* Governments address their own interests through international cooperation, via treaties, agreements, and consultation
1) To gain reciprocal advantages
- Governments act on the companies' behalf, join international orgs, sign treaties and agreements for a variety of commercial activities.
- right to use each other's seaports and airports, flyover rights, protect foreign-owned investments, patents, trademarks and copyrights, reciprocal reductions of import restrictions
2) To attack problems jointly that one country acting alone cannot solve
- coordinating activities along their mutual borders to serve the interests of all parties (dam between Brazil and Paraguay)
- attacking global problems together (global climate change/nuclear proliferation, natural disasters)
- coordinating economic policies (The Group of Twenty (G20) countries, which account for over 80 percent of the world;s production and trade as well as 2/3 of the population)
3) To deal with areas of concern that lie outside the territory of any nation
- global areas: noncoastal areas of oceans, outer space, and Antarctica
- commercial viability: mineral rights, fishing methods, piracy of ships.
- most of the cooperation is undertaken by international organizations
* also called non-merchandise international earnings
- referred to as invisibles.
- provider and receiver of payment: makes a service export
- recipient and payer: makes a service import
- services constitute the fastest growth sector in international trade and take many forms.
1) Tourism and transportation:
- tickets and travel expenses
- important sources of revenue for airlines, shipping companies, travel agencies, and hotels
- economies of some countries depend heavily on revenue from these sectors (Greece and Norway, Bahamian)
2) Service performance:
- companies earnings in the form of fees: payments for the performance of those services (banking, insurance, rental, engineering, and management services)
- turnkey operations: construction projects performed under contract and transferred to owners when they're operational
- management contracts: arrangements in which one company provides personnel to perform general or specialized management functions for another, such as Disney's management of theme parks in France and Japan
3) Asset use:
- licensing agreements: trademarks, copyrights, or expertise, companies receive royalties
- franchising: one party (franchiser) allows another to use the trademark (the franchisee)as an essential asset of the franchisee's business. Franchisor assists continuously in the operation of the franchisee's business by providing supplies, management services, or technology. They still receive royalties.
1) Geographic influences
- determining the location, quantity, quality and availability of the world's resources, as well as ways to exploit them
- explains why different products and services are produced in different places
- geographic barriers often affect communications and distribution channels
- adverse climatic conditions and natural disasters make business riskier in some areas than in others while affecting supplies, prices, and operating conditions in far-off countries
- population distribution and the impact of human activity
2) Political policies
- influence how and whether IB will take place in the country
- political disputes and military confrontations disrupt trade and investment
3) Legal policies
- domestic law includes both home and host country' regulations on such matters as taxation, employment and foreign exchange transactions
- international law (legal agreements between countries) determines how earnings are taxed by all jurisdictions, and also determine how companies can operate in certain places.
- how fastidiously are the policies enforced in different countries?
4) Behavioral factors
- different values, attitudes and beliefs help make operational decisions abroad
- difference on the type of court tennis is played on, in each country, due to popularity and tradition
5) Economic forces
- higher incomes in the U.S. and Canada allow major league teams to offer higher salaries that attract Dominican players, and people can afford the tickets
- explain why some countries can produce goods or services for less
- provides analytic tools to determine the impact of an international company's operations on the economies of both host and home countries, as well as the impact of the host country's economic environment on a foreign firm