Definition International Management

International Management deals with the maintenance and development of a multinational operation across
national borders, whose manager has the knowledge and the skills to manage and handle cross-cultural
processes, stakeholders and environments in a right way.
Business Definition for: International Management
* the maintenance and development of an organization's production or market interests across national
borders with either local or expatriate staff
* the process of running a multinational business made up of formerly independent organizations
* the body of skills, knowledge, and understanding required to manage cross-cultural operations
Management (from Old French mnagement the art of conducting, directing, from Latin manu agere to
lead by the hand) characterises the process of leading and directing all or part of an organization, often a
business, through the deployment and manipulation of resources (human, financial, material, intellectual or
intangible).
This definition of management refers to a program. This implies that, for management to be effective,
there needs to be some type of defined approach or system in place. This system becomes the plan and
management is guiding others in following that plan. This is often the downfall of managers. They have no
plan or system. As a result their actions seem random to the people they are managing and this leads to
confusion and disappointment. This is why it is so important for business managers to have an employee
manual. Without the employee manual providing direction, managers will struggle to be fair and balanced in
their dealings with employees.
The definition goes on to talk about how management is responsible for measuring details that may not be
required presently, but may be useful later on. These measurements often help determine the objectives in
the planning stage.
When management is following this type of sequence, it becomes a continuing cycle. Plan, execute, and
measure. The measurements become the basis for the next planning stage and so on.
1. The process of getting activities completed efficiently with and through other people; 2. The process of
setting and achieving goals through the execution of five basic management functions: planning, organizing,
staffing, directing, and controlling; that utilize human, financial, and material resources.
The first definition looks at the fact that management is getting work done through other people. The second
definition divides management up into five components. These components are all parts of the three
components (plan, execute, measure) that we looked at above. However the more detailed definition helps
show the activities that occur in each of the three phase definition.
Political factors
Governments and politics play a large role in international business. In this lesson, you'll learn about the political
environment in international business, some of its key factors and its impact. A short quiz follows.

Definition
The political environment in international business consists of a set of political factors and government activities
in a foreign market that can either facilitate or hinder a business' ability to conduct business activities in the foreign
market. There is often a high degree of uncertainty when conducting business in a foreign country and this risk is
often referred to as political risk or sovereign risk.

Factors
Let's look at some common political factors that influence the international business landscape.
Economic System
The type of economic system a country builds is a political choice. Foreign countries often will have different
economic systems from your domestic market and adjustments often need to be made to take these differences
into account.

A country may operate in a market economy where private individuals own most of the property and operate most of the
businesses. A market economy is usually the best economic environment for a foreign business because of the protection
of private property and contract rights.

Some countries lean more towards a socialist economy where many industries and businesses are owned by the state.
Operating businesses in this environment will be more difficult, but products can still be produced and sold as people still
pick their jobs and earn money.

A few countries operate under a communistic economic system where the state pretty much controls all aspects of the
economy. Conducting business in this environment ranges for difficult to impossible.

The reality is that all economies are mixed economies that take parts from two or more of the 'pure' economic systems. For
example, you can conduct business in communist China in Hong Kong and other special areas where a market economy is
allowed to operate.

Government System
Businesses must often contend with different governmental systems. Examples include democracies,
authoritarian governments, and monarchies. Some governments are easier to work with than others. Democracies,
for example, are answerable to their citizens and the rule of law. Authoritarian regimes are usually answerable to no
one, including the law. It is less risky to conduct business in democracies and constitutional monarchies (a monarch
with a constitution that protects the public and subjects the monarch to the rule of law) than in countries with
authoritarian regimes.
Trade Agreements
Countries often enter into trade agreements to help facilitate trade between them. If your country has entered into a
trade agreement with another country, conducting business in that country will usually be easier and less risky
because the trade agreement will provide some predictability and protection. One great advantage, for example, is
that your products will be subjected to fewer trade barriers that serve as obstacles to exporting your products into
the country.
Formal Trade Barriers
A trade barrier is simply anything that makes it harder for a company to export products to a foreign country.
Formal trade barriers are enacted by governments for the purpose of restricting imports to protect a country's
domestic industries. Formal trade barriers include tariffs, which are taxes on imports that helps make domestic
products more competitive, and product quotas that limits the number of products imported into the country.
Informal Trade Barriers
Governments may impose regulations that aren't primarily promulgated as barriers to trade but have the same
effect. Examples can include specific product standards and health and safety standards that businesses will be
required to meet before the products can be sold.
Chapter 9: Political and Economic Factors Affecting International Business
9.4 Managing International Financial Risks
Pg 293-296
Devaluation of a nations currency also tends to reduce the price of exports from
the country whose currency has been devalued, making those goods more

attractive in world markets. For example, Canadian exports are very attractive
because more can be bought with the U.S. dollar. When the Canadian dollar is
weak relative to the businesses and the consumer price of imported products
goes up.
Another currency risk that Canadian businesses face in international transactions
is that foreign trade may be regulated by exchange controls in a foreign country.
Exchange controls are political and economic measures used by a government
to try to regulate the amount and value of its currency. One fairly common way of
controlling currency flow is to restrict the amount of money that people can take
out of the country.
The value of a countrys currency can also be affected by individuals and
financial institutions that buy sell on the foreign exchange markets so they can
profit from changes in currency values. These parties are referred to as
speculators and they affect the demand and supply of currencies and
corresponding exchange rates. If you believe that the Canadian dollar will
strengthen, you will want to exchange your U.S. dollars now, when will you get
more Canadian dollars for them?
The value of the Canadian dollar is determined by the effects of foreign
exchange between all trading countries, and Canada has little district control over
the developments that affect the value of its dollar. The Canadian dollar is not
one of the worlds most traded currencies and trends to be dragged along by
trends in the U.S. and elsewhere.
Strategies to Manage Financial Risk
Some of the strategies by which companies can minimize their financial risk
include the following:
Foreign Exchange Management: Foreign exchange is beyond any single
companys control since it is usually in the hands of a foreign government.
Companies can rely on outside expertise or employ their own experts. Global
companies integrate foreign exchange management into every aspect of their
operation.
Credit Control: A Canadian company should know the history of its foreign
buyer, the currency it does business in, and how much it owes. The
international or foreign department of banks and credit companies can
normally investigate a foreign buyers credit information. The process is
similar to checking a reference on a new employee and serves as a final test
of the ability or capacity of the buyer to pay.
Open Accounts: Open accounts can also be used to reduce financial risk.
An open account is an agreement between the two companies that future
shipments of a product will be stopped if payment is not made. An open
account might cause problems if the order is rather large and expensive,
because the exporting company could face added risk by not being paid on

time.
Insurance: A company also has the option of purchasing insurance to cover
non-payment of international invoices. If this happens, the exporter receives a
majority of its invoiced amount from the insurer. With this kind of insurance in
place, companies might feel more secure operating in an open account.
Analyzing Foreign Investment Climates
Companies invest in other countries to obtain raw materials, acquire products at
a lower cost, and enter local markets. A company usually decides to invest in a
country after it has had success in export.
International business investors need to research and analyze potential foreign
investments carefully. A checklist for evaluating the investment climate:
General political stability: Form of government, rivalries and conflicts
present, past political climate.
Government policies towards foreign investment: Trade agreements and
attitudes.
Policies and legal factors: Labour laws, honesty of public officials, and
taxation on profits.
Economic environment: Per capita income, infrastructure, and economy.
International payments: Exchange rate.