What is International Business

Acknowledgments

I am Kesavan Govindasamy like to wish my gratitude to MRS R.Lalitha in helping and commenting on my assignment. I really appreciate her guidance and effort in completing this assignment. Last but not least , I also want to thank my beloved family , especially my father MR Govindasamy Millan and mother MRS UshaRani Rentnam for all the support and advice given in facing the obstacles and challenges in my campus life.












Question 1

a)What is International Business
b) how does International Business differs from Domestic Business

Question 2

a)What types of International Business activities are faster and easier because of technology ?
b)What is the difference between absolute advantage and comparative advantage?

Question 3

a) What are the four components of the environment ?
b) What are some examples of trade barriers that are created by government actions?

Question 4

a)Why companies frequently expand their business operations into other countries?
b)What are the benefits and drawbacks of doing business in other countries ?
c)Go to the McDonald’s web site (WWW.mcdonalds.com ) to find additional information about the company’s international operations. Explain your finding.










a)What is International Business
International Business is the business transaction outside country like Import and Export , shipping the product is called International Business like examples BMW car is Imported to Malaysia.. International business is important and necessary because economic isolationism has become impossible. Failure to become a part of the global market assures a nation of declining economic influence and deteriorating standards of living for its citizens. International business therefore presents more opportunities for expansion, growth, and income than does the domestic business. The major aspects of international business environment and operations with emphasis on its impact on the local businesses in your state. In other words, international business differs from domestic business, economic theories on international trade, and how managers deal with the uncontrollable forces such as cultural differences of international environment.
Global perspective through studying the impact of other countries and their people on society and develop skills that will enable you to interact effectively in an interdependent global community. International trade is the exchange of goods and services across international boundaries or territories. In most countries, it represents a significant share of GDP. While international trade has been present throughout much of history (see Silk Road, Amber Road), its economic, social, and political importance has been on the rise in recent centuries. Industrialization, advanced transportation, globalization, multinational corporations, and outsourcing are all having a major impact. Increasing international trade is the primary meaning of "globalization". you have to deal with laws of different countries, not just different states. You have to deal with complex administrative arrangements, since you are dealing with more than one country they have different laws and you have to comply with both. for example both may tax you for different things.


Owing to the pace of globalization, industrial structures are also changing at the international level. Declining computing, communications and transport costs coupled with regulatory reform and trade and investment liberalization have prompted firms to adopt global strategies. But their international activities now extend far beyond traditional forms of investment and trade. Cross-border mergers and acquisitions, international strategic alliances and electronic commerce are becoming common paths to internationalizing operations, research and markets. Cross-border merger activity grew more than five-fold between 1990-2000, while international joint ventures and strategic alliances increased more than six-fold in this period. At the same time, firms are combining distant operations and selling in global markets through the Internet. While firms downsize, they seek synergistic effects with other enterprises, including at the international level. Firms buy and sell branches and activities, and network with suppliers and competitors, on a global scale. Service firms seek partners to expand their geographical reach, while manufacturing companies use international acquisitions and collaborations for cost reduction and economies of scale and scope. While these deals grow in size and value, they are also more cross-sectoral, reflecting the blurred boundary between manufacturing and services. SMEs too are engaged in global networks of research, production and sales. Industrial assets and production structures are being reorganised on a global basis, which should lead to efficiency gains for firms, sectors and countries. However, governments must monitor developments to guard against anti-competitive effects and implement measures to realise positive spillovers.







b) How does International Business differs from Domestic Business

International Business is transaction outside country like Import and Export , shipping the product is all called International Business like examples BMW car is Import to Malaysia so it is International Business. International business is important and necessary because economic isolationism has become impossible. Failure to become a part of the global market assures a nation of declining economic influence and deteriorating standards of living for its citizens and Domestic business is transaction in the country only and they sell the product in their country only. Domestic business involves transaction occurring within the boundaries of a single country . International Business and Domestic business are different form Currencies , Legal systems of the country, Cultures of the country differ, Resources differ by country this is the difference of International Business and Domestic Business. International business differs from domestic counterpart in that it involves three environments—domestic, foreign, and international—instead of one. Although the kind of forces are the same in the domestic and foreign environments, their values often differ, and changes in the values of foreign forces are at times more difficult to assess. The international environment is defined as the interactions (1) between the domestic environmental forces and the foreign environmental forces and (2) between the foreign environmental forces of two countries when an affiliate in one country does business with customers in another. An international business model helps explain this relationship.

Currencies
The Currencies differ form other country to another in International Business must give important to the currencies of the country we want to have business but in Domestic business currencies is not emphasized because same currency is used. Examples in Malaysia for Domestic business they use RM but when have do business transactions with USA then we must use US dollar.




Legal systems of the country
Legal systems of the country are different form one country to another example in Malaysia we don’t allow Batik Textile form Indonesia and Malaysia government don’t allow some product form USA to sell here. And if u see some of country don’t allow product form other country for example, U.S law promotes equal employment opportunities for women, while Saudi Arabian law discourages the employments of women when they will have to interact with adult males to whom they not related. The first is that in international negotiations the parties must deals with the laws, policies and political authorities of more than one nation. These laws and policies may be inconsistent, or even directly opposed. For example, in the early 1980s U.S. companies operating in Europe were caught between the American prohibition on sales to the Soviets for their Trans-Siberian pipeline, and European nations' demands that these companies abide by their supply contracts. International business agreements must include measures to address these differences. Such measures typically include arbitration clauses, specification of the governing laws, and tax havens.

Cultures of the country differ
The cultures of the country differ form one country to other country in Domestic is not a problem because people in the country know what the cultures but different in International Business because we must know what the major cultures of the country we want have business so we must Get to know the culture. Someone once said that it's an incredible faux pas to offer a Japanese executive your business card without first turning it around so that he or she can read it right away. That detail illustrates the importance of understanding the traditions and nuances of the cultures with which you wish to do business. Check out Web sites that discuss various cultures; if possible, talk with businesspeople from foreign countries to gain a sense of appropriate business practices. Is a handshake sufficient to close a deal? Is bribery an accepted element of business leverage? “I once spent an entire summer in Europe asking waiter after waiter when I was going to get some ice in my water,” says Rochelle Shaw, chief operating officer of workz.com and an authority on developing business overseas. “We think the ways of America are the ways of the world, and they're simply not.” Each culture has its own customs when it comes to social and business relations. As a real estate professional, you want to ensure that you make the best impression on potential clients - and that means having at least a basic familiarity with the customs and protocols of the culture. This Field Guide will point you in the right direction for creating lasting business with multicultural clients i8n International business .

Resources differ by country
Availability of the Resources differ by country example Malaysia Domain in Oil Palm selling in the world this show that Malaysia rich in palm oil so this is different form Domestic business and International Business.

Politics Differ by Country
Pay attention to politics. Lastly, never overlook the political environment or even worse, the threat of terrorism in areas where you hope to do business. That's particularly true if you're planning on siting a warehouse or some other facility overseas. Make certain you gauge the economic and social stability of prospective markets, not merely to protect any resources that happen to be located there but also to ensure that any goods shipped will, in fact, arrive at their intended destination. Also, make sure you are dealing with a country that is receptive to products from the United States. But, adds Shaw, don't let attention wilt into fear. “If you're an entrepreneur, you're a risk taker,” Shaw says. “Don't let politics deter you completely








Question 2

a)What types of International Business activities are faster and easier because of technology ?

The of International Business activities are faster and easier because of technology in Electronic commerce or e-commerce which consists of the buying, selling, marketing, and servicing of products or services over computer networks. The information technology industry might see it as an electronic business application aimed at commercial transactions. An alternative definition of e-commerce might view it as the conduct of business commercial communications and management through electronic methods, such as electronic data interchange and automated data-collection systems. Electronic commerce may also involve the electronic transfer of information between businesses the purchase of goods and services over the World Wide Web via secure servers (note HTTPS, a special server protocol which encrypts confidential ordering data for customer protection) with e-shopping carts and with electronic pay services, like credit card payment authorizations. So this is make business activities faster and easier

E-commerce makes business activities faster and easier because of technology like companies sell goods and services to anyone with internet access examples Miss Variant Mendoza in Paris but can also buy product located in USA online which is faster and easy because this internet access is an important tool in Business world to make activities faster. Without internet its hard for companies to exchange information or trade and so on. Internet access and other technologies will expand international trade and global business activities, example Internet access ease business activities like buying, selling and exchanging information around the world. Internet automated production methods , and video conferencing are changing and expanding the business. This will help creating global e-commerce opportunities. The scope of global e-commerce include many activities, example companies sell goods and services to anyone with Internet access like DELL .Businesses buy online from supplier in other countries example now we can browse supplier in Internet from all over the world. These kind of research creates global customer and market opportunities online in International trade and global business activities
ADVANTAGES USING ELECTRONIC COMMERCE

In many cases, an e-commerce company will survive not only based on its product, but by having a competent management team, good post-sales services, well-organized business structure, network infrastructure and a secured, well-designed website. Such factors include:
1. Sufficient work done in market research and analysis. E-commerce is not exempt from good business planning and the fundamental laws of supply and demand. Business failure is as much a reality in e-commerce as in any other form of business.
2. A good management team armed with good and sound information technology strategy. A company's IT strategy should be a part of the business re-design process.
3. Providing an easy and secured way for customers to effect transactions. Credit cards are the most popular means of sending payments on the internet, accounting for 90% of online purchases. In the past, card numbers were transferred securely between the customer and merchant through independent payment gateways. Such independent payment gateways are still used by most small and home businesses. Most merchants today process credit card transactions on site through arrangements made with commercial banks or credit cards companies.
4. Providing reliability and security. Parallel servers, hardware redundancy, fail-safe technology, information encryption, and firewalls can enhance this requirement.
5. Providing a 360-degree view of the customer relationship, defined as ensuring that all employees, suppliers, and partners have a complete view, and the same view, of the customer. However, customers may not appreciate the big brother experience.
6. Constructing a commercially sound business model. If this key success factor had appeared in textbooks in 2000, many of the dot-com might not have gone into bankruptcy.
7. Engineering an electronic value chain in which one focuses on a "limited" number of core competencies -- the opposite of a one-stop shop. (Electronic stores can appear either specialist or generalist if properly programmed.)
8. Operating on or near the cutting edge of technology and staying there as technology changes (but remembering that the fundamentals of commerce remain indifferent to technology).
9. Setting up an organization of sufficient alertness and agility to respond quickly to any changes in the economic, social and physical environment
.
10. Providing an attractive website. The tasteful use of color, graphics, animation, photographs, fonts, and white-space percentage may aid success in this respect.
11. Streamlining business processes, possibly through re-engineering and information technologies.
12. Providing complete understanding of the products or services offered which not only includes complete product information, but also sound advisors and selectors.
Naturally, the e-commerce vendor must also perform such mundane tasks as being truthful about its product and its availability, shipping reliably, and handling complaints promptly and effectively. A unique property of the Internet environment is that individual customers have access to far more information about the seller than they would find in a brick-and-mortar situation.

Customer-Oriented
A successful e-commerce organization must also provide an enjoyable and rewarding experience to its customers. Many factors go into making this possible. Such factors include:
1. Providing value to customers. Vendors can achieve this by offering a product or product-line that attracts potential customers at a competitive price, as in non-electronic commerce.
2. Providing service and performance. Offering a responsive, user-friendly purchasing experience, just like a flesh-and-blood retailer, may go some way to achieving these goals.
3. Providing an incentive for customers to buy and to return. Sales promotions to this end can involve coupons, special offers, and discounts. Cross-linked websites and advertising affiliate programs can also help.
4. Providing personal attention. Personalized web sites, purchase suggestions, and personalized special offers may go some of the way to substituting for the face-to-face human interaction found at a traditional point of sale.
5. Providing a sense of community. Chat rooms, discussion boards, soliciting customer input and loyalty programs (sometimes called affinity programs) can help in this respect.
6. Owning the customer's total experience. E-tailers foster this by treating any contacts with a customer as part of a total experience, an experience that becomes synonymous with the brand.
7. Letting customers help themselves. Provision of a self-serve site, easy to use without assistance, can help in this respect. This implies that all product information is available, cross-sell information, advice for product alternatives, and supplies & accessory selectors.
8. Helping customers do their job of consuming. E-tailers and online shopping directories can provide such help through ample comparative information and good search facilities. Provision of component information and safety-and-health comments may assist e-tailers to define the customers' job.














b)What is the difference between absolute advantage and comparative advantage?

A country has an absolute advantage economically over another, in a particular good, when it can produce that good more cheaply. A country also has an absolute advantage if it can produce more of the good than another country can, with the same amount of resources. The term is important in the theory of international trade because it is often mistakenly assumed that (to take an example) if France has an absolute advantage over England in some product, say cheese, then France will not normally import cheese from England. A seminal analysis by the 19th-century English economist David Ricardo showed that despite France's absolute advantage, it may well benefit both countries for England to produce and export cheese to France. Ricardo identified comparative advantage, rather than absolute advantage, as the correct concept for understanding efficient patterns of production and exchange across countries. His discussion is central to modern trade theory.
The two concepts have applications outside international trade, though this is where they are most commonly used. Suppose that two castaways on a desert island gather both fruit and grain, which they then share equally between them. Suppose that Castaway A can gather more fruit per hour than Castaway B, and therefore has an absolute advantage in this good. Nonetheless, it may well make sense for A to leave some fruit-gathering to B.
One needs to look at comparative advantage rather than absolute advantage, to discover how A and B can each best allocate their effort. If A's initial advantage over B in grain-gathering is greater than his or her advantage in fruit-gathering, then fruit-effort should be transferred from A to B, to the point where A's comparative advantages in the two goods are equal. Thus it may be rational for fruit to flow from B to A, despite A's absolute advantage.
Absolute advantage can be demonstrated through a numerical example. Assume, for the sake of simplicity, that there are only two countries in the world, France and Japan; only two goods wine and clock radios; and only one factor of production. In France 1 hour of labor can produce either 2 bottles or wine or 3 clock radios. In Japan, 1 hour of labor can produce either 1 bottle of wine of 5 clock radios. France has an absolute advantage in the production of wine. Japan has an absolute advantage in the production of clock radios. If France and Japan are able to trade with one another, both will be better off. Suppose France agrees to exchange 2 bottles of wine for 4 clock radios. Only 1 hour of French labor is needed to produce the 2 bottles of wine bound for Japan. In return, France will get 4 clock radios from Japan. These 4 clock radios would have required 1.33 hours of French labor had France produced them itself rather than buying them from the Japanese. By trading with Japan rather than producing the clock radios itself, France saves 0.33 hour of labor. It can use this freed-up labor to produce more wine, which in turn can be consumed by French citizens or traded to Japan for more clock radios. By allocating its scare labor to produce goods for which it is more productive than Japan and then trading them to Japan, France can consume more goods than it could have done in the absence of trade. Japan is similarly better off. Japan uses 0.8 hour of labor to produce the 4 clock radios to exchange for the 2 bottles of the French wine. Producing the 2 bottles of wine itself would have required 2 hours of labor. By producing clock radios and then trading them to France, Japan saves 1.2 hours of labor, which can be used to produce more clock radios that the Japanese can consume themselves or trade to France for more wine.

comparative advantage
In economics, the theory of comparative advantage explains why it can be beneficial for two parties (countries, regions, individuals and so on) to trade without barriers if one is more efficient at producing goods or services needed by the other. What matters is not the absolute cost of production, but rather the ratio between how easily the two countries can produce different goods. The concept is highly important in modern international trade theory.
Under "absolute advantage", each state in an unregulated international economy would find a productive niche based on absolute advantage, i.e. it would benefit by specializing in those goods it produced most efficiently and by trading with other states. With comparative advantage, even if one country has no "absolute advantage" when it manufactures a product, it should specialize in and export those products with which it has a relative advantage (i.e. the least cost advantage).Comparative advantage was first described by Robert Torrens in 1815 in an essay on the corn trade. He concluded that it was to England's advantage to trade various goods with Poland in return for corn, even though it might be possible to produce that corn more cheaply in England than Poland.
However, the theory is usually attributed to David Ricardo who created a systematic explanation in his 1817 book The Principles of Political Economy and Taxation using an example involving England and Portugal. In Portugal it is possible to produce both wine and cloth with less work than it takes in England. However, the relative costs of producing those two goods are different in the two countries. In England it is very hard to produce wine, and only moderately difficult to produce cloth. In Portugal both are easy to produce. Therefore, while it is cheaper to produce cloth in Portugal than England, it is cheaper still for Portugal to produce excess wine, and trade that for English cloth. Conversely, England benefits from this trade because its cost for producing cloth has not changed but it can now get the cheaper Portuguese wine.

For example two countries of equal size, Northland and Southland that both produce and consume two goods, Food and Clothes. The productive capacities and efficiencies of the countries are such that if both countries devoted all their resources to Food production, output would be as follows: Northland: 100 tonnes, Southland: 200 tonnes. Conversely if all of the resources of the countries were allocated to the production of Clothes, output would be: Northland: 100 tonnes, Southland: 100 tonnes. Assume that each of the countries has constant opportunity costs of production between the two products, and that both economies have full employment at all times. Also all factors of production are perfectly mobile within the countries between clothing and food industries, but are immobile between the countries. Finally the price mechanism must be working to provide perfect competition. So Southland has an absolute advantage over Northland in the production of Food, and both countries are equally efficient in the production of Clothes. Intuitively it would seem that there is no mutual benefit in trade between the economies. But an examination of the opportunity costs shows something different. For Northland the opportunity cost of producing one tonne of Food is one tonne of Clothes and vice versa. But for Southland the opportunity cost of one tonne of Food is 0.5 tonne of Clothes; and the opportunity cost of one tonne of Clothes is 2 tonnes of Food. Looked at this way, Southland has a comparative advantage in Food production because of its lower opportunity cost of production with respect to Northland. And Northland also has a comparative advantage over Southland in the production of Clothes, the opportunity cost of which is lower in Southland with respect to Food than in Northland. To show that these different opportunity costs can lead to mutual benefit if the countries specialize production and trade, consider the following starting position. Both countries produce and consume only domestically. The volumes are:
Production and consumption before trade:

Food
clothes
Northland
50
50
Southland
100
50
World total
150
100

Examine the consequences of trade between the two countries. This example includes no formulation of the preferences of consumers in the two economies which would allow the determination of the international exchange rate of Clothes and Food. But given the production capabilities of each country, in order for trade to be worthwhile Northland requires a price of at least one tonne of Food in exchange for one tonne of Clothes; and Southland requires at least one tonne of Clothes for two tonnes of Food. It follows that the actual exchange price will be somewhere between the two. The remainder of the example works with an international trading price of one tonne of Food for 2/3 tonne of Clothes. If both countries specialize completely in the goods in which they have comparative advantage, their outputs will be:
Production after trade:

Food
clothes
Northland
0
100
Southland
200
0
World total
200
100
Note that world production of Food had increased and Clothing production has remained the same. Using the exchange rate of one tonne of Food for 2/3 tonne of Clothes, Northland and Southland are able to trade to yield the following level of consumption:
Consumption after trade:

Food
clothes
Northland
75
50
Southland
125
50
World total
200
100
Northland has traded 50 tonnes of Clothing for 75 tonnes of Food. Both countries have benefited. In fact, both countries are now consuming at points outside their production possibility frontiers

















Question 3
a) What are the four components of the environment ?

GEOGRAHHIC CONDITIONS
The climate, terrain, seaports and natural resources of a country will influence its business activities. Very hot weather will limit the types of crops that can be grown. It also will restrict the type of businesses that can operate in that climate. A nation with many rivers or seaports is able to easily ship products for foreign trade. Countries with few natural resources must depend on imports.

CULTURAL AND SOCIAL FACTORS
In some societies, hugging is an appropriate business greeting. In order societies, a shake hands is a custom. These differences represent different cultures. Culture is the accepted behaviors, customs, and values of a society. A society’s culture has a strong influence on business activities. For example, many businesses were traditionally closed in the afternoon in Mexico while people enjoyed lunch and rest period known as a siesta.
The main cultural and social factors that affect international business are language, education, religion, values, customs, and social relationships. These relationships include interactions among families, labor unions, and other organizations.

POLITICAL AND LEGAL FACTORS
Each day, encounter examples of government influences on business. Regulation of fair advertising, enforcement of contracts, and safety inspections of foods and meditations are a few examples. In general, however, people in the United States have a great deal of freedom when it comes to the business activities. In many places, government restricts the activities of consumer’s ad business operators. The most common political and legal factors that affect international business activities include the type of government, the stability of the government, and government policies toward business.


ECONOMIC CONDITIONS
Everyone faces the problem of limited resources to satisfy the numerous needs and wants. This basic economic problem is present for all of us. Continually make decisions about the use of time, money, and energy. Similarly every country plans the use of its land, natural resources, workers, and wealth to best serve the needs of its people. Factors that influence the economic situation of a country include the type of economic system, the availability of natural resources, and the general education level of the country’s population. Others economics factors include the types of industries and jobs in the country and the stability of the country’s money supply. The level of technology available for producing and distributing goods and services influences a nation’s economic situation.


The Environment is comprised of two major categories of components: the living environment and the nonliving environment. The living environment consists of all of the plants and animals that live in a particular habitat, region, area or biome. At the lowest level, these make up a community.
The nonliving environment contains the components that are not alive. These are the physical components which can be summarized as soil/rock, air, water and sun.
• Soil/Rock. This category contains all of the rocks in the environment that is being studied as well as the soils that are encountered in the environment. Certain soils are characteristic of certain environmental regions. Forests contain much organic material in the soil so the soil is known as loamy. The soil in the desert is dry and sandy. Rocks play a role in the environment as well. Red rocks generally contain iron. This works its way into the soil above the rocks. Much good farmland contains loamy soil with lime in it. The lime originates in the limestone beneath the soil.
• Air. Air is found in the atmosphere. It is also found dissolved in the soil and water to some extent. All higher organisms require the oxygen in the air to breathe. This includes all of the animals, plants, fungi and protozoa. An exception is the anaerobic bacteria which have no need for air or oxygen. The living creatures use the oxygen in the air for cellular respiration. This process occurs in all higher organisms inside their cells in organelles known as mitochondria. The oxygen in the air has resulted from the process of photosynthesis by green plants. The Earth is approximately 4.5 billion years old. Photosynthesis by green plants has been producing oxygen for approximately half of that time, approximately 2.5 billion years.
• Water. Water is essential for all life. Earth is a planet with over 3/4 of its surface covered with water. Water is the major constituent of living things. Most creatures are approximately 90% water. Living things need water in order to maintain metabolic balance and to keep from drying out. Many organisms such as fish live entirely in the water. Some animals such as frogs have part of their life cycle in the water and part outside the water. Land animals live entirely out of the water. But, all organisms require water. In the environment, water is circulated by means of the Water Cycle.
• Sun. The Sun provides energy in the form of light. The energy from the sun is used by green plants to make food by photosynthesis. This provides the base level of the food chain. The green plants are the producer organisms which utilize the Sun's energy to make food. Animals which eat the plants are known as primary consumers. They, in turn, are food for secondary consumers which eat them. This constitutes a basic food chain.
sun ------> green plant ------> animals
This simple food chain is found in the natural environment. The source of energy in the food chain is the Sun. This is true for all parts of the surface of the Earth including the land and the upper parts of the ocean.
The four natural resources; soil/rock, air, water, sun; constitute the major components of the physical environment








b) What are some examples of trade barriers that are created by government actions?

A broad range of obstacles that affect international trade, are commonly referred to as
trade barriers. Essentially, a trade barrier is anything that makes trade difficult or even
impossible. Examples of trade barriers range from government-instituted tariffs to
cultural preferences. Trade barriers have a negative effect on exporters because they
interfere with the normal supply and demand and make international trade more
complicated. They also negatively impact importers and ultimately consumers since
they interfere with competitive sourcing which can result in higher prices.
The global trend in recent years has been to eliminate as many trade barriers as
possible. Organizations like the World Trade Organization (WTO) have been
established with the sole purpose of limiting barriers and reconciling trade disputes
among member nations. Free trade agreements among countries, such as the North
American Free Trade Agreement (NAFTA), ASEAN in Asia, and the European Union
trade agreements have reduced the number of barriers involved in regional trade.
Recent U.S. policy has been to establish trade agreements in all hemispheres by
negotiating bi-lateral agreements with trading partners such as Jordan, Singapore,
Chile, Australia, Dominican Republic, Bahrain, CAFTA, and CARRICOM nations in the
Caribbean.

Trade barriers are as ancient as trade itself and there are many reasons countries
institute trade barriers. Trade barriers initially arose in the form of tariffs levied to raise money. For many countries, tariffs are a major source of income and very important to the national economy. Tariffs, quotas and non-tariff barriers such as excessive regulations are now commonly used to protect domestic industry from foreign competition. Finally, countries often use barriers as tools of foreign policy. Very high or low tariffs can be used to reward or punish other nations in support of foreign policy initiatives. This is the premise of most free trade agreements and embargoes, boycotts and sanctions. For all of these reasons, trade barriers are sensitive and controversial issues.

Import tariff
An import tariff or import duty is a schedule of duties imposed by a country on imported goods. It is paid at a border or port of entry to the relevant government to allow a good to pass into that government's territory. In medieval and ancient times, such tariffs were even collected by local governments. Now this is very rare. Typically they are collected by national governments or, in a customs union, by the regional authority.
The tariff can be levied on a percentage of the value of the import, or the amount of the import (amount per unit of import). Tariffs are traditionally designed to raise revenue for the government, however they can also be for; Reducing the level of imports by making them more expensive relative to domestic substitutes (this lowers a balance of trade deficit). To counter the practice of dumping by raising the import price of the dumped good to market level. To retaliate against trade barriers imposed by another country, a trade war. To protect key industries such as agriculture, such as the European Union has done with its Common Agricultural Policy. To protect a new industry until it is sufficiently well established to compete on the international market. In the United States and other countries, import tariffs are controversial, and the World Trade Organization has attempted to minimize them. In the United Kingdom, import tariffs were abolished by Harold Macmillan's Conservative government in 1959, a method which arguably did much to increase American cultural influence in the UK.
Import quota
An import quota is a type of protectionist trade restriction that sets an upper limit on the quantity of a good that can be imported into a country in a given period of time. For example, a country might limit sugar imports to 50 tons per year. Quotas, like other trade restrictions, are used to benefit the producers of a good in a domestic economy at the expense of all consumers of the good in that economy. Critics say quotas often lead to corruption (bribes to get a quota allocation), smuggling (circumventing a quota), and higher prices for consumers.
From an economics perspective, quotas are thought to be less economically efficient than tariffs which in turn are less economically efficient than free trade.

An import quota works by reducing amount of foreign goods a country may import. In a competitive market, the equilibrium point which determines the price and quantity produced of a good is where the demand curve and the domestic supply curve intersect. In the case of a purely domestic market, this point is at P* and Q* (see Figure 1). When international trade is introduced into the market, this equilibrium may change. Let us assume that the price of a certain good is less when imported from abroad than when produced domestically. We will also assume that the world economy can supply more goods at that price than could ever be consumed by the domestic economy. In this case, the international supply curve is a horizontal line at P2, which is the price of that imported good. In this case, the equilibrium price lowers to P2, and the equilibrium quantity produced increases from Q* to Q4. Domestic producers will actually produce less (Q1), while the balance (the difference between Q1 and Q4) will be supplied by imports.

When free international trade is introduced, consumers benefit significantly. In a purely domestic market, the consumer surplus is represented by the area A. With free international trade, this surplus increases to include B, C, D, E, F, G, H, and I because they only have to pay price P2 for the good instead of the higher price P*, and they are able to purchase the quantity Q4 instead of the quantity Q*. On the other hand, domestic producers of the good are adversely affected. In a purely domestic market, the domestic producer surplus is represented by areas B, E, and J. With the introduction of free international trade, they lose areas B and E to consumers because they can only get the price P2 for their goods instead of the price P*. Finally, the economy on the whole benefits by areas C, D, F, G, H, and I, as these are areas of surplus that did not exist before the introduction of free trade. As is evident, all of the economic benefit goes to consumers.

Because of the adverse effects of free trade on domestic producers, those producers may attempt to petition the government to enact an import quota. When this happens, the government will restrict the quantity of a good that can be imported in order to increase the price and allow producers to recover some of their lost surplus. If the government restricts total imports to the difference between Q2 and Q3, three things will happen. First, producers will increase output from Q1 to Q2. Second, imports will decline from the difference between Q1 and Q4 to the difference between Q2 and Q3. Third, the price will rise to reflect the new total quantity consumed, which is now Q3.

The effect of an import quota on domestic producers is to allow them to recover the producer surplus in area E, which they take away from consumers. The effect on international producers is that they now obtain areas G and H as a surplus. The effect on consumers is that they lose E, F, G, H, and I. The effect on the total world economy is that areas F and I are lost in what is called a deadweight loss. F represents consumer surplus which is lost by goods consumed but not at a surplus to producers. I represents consumer surplus which is lost as these goods are not consumed at all. The effect on the domestic economy is that E is gained, but F, G, H, and I are lost. The following table summarizes the effect on the various stakeholders of an import quota.

Economics of domestic trade, quota-restricted trade, and free trade
Situation
Consumer surplus
Domestic producer surplus
Foreign producer surplus
World economy
Domestic economy
Purely domestic market
A
B, E, J
none
loss of C, D, F, G, H, I
loss of C, D, F, G, H, I
Free international trade
A, B, C, D, E, F, G, H, I
J
none
none
none
Trade with import quota
A, B, C, D
E, J
G, H
loss of F, I
loss of F, G, H, I

To summarize, free international trade represents the highest net benefit for consumers, the world economy, and the domestic economy. Purely domestic trade represents the least beneficial situation for domestic consumers, the world economy, and the domestic economy, but the most beneficial situation for domestic producers. An import quota is the most beneficial to foreign producers and somewhat beneficial to domestic producers, but is somewhat harmful overall to consumers, the world economy, and the domestic economy.

Other issues that deserve consideration are whether the international producers which obtain the quota rights are the most efficient producers or not. If they are not, this represents an additional deadweight loss to the world economy and a reduced benefit to those producers. Tariffs are generally seen as a more advantageous way to protect domestic producers without creating as much damage to the world economy as a whole.

Import license
An import license is a document issued by a national government authorizing the importation of certain goods into its territory. Import licenses are considered to be non-tariff barriers to trade when used as a way to discriminate against another country's goods in order to protect a domestic industry from foreign competition. Import and export licensing is meant to be used to protect national interests by limiting access to dangerous imports and ensuring that critical technology is not shared with terrorists or rogue nations. If too excessive, they can limit access to foreign markets.

Cultural Barriers
Cultural Barriers: The most obvious unofficial barriers to free trade are language and
cultural barriers. These can hinder processing of paperwork and often are the cause of
issues in packaging and labeling. Furthermore, nuances of religion and social etiquette
not obvious to foreigners often cause products to fail in new markets. Usually these
barriers can be overcome with research, education and the right in-c

Boycott
Boycott is where a government issue an absolute restriction on the import of certain products form certain countries for example in India importation of many consumer goods is banned. This forces foreign companies that want to sell their products to invest in India and manufacture the products locally for examples Dior want sale sunglass in India because that Dior have do Built Factory in India to manufacture his sunglass to sale in Indian Market . Dior cannot Import his product form Paris to India because India Boycott the things all import. In Japan the government maintains a nearly complete ban on the import rice. This action protects Japanese rice farmers from foreign competition and in Norway their government protects its apple and pear products by allowing imports only after the domestic crop has been sold

Countervailing Duties: When a country feels another country is dumping products into
their market unfairly (selling at less than cost and often with support of subsidies),
import duties/tariffs can be an effective tool to offset the discount and protect domestic
suppliers. The U.S. request to retaliate against Canadian processed dairy export
subsidies is a good example of tariffs as a legitimate tool used to protect industries
unfairly harmed by foreign suppliers who dump goods into their country. “Countervailing
duties” are tariffs imposed to offset discounted imports often subsidized by foreign
governments.

Bans, Boycotts, Embargoes and Trade sanctions: These trade policies can be used
in support of foreign policy as reward or punishment for cooperation or lack of
cooperation. Examples: Trade sanctions with Iraq were designed to get Iraq to comply
with UN resolutions and prevent them from continuing to source items used to
manufacture military weapons.

Excessive Regulations: Standards, testing, labeling and certification: These types
of standards aren’t necessarily trade barriers, but they can be if the standards are too








Question 4

a)Why companies frequently expand their business operations into other countries?

Companies frequently expand their business operations into other countries because they expand their business to get more customer after get more customer the profit go high examples McDonald’s now have 28000 restaurants around the world and also because the diplomatic relationship between country are good like examples because our good relationship a lot of japans come and expand their business in Malaysia. Companies become expand tin international markets for a variety of reasons . Some companies simply respond to order from abroad without any organized efforts to their own, but most companies take a more active role because they have determined that it is to their advantage to pursue export business on an incremental basis. The profitability of a company can increase when fixed manufacturing costs are already committed and additional economies of scale are achieved.
Some companies expand their business in other countries after domestic market has reached maturity. Cola-Cola, a market leader worldwide in the soft drink business, finds that foreign consumers drink only 14 percent as much as Americans do. This suggests an enormous market potential outside the United States. The company already earns as much as 80 percent of its operating earnings outside the United States and strong growth to come from Europe. In eastern Germany, where Coke could only be sold after the liberalization 1989, sales may reach $1 billion within just a few years. The Swiss- based food company Nestlé’s world wide facing maturing markets in Europe, is aiming at Asia as a major source of growth and new revenue. Nestle has targeted China as a key market opening joint ventures in China for marketing Nescafe.

As the world grows smaller because of increasingly efficient global communications and multinational corporations, chances are good that your business will take you outside your home country. Sound and video contractors, pro A/V installers, and consultants are all finding that international business can provide an avenue for growing their business. Sometimes a customer's international operations will require your services in other countries. Even if you never plan on opening an office outside your national borders, you may find that your best customer has. Your customer may want to count on your involvement in equipping his or her international installations. In any of those scenarios, you should know what you're getting into before jumping in.

Americans are at more of a disadvantage in being prepared than their international neighbors. For reasons having to do with geography (as well as perhaps an historical proclivity toward isolationism), international travel and multilingual and multicultural awareness do not come naturally to Americans, unlike citizens of many other continents. But during the past several decades, international business has become a matter of survival in many industries.

For sound and video contractors, systems integrators, and consultants whose businesses achieve a certain size plateau, global expansion becomes an obvious consideration for continuing their development objectives. But careful consideration of these opportunities can help you avoid costly mistakes. International business opportunities are not always as attractive as they might seem. As Harvard Business School Professor Pankaj Ghemawat says, “Businesses routinely overestimate the attractiveness of foreign markets. They become so dazzled by the sheer size of untapped markets that they lose sight of the vast difficulties of pioneering new, often very different territories.” Failure in foreign markets is often the result of evaluating the opportunity based only on potential sales while ignoring the costs and risks of doing business in a new market.










b)What are the benefits and drawbacks of doing business in other countries ?

McDonald’s now have 28000 restaurants around the world and giving work for people in the country by reducing the unemployed rate and increase the total production of McDonald’s which leads to opening it’s restaurants outside of US like in Canada and Puerto Rico and after year McDonald’s opened his restaurants around the world. The changing lifestyle benefits the McDonalds restaurants around the world by obtaining big profits. The drawbacks of doing business in other country is that the business can lose if the political stability of that country is not stable ; example in 1970 political trouble in Iran forced McDonald’s to close its restaurants and this cost a big lost to the company. Theorists attack in 1992 after being open only few months in Taiwan has resulted McDonalds to shut down its 57 restaurants there because bomb explosions and for more examples is you can see in below

The Benefits and Drawbacks of doing business in Afghanistan
Background

Gulestan Ariana Co. Ltd. was registered with AISA on Dec 9th, 2004. Based on an idea by Barnett R. Rubin (see links on the website, www.gulestan.com), Gulestan is producing essential oils and floral waters for the production of fragrance, personal care, and pharmaceutical products. It already has a small line of bath and massage oils, essential oils, floral waters, and lip balm. Gulestan imported equipment and know-how from Turkey and France in order to start producing essential oils in Jalalabad. After a test distillation of bitter orange (naranj) fllowers in 2005, Gulestan intends to produce a substantial amount of essential oil for the perfume industry in spring 2006.Gulestan intends to foster development of organic rose plantations in Afghanistan. Gulestan has also started wild plant collection in remote Hisarak district of Nangarhar. The first samples have been sent to the perfume industry in France and their initial reaction is positive. Gulestan has also packaged some products for local retail sales, including floral waters, bath oils, essential oils, lip balm, teas, and diffusers hand-made by Istalif potters with lapis lazuli glaze.

Gulestan is an example of the type of industry singled out for attention by the Interim Afghanistan National Development Strategy. According to the I-ANDS The ideal type of agricultural activity for Afghanistan is labor-intensive production of high-value horticultural crops that can be processed and packaged into durable high-value, low volume commodities whose quality and cost would be adequate for sale in Afghan cities or export to regional or world markets.Developing this type of industry is also essential to counter-narcotics. As the I-ANDS also states, “the strategy for providing licit livelihoods will focus on economic activities that produce import substitution or goods for export, not expansion of subsistence farming.” The horticultural crops needed for the fragrance, personal care, and pharmaceutical industries are precisely this type of agriculture. The experience of Gulestan shows what are the potentials for and obstacles to creating such high-value, rural-based industries in Afghanistan.

Benefits

Afghanistan has great resources.The biodiversity of wild plants is exceptional, and knowledge of the traditional medicinal uses of local plants has been preserved in unani dawakhana. Medicinal plants are a specialty of Afghanistan that should be (re-)developed to tap their economic potential. Afghan culture creates a welcoming social environment. Hospitality is central: everywhere in Afghanistan, especially in villages, people are very welcoming and ready to help with our project, when they see that we are coming with an idea for mutual benefit. Roses, orange flowers, jasmine and many more scented flowers and plants are celebrated in the poetry and music tradition in Nangarhar, and flowers are a very important part of the Afghan heart.
Some new institutions work well. AISA works well and provides useful, efficient services. Registration there was made very easy by high-quality staff. Banks work quite well for international electronic transfers. Contrary to expectations, we have not been exposed to corruption much. We were only very rarely asked to pay bribes to get anything done.

Drawbacks

The lack of infrastructure constantly causes delays, bottlenecks, and high costs. The condition of Afghan roads is a major issue. The very bumpy roads to rural areas of Nangarhar prevent economies of scale by reducing the area we can cover with a distillery. Flowers have to be brought to the distillery within a few hours of harvest. The journey from Hisarak to Jalalabad would take only a few hours on a good road, but the actual travel time is over eight hours. Hence we cannot use fresh materials from Hisrak for production in Jalalabad. When we imported our distillery from Turkey, bad roads and lack of capacity at the Islam Qala customs point, as well as the requirement that all cargo had to be off-loaded and on-loaded into Afghan trucks made us miss the blossoming of gul-i naranj in 2005, depriving us of a whole year’s major source of revenue. Lack of electricity prevents proper cold storage of products and forced us to purchase an expensive, diesel-powered generator. The Nangarhar Canal Authority has allowed us to use space, power, and water in their olive oil factory, but even this major institution cannot guarantee a steady supply of power. Both the generator and the fuel to run it add to our costs.

Another issue is lack of skills. Gulestan needs to train technicians, farmers, and wild plant harvesters. No expertise from universities or ministries is available to help with training. Any knowledge there of organic agriculture or wild plants is not used systematically and takes a lot of research to find. All these points add up to make production relatively expensive in Afghanistan. Society is dominated by informal power holders. Gulestan cannot rely on the government to provide security, and it cannot rely on the courts to resolve any disputes. It has no way to operate in Nangarhar or to contact local villagers except through the tribal structure, which is dominated by a few big families. In the absence of a reliable government, this structure has enabled us to enjoy security and to have access to villages and other properties from which we purchase our raw materials, and find space and land to locate our facilities, but it makes it more difficult for us to maintain autonomy. Dominance by these families makes it difficult to maximize the social benefits of our operations, as they monopolize the role of intermediary between us and the society. Rivalries could also limit our activities. The big families have been very welcoming (see above about hospitality) and have shown a lot of understanding of the benefits that our company can bring to the province, but they are all involved in politics, competing with each other, and Gulestan does not want to ally with one or the other of them. The tax regime and the process of paying tax is very burdensome. All taxes must be paid in cash and in person, because of a lack of checking or electronic payment systems. A fledgling company with no revenues has to pay taxes: a 24,100 Afg (US$ 480) fee is collected to register the balance sheet from 1383. This fee is fixed regardless of the size of companies, imposing a heavy cost on small companies that join the formal sector. When you add AISA registration it adds up to 2% of our initial capital paid in tax before we have any revenue, not to mention profit.

More importantly, it takes at least 10 man-days to go through the labyrinth of offices, signatures, stamps and (sometimes) corrupt officials that will allow us to complete this payment process. We will have to withhold 4,000 Afg (US$ 80) from our employees’ salaries every month, because we have a small company with small salaries. But we are required pay this fee in cash and in person every month, which also takes two man-days. We would like to be able to pay at the end of the quarter instead. Eventually we should be able to pay through check or an electronic payment system. International standards do not include Afghan products. Several medicinal and aromatic plants are found only in Afghanistan, and are famous for their uses in the traditional unani dawakhana medicine. But there has been no modern research concerning these plants and their medicinal uses. Many of these plants are not registered as raw materials on important American and European markets, and thus cannot be exported there. Besides, the traders of neighboring countries have been adulterating these products for a long time. Today international standards and market prices for resins (such as galbanum or asafoetida) are based on the adulterated product, which makes it difficult for Afghanistan to position itself in the world market.
c)Go to the McDonald’s web site (WWW.mcdonalds.com ) to find additional information about the company’s international operations. Explain your finding.

McDonald's Corporation is the world's largest chain of fast-food restaurants, primarily selling hamburgers, chicken, french fries, milkshakes and soft drinks. More recently, it also offers salads, fruit and carrot sticks.The business began in 1940, with a restaurant opened by siblings Dick and Mac McDonald in San Bernardino, California. Their introduction of the "Speedee Service System" in 1948 established the principles of the modern fast-food restaurant. The present corporation dates its founding to the opening of a franchised restaurant by Ray Kroc, in Des Plaines, Illinois on April 15, 1955, the ninth McDonald's restaurant overall. Kroc later purchased the McDonald brothers' equity in the company and led its worldwide expansion.
With the successful expansion of McDonald's into many international markets, the company became a symbol of globalization and the spread of the American way of life. McDonald's restaurants are found in 120 countries and territories around the world and serve nearly 54 million customers each day also have McDonald's restaurants in India How many McDonald's are there in India the answer is There are 56 McDonald's restaurants in India employing around 2,000 Indians so this means McDonald's give job to local people and McDonald's serve around half a million customers on an average, in Indian restaurants across every day. All our vegetarian products are 100% vegetarian. Even their mayonnaise was specially developed for Indian consumers and hence does not contain any egg. Additionally, our soft serves too do not contain any egg and are 100% vegetarian. McDonald' take great efforts to ensure that their vegetarian products are kept distinctly from our non-vegetarian products right from our supplier’s end till they are served to our customers. In 1996 McDonald's opens in India the 95th country.


McDonald’s respect for local culture

McDonald’s India have special menu with vegetarian selections to sut Indian tastes and preferences. McDonald’s does not offer any beef or pork items in India . only freshest chicken , fish and vegetable products find their way into Indian restaurants.
The examples burger pure vegetarian to Indian people McDonald created egg less sandwich sauces for our vegetarian customer also the soft serves and mc shakes are egg less offering a larger variety of vegetarian consumers .McDonald’s Respect For The Customers they Serve .Vegetarian and Non-Vegetarian Options for Indian Customers Consistency and uniformity – the trademark of McDonald’s anywhere in the world – be it in areas like the quality of the food or the attention to service. Yet, a McDonald’s in China would be distinct from its counterpart in Germany or Canada or India. In India, McDonald’s opened with a beef and pork menu and special product formulations to accommodate Indian culture and palate. Amit Jatia, the joint-venture partner for McDonald's India says, “McDonald's has spent considerable amount of time to understand Indian culture. Out of respect for many of our customers' beliefs, we are not serving any beef and pork items.”The menu consists of chicken, fish and vegetarian products that include milkshakes, soft serves and the world-famous French fries. McDonald's has also added Chatpatey (spicy) Potato Wedges and the Wrap to their menu in 2002.


McDonald's commitment to its Indian customers is also shown in its development of special sauces that use local spices. McDonald's has also changed its operations to address the special requirements of a vegetarian menu. Vegetable products are prepared separately, using dedicated equipment and utensils. Also In India McDonald's uses only vegetable oil as a medium for cooking. The French fries are prepared using spices and fried in 100% vegetable oil (Palmolein oil). Not only that, but the mayonnaise used in its vegetarian burgers is also egg-less. This dedication to local cultures is not new for McDonald's. For the past 49 years, McDonald's has opened restaurants in about 120 distinctly different countries and cultures. With guidance from its local partners, McDonald's is able to adapt - where necessary - its menu and restaurant operations to complement existing eating-out options. McDonald's local owners understand what their customers want and perhaps more importantly, what is acceptable within local customs and values.

McDonald's Kids and Fun Zone
In kids and Fun Zone have game so they kids can play in McDonald's they do birthday party , family party have place for kids play around the Restaurant in McDonald's Indian they Introduce the cartoon Characters so kids more happy to come and eat in McDonald's







Career

McDonald's is not just a burger company serving people; we are a people company serving burgers. We recognize that our real strength and the foundation of our business is our people. Our vision is to be our customer’s favorite place and way to eat. The culture and heritage of our business - our brand, our behavior and our values are the foundation for achieving our vision. Together, they define who we are and how we act at McDonald’s. The world-class training that we impart allows our people to provide our customers the ultimate McDonald's experience. The average McDonald's restaurant employs as many as 40 people - from crew to the restaurant manager. As of today, we employ close to 2,500 people in India. A job at McDonald’s opens the door to limitless career opportunities.














Community
McDonald's is known for it's exemplary contribution to the local economy and environment. Ever since it's first restaurant opened in India, McDonald's has fulfilled its social obligations in every possible manner and bringing smiles to many faces.
McDonald's knows that there's a li'l performer in every child. So in order to help you beat the stress and tension that everyday homework and tiresome exams bring, we introduced McDonald's Spotlight. McDonald's Spotlight is an annual inter-school performing arts competition. This competition is open to all secondary schools [standards 5th to 10th] in Mumbai, Navi Mumbai, Thane and Pune and entry is absolutely FREE!

Events and their categories in McDonald's Spotlight are:

Showtime!: [One-Act Plays in English, Hindi & Marathi, Tamil]
Step-By-Step: [Group Dancing – Indian Classical, Indian Folk & Fusion Moves]
Soundtracks: [Solo Singing – in English, Hindi & Marathi ,Tamil]
Scriptless: [Impromptu Speaking in English, Hindi & Marathi ,Tamil]
The popularity of McDonald's Spotlight is evident from the number of schools participating in it. From 28 schools in 1998, the figures have soared to a whopping 120 schools in 2003! Participants go back with a Certificate of Participation, while winners receive a Certificate of Merit as well as Gift Vouchers from McDonald’s.

McDonald's no just see for profit they care about people in the country they open Restaurant .
References ….
Note form MRS Lalithana Vukarasu

Form Internet

http://en.wikipedia.org/wiki/Trade_barrier
http://en.wikipedia.org/wiki/Trade_bloc
http://www.sjrcc.cc.fl.us/faculty/hinton/chap5.html
http://en.wikipedia.org/wiki/Ebusiness
http://en.wikipedia.org/wiki/Category:International_trade
http://en.wikipedia.org/wiki/McDonald%27s
http://en.wikipedia.org/wiki/Globalization
http://en.wikipedia.org/wiki/Tax%2C_tariff_and_trade
http://en.wikipedia.org/wiki/Import_quota
http://highered.mcgraw-hill.com/sites/0072537973/student_view0/chapter3/chapter_overview.html