls the production, distribution, and
allocation of resources.
International Monetary Fund

Mixed Economy
- aims to promote international monetary
cooperation, exchange rate stability,
- A mixed economy is an economic system
balanced growth, and financial stability.
characterized by a combination of market
- Monitors global economic development
principles and government intervention. In a
mixed economy, both private individuals and
the government play significant roles in World Bank Group
economic decision-making and resource
allocation. - aims to reduce poverty and promote
sustainable development by providing
Traditional Economy financial and technical assistance to
developing countries.

- A traditional economy is an economic

system where economic decisions are
based on customs, traditions, and cultural
beliefs that have been passed down from
World Trade Organization International Market Entry Strategies

- aims to facilitate international trade by Market Analysis

negotiating and implementing trade
agreements, resolving disputes, and
- Market research
providing a forum for multilateral trade
negotiations
- Monitors trade policies Product Adaptation

Organization for Economic Co-operation and - Modifying products, services, and marketing
Development strategies to align with local market
preferences, cultural norms, and regulatory
standards.
- promotes policies to improve the economic
and social well-being of people around the
world by providing a forum for countries to Entry Mode Selection
share experiences and develop best
practices. - Choosing the most appropriate entry mode,
such as exporting, licensing, joint ventures,
Gross Domestic Product FDI, or online platforms, based on market 1
conditions and company objectives.

- measures the total value of goods and

services produced within a country's Distribution and Channel Management
borders over a specific period.
- Establishing efficient distribution channels
Unemployment Rate and partnerships to reach customers and
deliver products or services in foreign
markets.
- The unemployment rate measures the
percentage of the labor force that is
unemployed and actively seeking Regulatory Compliance
employment.
- Ensuring compliance with local laws,
Consumer Price Index regulations, and industry standards
governing trade, investment, intellectual
property, and consumer protection.
- measures the average change in prices of a
basket of goods and services purchased by
households over time. Risk Management

Trade Balance - Identifying, assessing, and mitigating risks

associated with international market entry,
including political, economic, legal, cultural,
- Trade balance measures the difference
and competitive risks.
between a country's exports and imports of
goods and services.
Localization and Cultural Adaptation Licensing and Franchising

- Customizing products, services, and - Licensing involves granting another

marketing communications to resonate with company (the licensee) the right to use the
local cultural preferences, language, and licensor's intellectual property, technology,
consumer behavior or brand for a specified period in exchange
for royalties or licensing fees.
- Franchising is a form of licensing where the
Technology and Innovation
franchisor grants the franchisee the right to
use its business model, brand, and
- Leveraging technology and innovation to operational know-how in exchange for
enhance product features, optimize ongoing fees and royalties.
operations, and differentiate offerings in
global markets.
Joint Ventures

Customer Feedback and Iterative Improvement

- forming a new entity or partnership with a
local company or partner in the target
- Soliciting feedback from customers, market. Both parties contribute resources,
monitoring market performance, and expertise, and capital to the joint venture
continuously improving products, services, and share control, risks, and profits.
and strategies based on insights and
lessons learned.
Foreign Direct Investors

Modes of Entry
- FDI involves establishing a physical
presence in a foreign market through direct
Exporting investment in facilities, production plants,
subsidiaries, or acquisitions of existing
Direct Exporting companies.

- the company sells its products or services Strategic Alliances and Partnerships
directly to customers in foreign markets.
- Strategic alliances and partnerships involve
Indirect Exporting collaborating with other companies,
organizations, or government agencies in
foreign markets to share resources,
- the company sells its products to an capabilities, and risks.
intermediary, such as an export trading
company or an export agent, who then sells
the products to customers in foreign Greenfield Investments
markets.
- Greenfield investments involve building new
facilities or operations from scratch in
foreign markets, such as manufacturing
plants, offices, or retail stores.
Turnkey Project Dispute Resolution

- a contractor provides a complete solution - Dispute resolution in international business

that's ready to use. The client just needs to and trade encompasses the mechanisms
"turn the key" to start using it. and procedures used to resolve conflicts,
disputes, or disagreements that arise
between parties engaged in cross-border
International Marketing Strategies
transactions or commercial activities.

1. Market Research and Analysis

Cultural Factors
2. Market Entry Mode
3. Product Adaptation and Standardization
4. Pricing Strategies - Various elements of culture that influences
5. Distribution Channels interactions, behaviors, and decisions within
6. Promotion and Advertising the context of global commerce
7. Brand Management
8. Cross-Cultural Communication
9. Regulatory Compliance
10. Performance Measurement and
Optimization

Adaptation - delivers a modified version of the

product that considers local requirements, culturally
and legally.

Standardization - delivers a single unified product

that sits comfortably in all markets.

International Business Law

- International business law refers to the body

of legal principles, rules, and regulations
that govern business activities conducted
across national borders.

Contracts

- A contract in international business and

trade is a formal agreement between parties
from different countries or legal jurisdictions,
setting forth the terms and conditions
governing their business relationship,
transactions, or obligations.