Introduction to

International Trade &

Business
 International Trade vs. International Business
International Trade
• economic transactions that are made between
countries.
• commonly traded are consumer goods, such as
television sets and clothing; capital goods, such
as machinery; and raw materials and food.
• Other transactions involve services, such as
travel services and payments for foreign patents
International Business
• very important for the sustenance of a
country as the gross domestic product or
the GDP is reliant on good foreign
business.
• It is a very broad term because it holds
various types of rules and regulations.
• It refers to business activities that take
place transversely national frontiers.
• international trade transactions are facilitated •  It refers to business activities that take place
 by international financial payments, in which transversely national frontiers.
the private banking system and the  • Transactions that are devised and carried out
central banks of the trading nations play across national boarders to satisfy the objectives
important roles. of individuals, companies and organizations.

• generally conducted for the purpose of • Multinational corporations & international

providing a nation with commodities it lacks in business companies exchange business in
multiple countries
exchange for those that it produces in
abundance; such transactions, functioning
with other economic policies, tend to improve
a nation’s standard of living.
• The scope of International Business
• international business is much broader than
international trade.
• It includes not only international trade (i.e.,
export and import of goods and services) but
also a wide variety of other ways in which the
firms operate internationally. 
 Major forms of business operations that constitute international
business are as follows.
Merchandise exports and imports
Service exports and imports
Licensing and franchising

• Monopoly Power
• Benefiting from currency exchange
• Limitations of Domestic Market
• Increased revenues
• Growth opportunities
• Expand and diversify
• Opportunity to specialize
 Need for International Business

Causes the flow of Offer new choices of Permits the acquisition

ideas , services & capital products/ services to of a wider variety of
across the world consumers products

Facilitate the mobility

Relocate resources
of labor, capital and
makes preferential
technology/ challenging
choices & shifts
employment
activities to global level
opportunities
 Types of International Business

Export-import Foreign direct

trade investment Licensing

Management
Franchising
contract
 Export-import trade

The sale of products and services in foreign

countries that are sourced or made in the home
country. ... Importing refers to buying goods and
services from foreign sources and bringing them
back into the home country.
 Foreign direct investment

is an investment made by a company or individual

in one country in business interests in another
country. FDI is done in the form of either
establishing business operations or acquiring
business assets in the other country, such as
ownership or controlling interest in a foreign
company.
 Licensing

a business arrangement in which one company

gives another company permission to
manufacture its product for a specified payment.
...
Under a licensing agreement, the multinational
firm grants rights on its intangible property to a
foreign company for a specified period of time.
 Franchising

It typically involves a franchisor who grants to

an individual or company (the franchisee), the
right to run a business selling a product or
service under the franchisor's successful
business model and identified by the
franchisor's trademark or brand.
Management contract

a way for managed firms to attain expertise

and/or experience in a new field . For the
managing firm, such a contract serves as a
source of income as well as an opportunity
to scout a new market and establish the
company or its brand there.
 Globalization

• means the speedup of movements and exchanges (of human beings,

goods, and services, capital, technologies or cultural practices) all over
the planet.
• effects of globalization is that it promotes and increases
interactions between different regions and populations around
the globe
the increased interconnectedness and interdependence
of peoples and countries.

It is generally understood to include two inter-related

elements:

 the opening of international borders to increasingly

fast flows of goods, services, finance, people and
ideas;
 and the changes in institutions and policies at national
and international levels that facilitate or promote such
flows.”