International Business Policies

Managing Political Risk in International Business

Political environment could involve a risk to businesses, domestic and foreign. Such risk is called political risk. Political risk is that perception by the businesses that their interests will get deteriorated when certain political upheaval happens. Political risk can occur in both democracies as well as in the totalitarian set ups as well.

Political Risks are of different types. There are micro and macro political risks. Micro political risk is the one that affects a particular firm or class of firms. Usually firms owned by one class of businessmen, say, the foreigners from certain country, a particular business family or region/state.… Read the rest

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International Asset Protection

Company’s investments and other assets in foreign countries may face the risk of expropriation. Governments are therefore concerned about the protection of the interests of their national companies in the foreign countries. The potential risk was more before the worldwide liberalization set in the 1980s.

Important protective measures in this respect include the following:

Coercion and Pressure

Until the Second World War, home countries used military force and coercion to ensure that host governments would give foreign investors prompt, adequate, and effective compensation in cases of expropriation, under a concept known as the international standard of fair dealing. It may be noted that the home countries of the companies involved were developed ones and the host countries were developing nations and these host countries had little to say about this standard.… Read the rest

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How Does International Business Differ From Domestic Business?

It is almost commonplace today to find businesses venturing into international markets. Thanks to advancements in communication and information technology, this trend will most certainly persist for the predictable future. The most domestic organization’s when considering expansion will usually look outside their geographical location. This usually means looking at opportunities in international markets. It is believed that managing and running a domestic business is less complex than undertaking international business for a number of reasons. Nation-states typically have unique laws governing trade and investment, variations in business ethics and culture, different political systems, monetary policies, currencies, and so on. And these are all possible factors that could make international business more complicated and therefore, riskier than doing business at home.… Read the rest

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What is CounterTrade?

Countertrade constitutes an estimated 5 to 30 percent of total world trade. Countertrade greatly proliferated in the 1980s. Perhaps, the single most important contributing factor is  Least Developed Countries (LDC’s) decreasing ability to finance their import needs through bank loans.

Countertrade, one of the oldest forms of trade, is a government mandate to pay for goods and services with something other than cash. It is a practice, which requires a seller as a condition of sale, to commit contractually to reciprocate and undertake certain business initiatives that compensate and benefit the buyer. In short, a goods-for-goods deal is countertrade.… Read the rest

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Trends in International Trade and Cross Border Financial Flows

When a firm operates only in the domestic market, both for procuring inputs as well as selling its output, it needs to deal only in the domestic currency. As companies try to increase their international presence, either by undertaking international trade or by establishing operations in foreign countries, they start dealing with people and firms in various nations. Since different countries have different domestic currencies, the question arises as to which currency should the trade be settled in. The settlement currency may either be the domestic currency of one of the parties to the trade, or may be an internationally accepted currency.… Read the rest

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Trading Blocks Concept in International Economics

The post-second World War period has seen a growing interest in integrating national economies at regional levels. The efforts to form regional groupings, trade blocks and treaties have often floundered due to political differences and unforeseen economic hurdles.   The motivation arises out of the realization of the limitations imposed by national frontiers and the expected benefits of a wider market, consisting of several national economies.

Regional trade agreements represent an attempt by a group of countries to increase the flow of trade and investment by reducing direct and indirect trade barriers between them, as well as implement similar trade policies vis-à-vis outsiders.… Read the rest

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