International

Business
Economics

Arundhati Sarkar Bose

arundhatisb@xlri.ac.in
Phone: 9771469737
 What is international business?

Selling products in another country and earning

foreign exchange for the country?
 Who makes and exports the Apple iPod?

What does it contribute to the exporting countrys foreign

exchange earnings?
 USA

Apple

Price of a
30 GB
video iPod
$299
 USA

export

Product distribution
in importing country
Apple

Acquiring finance
capital Price
internationally $299
 Assembling in Final
China, Taiwan exporter
USA

Inventec
Asustek
Foxconn
Apple

Price
$299
 Assembling in Final
China, Taiwan exporter
USA

Inventec
Asustek
Foxconn
outsourcing Apple

$150 Price
$299

Final assembly
costs $4 per unit
 China, Taiwan USA
Hard drive from
Toshiba $73
Inventec
Asustek
Video / Multi-time Foxconn
processor chip, Apple
and Controller
chip from
PortalPlayer
$13 $150 $299
BroadCom

Display module from

Final assembly
LG Display costs $4 per unit
$20

+ Other 447 parts from

different parts of the world
 China, Taiwan USA
Hard drive from
Toshiba $73
Inventec
Asustek
Video / Multi-time Foxconn
Importing processor chip,
inputs
Apple
and Controller
chip from
PortalPlayer
$13 $150 $299
BroadCom

Display module from

Final assembly
LG Display costs $4 per unit
$20

+ Other 447 parts from

different parts of the world
Toshibas
subsidiary in
China and China, Taiwan USA
Philippines Hard drive from
Toshiba $73
Inventec
Asustek
Video / Multi-time Foxconn
processor chip, Apple
Subsidiaries and Controller
in Taiwan
chip from
PortalPlayer
$13 $150 $299
BroadCom

Display module from

Final assembly
LG Display costs $4 per unit
$20

+ Other 447 parts from

different parts of the world
Toshibas
subsidiary in
China and China, Taiwan USA
Philippines Hard drive from
Toshiba $73
Inventec
Asustek
Video / Multi-time Foxconn
processor chip, Apple
Subsidiaries and Controller
in Taiwan
chip from
PortalPlayer
$13 $150 $299
BroadCom
Also include
Apples
R&D Display module from
Final assembly
investments LG Display costs $4 per unit
in India, $20
China,
Israel, < $69
Taiwan etc . + Other 447 parts from
different parts of the world
Toshibas
subsidiary in
China and China, Taiwan USA
Philippines Hard drive from
Toshiba $73
Inventec
Asustek
Video / Multi-time Foxconn
processor chip, Apple
Subsidiaries and Controller
in Taiwan
chip from
PortalPlayer
$13 $150 $299
BroadCom
Also include
Apples
Display module from
R&D Final assembly
investments LG Display costs $4 per unit
in India, $20
China,
< $69
Israel,
Taiwan etc . + Other 447 parts from
different parts of the world
 What is international business?

Selling products in another country and earning

foreign exchange for the country: Exports

And much more

 What is international business?

Selling products in another country: Exports

And

Importing inputs
Outsourcing
Product Distribution in the importing country
Foreign Direct Investment
Acquiring finance capital
International Migration of workers
 Transfer of commodities Transfer of money
(affecting commodity market) (affecting currency market)
Payments for export / import

Export and Export and import Migrated workers remittances

import of goods of services
Acquiring finance capital from
international sources (public and private)
Final Factor Final Factor
goods goods service service Foreign direct investment
trade trade trade trade

Trade policies Policies in relation to Currency market

Tariff
Currency market policies
Quota
Trade subsidies
Policies restricting capital flows
VERs
Antidumping
Macroeconomic policies that affect
Trade related Intellectual property rights
currency market and commodities trade
Product quality standards
Consider the following cross border activities:
Identify the categories of international business.

Indian textile products sold in Germany

Infosys operation in USA

Hindustan Unilevers factory in Solan, Himachal

On sight work for software professionals

Study abroad

Tourism

Food aid

Financial Aid to India from the German Government

Concessional loans from the World Bank forwarded to Nepal

Consider the following cross border activities:
Identify the categories of international business.

Indian textile products sold in Germany (goods export)

Infosys operation in USA (service export operation)

Hindustan Unilevers factory in Solan, Himachal (FDI)

On sight work for software professionals (Service export)

Study abroad (service import)

Tourism (service export)

Food aid (goods export)

Financial Aid to India from the German Government (FII)

Concessional loans from the World Bank forwarded to Nepal (FII)

Course Outline
Part I INTERNATIONAL TRADE

Module 1 Trade theories

Module 2 Trade policies

Part II CURRENCY AND INTERNATIONAL FINANCE

Module 3 Currency market and exchange rates

Module 4 Exchange rate policies and macroeconomic management
Part I INTERNATIONAL TRADE

Module 1 Trade Theories

The nation is adopting freer trade regime.

How do we expect the price to move?
What will be the quality / variety of product available to the consumers?
Which businesses are likely to survive or grow?

Issues of pricing under differing degrees of international competitiveness

Understanding free trade arguments that govern trade agreements.
Part I INTERNATIONAL TRADE
Module 2 Trade policies (unilateral and multilateral)

WTO governs trade policy choices for Member countries.

How a protectionist trade policy improves the prospects of survival / growth of
business?
What kind of support we can expect from the government as exporters?
How free we are to choose a price of our product?
What are the implications of trade related policies under different levels of product
market concentration?

Tariff / Quota / Voluntary Export Restraints

Dumping / Antidumping duties
Export taxes / Export subsidies
Regional integrations
Part II CURRENCY AND INTERNATIONAL FINANCE

Module 3 Currency market and exchange rate

How do currency market work?
How to minimise risk in international currency transactions?

- spot and forward markets

- currency futures and options
Part II CURRENCY AND INTERNATIONAL FINANCE

Module 4 Exchange rate policies and macroeconomic management

How does foreign exchange policy affect the business environment?
How do macroeconomic policies affect foreign exchange market transactions?
How is the risk in foreign investment determined by the macroeconomic
environment?
Fixed and flexible rates Central Banks actions
Impact of changing exchange rates on exports and imports
Volatility managements by the government and Exchange rate regimes
Open economy macroeconomics
Monetary approach and asset market approach to predict future exchange rate
3 International Financial Crises models - Understanding the recent few crises
Analysis of recent events of crisis
Economic risk indicators for FDI and FII
Pedagogy

Largely models and exercises based

Follow methods of analysis that are conventional in economics.
Case studies will supplement analytical understanding as and when required.

Prerequisites

Fundamentals of Managerial Economics

Fundamentals of Macroeconomics

Evaluation

2 quizzes 20 marks each

1 end term examination - 40 marks
Term paper 20 marks [to be presented during class hours. Dated to be
declared soon. ]
Important Dates

Quiz 1 22nd July 2017

Quiz 2 8th August 2017
Term Paper presentations 14th and 16th August 2017
READINGS / REFERENCES-

Reading material will be given separately for each module.

Cases / Articles will be mailed as and when required.

Reading

From reading material on module 1-

Trade in Global Economy