International Economics
Name:
Institution:
International Economics
Part I
Entering international markets affects businesses, regions and a country in various ways. One of the effects of the international arena to a business is access to new customers. Through international markets, a business can access a wider variety of customers (Welch, Benito & Petersen, 2007). To a region, this can mean increased competition for local goods. It can also avail products that were hard to get locally, lowering their price significantly. One effect of international arena to the country as a whole is the risk of off shoring. Being in United States means manufacturing is costly compared to other countries. In overseas, it would be cheaper, which means I will manufacture most of the products there. This will save the business some costs, but people back in the country will lose their jobs. My region will be affected too because the community will have lost a source of revenue.
Some of the risks to my business include political, cultural and economic. Political refers to the potential of government policies and upheavals affecting operations of the business. Cultural risks on the other hand refer to the likelihood that a business will struggle in another country because of factors such as language difference, customer preference, norms and customs. Finally, economic risks can affect the business due to factors such as currency exchange, property costs and protections amongst others. The advantages include increased customers, lowered costs and risk diversification. To the welfare of the country, more revenues for the business mean more for the government as well (Welch, Benito & Petersen, 2007). Therefore, the country stands to benefit through taxation.
Part II
If I were the owner of an automotive company, I would face imperfect competition. This is a type of competition where there are few suppliers with the ability to influence the market. This is the opposite of a perfect competition where the market itself controls everything. What makes the international market of automobile imperfect is the fact the there is not easy entrance and one has to invest heavily to start. Some of the circumstances I would have to be aware of in such competition are that competitors can influence the prices. Entrance and exit out of the market is hard and customers do not have full knowledge about the products (Welch, Benito & Petersen, 2007).
If I were a major retailer in United States,
I would face perfect competitions because I would have no control over the
goods I sell. In such a case, I would be aware of the fact that there is no
barrier to entrance or exit. In addition, all firms are price-takers and have
relatively small market shares. At this moment, I do not think I know enough to
make such a major decision because I have not had any experience in
international business.
References:
Welch, L. S., Benito, G. R. G. & Petersen, B. (2007). Foreign Operation Methods: Theory, Analysis, Strategy. Cheltenham, UK: Edward Elgar.