2  TOPIC 1 WHAT IS INTERNATIONAL BUSINESS?

banks in other countries. Those involved in these transactions may include private
individuals, firms and government agencies. Figure 1.1 illustrates international
business transactions as opposed to domestic business transactions.

Figure 1.1: International business transactions

International business differs from domestic business due to several reasons. As

international business involves other countries, its activities are carried out using
different currencies, different legal systems and practices and in different cultures.
Countries also differ in the availability of their natural or labour resources,
resulting in varying production capabilities.

Finally, this topic shall include discussions on the types of international business
activities and its importance to countriesÊ economies, the reasons for its
tremendous growth, the concept of globalisation and its effects. This topic shall
also explain the major factors that motivate firms to engage in international
business and the challenges they face in todayÊs highly competitive environment.

1.1 THE IMPORTANCE OF INTERNATIONAL

BUSINESS
The field of international business has become increasingly important not only as
a subject of academic study but also how it affects our daily lives as individuals,
employees and citizens of a particular country.

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