INTERNATIONAL

BUSINESS AND TRADE

INTRODUCTION:
GLOBALIZATION &
INTERNATIONAL
TRADE

GROUP 1 BSA-3
INTRODUCTION

History
Theories and Principles
Describe the environment TRADE
affecting international trade.
Identify institutions and policies
affecting international trade.
Explain how globalization and
international trade affects the
business environment.
 GLOBALIZATION

the interdependent relationships among

people from different regions and countries

has dramatically changed the way people

behave and conduct their lives - including
business and trade

in business, it’s the force that eliminates the

separation of countries and allows each
one free movement of goods, services,
capital, technology, and people, integrating
each country into the global economy
 DOMESTIC VS INTERNATIONAL BUSINESS

DOMESTIC BUSINESS
INTERNATIONAL BUSINESS
(NATIONAL BUSINESS)

are business transactions happening is comprised of all commercial

within the geographical boundaries of transactions, including sales,
a nation investments, and transportation, that
take place between two or more
countries
 DOMESTIC BUSINESS VS
INTERNATIONAL BUSINESS

a. Nationality of Buyers and Sellers

b. Nationality of other Stakeholders
c. Mobility of Factors of Production
d. Customer heterogeneity across markets
KEY DIFFERENCES e. Differences in business systems and practices
f. Political system and risks
g. Business regulations and policies
h. Currency used in business transactions
 INTERNATIONAL BUSINESS

1 2 3
is a comprised of all is a much broader a multinational
commercial concept and includes enterprises (MNE) is a
transactions, including international trade, company that has a
sales, investments, direct foreign worldwide approach
and transportation, production or any other to markets and
activity across
that take place production or one with
countries conducted by
between two or more operations in more
an entity in managing
countries than a country
and carrying out its
operations
 INTERNATIONAL TRADE

1 2 3
is the exchange of trading globally
capital, goods, and is a much narrow gives consumers
services across set of activities and and countries the
international consists of exports opportunity to be
borders or and imports only exposed to new
territories markets and
products
 COMPONENTS OF INTERNATIONAL TRADE

EXPORT IMPORT
refers to a product or service is a good or service produced
produced in one country but abroad and purchased in your
sold to a buyer abroad home country
 TWO TYPES OF INTERNATIONAL TRADE
BILATERAL
TRADE
is a trade carried out between two
countries based on the agreement deal of
not using currency for payment. In this
trade a country sells its surplus goods to a
needy country and in return buys an
equally valuable required goods from the
same country
MULTILATERAL
TRADE
is a trade carried out between many
countries. In this trade a country sells its
surplus goods to the needy country by
getting revenue and buys the required
good from another country by using the
same revenue
 HISTORY

WORLD POST-WORLD
MERCANTILISM WAR I WAR II

SILK ROAD LIBERALISM THE GREAT

DEPRESSION
 SILK ROAD
H
It refers to a network of ancient trade routes that connected the East and West, facilitating the
exchange of goods, ideas, cultures, and technologies between regions of Asia, the Middle East,
Africa, and Europe. I
These routes facilitated the exchange not only of goods but also of cultures, religions (such as
Buddhism and Islam), and knowledge.
It played a crucial role in shaping the world's history by fostering connections between
S
civilizations and enabling the exchange of goods and ideas on a global scale.
T
MERCANTILISM
O
It was an economic and political theory that dominated European
economic thought from the 16th to the 18th centuries that is often
associated with the early modern period and the colonial expansion of R
European powers.
It is characterized by a set of principles and policies aimed at
promoting a country's economic strength through its trade and
Y
accumulation of wealth.
 ADAM SMITH’S WEALTH OF NATIONS (LIBERALISM)
It is a seminal work in economics that laid the foundation for modern economic thought and the
principles of classical liberalism.
The book was published in 1776 and was considered one of the most influential texts in the field of
economics and has had a profound impact on the development of capitalist and liberal economic
theories.

WORLD WAR I (“NEW” MERCANTILISM)

It is a global conflict involving many of the world's major powers. It had significant
social, political, and economic implications, reshaping the global landscape in
various ways.
Many countries adopted war economies, where governments took direct
control over economic resources, industries, and production. This level of
government intervention resembled certain aspects of mercantilism, where
the state played a central role in economic activities.
 THE GREAT DEPRESSION

It was the most devastating economic crisis in modern history, causing widespread unemployment,
poverty, and a significant decline in economic activity across many countries.
It came to an end with the onset of World War II, as the massive government spending associated
with war efforts helped stimulate economies and alleviate unemployment.

POST-WORLD WAR II
It refers to the period after the conclusion of World War II which ended in 1945.
This period laid the groundwork for the modern world, shaping international
relations, economic systems, and cultural dynamics. The legacy of this period
continues to influence contemporary politics, economics, and social trends.
.
 THEORIES AND PRINCIPLES
A. INTERVENTIONIST THEORIES

MERCANTILISM NEOMERCANTILISM

Mercantilism held that a country's wealth was It has emerged to describe the approach of
measured by its holdings of treasure, which countries that try to run favorable balances
usually meant its gold. A country should of trade in an attempt to achieve some social
increase export more than import. or political objective.
 FREE TRADE THEORIES

ABSOLUTE ADVANTAGE COMPARATIVE ADVANTAGE

It refers to the ability to produce more or It refers to the ability to produce goods and
better goods and services than other services at a lower opportunity cost, not
business. necessarily at a greater volume or quality.
 DYNAMICS OF TRADE

PRODUCT LIFE CYCLE (PLC)

PORTER DIAMOND
THEORY
The framework of the theory is, therefore, a useful tool for
The theory of trade states that the location of
understanding how and where globally competitive
production of certain kinds of products shifts as
companies develop and sustain themselves.
they go through their life cycles, which consist of
four stages: The theory showing four conditions as important for
Introduction competitive superiority:
Growth Demand Conditions
Maturity Factor Conditions
Related and supporting industries
Decline
Firm strategy, structure, and rivalry
BREAK
SLIDE
4 PICS 1 WORD
 ENVIRONMENT AFFECTING
INTERNATIONAL TRADE

1 2 3 4
GEO-
CULTURAL ECONOMIC
POLITICAL & GRAPHICAL
Location Exchange Rate
Cultural LEGAL Natural Resources Infaltion
Diversity Climate Productivity/Labor
Population Density National Income
Transport and
Communication
 ENVIRONMENT AFFECTING
INTERNATIONAL TRADE
1 2
CULTURAL
Cultural Diversity
Every country's people have different
religious beliefs, lifestyles, customs and
traditions, and preferences. Because of
these differences, demand and
production in each country differ.
POLITICAL & LEGAL
A country’s government can have a
major effect on its balance of trade due
to its policies on subsidizing exporters,
restrictions on imports, or lack of
enforcement on piracy.
When foreign trade restrictions are
relaxed, it is easier for domestic firms to
sell their products to other countries.
 ENVIRONMENT AFFECTING
INTERNATIONAL TRADE

Location
Countries that are close to one another tend to trade more than countries

3
that are far apart. This is because transporting goods over shorter
distances is easier and less expensive.

Natural resources
GEOGRAPHICAL
Natural resources like primary fossil fuels, mining products, and solid
forestry products drive nations' economic development. Natural resource
demand in an economy is heavily reliant on international trade due to
characteristics such as uneven distribution and exhaustibility (WTO, 2010).
 ENVIRONMENT AFFECTING
INTERNATIONAL TRADE

Climate
Climate change is affecting international trade and economic

3
development prospects. Extreme weather can disrupt supply chains,
damage transportation infrastructure required for goods trade, and limit
people's ability to travel.
GEOGRAPHICAL
Population Density
In countries with a larger population and a lower standard of living, there is
a greater demand for necessities and a lower demand for articles of
comfort and luxury.
 ENVIRONMENT AFFECTING
INTERNATIONAL TRADE

3 Means of Transport and Communication

Communication techniques enable traders to connect with other traders,
and the availability of cheap and fast modes of transportation and
GEOGRAPHICAL communication facilitates the transportation of goods to remote locations.
 ENVIRONMENT AFFECTING
INTERNATIONAL TRADE

Exchange rates
An increase in exchange rates reduces the balance of trade in a country by
reducing exports and increasing imports.

Inflation
If a country’s inflation rate increases relative to the countries with which it
4
trades, its current account will be expected to decrease, other things being ECONOMIC
equal.
Due to high local inflation, consumers and corporations in that country will
most likely purchase more goods abroad, while exports to other countries will
decline.
 ENVIRONMENT AFFECTING
INTERNATIONAL TRADE

Productivity/ Labor
The more productive a country’s workers are, the lower the labor costs per
unit and cheaper its products - so exports should increase and imports
decrease.
4
National Income ECONOMIC
If a country's income level (national income) increases compared to other
countries, its current account is expected to fall. The rise in real income
(adjusted for inflation) reflects increased demand for foreign goods.
INSTITUTIONS AFFECTING
INTERNATIONAL TRADE

World Bank
-Owned by 187 countries
-Works to reduce poverty and promote development in
low income countries

World Trade Organization (WTO)

-159 members
-Works to negatiate trade agreements, settle disputes,
and establish rules of trade

International Monetary Fund (IMF)

-Promotes economic growth, financial stability, works to
reduce poverty and mediates international trade
INSTITUTIONS AFFECTING
INTERNATIONAL TRADE

Other International Economic Organizations:

• International Bank of Reconstruction and Development (IBRD)

• International Trade Organization (ITO)
• Nations Conference on Trade and Development (UNCTAD)
• Asia Pacific Economic Cooperation (APEC)
• Association of South East Asian Nations (ASEAN)
 POLICIES AFFECTING
INTERNATIONAL TRADE

TRADE POLICIES TYPES OF TRADE INSTRUMENTS

POLICY OF TRADE
POLICY
TRADE POLICY

A trade policy is a government policy that affects the number of goods and
services a country exports and imports.

• Free trade is when there are no government restrictions on trade.

• Protectionism is when governments set trade restrictions to help domestic
industries.
 TYPES OF TRADE POLICY

• Import - a good or service that is manufactured or provided in another

country and sold domestically

• Export - a good or service that is manufactured or provided domestically

but sold in another country
 INSTRUMENTS OF TRADE
POLICY
• Tariff - tax placed on an imported
good or service
• Import Quota - restriction on the
amount of a good or service that can
be imported in a set time frame
• Export Subsidy - money paid by the
government to exporters of a good
• Voluntary Export Restraints (VER) -
an export quota that restricts the
quantity of a good that can be
exported to another country
• Local Content Requirements (LCR) -
a trade policy that mandates that a
portion of the goods that producers
manufacture be produced
domestically
• Other Trade Policies - export credit
subsidies, red-tape barriers, and
government procurement that serve to
benefit the citizens of the nation, be it
economically or by protecting their
health
 MORE JOB ENHANCED COMPANY
OPPORTUNITIES REPUTATION

EXPANDING TARGET OPPORTUNITIES TO

MARKETS & INCREASING SPECIALIZE
REVENUES

ADVANTAGES/BENEFITS
OBTAINING VALUABLE
IMPROVED RISK
OF INTERNATIONAL FOREX
MANAGEMENT
BUSINESS AND TRADE

CULTURAL
GREATER VARIETY OF
DEVELOPMENT
GOODS AVAILABLE

INCREASING PUBLIC
BETTER RELATIONS
INCOME
BETWEEN COUNTRIES
COMPETITION
LANGUAGE
BETWEEN
NATIONS ISSUES

COLONIZATION COMPLEX
TECHNICAL STEPS
DISADVANTAGES/BARRIERS
OF INTERNATIONAL
BUSINESS AND TRADE
SHORTAGE OF
EXPLOITATION COMMODITIES IN
EXPORTING COUNTRIES

LEGAL ISSUES NEGATIVE IMPACT ON

THE DOMESTIC INDUSTRY
CURRENT SITUATION OF INTERNATIONAL
TRADE IN PHILIPPINE ECONOMY

It stimulates economic growth, provides access to foreign technology, promotes diversification,

fosters specialization, promotes cultural exchanges, and contributes to poverty alleviation. Therefore,
International trade is crucial in promoting economic growth and development in the Philippines. By
expanding market access, encouraging specialization, facilitating technology transfer, attracting
foreign investment, and promoting diversification, trade enhances productivity, creates employment
opportunities, and improves Filipino people's overall standard of living. Participation in international
trade helps diversify a country's income sources. The Philippines can reduce dependence on any
industry or market by exporting a wide range of products and services.
 MEET OUR BEST TEAM

ABRIGO, KIANNA JOY

CAMACHO, PRINCESS DIANNE
DE ALDAY, TRISTAH MONICA
GUEVARRA, KATHLEEN
MUSICO, KRIZELL
REYNOSO, XIALLEMHER
REFERENCES

https://www.studysmarter.co.uk/explanations/microeconomics/market-efficiency/trade-policy/
https://youtu.be/xWwXKmNnBZs?si=88VJa_4aJ0NQ-tvJ
https://youtu.be/uBEhikGJYyI?si=4EWj6ujT26abKU-l
https://www.everstudy.co.in/blog/international-economic-
institutions#:~:text=There%20are%20three%20major%20international,in%20favor%20of%20developed%2
0countries.
https://opentext.wsu.edu/cpim/chapter/3-4-what-is-culture/
https://brightoncollege.com/blog/7-key-benefits-of-international-trade/
https://www.easymanagementnotes.com/advantages-and-disadvantages-of-international-
business/
https://papers.ssrn.com/sol3/papers.cfm?
abstract_id=4454229#:~:text=It%20stimulates%20economic%20growth%2C%20provides,and%20contrib
utes%20to%20poverty%20alleviation.
https://www.investopedia.com/terms/c/comparativeadvantage.asp#:~:text=Absolute%20advantage%
20refers%20to%20the%20ability%20to%20produce%20more%20or,a%20greater%20volume%20or%20qua
lity
REFERENCES

https://www.mpboardonline.com/answer/class-10-social-science-em/123.html
https://limbd.org/factors-affecting-international-trade-flows-difference-between-balance-of-trade-
and-balance-of-payments/
https://www.yourarticlelibrary.com/foreign-trade/7-most-influential-factors-affecting-foreign-
trade/5938
https://www.yourarticlelibrary.com/economics/8-factors-influencing-the-value-of-a-countrys-
exports-and-imports/32931
https://www.sciencedirect.com/science/article/abs/pii/S0959652623002688#:~:text=Natural%20resou
rces%20such%20as%20primary,trade%20(WTO%2C%202010).
https://www.lse.ac.uk/granthaminstitute/explainers/how-does-climate-change-impact-on-
international-
trade/#:~:text=Climate%20change%20is%20affecting%20prospects,restrict%20people's%20ability%20to
%20travel.
https://www.investopedia.com/terms/e/export.asp
https://www.investopedia.com/terms/i/import.asp
https://www.toppr.com/ask/content/concept/trade-and-factors-affecting-trade-206058/
THANK
YOU!

ANY QUESTIONS?