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Challenges in Global Business

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Evaluate the barriers to international trade and determine which barrier is the most significant overall. Explain your rationale.

Imagine you are the owner of a business on the brink of going global. Briefly describe your business and develop a strategy for expanding your business globally.

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Competing in World Markets

The most common barriers to trade are local Culture, tariffs, quotas, and non-tariff barriers.
Local culture includes local languages, religion, values and attitudes, education, social organization, law and politics.


Answers.com, "Culture and Marketing Mix", retrieved on April 13, 2011 from http://wiki.answers.com/Q/What_impact_could_culture_have_on_the_international_marketing_mix

Local culture dictates the buying preferences of its inhabitants.

A tariff is a tax on imports, which is collected by the federal government and which raises the price of the good to the consumer. Also known as duties or import duties, tariffs usually aim first to limit imports and second to raise revenue.

A quota is a limit on the amount of a certain type of good that may be imported into the country. A quota can be either voluntary or legally enforced.

A tariff is a tax on imported goods, while a quota is a limit on the amount of goods that may be imported. Both tariffs and quotas raise the price of and lower the demand for the goods to which they apply. Nontariff barriers, such as regulations calling for a certain percentage of locally produced content in the product, also have the same effect, but not as directly.

You may wonder why a nation would ever choose to use a quota when a tariff has the added advantage of raising revenue. The major reason is that quotas allow the nation that uses them to decide the quantity to be imported and let the price go where it will. A tariff adjusts the price, but leaves the post-tariff quantity to market forces. Therefore, it is less predictable and precise than a quota.

The effect of tariffs and quotas is the same: to limit imports and protect domestic producers from foreign competition. A tariff raises the price of the foreign good beyond the market equilibrium price, which decreases the demand for and, eventually, the supply of the foreign good. A quota limits the supply to a certain quantity, which raises the price beyond the market equilibrium level and thus decreases demand.

Tariffs come in different forms, mostly depending on the motivation, or rather the stated motivation. (The actual motivation is always to limit imports.) For instance, a tariff may be levied in order to bring the price of the imported good up to the level of the domestically produced good. This so-called scientific tariff-which to an ...

Solution Summary

This solution evaluates the barriers to international trade. It also determines which barrier is the most significant overall.
This includes discussion on what the owner of a business can do on the brink of going global.It describes also the challenges a business encounters when going global.