INTRODUCTION TO INTERNATIONAL
BUSINESS AND TRADE
INTERNATIONAL BUSINESS
 The performance of trade and investment
activities by firms across national borders
 Cross-border business
 Because it goes beyond the geographical
border of the country
 Transactions are devised and carried out across
national borders to satisfy the objectives of
individuals, companies and organizations
 The economic system of exchanging goods and
services, conducted between individuals and
business in multiple countries
 International Business allows us to
access product and services around the
world and it intensely affect the quality of
life and economic well-being of people.
TYPES
 Export-Import trade
 Foreign Direct Investment (FDI)
 Licensing
A business arrangement in which one company
gives another company permission to
manufacture its product for a specified payment.
 Franchising
 The methods of practicing and using another
person's business philosophy
 Franchisor grants the independent operator
the right to distribute its products, techniques,
and trademarks for a percentage of gross
monthly sales and a royalty fee
 Various tangibles and intangibles such as
national or international advertising, training,
and other support services are commonly
made available by the franchisor
 Agreements typically last from five to thirty
years, with premature cancellations or
terminations of most contracts bearing
serious consequences for franchisees
 Management of contract
 An agreement between investors or owners
of a project, and a management company
hired for coordinating and overseeing a
contract
 An agreement by which a company will
provide its organizational and management
expertise in the form of services.
GLOBALIZATION
 The group of international activities
coincides with the broader phenomenon
of globalization of markets, for that
reason people would say International
business is Globalization.
 The increasing integration of economies around
the world through trade, financial flows,
movement of people and ideas facilitated by the
revolution
in
telecommunication
and
transportation
 Interdependence of countries around the world
 Increase in the efficiency of business firms
worldwide to withstand international competition.
 Internationalization of the firms refers to the
tendency of the companies to systematically
increase the international scope/dimension
of their business activities, this happen in a
micro trend while globalization refers to a
makrotrend intensive economic relations or
interconnectedness between the countries
in the world.
 Leads to compression of time and space,
 it allows firms to internationalize and has
substantially increase the volume and variety
of cross border transactions in goods
services and capital flows.
GLOBALIZATION RELATED TRENDS
 It has led to more rapid and wide
diffusion of product, technology and
knowledge worldwide regardless of
origin. It practical term, the globalization
of market is evident several related
trends;
1. Unprecedented growth of international trade
2. Trade between nations is accompanied by
substantial flows of capital, technology, and
knowledge
3. Development of highly sophisticated global
financial systems and mechanisms that
facilitate the cross border flow of products,
money, technology, and knowledge
4. Greater degree of collaboration among nations
through multilateral regulatory agencies such as
the World Trade Organization (WTO) and the
International Monetary Fund (IMF).
INTERNATIONAL TRADE
 Globalization both compels and facilitate
companies to pursue cross-border business
and
international
expansion.
Simultaneously, going to international for a
firm has become easier than even before. A
few decades ago, international business was
largely the domain of large multinational
companies but recent developments have
created a more level playing field that allows
firms of any size to benefit from active
participation in international business then once
dominated by manufacturing firms today, it is no
longer the case. Companies in the services such
as industries, as banking, transportation
engineering, design, advertising and retailing are
now internationalizing.
 The most conventional form of international
business transactions are international trade and
investment. International trade is the exchange
of goods and services among countries;
Total trade = export + imports
 The exchange of goods and services among
countries
 Involves both products (merchandise) and
services (intangibles)
Exports is the sale of products or services from the
home country to customers located abroad.
 the products or services is coming from the
home country
 Outbound activity
 The domestically produced goods are sold
abroad
Imports (or global sourcing) is the procurement of
products or services from suppliers located abroad
for consumption in the home country
 Inbound activity
 Foreign good are sold locally
 WORLD TRADE (2018)
o Total trade is USD39.7 trillion

Exports was USD20.8 trillion
Imports was USD 18.9 trillion
o Top 5 importing countries
 United States
 China
 Germany
 Hong Kong, China
 United Kingdom

o Top 5 exporting countries
 China
 United States
 Germany
 Japan
 Republic of Korea
o Total trade is 46% of the USD86 trillion global
economy