OVERVIEW
Trade, or exchanging goods and services among nations, is imperative in today’s global economy. Essential to understanding international business is reviewing the history of international trade and assessing what influences countries to encourage or discourage trade.
The goal of unrestricted trade is to provide access to unrestricted commodities to all countries; however, in reality the absence of regulation fosters bureaucracy and corruption. Countries enter into free trade agreements to warrant a smooth flow of goods and services across borders and to create peace and stability through economic and political cooperation.
Governments enable foreign direct investment (FDI) through incentives, regulations, and policies, which companies react to. Governments intervene in trade with policies that control and manage trade such as tariffs, subsidies, import quotas, and local content requirements.
Global sourcing denotes purchasing raw materials, components, or services from companies outside the home country, with lower costs and higher comparative quality being very advantageous. Outsourcing refers to allocating an entire process, such as manufacturing and accounting, to a foreign vendor. While reaping the benefit of lower labor costs, hidden costs could also arise such as delayed shipments, damaged goods, and unforeseen events in the foreign country, such as a political upheaval.
The U.S. government provides trade financing through agencies such as the U.S. Small Business Administration (SBA), the Overseas-Private Insurance Corporation, and the Export-Import Bank of the United States (EXIM). Some foreign countries have their own financing agencies such as the Japan External Trade Organization (JETRO).
TOPICS
Module 4 covers the following topics:
- International trade
- Importing, exporting, and balance of trade
- Licensing and franchising
- Foreign direct investment (FDI)
- Theories of trade flow between nations
- Government intervention of international trade
- Unrestricted free trade among nations
- Global sourcing
- Government-supported organizations providing financing
OBJECTIVES
After successfully completing Module 4, you should be able to:
MO 4.1 Explain why nations trade and the various forms that international trade can take.
MO 4.2 Evaluate the advantages and disadvantages of foreign direct investment (FDI).
MO 4.3 Compare and contrast trade theories and cite their implications.
MO 4.4 Evaluate governmental influence on trade through trade control and trade agreements.
MO 4.5 Analyze whether unrestricted trade raises the economic welfare of participating countries.
MO 4.6 Differentiate outsourcing from global sourcing.
MO 4.7 Evaluate export financing opportunities including those from governmental agencies.
Course objectives covered in this module include CO 4
STUDY MATERIALS
Textbook Readings
- Chapter 6 (Section 6.7) in International Management
- Chapters 2 and 9 in International Business
ACTIVITIES
Module 4 has two activities. The bibliography for your final project is also due during this module. Consult the Final Project area of the syllabus for instructions and the Course Calendar for the due dates.
Written Assignment 4
Write a 4- to 5-page paper (1000 to 1375 words) in APA format and thoroughly address the prompts below. Provide a descriptive title or heading for your paper. Whenever possible, provide specific examples or recommendations. Be sure to cite all of your sources and include at least one outside source in this paper. [MO 4.1, MO 4.2, MO 4.3, MO 4.4, MO 4.5, MO 4.6, MO 4.7]
- Describe a product or service idea you have for your international firm to expand into a new country market and analyze any potential competition in the host country.
- Identify your new host country market entry as import/export, licensing/franchising, outsourcing or joint venture. Then, discuss the advantages and disadvantages of your chosen operation.
- Discuss whether or not you would use foreign direct investing in the host country and why.
- Communicate the host country’s governmental influence on trade including trade agreements and any possible restrictions that would affect your firm’s success there.
- Provide details on working conditions and human rights in the host country.
- Describe the products currently traded between the home and host country and any trade barriers between the two countries. Which trade theory best describes your new country market venture?
- Explain how you would finance this new country market venture, including terms of repayment.
- Suggest recommendations and implications for managers of international firms seeking to trade with this host country including any specific aspects that should be considered before expanding there.
Submit your paper to the mentor for grading. Consult the Course Calendar for due dates.
