Deck 6: International Business

Question 1

Exchange Rates
Your company imports 3 million pounds of chocolate from Switzerland a year at a cost of 3 Swiss francs a pound. Last year the value of the Swiss franc was 1.5 francs per dollar. How much did your imports cost in dollars? If the value of the Swiss franc goes to 1.2 francs per dollar this year, how much will your imports cost?

Answer 1

Cost in Swiss Francs = 3,000,000 pounds of chocolate × 3 Swiss Francs a pound = 9,000,000 Swiss Francs.
At 1.5 francs per dollar, the imports would cost $6,000,000 (= 9,000,000/1.5).
At an exchange rate of 1.2 francs per dollar this year, the imports will cost $7,500,000 (= 9,000,000/1.2).

Question 2

Describe a free trade area.

Answer 2

Companies engage themselves in international trade to enhance their sales and gain more profitability. While doing international trade, the companies should follow the rules and regulations of the countries involved in the trade. The government of certain countries might impose trade restrictions for foreign trade.
International trade happens when there is exchange of goods or services between countries. The companies should understand the trade rules and laws in foreign being followed by various countries. Restrictions in the international trade or heavy taxes being imposed on the foreign products can reduce the possibilities of the international trade.
Free trade area: There are certain countries that do not impose restrictions on foreign trade. The restrictions might be eliminated or negligible. Such areas where there are no restrictions for the foreign trade could be referred to as free trade area. Companies can gain more profit by trading in such areas, as the taxes imposed on the goods will be less or nil. The price of the products in these areas will be less, as the tariffs imposed by the government is less. Hence the countries in the neighborhood of the free trade areas will prefer to buy products from them. This will help in enhancing the economy of the free trade areas nations.

Question 3

Do you think the old saying "When in Rome, do as the Romans do" applies to international business activities? Explain your answer.

Answer 3

International business involves the exchange of goods and services between different countries. The managers or the executives involved in the distribution and marketing of the products in a foreign country should understand and adapt to the cultural differences.
International business brings together the people of various culture and tradition to accomplish the common goal of expanding heir business entities. As it involves the exchange of goods and services between two or more different countries, the managers of the company might be required to work in a foreign country to take care of the business operations.
The statement mentioned here could considered appropriate for the international business activities. The managers appointed in a foreign country to facilitate the business operations should understand the culture of the country and act accordingly. This will help in enhancing the business. Also the products should be modified according to the requirement of the people in the country. Some countries ban the usage of animal fat in the products and the company exporting the food products should follow it. Adapting and behaving as if a part of the foreign culture can help in enhancing the business possibilities. The objective of the managers to work in a foreign country will be to establish sales of their product in that country. Hence to accomplish that goal, the manager should think and behave as the natives of the foreign country to understand their demands and expectation about the product.

Question 4

Explain why many U.S. expatriate managers fail and how to reduce their failure rate.

Question 5

Explain why companies expand into international markets.

Question 6

Describe the strategies organizations use to compete in the global economy.

Question 7

Free Trade
Free trade agreements, such as NAFTA (the North American Free Trade Agreement) and GATT (the General Agreement on Tariffs and Trade), may reduce trade restrictions within a designated region, as well as allow for increased sales and lower-priced goods. However, much criticism has also been voiced by consumer, labor, health, and environmental groups, such as the Alliance for Democracy, Public Citizen in Washington, D.C., and the Fair Trade Network. They believe that unrestricted "corporate-managed" trade will do more harm than good. Do research on the Internet to answer the following questions:
1. Be prepared to discuss positives and negatives of NAFTA and GATT.
2. Be prepared to describe the purpose of:
a. Alliance for Democracy.
b. Public Citizen in Washington, D. C.
c. Fair Trade Network.

Question 8

Describe the five dimensions that can be used to understand differences in national cultures.

Question 9

What problems might you face if you were asked to serve as a manager in a foreign country?

Question 10

International Trade Decision
The Castle Company is a small yet fairly profitable American company that raises animals for their wool-merino wool sheep for merino wool, angora goats for cashmere, and alpacas for alpaca wool. The company also cleans, dyes, and spins the wool. Because of the high quality of the wool fibers, the Castle Company can command top dollar for the product. The retail prices per pound for dyed and natural yarns are: merino wool-$25; alpaca wool-$35; merino wool and alpaca blend-$40; and cashmere and merino wool blend-$50.
Jack Castle, the Castle Company president, believes their product line would sell well in Canada. Currently the exchange rate for the Canadian dollar is 0.9354 to one U.S. dollar. He has been considering two options.
The first option is to sell his yarns through a wholesaler in Montreal. Rather than receiving a commission, the wholesaler wants to pay the Castle Company a wholesale price in U.S. dollars that is 75 percent of the U.S. retail price. Presently the Castle Company receives a wholesale price of 80 percent of the retail price from its distributors in the United States. The Montreal wholesaler is also willing to pay for the yarns up front, that is, before it sells them.
The second option is for Jack to sign a licensing agreement with a chain of stores that specializes in craft products, like yarn and knitting needles. The chain's headquarters is in Toronto. The licensing agreement states that it would market and sell the Castle Company yarns for 5 percent of the Canadian retail price.
Other differences between the Montreal wholesaler and the chain craft store from Toronto involve their markets and the breadth of their distribution. The Toronto craft store is part of a 25-store chain throughout Canada, and it sells supplies for all kinds of crafts-from painting to jewelry making to sewing to needlepoint. The Montreal wholesaler sells only to yarn sellers and some specialty craft stores in Quebec.
After reviewing both offers, Jack chooses the wholesaler in Montreal. He believes the wholesaler would sell his yarns to the most appropriate market-specialty weavers and knitters.
Do you agree with Jack Castle's decision?

Question 11

Explain why companies export and import.

Question 12

Describe various ways used by companies to sell their products or services in the international market.

Question 13

Geography of International Trade
Organize the class into teams of three students per team. Have each team either create or obtain a map of the world. Identify and highlight on the map the five countries that are the leading importers of U.S. goods and the five countries that are the leading exporters of goods to the United States. Each team should then explain why they feel that the top importer and top exporter is in that position.

Question 14

Imposed Quotas
A labor union official was alleged to have made the following statement:
Foreign imports of textiles have cost American jobs and tax revenues. In order to slow down the disruptive impacts on American society, quotas should be placed on imports into the United States for those goods and products that are displacing significant percentages of U.S. production and employment.
Do you agree with the union official? Explain.

Question 15

What are some typical U.S. management practices that would be difficult to apply in foreign countries?

Question 16

International Trade Decision
The Castle Company is a small yet fairly profitable American company that raises animals for their wool-merino wool sheep for merino wool, angora goats for cashmere, and alpacas for alpaca wool. The company also cleans, dyes, and spins the wool. Because of the high quality of the wool fibers, the Castle Company can command top dollar for the product. The retail prices per pound for dyed and natural yarns are: merino wool-$25; alpaca wool-$35; merino wool and alpaca blend-$40; and cashmere and merino wool blend-$50.
Jack Castle, the Castle Company president, believes their product line would sell well in Canada. Currently the exchange rate for the Canadian dollar is 0.9354 to one U.S. dollar. He has been considering two options.
The first option is to sell his yarns through a wholesaler in Montreal. Rather than receiving a commission, the wholesaler wants to pay the Castle Company a wholesale price in U.S. dollars that is 75 percent of the U.S. retail price. Presently the Castle Company receives a wholesale price of 80 percent of the retail price from its distributors in the United States. The Montreal wholesaler is also willing to pay for the yarns up front, that is, before it sells them.
The second option is for Jack to sign a licensing agreement with a chain of stores that specializes in craft products, like yarn and knitting needles. The chain's headquarters is in Toronto. The licensing agreement states that it would market and sell the Castle Company yarns for 5 percent of the Canadian retail price.
Other differences between the Montreal wholesaler and the chain craft store from Toronto involve their markets and the breadth of their distribution. The Toronto craft store is part of a 25-store chain throughout Canada, and it sells supplies for all kinds of crafts-from painting to jewelry making to sewing to needlepoint. The Montreal wholesaler sells only to yarn sellers and some specialty craft stores in Quebec.
After reviewing both offers, Jack chooses the wholesaler in Montreal. He believes the wholesaler would sell his yarns to the most appropriate market-specialty weavers and knitters.
Are their any other options Jack should consider?

Question 17

Explain countertrading.

Question 18

Imposed Quotas
A labor union official was alleged to have made the following statement:
Foreign imports of textiles have cost American jobs and tax revenues. In order to slow down the disruptive impacts on American society, quotas should be placed on imports into the United States for those goods and products that are displacing significant percentages of U.S. production and employment.
Do you believe import quotas should be established for certain industries? Which ones?

Question 19

Blockbuster Video
Blockbuster Video is considering expanding into 10 new countries. The company's chief executive officer has asked you to analyze which countries might represent good choices. First, you should find out where Blockbuster has already expanded internationally. Then you should prepare a one-page report in which you identify all of the issues you think the company should consider. Be sure to discuss the importance of international trade agreements, economic and competitive issues, and cultural and political issues.

Question 20

Imposed Quotas
A labor union official was alleged to have made the following statement:
Foreign imports of textiles have cost American jobs and tax revenues. In order to slow down the disruptive impacts on American society, quotas should be placed on imports into the United States for those goods and products that are displacing significant percentages of U.S. production and employment.
Does the United States benefit or lose from international trade?

Question 21

The fastest-growing market for U.S. cigarette manufacturers is in international markets. What ethical problems do you see in exporting cigarettes to foreign markets?

Question 22

Explain how and why countries restrict international trade.

Question 23

What do you think could be some potential pitfalls of entering into a strategic alliance?

Question 24

International Trade Decision
The Castle Company is a small yet fairly profitable American company that raises animals for their wool-merino wool sheep for merino wool, angora goats for cashmere, and alpacas for alpaca wool. The company also cleans, dyes, and spins the wool. Because of the high quality of the wool fibers, the Castle Company can command top dollar for the product. The retail prices per pound for dyed and natural yarns are: merino wool-$25; alpaca wool-$35; merino wool and alpaca blend-$40; and cashmere and merino wool blend-$50.
Jack Castle, the Castle Company president, believes their product line would sell well in Canada. Currently the exchange rate for the Canadian dollar is 0.9354 to one U.S. dollar. He has been considering two options.
The first option is to sell his yarns through a wholesaler in Montreal. Rather than receiving a commission, the wholesaler wants to pay the Castle Company a wholesale price in U.S. dollars that is 75 percent of the U.S. retail price. Presently the Castle Company receives a wholesale price of 80 percent of the retail price from its distributors in the United States. The Montreal wholesaler is also willing to pay for the yarns up front, that is, before it sells them.
The second option is for Jack to sign a licensing agreement with a chain of stores that specializes in craft products, like yarn and knitting needles. The chain's headquarters is in Toronto. The licensing agreement states that it would market and sell the Castle Company yarns for 5 percent of the Canadian retail price.
Other differences between the Montreal wholesaler and the chain craft store from Toronto involve their markets and the breadth of their distribution. The Toronto craft store is part of a 25-store chain throughout Canada, and it sells supplies for all kinds of crafts-from painting to jewelry making to sewing to needlepoint. The Montreal wholesaler sells only to yarn sellers and some specialty craft stores in Quebec.
After reviewing both offers, Jack chooses the wholesaler in Montreal. He believes the wholesaler would sell his yarns to the most appropriate market-specialty weavers and knitters.
Questions
1. Do you agree with Jack Castle's decision?
2. Are their any other options Jack should consider?

Question 25

Describe a global economy.

Question 26

Imposed Quotas
A labor union official was alleged to have made the following statement:
Foreign imports of textiles have cost American jobs and tax revenues. In order to slow down the disruptive impacts on American society, quotas should be placed on imports into the United States for those goods and products that are displacing significant percentages of U.S. production and employment.
Questions
1. Do you agree with the union official? Explain.
2. Do you believe import quotas should be established for certain industries? Which ones?
3. Does the United States benefit or lose from international trade?

Question 27

Do you think NAFTA is a good idea? Develop five pro arguments and five con arguments for the establishment of NAFTA. What do you think will be the next country to join the NAFTA agreement? Justify your answer.

Question 28

Define international trade.

Question 29

Explain e-commerce.