Bafin Reviewer
Bafin Reviewer
Bafin Reviewer
IB consists of transactions that are devised and carried out across national borders to satisfy the objectives of:
▪ INDIVIDUALS ▪ COMPANIES ▪ ORGANIZATIONS
SCOPE
NATURE • International Marketing
• Accurate Information & timely • International Finance and Investments
• The size of the international business • Foreign Exchange
• Market segmentation • Global HR
• International markets have more potential than domestic markets
IMPORTANCE
FEATURES 1. Earn foreign exchange
• Large scale operations 2. Achieve its objectives
• Integration of economies 3. To spread business risks
• Dominated by developed countries and MNCs 4. Optimum utilization of resources
• Benefits to participating countries 5. Get benefits from Government
• Keen competition 6. Improve organization's efficiency
• Special role of science and technology 7. Increase competitive capacity
8. Expand and diversify
The Need for International Business
➢ Causes the flow of ideas, services, and capital across the world
➢ Offers consumers new choices
➢ Permits the acquisition of a wider variety of products
➢ Facilitates the mobility of labor,
➢ capital, and technology
➢ Provides challenging employment opportunities
➢ Re-allocates resources, makes preferential choices, and shifts
Managers need to understand their implications, anticipate them, and take proactive action to reduce adverse effects.
CHAPTER TWO
CULTURE
– specific learned norms based on attitudes, values, and beliefs that exist in every nation
– integral part of external environments
CULTURAL AWARENESS
– It is vital that managers develop an acute awareness of all those cultures in which they operate. cultures are dynamic,
current attitudes and behaviors may well change in the future.
Social stratification systems
• Ascribed group membership – gender, family, age, and caste – ethnic, racial, or national origin
• Acquired group membership – religion, political affiliation, and professional and other associations
Motivation — countries differ in how much people are motivated to work and why
• Materialism and leisure
– Protestant ethic—work a means to salvation
– most people consider economic achievement to be commendable, regardless of culture
• Expectation of success and reward
— people are more eager to work if:
– rewards for success are high » may have different rewards for success and consequences of failure
– some uncertainty of success » may have different probabilities of success
MASCULINITY INDEX — degree of admiration for success, sympathy for unfortunate, for being better than others
• High masculinity cultures – roles differentiated by gender – men should dominate
• Low masculinity culture – need for smooth social relationships
– employee and social welfare has higher priority than growth and efficiency
NEED HIERARCHY — lower-order needs must be fulfilled prior to higher-order needs
• Hierarcgy of needs
1. Physiological
2. Security
3. Affliation
4. Esteem
5. Self-actualization
INDIVIDUALISM — low dependence on organization and desire for personal time, freedom, and challenge
– self-actualization a prime motivator
COLLECTIVISM — dependence on organization
– value secure physical and social environments
RISK-TAKING BEHAVIOR
1. Uncertainty avoidance – handling uncertainty
2. Trust – degree of trust among people, leads to lower cost of doing business
3. Fatalism—belief in inevitability of events rather than self-determination
High fatalism—people plan less for contingencies
4. Future orientation – delaying gratification, planning ahead/optimism
Information processing
▪ All cultures have ordering and classifying systems
Monochronic — preference for sequential work
Polychronic — comfortable working on several tasks simultaneously
CULTURE SHOCK – Frustration from having to learn to cope with new cultural cues and expectations
ASSET SIZE
• Micro - less than Php3, 000,001
• Small - Php3, 000,001 up to Php15, 000,000
• Medium - Php15, 000,001 up to Php100, 000,000
• Large - Above Php 100M
NOTE: the company may pay employees below minimum wage rates on condition that a request is filed for exemption from
compliance with wage orders with the National Wage and Productivity Council (NWPC)
If the company does not pay minimum wages
• It will be subject under Republic Act No. 8188 to a fine not less than (P25.000) nor more than (P100.000) or imprisonment
of not less than two years nor more than four years or both such fine and imprisonment at the discretion of the court
Computation of Wages
• Monthly-paid employees – you pay every day of the month, inc unworked rest days, special days and regular holidays.
• Daily-paid employees – you pay for days actually worked and on unworked regular holidays.
Workers who are paid by results, including home workers and those who are paid on piecework, takay, pakyaw, or task basis,
shall receive not less than the applicable statutory minimum wage rates prescribed.
Apprentices, learners or handicapped workers you would need to pay them no less than 75% of the applicable statutory wage
PREMIUM PAY
– companies need to pay employees premium pay if you require them to perform work on non-working days, such as rest days
and special days.
–The company may opt not to pay your managerial employees, workers paid by results or field personnel the above premium
pay
OVERTIME PAY
– company requires employees to perform work beyond eight hours a day the company would need to pay them
additional compensation as follows:
Overtime Rate
Work > 8 hours on ordinary working days 25%
Work > 8 hours on rest day or special or regular holidays 30%
CHAPTER THREE
POLITICAL & SOCIAL FACTORS
• Political policies and legal practices
- role of govt in society
- political ideologies
- political risk
- legal environment
- operational and strategic legal issues
• Cultural factors
• Economic forces
• Geographic Influences
* Managers - evaluate, monitor & forecast
* POLITICAL SYSTEM - structural dimensions & power dynamics of its govt that specify institutions, orgs & interest group
• POLITICAL ENVIRONMENT - constitutes the type of govt, relationship between govt & the business & political risk in the
country
POLITICAL FACTORS
— form of govt & political party system — trade restrictions & reform
— political ideology & role of govt — tariffs
— tax policy — political stability
— environmental regulations
TYPES OF GOVERNMENT
1. DEMOCRATIC
— nation citizens hold political power
— right, freedom & responsibilities of individual
— market economy - economic system based on supply & demand
2. TOTALITARIANISM
— gov't control all aspects of life
— including attitudes, values and beliefs
KINDS:
• THEOCRATIC - religious leaders
*theocracy - leader claims to be inspired by divine guidance (iran/afghanistan)
• SECULAR - comes from military/single political party
DEMOCRACY
— citizens politically and legally equal
— all are entitled to freedom of thought
— equally command sovereign power over public officials
TYPES: CHARACTERISTICS:
*representative 1. freedom of opinion, expression, press & freedom to organize
*multiparty 2. elections in which voters decided who is to represent them
*parliamentary 3. limited terms for elected officials
*social 4. independent & fair court system
5. nonpolitical bureaucracy
6. accessibility to the decision making process
TOTALITARIANISM
— subordinates the individual to the interest of the collective
• dissent is eliminated thru indoctrination, persecution, surveillance, propaganda, violence
TYPES: ENGINES OF TOTALITARIANISM ENGINES PF DEMOCRACY
• Authoritarianism *economic development *failure of totalitarian regimes to deliver economic progress
• Fascism *inconsistencies *improved communications tech
• Secular *economic problems *economic dividends of increasing political freedom
• Theocratic *standards of democracy
SPECTRUM ANALYSIS
• DEMOCRATIC • TOTALITARIANISM
- Reactionary - Authoritarian
- Conservative - Facist
- Liberal - Communist
- Radical - Dictatorship
MIXED SYSTEM
- combination of both
- citizens free to trade and create companies thru the govt still directs the economy
1. ISOLATIONISM
- foreign policy that combines an avoidance of political & military alliances
- govt protects its economy by closing its borders (discourages immigration & trade)
ECONOMIC POLICIES & PRACTICES
• INTERNATIONAL TAX
A. INCOME TAX - annual tax on indiv/corp net proft
- progressive - higher taxes, higher salaries
- regressive - higher taxes, lower salaries
- flat - pays taxes the same
B. SALES TAX - on sale of the products
C. EXCISE TAX - levied on specific goods/services, incl prices of the products
D. PAYROLL TAX - employees required to withhold emp' paycheck
E. VALUE ADDED TAX - paid on the increased value of good
• TRADE BARRIERS
a. Duties - goods that cross national borders
b. Tariffs - import tax
c. Quotas, embargoes, licensing reqs & exchange rate controls
POLITICAL RISK - risk that political decisions in a country negatively affect the profitability of an investment
TYPES of PR:
• systemic • distributive
• procedural • catastrophic
LEGAL ENVIRONMENT
• host country laws • home country laws
• COMMON LAW - based on local customs, traditions & precedent (something has come before)
• CIVIL LAW - set of codes based on broad legal principles
- based on codes written over time
- must understand countries codes when doing a business
*THEOCRATIC LAW - based on religious teachings
TRADE
— means exchange of goods and services for the satisfaction of human wants.
— Domestic or national trade is confined to the geographical limits of a country
— International or foreign trade refers to the trade between two countries.