International business refers to the trade of goods,
Exchange- the activity that requires any
services, technology, capital and/or knowledge
across national borders and at a global or
transnational scale.
 It involves cross-border transactions of
goods and services between two or more
countries.
 International business is also known as
globalization.
Symbol of Export in Economics= X
Symbol of Import in Economics= M
Symbol for Income in Economics = Y
Trade- exchange of goods and services
2 Classifications of Trade
1. Foreign Trade or International Trade- Theory of
comparative advantage (states that the country
should export the products on which the country
has the greatest advantage and import the product
on which it has the greatest disadvantages.)
2. Local or Domestic Trade- exchange of goods
and services within the country,
INTERNATIONAL TRADE- allows countries to
expand their markets and access goods and
services that otherwise may not have been
available domestically.
INTERNATIONAL BUSINESS relates to any
situation where the production or distribution of
goods or services, exchange or consumption
crosses country borders.
Phases of Economic Activities:
1. Production- the first phase of economic activities
that involves the transformation of diff inputs so that
the inputs might be converted to final products.
2. Distribution- this is the systematic way to
process on how commodities and income are
properly allocated among the economic
resources owners.
3.
transfer of money or trading of products
between buyers and sellers in a marketplace.
4. Consumption- the end phase of any economic
activity, which involves the utilization of goods
and services to provide satisfaction to people.
Economic Resources- are the inputs or resources
used in the productions of goods and services.
It is also known as FACTORS OF PRODUCTION.
Categories include in Economic Resources
1. Land- the physical space or are which production
takes place. It includes economy's natural
resources. Like trees, farmland, water resources,
gold and oil deposits.
2. Labor- the time physical and mental skills that
people contributed in producing goods and
services. Like farmer, teacher, nurse, carpenter and
call center representative.
3. Capital- the tools and other productive
equipment utilized in producing consumer
goods and services. Like plant, money, machine,
industrial robots and computer.
4. Entrepreneurship- a human resource responsible
fir combining or organizing the land, labor and
capital resources into a good or services. Like
CEO, manager, entrepreneur, company president
and product innovator.
2 types of income
1. Salary (white color jobs- professional level)
2. Wages (blue color jobs)
3 considered capitals in Economics
1. Tools
2. Equipment
3. Machine
Capital in Finance- Money
Capital in Accounting- Assets
 Objectives of international business
Entrepreneurship- is a humorous human resource
possible for combining and organizing the land, 1. Social and cultural exchange -between one
labor and capital resources into good resources. country to another.

People who manage and control the business and
the objective of entrepreneurship is to MAXIMIZE
PROFIT.
FORMULA OF PROFIT:
2. To help and assist developing countries in their
economic in terms of industrial growth.
3. To assure sustainable managements of the
resources globally.

Total Revenue (sale) minus Total cost (expenses)= 3 classifications of countries:

Profit
1. LDC- less developed countries or under
TR- TC= PROFIT developed or a third world countries.

2. IMC- intermediate countries

Resources can be classified into 3:
3. HDC- highly developed countries is always there
1. Human Resources to help the under developed countries in terms of
doing the expansions of the industrial and
2. Manmade Resources technology and markets.
3. Natural Resources Features of international trade

FACTORS THAT CAUSE SCARCITY OF

RESOURCES (limited) GLOBALIZATION

1. Supply induced  Globalization means the speed up of

2. Demand induced movement and the exchange of human
3. Structural Scarcity being goods and services, capital,
4. No effective substitutes
technological or cultural practices.

 Globalization is the new big word of the

EXCHANGE- is the activity that requires any
day because -----------
transfers of money or trading between buyers and
sellers in the market.
Effects of Globalization
Phase of economic activities- it involves the
utilization of goods and services to provide  Promotes and increases interaction
satisfactions to people. between different regions and population
around the world.
2 fundamental economic problems

1. Unlimited Satisfaction (in order to solve Impacts of Globalization

fundamental economic problems we need to erase
letter u and letter n)
2. Limited Resources (we should allocate the
economic resources) it includes economy’s natural
resources.
1. Economic Impact- is the improvement of the
standard of living, increase completion
among nations and the widening gap
between the rich and poor countries.
2. Increase of awareness of foreign culture-
aware of diff. culture
 3. Environmental impact- includes 1. Economic Globalization- development trade
deforestation and related problems (global system between corporations of a certain
warming and environmental managements different regions and countries.

Advantages of Globalization 2. Financial Globalization- considered as it can

be link a financial system
1. Increase competition- customers looking for
a cheaper of good but there is a better 3. Cultural- different countries to adopt
quality of the products you can survive the cultural system
competition if there is no quality you will not
survive. 4. Political- development of growing influence
by
2. Increase international mobility- it needs
skilled workers 5. Sociological- different information and
events to move into interconnection
3. Lower cost of production- there must be a
quality of products and must have lower 6. Technological- the will of the people are
cost of production. interconnected

4. Improvement of education- interest to 7. Geographical-

spread and improve cultural diversity 8. Ecological-
5. There is a reduction of poverty- because it
leads to more workers
Gross Domestic Product- all about the product in
6. Leads tremendously of the transport
the Philippines
services of the world

Gross National Product (GNP)

Disadvantages of Globalization
 is all about export and import
 Globalization is the key factor of
international business. This new era of  It refers to the total market value of all final
globalization brings competition to goods and services produced by citizen in
international market. There is specialization one (1) year.
and higher level of thinking.

1. Increase commodity price- we cannot 3 approaches of computing gross national product.

control the price of the imported products
1. Gross national product by expenditure
2. Exploitation of lower labor- approach

3. Cost of diseases 2. Gross national product by income approach

4. Increase relative poverty and inequality 3. Gross national product by income approach
5. Increase stability Formula by Expenditure Approach

6. Disparity among people 1. XN= X-M

7. Uneven distribution of goods 2. Ig= IN + CCA (capital consumption
allowances/ depreciation)
Examples of Globalization 3. GNP= c + G + Ig + Xn
Formula by Income Approach
1. To protect newly established domestic
1. CP=UCP+D+ CITX industries from foreign competition.
2. To protect aging and inefficient domestic
CORPORATE PROFIT= industries from foreign competition.
UNDISTRIBUTED CORPORATE PROFIT+ 3. To protect domestic producers from
DIVIDENT+ CORPORATE INCOME “dumping” by foreign companies or
TAXES) governments.

 GNP= R+I+W/S+PY+IBTX+CCA+CP 4. To raise revenue

GNP by Industrial origin approach IMPORTANCE OF TARIFFS

1. Agricultural sectors  Tariffs have three primary functions:

a) Forestry
b) Fishery 1. to serve as a source of revenue,
2. to protect domestic industries, and
2. Industrial sectors 3. to remedy trade distortions (punitive
function). 
a) Mining and Quarrying
b) Construction The revenue function comes from the fact
c) Manufacturing that the income from tariffs provides
d) Electricity governments with a source of funding.

3. Services sectors
NEGATIVE EFFECTS OF TARIFF
a) Transportation and
Communication  Negative consequences of the tariffs
b) Ownership and Real Estate increase on the broad economy {including
c) Trade higher prices, lower consumption, reduced
d) Finance business investment, and drops in the
e) Public Services valuations of affected firms.
f) Private Services

TWO DISADVANTAGES OF TARIFFS

TARIFF
 it is a political tool that has been used
throughout the history to control the amount
of imports that flow into a country and to
determine which nations will be granted the
most favorable trading conditions.
 A tariff is a tax or duty imposed by one
nation on the imported goods or services of
another country that serves to increase the
prices and make imports less desirable or
atleast competition vs. domestic goods and
services.
 Higher tariffs create protectionism
TARIFFS ARE GENERALLY IMPOSED FOR:
 Tariffs raise the price of imports. This
impacts consumers in the country applying
the tariff in the form of costlier imports.
When trading partners retaliate with their
own tariffs, it raises the cost of doing
business for exporting industries.
 Tariffs cause a decrease in product
quality.
ADVANTAGES/ BENEFIT OF TARIFF
 Tariffs mainly benefit the importing
countries, as they are the ones setting the
policy and receiving the money. The primary
benefit is that tariffs produce revenue on
goods and services brought into the
country. Tariffs can also serve as an
 opening point for negotiations between two What is an example of a quota?
countries.
 A quota is a type of trade restriction where a
How Do Tariffs Affect a Country’s Balance of government imposes a limit on the number
Trade? (Negative) or the value of a product that another
country can import.
 Tariffs make imported goods more
expensive, which obviously makes
 For example, a government may place a
consumers unhappy if those costs result in
quota limiting a neighboring nation to
higher prices.
importing no more than 10 tons of grain.
 Domestic companies that may rely on
imported materials to produce their goods
could see tariffs reducing their profits and  For example, the organization of petroleum
raise prices to make up the difference, exporting countries sets a production quota
which also hurts consumers. for crude oil in order to “maintain” the price
of crude oil in the world market.
POSITIVE NEGATIVE
- Reducing the -make imported Types of quotas
profits goods more
expensive that  Absolute quota – a simple physical limit on
makes the the number.
consumers unhappy
-Raises prices to -cost result in higher  Tariff rate quota – These allow a certain
make up the prices. number of imports to gain a discount on the
difference usual tariff rate.

 Voluntary export restraints (VER) - This is

QUOTA
 A quota is a government-imposed trade
restriction that limits the number or
monetary value of goods that a country can
import or export during a particular period.
Countries use quotas in international trade
to help regulate the volume of trade
between them and other countries.
 Countries sometimes impose quotas on
specific products to reduce imports and
increase domestic production.
How do quotas affect businesses?
when a government limits the amounts of
exports from one country to another for a
particular type of good.
Effect of import quotas
 An import quota is a limit on the amount of
imports that can be brought into a particular
country.
For example, the US may limit the number
of Japanese car imports to 2 million per
year.

 Quotas will reduce imports, and help
domestic suppliers. However, they will lead
to higher prices for consumers, a decline in
economic welfare and could lead to
retaliation with other countries placing tariffs
on our exports.
Quotas will reduce imports, and help
domestic suppliers. However, they will lead
to higher prices for consumers, a decline in
economic welfare and could lead to
retaliation with other countries placing tariffs
on our exports.

 The primary goal of import quotas is to Quotas will lead to lower sales for foreign
reduce imports and increase domestic companies, but it could push up prices and
production. make sales more profitable.