MAN - 101 Introduction To Business Near East University Faculty Of Economics & Administrative Sciences

Near East University

Faculty Of Economics &

Administrative Sciences

MAN - 101 Introduction To Business

Week 3

Business in Global Markets

Tuğberk KAYA

tugberk.kaya@neu.edu.tr

~BUSINESS IN GLOBAL MARKETS~

IMPORTING AND EXPORTING

When local businessman buys foreign goods and services from other countries to be sold in the local market, it is called importing. The foreign goods and services purchased by local businessman are called imports.

Exporting occurs when the local business people sell

domestically produced goods and services to foreign

countries. These products which are produced domestically to

be sold to foreign markets are called exports.

Exporting

 Exporting can be exercised in two ways: direct or indirect.

Selling the finished product to foreign countries is called direct exporting.

 While a business person does direct exporting of the final

products, he also does indirect exporting of the components and accessories as the input for the finished product.

 Exporting cars to foreign countries would be an example of

direct exporting. On the other hand, components such as

tires, rods, engines, and car seats are indirectly exported

items in car exporting.

Balance Of Trade: Favorable And Unfavorable

 The relationship between a country’s export and

import signifies the said country’s balance of trade.

 If the country’s export is more than its import, then the balance of trade represents a favorable situation.

This favorable situation is called trade surplus.

 Trade deficit on the other hand, means unbalanced

trade due to the discrepancy between the country’s

imports and exports when the country’s imports are

larger than exports.

Balance of Payments

Balance of Payments

 Like the balance of trade, the balance of payment might also lead to a favorable situation if the incoming money flows into a country is more than the outgoing money flow from a nation.

 This favorable balance of payments is called balance of payment surplus. The balance of payment deficit is a result of the outgoing money being more than the

incoming money of a country.

Exchange Rates

 Exchange rate is the value of a nation’s local currency in relation to the currencies of the other countries.

 When the currency changes up and down

continuously in money markets and lead to

currencies to have floating values, it is called

floating exchange rates.

Stages Of Global Business

Exporting, Importing And Countertrading

 Trading between nations commonly starts with the sole trading of the goods and services that can be described as exporting and importing between nations.

 If an opportunity is seen for trade, with the help of agent or offices in foreign countries, the local manufactories make it possible for their

commodities to be sold in other countries.

 Countertrading, a bartering (exchange goods or

services without involving money) agreement is

also used in many countries.

 Franchising: Manufacturers or other suppliers may give a local party, a wholesalers or retailers, in the foreign country the right to sell their products under their globally registered brand name.

Suppliers and local party make an agreement that specifies the responsibilities of each side.

 The manufacturer or supplier is called FRANCHISER and local

party that gets the right to sell the goods in its domestic market is

called the FRANCHISEE. The franchiser provides its registered

brand name, building and business operation plans, site selection

help, accounting and management systems and other services to

assist the franchisee.

 Foreign Licensing: Under the contracted licensing agreement, the manufacturer or supplier allows the local party to use it intellectual property which may be agreement a local company or manufacturer gains the right manufacture and sell the goods with the same

manufacturing methods and trademarks of the foreign seller/manufacturer, in the local territory.

 Subcontracting: The foreign companies hire local companies to produce, distribute and sell goods & services. Under this contractual agreement, the subcontractor produces, distributes or sells in the

name of the foreign companies. Many manufacturers use foreign subcontractors to produce their goods in the subcontractors’

countries since they save on import duties and labor costs.

 Overseas Marketing: The seller, supplier or manufacturer opens

and owns a sales office or division in foreign countries.

 Overseas production: The seller, supplier or manufacturer makes the production in the overseas countries where they want to sale their products.

 International Joint Ventures: The companies in different countries share the risks costs, profits and management responsibilities by

utilizing their resources and capabilities to serve in any one of the international markets.

 International Mergers and Acquisitions: Companies focusing on international operations to sell goods and services to the foreign

markets may go international by merging with or acquiring local companies registered in the countries in which they want to

penetrate.

 Merger is a transaction in which two firms agree to integrate their operations relatively co-equal basis and create a new identity. On the other hand, one firm’s buying the control of all shares in another

company and making subsidiary is called acquisition.

The Barriers In Global Business

The Barriers In Global Business

 Tariffs:

 Trade Restrictions:

 Political and Legal Barriers:

 Physical (local) Barriers:

 Social and Cultural Barriers:

References

 Ebert, R. J. and Griffin, R. W. (2015) Business

Essentials. 10

Edn. Harlow: Pearson Education Limited

 Kadri Mirze (2002) Introduction to Business. Istanbul:

Literatür Publishing.

Any Questions?

tugberk.kaya@neu.edu.tr