Question 1
International trade is an approach that is used to engage in the international business through imports and exports. A firm can penetrate the market through selling their products abroad and obtaining low cost suppliers. Some of its advantages involve increase wages for the members, counterbalance monopsony, and productivity deals. It disadvantage includes unemployment, ignoring of non-members trade unions and lost productivity.
Another method of engaging in the international business is through licensing where a firm acquires trademarks, patents, copyrights, trade names and royalties. Advantages of licensing are that a company is able to penetrate to the local market with minimum expense, risks and costs. It also provides an instant market access and limits the imitators and competitors. Disadvantages involved are requirement of proper control provision, and provision of technical assistance and brand standards.
Franchising is an approach that involves provision of service strategy by franchisor, support assistance, and in some cases initial investment in the franchise for a periodic fee. Advantages involve building of earnings and capital, and substantial support from the banks. As much as the advantages are concerned, the franchise firm requires highest level of family and personal commitment.
Question 2
The fluctuation in the exchange rate influences the level of the trade through exports and imports in the international trade. When the currency is weak, a country makes more exports and imports become more expensive. As a result the country’s trade deficit decreases over time. On the other hand, when the currency is stronger, the imports become more expensive while the exports get cheaper. In this case the level of trade deteriorates.
When the US dollar is stronger than the currency of a particular country, the exports made by that country becomes cheaper while the imports become more expensive. In other words, the deficit in the balance of trade decreases i.e., that country experiences a surplus in its balance of trade.
Disadvantages of strong US dollar
- The strong dollar influences the global perception. A strong US dollar reflects a strong economy in US
- A strong US dollar influences imports, thus the US companies access to imports from another country at a lower cost.
- A strong US dollars enables vacationers and business travellers to buy more locally currencies when travelling abroad
Disadvantages of strong US dollar
- There are higher export prices which reduces the level of export in a country
- It restricts tourism which leads to reduction of foreign currency.
- A strong US dollar diminishes profit of the companies that operates globally
Impact of a weak US dollar
It discourages importation which promotes market for the locally produced goods. Weak US dollar also encourages export which increase foreign currency of a country.
Question 3
Culture is defined as a framework of values, behavioral patterns, experience and assumption shared by social group. There are aspects of culture such religion, art, language, education, clothing and culture affects the international business. This is because what come culture considered to be good, other consider them to be wrong. For instance, japan considers the art of silence in negotiation this forces Americans to feel pressure and hence close negotiation when it is immature.
Question 5
“No nation was ever ruined by trade” was Benjamin’s quote that illustrated his strong support of trade. He believed that free trade was advantageous to every nation and every person in particular. When a nation is open to trade, its rapacious corporations are able to ship job oversees. Other benefits of the trade that were emphasized by the Benjamin involve economies of scale, increased competition and exports, engine of growth, comparative advantage, and utilization of surplus raw material.
