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L1 - International Business and Trade

International business comprises commercial transactions that occur between two or more countries, including trade, investments, and transportation beyond a nation's borders. It involves the international movement of products, services, information, skills, labor, technology, and intellectual property. International business is broader in scope than simply international trade, as it also includes investments, tourism, banking and other transactions across national borders. Companies participate in international business to access raw materials, sell to foreign demand, pursue new market opportunities, make investments, and for other reasons.

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166 views4 pages

L1 - International Business and Trade

International business comprises commercial transactions that occur between two or more countries, including trade, investments, and transportation beyond a nation's borders. It involves the international movement of products, services, information, skills, labor, technology, and intellectual property. International business is broader in scope than simply international trade, as it also includes investments, tourism, banking and other transactions across national borders. Companies participate in international business to access raw materials, sell to foreign demand, pursue new market opportunities, make investments, and for other reasons.

Uploaded by

Maskter Archery
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Lesson 1: Introduction -

International Business and Trade


Domestic Business - are business transactions that take place within a country's
geographical borders; also known as domestic or national business.

International Business – According to Daniels, Radebaugh & Sullivan (2015),


International business comprises all commercial transactions, including sales,
investments, and transportation, that take place between two or more countries. In
simpler terms, this refers to as business transactions beyond a nation’s
geographical scope. This involves international movement
of:ProductsServicesInformation and dataSkillsManpower / human
resourcesTechnology (infrastructure or software)Patents, licenses, etc.

Key Differences between Domestic and International Business

● Nationality of Buyers and Sellers


● Nationality of other Stakeholders
● Mobility of Factors of Production
● Customer heterogeneity across marketsDifferences in business systems and
practices
● Political system and risks
● Business regulations and policies
● Currency used in business transactions
Differentiating International Business from International Trade

International Trade – international movement of products (imports and exports)


However, International Business is broader and more comprehensive and has a
bigger scope. It comprises other forms of transactions such as investments,
tourism, travel, transportation, communication, banking, distribution, advertising,
etc. International business includes all of the business activities necessary for
creating, shipping, and selling goods and services across national borders.
International business also may be referred to as global business, international
trade, and foreign trade. Companies in various countries participate in international
business for five main reasons.

Companies in various countries participate in international business for


five main reasons.

1. SOURCE OF RAW MATERIALS AND PARTS


2. DEMAND FOR FOREIGN PRODUCTS
3. NEW MARKET OPPORTUNITIES FOR BUSINESSES
4. INVESTMENT OPPORTUNITIES
INTERNATIONAL TRADE FUNDAMENTALS

International trade activities can be viewed from two sides—buyer and seller.
Products bought by a company or government from businesses in other countries
are called imports. For example, radios for France and computers for India. From
the point of view of the seller, exports are products sold to companies or
governments in other countries.

Trade barriers are restrictions that reduce free trade. They include import taxes
that increase the cost of foreign products, restrictions on imports, and laws
preventing certain products from coming into a country

One of the most common trade barriers is a tariff, a tax on imported items. Also
called an import duty, a tariff raises the cost of goods produced in other countries,
thus discouraging consumers from buying them.

Absolute advantage exists when a country can produce a good or service at a


lower cost than other countries. This situation may occur from natural resources or
raw materials of a country.

Comparative advantage, a situation in which a country specializes in the


production of a good or service at which it is relatively more efficient.

Gross domestic product (GDP) measures the output of a country within its
borders, including items produced with foreign resources.

Balance of trade is the difference between a country’s exports and imports.

When a country exports (sells) more than it imports (buys), it has a favorable
balance of trade. This is also called a trade surplus. However, if a country imports
more than it exports, the nation has an unfavorable balance of trade or a trade
deficit.

Balance of payments measures the total flow of money coming into a country
minus the total flow going out. Included in this economic measurement are exports,
imports, investments, tourist spending, and financial assistance.
1. What types of international business activities are faster and easier as a result of
technology?
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________

2. In what ways might you and others in your community be affected by


international trade?

__________________________________________________________________
__________________________________________________________________
__________________________________________________________________

2. How do imports differ from exports?


__________________________________________________________________
__________________________________________________________________
__________________________________________________________________

3. Research an event from world history. Write a short paper explaining how that
event might encourage or deter trade among countries.

4. Select a country in Asia, Europe, or Latin America. Research the major exports
and imports for that country. Prepare a graph or chart displaying the top exports
and exports of that nation.

5. Select a country in Africa, Latin America, or the Middle East. Research to


determine its major trading partners. Write a paragraph explaining why this country
likely trades with those other nations.

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