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本章主要介绍和讨论：（1）国际商务的一般知识，包括国际贸易的内容、历史和主要参与主体等；（2）国际商务的经济环境、政治环境、文化环境和竞争环境；（3）国际商务中可能存在的3类主要风险，包括政治风险、交易风险和法律风险。学习本章的目的在于了解国际商务及其国际环境，为后续国际商法的学习奠定知识基础。
Warm-up Questions
(1) What is the impact of international business on your daily life?
(2) How does international business differ from domestic business?
(3) What are the risks of doing business internationally?
International business
consists of the import and export of goods and services. Exporting is the shipment of goods out of a country or the providing of services to a foreign buyer located in another country. Importing is the entering of goods into a country or the receipt of services from a foreign provider. Exporting is often the first choice when businesses decide to expand abroad. It may provide businesses an opportunity to reach new customers and to explore new markets. Importing is also a regular and necessary part of international business. It involves purchasing goods or services on a worldwide basis to reduce production costs. Such a process is often described by the term of
global outsourcing
.
International business may be conducted among individuals, businesses, and even governments in multiple countries. Businesses include very small firms that export (or import) a small quantity to only one country, as well as very large
multinational corporations (MNCs)
with integrated operations and strategic alliances around the world. It is reported that exports by MNCs account for one-third of world exports, and one-third of the world's production of goods and services.
International business is different from domestic business because the environment changes when a firm crosses national borders. An individual traveling from his home country to a foreign country needs to have the proper documents to carry foreign currency, to be able to communicate in the foreign country, to be dressed appropriately, and so on. Doing business in a foreign country involves similar issues and is thus more complex than doing business at home country. States generally have different economic environments, government systems, laws and regulations, currencies, taxes and duties as well as different cultures and practices. Companies doing business in a foreign country would encounter the greater distances, communication problems, language and cultural barriers, differences in ethics and religions, different currencies, and exposure to strange foreign laws and government regulations. Typically, a company understands its domestic environment quite well, but is less familiar with the environment in other countries and must invest more time and resources to understand the new environment. The following considers some of the important aspects of the environment that changes internationally.
A. The economic environment
can be very different from one nation to another. Countries are often divided into three main categories:the developed or industrialized countries, the developing countries or emerging economies, and the least developed countries or third world. These distinctions are usually made based on
gross domestic product (GDP) per capita
. Better education, infrastructure, technology, health care, and so on are also often associated with higher levels of GDP.
Within each category, there are major variation. Overall, the developed countries generally have a high GDP per capita, a high standard of living, and are in the later stages of industrialization. They are characterized by advanced technology, modern production, management methods, and advanced research facilities. They have diversified economies rather than only dependent on agriculture, oil or mining alone. Today it can be said that many developed countries are entering a postindustrial economy, with declining manufacturing but a growing service sector. The best examples of developed countries may include the United States,Canada, the European nations,Australia,New Zealand and Japan. Developing countries usually have a lower GDP per capita than developed countries. Many have large agrarian populations, densely populated cities, and unskilled labor. However, the typical developing country is hard to describe. Some are newly emerging economies like China
,Brazil,India,Russia, and South Africa. The least developed countries (LDCs) are the world's most impoverished and vulnerable countries. The criteria are based on GDP per capita averaged over three years,The list of LDCs covers 48 countries including Laos,Afghanistan,Bangladesh, and so on.
In addition to the level of economic development, countries can be classified as free-market economies, centrally planned economies, or mixed economies. Free-market economies are those where the government intervenes minimally in business activities, and market forces of supply and demand are allowed to determine production and prices. Centrally planned economies are those where the government determines production and prices based on forecasts of demand and desired levels of supply. Mixed economies are those where some activities are left to market forces and some, for national and individual welfare reasons, are government controlled.
Clearly, the level of economic activity combined with education, infrastructure, as well as the degree of government control of the economy, affects virtually all aspects of business, and a company needs to understand this environment if it is to operate successfully internationally.
B. The political environment is another important aspect of the international business environment. It refers to the type of government, the government's relationship with business, and the political risk in a country. Doing business internationally thus implies dealing with different types of governments, relationships, and levels of risk.
There are many different types of political systems, for example, multi-party democracies, one-party states, constitutional monarchies, and dictatorships (military and nonmilitary). Also, governments change in different ways, for example, through regular elections, occasional elections, death, or war. Government-business relationships also differ from country to country. The business may be viewed positively as the engine of growth, or may be viewed negatively as the exploiter of the workers, or somewhere in between as providing benefits and drawbacks. Specific government-business relationships can also vary from positive to negative depending on the type of business operations involved and the relationship between the people of the
host country
and the people of the
home country
.
To conduct a business successfully in a foreign country, a company needs to have a good understanding of all these aspects of the political environment.
C. The cultural environment is one of the critical components of the international business environment. It seems more difficult to understand because the cultural environment is essentially unseen. The"culture"has been described as a shared, commonly held body of general beliefs and values that determine what is right for one group. National culture is described as the body of general beliefs and values that are shared by a nation. Beliefs and values are generally seen as formed by factors such as history, language, religion, geographic location, government, and education;thus, firms begin a cultural analysis by seeking to understand these factors.
Companies need to understand what beliefs and values they may find in countries where they do business. In fact, several models of cultural values have been proposed by scholars. The most well-known one is that developed by Hofstede in 1980. This model proposes four dimensions of cultural values including individualism versus collectivism, uncertainty avoidance, power distance and masculinity versus femininity
. Individualism is the degree to which a nation values and encourages individual action and decision making. Uncertainty avoidance is the degree to which a nation is willing to accept and deal with uncertainty. Power distance is the degree to which a nation accepts and sanctions differences in power. And masculinity is the degree to which a nation accepts traditional male values or traditional female values. This model of cultural values has been used extensively because it provides data for a wide array of countries. Many academics and managers found this model helpful in exploring management approaches that would be appropriate in different cultures. For example, in a nation that is high on individualism(such as the U.S.), individual goals, individual tasks, and individual reward systems are effective, whereas the reverse would be the case in a nation that is low on individualism.
D. The competitive environment can also change from country to country. This is partly because of the economic, political, and cultural environments. These environmental factors help determine the type and degree of competition that exists in each country. Competition can come from a variety of sources. It can be the public or private sector, come from large or small organizations, be domestic or global, and stem from traditional or new competitors.
The nature of competition can also change from place to place: Competition may be encouraged or discouraged in favor of cooperation;relations between buyers and sellers may be friendly or hostile;barriers to entry and exit may be low or high;regulations may permit or prohibit certain activities.
An important aspect of the competitive environment is the level and acceptance of technological innovation in different countries. The last decades of the twentieth century saw major advances in technology, and this is continuing in the twenty-first century. Technology is often seen as giving firms a competitive advantage. Hence, firms compete for access to the newest in technology, and international firms transfer technology to be globally competitive. It is easier than ever for even small businesses to have a global presence thanks to the Internet, which greatly expands their exposure, their market, and their potential customer base. For economic, political, and cultural reasons, some countries are more accepting of technological innovations, others are less accepting. To do international business effectively, companies need to understand these competitive issues and assess their impact.
International business is as old as the oldest civilization. Throughout the history of mankind, countries traded to obtain needed items from silk to spices that were not readily available in their own countries. Asia, the Middle East,Africa, and Europe have been the major marketplaces of trade for hundreds of years. In history, there were famous"Silk Road", which linked the market of China with the Middle East and Europe, and the first international sea trade route established by the Europeans in the sixteenth century. With the advent of great naval power,Portugal and Spain opened the Americas,India, and the Pacific to trade. For more than three hundred years, trade in cotton, corn, horses, weapons thrived among Europe,America, and Africa.
Since the end of World War Ⅱ, much has been changed in the field of international business. The General Agreement on Tariffs and Trade (GATT) negotiation rounds resulted in trade liberalization, and this was continued with the formation of the World Trade Organization (WTO)
in 1995. At the same time, worldwide capital movements were liberalized by most governments, particularly with the advent of electronic funds transfers.
The world today is economically interdependent. It is fair to say that
globalization
continues to represent the historical trend of the world. Phenomena such as climate change and free trade agreements demonstrate the continuing relevance of global cooperation and interconnectivity.
In effect, globalization is not only an economic concept with significant legal meaning. It is an economic process, which appears to be unstoppable. Undoubtedly, with the increasing globalization of the economy, we will experience more cross-border activities. Many economists and business experts believe that no trade can be purely domestic in such a globalization process. The reality of the increasing economic interdependence among countries makes all trade international. No longer can an economic or policy change in one country occur without causing reverberations throughout the world's markets. For example, the deterioration in trade relations between the United States and China can affect the manufacturing plants in Canada or Mexico. The Mad Cow disease affected far more than the English cattle and the beef trade worldwide.
Globalization can be attributed to many factors. Natural resources and raw materials are unevenly located around the world. Technology advances in communications have brought people closer than ever and made the world, to some extent, a village on the earth. Most nations have moved away from pure protectionism of trade and increasingly moved toward free trade. Recent decades have seen a steady and robust movement towards regional integration, for example,
EU
and the development of free trade areas such as
China-ASEAN
and
NAFTA
. Technologies of patents, copyrights, trademarks, and know-how are transferred by licensing agreements around the world, as freely as goods and services are sold. Greater political stability in newly emerged economically powerful countries has led to increasing trade volume around the world.
Globalization is also a legal event, as evidenced by the spread of the rule of law among nations. Greater economic interdependence has required countries to reach an agreement on important legal issues. The global economy has been affected by the development of widely accepted international conventions and practices, which provide a reliable and consistent legal environment for international business. Meanwhile, national laws are required to be harmonized and adjusted to new development in international business.
Factors such as differences in language, culture, economics, politics, and laws bring barriers. No company can make a strategic business decision or enter an important business transaction without a full evaluation of the risks involved. To a great degree, the management of international business is the management of risk. In this part, we will discuss just two types of international business risks:political risk and the risk of exposure to foreign laws and courts.
A particular concern of international companies is the degree of political risk in a foreign location.
Political risk
is generally defined as the risk to a company's business interests resulting from political instability or civil unrest, political change, war, or terrorism in a country in which the company is doing business. For example, political decisions made by governmental leaders about taxes, currency valuation, trade tariffs, wage levels, labor laws, environmental regulations and development priorities can affect business conditions and profitability. Similarly, political disruptions such as terrorism, riots, civil wars, international wars, and even political elections that may change the ruling government, can dramatically affect businesses. Generally, political risk is associated with instability. A country is seen as riskier if the government is likely to change unexpectedly, if there is social unrest, and if there are riots, revolutions, war, terrorism, and so on.
Companies naturally prefer countries that are stable and that present little political risk, but the returns need to be weighed against the risks, and firms often do business in countries where the risk is relatively high. In these situations, companies seek to manage the perceived risk through
political risk insurance
, ownership and management choices, supply and market control, financing arrangements, and so on. Handling political risk requires planning and vigilance. Firstly, the company must understand the domestic affairs of a country. Typical questions might include: Is the country subject to religious or ethnic strife?Is the country politically stable?Can the government of the country rule effectively?The firm must also understand regional politics. Is the region stable?Are neighboring countries in the region hostile?Finally, it is well advised that managers of the company should keep abreast of all political affairs that could affect their business interests worldwide.
Exposure to foreign laws and courts is another risk for international business. Laws vary from country to country depending on social, political, cultural, and historical traditions. Some acts that are perfectly legal in one country may be illegal in another. For example, under Islamic law in many Middle East countries, there is a prohibition against charging interest on a loan. However, in other parts of the world, it is almost taken for granted.
Settling disputes among companies can be much more difficult in international business than in domestic business. It may involve complex procedural problems: What country's court should hear the case?What country's laws should apply?Should the case be submitted to
arbitration
?
and so on.
Litigation
in a foreign court is both costly and time-consuming. The laws of a foreign country can differ greatly from those laws that are accustomed to at home. In addition, language and logistical issues can be problems as well. A company may respectively need representation by attorneys in its own country and in the foreign country. Frequent court appearances could cost a lot of time and travel expenses.
Chapter Summary
本章是关于国际商务及国际商务环境的介绍。国际商务是一种跨越国界的商业活动，是在不同国家之间进行商品、劳务、资本、技术和信息等资源的国际转移，其主体活动是进出口贸易，包括货物贸易和服务贸易。个人、企业乃至政府（在某些情况下）都可以从事国际商务活动，其中最活跃的主体当属跨国公司。
相较国内商务活动，国际商务因跨越了国境而更为复杂。他国的经济环境、政治环境、文化环境和竞争环境等情况都将对国际商务活动产生重要影响，可能会给国际商务活动带来政治、经济和法律风险。
国际商务的历史悠久。“二战”之后，国际商务发展迅速，全球化加剧了国家之间的经济依赖，有力地促进了国际商务的繁荣，也对国际商务相关的法律规制产生了重大影响。
Exercises
Part Ⅰ. True or False Statements: Decide whether the following statements are True or False and explain why.
1. International business consists of the import and export of goods.
2. In international business, exporting is more important than importing.
3. Only multinational corporations can conduct international business transactions.
4. Based on GDP per capita, countries are often divided into three main categories:the developed countries, the developing countries, and the least developed countries.
5. China is a newly emerging country and has graduated from the group of developing countries.
6. It seems more difficult to understand the cultural environment because the cultural environment is essentially intangible.
7. According to Hofstede's model of culture,China is a country of individualism.
8. International business began to exist after the end of World War Ⅱ.
9. With the increasing globalization of the economy, we will experience more cross-border international business transactions.
10. Terrorism, riots, and wars occurring in one country are political risks, which may affect international business.
Part Ⅱ. Chapter Questions: Discuss and answer the following questions according to what you have learned in this chapter. You are encouraged to use your own words.
1. Describe a real-life example of international business.
2. What are the factors that contribute to globalization?
3. What is the influence of globalization on international business?
4. How do you understand the cultural environment of international business?Can you give an example illustrating the impact of culture on international business?
5. What methods a company may rely on to reduce or avoid the political risks in international business?
6. How do you understand the statement in the text that "Even the small local companies are affected by global competition and world events"?
7. Give an example of political risk in international business.
8. What are the possible methods to avoid or reduce the business losses resulting from political risk?
9. Can you give a real-life example for the statement in the text"Most travelers to a foreign country could conceivably break laws but not even be aware of it"?
10. What are the problems that may arise from litigation in a foreign court?
Part Ⅲ. Case Problem
Frigaliment (Plaintiff), a Swiss corporation, entered contracts to purchase chicken from BNS International Sales Corporation (Defendant), a New York corporation. The English language contracts between them stated:"US Fresh Frozen Chicken,Grade A,Government Inspected,75,000 lbs.2 1/2-3 lbs at $33.00;25,000 lbs.1 1/2-2 lbs at $36.50." When the chickens were shipped to Switzerland,Plaintiff found 2-lb sizes were mature stewing chickens or fowls, but not young broiling chickens as they had expected. Plaintiff protested and claimed that in German the term"chicken"referred to young broiling chickens. Defendant pointed out the reference to "US fresh frozen chicken, grade A." The USDA defined the term"chicken"as subsuming different grades of chicken, including broilers and fowl, as well as other types such as capons, stags, and roosters.
1. What's the focus issue in this case?
2. If you were the judge, what kind of chicken did Plaintiff order?Was it"broiling chicken"as the Plaintiff argued, or any chickens weighing 2 lbs as the Defendant insisted on?
3. What would the parties have done to avoid this ambiguity?
4. What can you infer from this case?
Part Ⅳ. Further Reading
Now more businesses are striving to go international and crack foreign markets. When dealing with businesses outside of your region, knowing the economic and technical differences in your target area is surely sufficient. So why is it that many individuals are experiencing pushback when it comes to their lack of cultural sensitivity and awareness?It's just as important to prepare for and familiarize yourself with your target country's cultural differences.
Do you know that Mexican businessmen prefer to avoid explicit disagreements and that their way of saying"no"is often disguised as a"maybe"or"I'll get back to you". Are you still waiting to hear back from a potential business partner in Mexico?Perhaps you've had their answer all along. Other cultural differences to note when doing business in Mexico include the 10-minute rule for punctuality, working hours, avoiding the use of aggressive paper or hand movements and ensuring that you do not stare for too long. Take note of these differences, for although your technical knowledge of Mexico's economic and tax rules may be exemplary, being unaware of their working culture may ultimately be your pitfall. Be sure to cry"Salud!"when toasting your business success in Mexico.
On the cultural side of things, the British are an interesting bunch with several peculiarities that those looking to do business with us should be aware of. For some cultures, making your introductions is standard, however, most British feel far more comfortable being introduced by a mutual party-be sure to take this into account if you find British lingering on the edge of the group uncomfortably.