International Business
Due to legal environment. When you cross national environment change in which Natural environment, political economic and Cultural environment.
Q: Which activities deals in International Business?
Business in which cross-border activities involved;
• Home country
• Host country
Types of Companies W.R.T Internationalization:
• Domestic• International
• Multinational
• Gobal
1. Domestic Company:
Product as well as consumer are in homi country.e.g: Garment.
2. International Company:
Production in home country sells in host country as well. Home and host means exports.e.g: National foods, Mentor Pharmacist (international).
3. Multinational Companies:
Those companies which have production facility in host as well.Production and sells across the border.
e.g: Unilever (lux, India-Pak).
They are locally Responsive company (LRC).
4. Global Company:
Production facility across the border as well• products / also practices not vary in taste, quality and Standard.
• Relatively Same (Consistent).
e.g:
a. Tyres companies mostly global.
b. Fast food Industries. Because teenager taste, quality, thinking same that why global.
c. Micro Soft (technology Related). Because technology country to country not vary.
Passive Exports: In domestic companies of sells are not done in home country so they exports across.
Foreign Exchange:
Foreign Exchange means foreign currency.Currency:
• Strong Currency
• Weak Currency
Currency of our country will strong when the value, amount or price of dollar will weak.
• Strong Currency ; Exports decreases
• weak Currency ; Exports increases
Pakistan is not a very much freely floating country, It is controlled economy.
To maintain import and export of country, exchange rate of country increased or decreased.
Protectionist Policy:
Protectionist Policy is adopted to protect local industry just like tariff and quota policies.Foreign Exchange Market:
The place where one currency is treated for an other country. Trade is exchange market took place 24/7.With currency trading of highly liquidated assets also took place in foreign exchange market. There assets include's like Pakistani prize bondi which are easily liquidates.
Exchange Rate:
Rate at which one currency is treated with another Currency.There are two types of Quoting Exchange Rate:
1. Direct Quote:
Number of unity of domestic currency required to purchase one unit of foreign currency.
Like: Rs105/1 , $ 105 are required to purchase one dollar.
2. Indirect Quote:
Number of units of foreign currency are required to purchase one unit of foreign or domestic local currency.
Like: 0.0095 $ / Rs: 0.0095 $ units are required to purchase 1 rupees.
Currency Risk:
Due to depreciation in value of currency, Value of assets decreases.Convertible and Non-convertible Currencies:
• All currencies are not freely convertible currencies.
• Only vs Dollar and Euro are freely convertible.
• Pakistani and Indian rupees are not freely convertible.
• Government has banned on converting currency that's why currencies of countries are not convertible.
Reasons:
There are two reasons for which government has not adopted freely floating economy, they have controlled economy, they controlled the price of currency.
1. If their is freely floating economy then value of currency depends upon the demand of currency or currencies in international market. If buyer wants to purchase the currency in international market increase and vice versa. Due to depend upon the Market demand, the flactuation is to much increases.
i.e; Some time Currency value is high and some time low, due to this flactuation risk is greater, So the investor's importer's and exporter's hesitate in investing country because the value of currency is not stable. So, that the countries adopts controlled economy not freely Floating.
2. If country's economy is freely floating then at the time value of currency is depreciation the central bank interview in market and start purchasing it's own currency through foreign exchange reserves, which increases the demand of currency appreciates. So, in this way the developed countries sustain the value of currency and make it stable.
Countries like Pakistan have not enough foreign exchange reserves which was sufficient for raise in demand of currency.
Is the criteria to measure economy, not the high and low value of currency is indicator bor criteria to measure of economy.
• So that's why by thd control on demand and supply of currency, ths value of currency was sustain.