International trade

International business is the buying, selling and trading of goods and services across national boundaries. A company could be called international trader when they are Involved in exporting and importing. Exporting refers to the sale of goods and services to foreign market. Sometimes, exporting take place through countertenor agreement that involve bartering products for other products Instead of currency. Although a company exports Its product directly, there Is an agent that could help to handle International transaction for other firms.

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It Is called export agent that has responsibility for storage and transportation In export process. Furthermore, Importing Is the purchase of goods and services from foreign service. It could be happened as there are some countries can’t produce the product that they need. Therefore, they have to buy that product from the other countries which able to create It. A nation’s balance of trade Is the different In values between Its exports and imports. If the imports value is higher than the export has, it would be a negative balance of trade or trade deficit.

It is harmful as it could damage of businesses. Moreover, it causes the loss of job and a lowered standard of living. Additionally, the difference between the flow of money into and out of a country is called as balance of payment. There are some aspects that involve on it. For instance, a country balance of trade, foreign investment, foreign aid, loan, military expenditures and money spent by tourist. We can conclude that a country with a trade plus has a favorable balance of payment because it receive more money from trade with foreign country compared to paying out.

When a company decides to extend its business into global riding, it has to concern about the other country legal, social, culture, technological background and especially a number of basic economics factor, for instance economic development, infrastructure, and exchange rates. There is no doubt that many countries are in general poorer and economically advance. Consequently, business people need to recognize that they could not utilize their business at the same way with industrialized nations.

Similarly, exchange rate, the ratio at which one nation’s currency can be exchange for another nation’s currency, is the most significant aspect of basic economics as it affects the cost of imports and exports. There are three deferent aspects when a company desires to enter the International market. Firstly, law and regulation which are used within partner trading. We realize that every country has its own law and regulation. It means that a company has to accustom the rule within operating Its business.

For example, taking extra steps to protect Its product is due to the local law. Secondly, tariffs and trade restrictions that are established for political reason. An Import tariff refers to a tax levied by a nation n goods Imported Into the country. It Is commonly Imposed for protecting domestic product by raising the price of Imported one. There are two different type of Import tariff. Firstly, a fixed tariff reveals about the specific amount of money levied on each unit of a product brought Into the country.

Then, an ad valor tariff reveals that based on the value of the item. Thirdly, political barriers that affect international restrictions in response to political events. Social and cultural barriers are the importance aspect while most businesses usually ignore them. For instance, cultural preferences include difference in spoke and written language could misinterpret the true meaning that have translated from one language to another. Additionally, body language and personal space also contribute international trade.

In social aspect, family role influence marketing activities because many countries don’t allow children to be used in advertising. Moreover, the national and religious holidays and local custom of the host country are the significant aspects that influence companies when they engaged in foreign trade. There are also organizations and agreement beside economics, law, social and culture issues, which enlarge international trade and could assist companies get involved in and succeed in global market.

Many organizations and agreements concern about foreign trade, such as General Agreement on Tariffs and Trade, NONFAT, the European Union, APACE, and many more. Licensing and franchising are also embroiled in overseas trade. Licensing is a trade arrangement when one company allows another company to use its company name, product, patents, brands, trademarks, raw materials, and production process in exchange for fee or royalty. It is very advantageous for small companies to expand their brand internationally.

Furthermore, franchising refers a form of licensing while a company agrees to provide a franchisee the name and method of operation with the franchiser’s business. Plenty of fast food restaurants and cafes in Indonesia, such as McDonald and Cataracts are the shape of franchising and licensing from the US firms. Similarly, licensing has to preserve with high standard quality in order to keep their well image. Therefore, it is important for licensor to enforce quality standard. There are two different methods if companies want to enlarge their product overseas.

First of all, they cooperate with local partner that share the costs and operations of the business which is called Joint ventures. Subsequently, direct investment involves the development and operation of new facilities. There are two main factors that will affect the strategy a business chooses to use outside its own borders. To begin with, companies have traditionally used a multinational strategy which implicate customizing products, promotion, and distribution according to ultra, technological, regional, and national differences.

Moreover, more companies are moving from this customization strategy to global strategy that involves standardizing products for the whole world. Secondly, managing the challenges of global business. It means that manager who can meet the challenges of creating and implementing effective business strategies for the global marketplace can help lead their companies to success. Source: O. C. Ferret, Geoffrey A. Hire, and Linda Farrell, Business: A Changing World (New York: MAC-Grab Hill,2014), p. 86-110.