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INTERNATIONAL
TRADE
MULTINATIONAL
CORPORATIONS
BUNGA ALFITRIA N
RIZKY MUHAMMAD F
WAFA SYAHIDAH
ZIDAN NAUFAL A
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01
INTERNATIONAL
TRADE
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DEFINITION INTERNATIONAL TRADE

International trade refers to as the transfer of goods and services which include capital goods from
one country to another. This definition was concurring by Economics Concepts (2012) who defined it
as trade across international boundaries. In most countries, such trade represents a significant share
of gross domestic product (GDP). While international trade has been present all the way through a
large amount of history, its economic, social and political importance has been on the rise in recent
centuries. Therefore, without international trade, nations would be limited to the goods and services
produced within their own borders. However, Economics Concept (2012) adds that, the difference
between international trade and domestic trade is that, this type of trade is more costly than domestic
trade. This is because the trade across international border require other charges or costs such as
tariffs, and other costs associated with country differences such as language, legal system or culture
are also incurred. Factors of production such as capital and labour typically move more freely within a
country than across countries. Therefore, these determinants really give clear polarization of the two
concepts to business individual and organisations.
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Classification of International Trade:

Import Trade Export Trade Entrepot Trade

It refers to purchase of goods from a foreign
country. Countries import goods which are
not produced by them either because of
cost disadvantage or because of physical
difficulties or even those goods which are
not produced in sufficient quantities so as to
meet their requirements.
It means the sale of goods to a foreign
country. In this trade the goods are
sent outside the country
When goods are imported from one country and
are exported to another country, it is called
entrepot trade. Here, the goods are imported not
for consumption or sale in the country but for re-
exporting to a third country. So importing of
foreign goods for export purposes is known as
entrepot trade
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Characteristics of International Trade

Separation of Buyers and Producers:
In inland trade producers and
buyers are from the same
country but in foreign trade they
belong to different countries.
Foreign Currency: Restrictions: Need for Middlemen:
Foreign trade involves payments Imports and exports involve a number of The rules, regulations and procedures
restrictions but by different countries. involved in foreign trade are so
in foreign currency. Different Normally, imports face many import duties complicated that there is a need to
foreign currencies are involved and restrictions imposed by importing take the help of middle men. They
while trading with other country. Similarly, various rules and
render their services for smooth
regulations are to be followed while sending
countries conduct of trade.
goods outside the country.

Risk Element: Law of Comparative Cost: Governmental Control:

The risk involved in foreign trade
is much higher since the goods
are taken to long distances and
even cross the oceans.
A country will specialise in the production of those
goods in which it has cost advantage. Such goods
are exported to other countries. On the other hand,
it will import those goods which have cost
disadvantage or it has no specific advantage.
In every country, government controls the
foreign trade. It gives permission for imports
and exports may influence the decision about
the countries with which trade is to take
place.
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Reasons of International Trade:
1- Reduced dependence on your local market
Your home market may be struggling due to economic pressures, but if you go
global, you will have immediate access to a practically unlimited range of
customers in areas where there is more money available to spend, and because
different cultures have different wants and needs, you can diversify your product
range to take advantage of these differences.
2- Increased chances of success
Unless you’ve got your pricing wrong, the higher the volume of products you sell,
the more profit you make, and overseas trade is an obvious way to increase sales.
In support of this, UK Trade and Investment (UKTI) claim that companies who go
global are 12% more likely to survive and excel than those who choose not to
export.
3- Increased efficiency
Benefit from the economies of scale that the export of your goods can bring – go
global and profitably use up any excess capacity in your business, smoothing the
load and avoiding the seasonal peaks and troughs that are the bane of the
production manager’s life.
4- Increased productivity
Statistics from UK Trade and Investment (UKTI) state that companies involved in
overseas trade can improve their productivity by 34% – imagine that, over a third
more with no increase in plant.
My work
5- Growth
The holy grail for any business, and something that has been lacking for a long
time in our manufacturing industries – more overseas trade = increased growth
opportunities, to benefit both your business and our economy as a whole.
6- Economic advantage
Unless you’ve got your pricing wrong, the higher the volume of products you sell,
the more profit you make, and overseas trade is an obvious way to increase sales.
In support of this, UK Trade and Investment (UKTI) claim that companies who go
global are 12% more likely to survive and excel than those who choose not to
export.
7- Differences in Economic Growth Rate
There are many differences in the economic growth rate of different countries.
Some countries are developed some are developing, while there are some other
countries which are under-developed: these under-developed and developing
countries have to depend upon developed ones for financial help, which ultimately
encourages international trade.
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—Need for International Trade:

In today’s world, economic life has become more complex and

diversified. No country can live in isolation and claim to be self-
sufficient. Even countries with different ideologies, culture, and
political, social and economic structure have trade relations with
each other. Thus, trade relations of U.S.A. with U.S.S.R. and China
with Japan are examples. The aim of international trade is to
increase production and to raise the standard of living of the
people. International trade helps citizens of one nation to consume
and enjoy the possession of goods produced in some other nation.
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0
MULTINATIONAL
CORPORATIONS
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DEFINITION MULTINATIONAL CORPORATIONS

The multinational corporation is a business organization
whose activities are located in more than two countries and
is the organizational form that defines foreign direct
investment. This form consists of a country location where
the firm is incorporated and of the establishment of
branches or subsidiaries in foreign countries. Multinational
companies can, obviously, vary in the extent of their
multinational activities in terms of the number of countries
in which they operate. A large multinational corporation can
operate in 100 countries, with hundreds of thousands of
employees located outside its home country. Some
examples of MNCs are – Burger King, Walmart, Adidas etc.
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Types of MNCs
Decentralised MNC
01 this corporation maintains a prominent presence
in its home country.

Centralized global corporation

02 this corporation has a chief administrative and management
01 03
office or head office which outsources production to developing
economies in order to lower costs.

International company
03 is a corporation that builds on the research and development of its
parent company to increase the success rate in its endeavours . 02

Transnational Enterprises
04 These corporations do business in several countries without one
location as a corporate home.
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Advantages of an MNC

• The MNC enjoys economies of scale,

thereby lowering cost of production.
• Enjoys high turnover and has a large
number of assets in its name.
• There is continued growth through
mergers, acquisitions, expansions etc.
• Use of capital intensive technology
enhances quality of the product.
• Access to a large, diverse talent pool.
• Increased innovation.
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Disadvantages of an MNC

• Indiscriminate use of resources and

environmental damage.
• Increases competition and oftentimes throws
smaller, domestic players out of the market.
• Profits are exported to the home country.
• Adverse impact on societies due to negative
externalities created.
• Powerful pressure group on the government.
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Difference between MNC and Domestic Corporation

Domestic
MNC Corporations
● It has physical presence in It has a simpler business
many countries model
● It has physical presence in its Subject to International
home country Financial Reporting
● An MNC has a more Standards (IFRS)
complicated Subject to Generally
Accepted Accounting
Principles (GAAP)
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Thank you so much

for you attention