IBT M1

International Business

The activity of exchanging goods and services between countries.

Domestic Business

The making, buying, and selling of goods and services within a single country.

Global Business / Foreign Trade

Business activities involved in creating, shipping, and selling goods and services across national borders.

Importance of International Business

 It provides a source of raw materials and parts and demand for foreign products.
 Global business allows for new market and investment opportunities.
 It can even help improve political relations.

Early International Trade

Evidence shows that countries such as China, India, and Japan traded goods globally around 15,000 years ago.

Ancient Trade (5th Century B.C.)

Greek and Middle Eastern merchants were actively engaged in foreign trade.

Roman Empire

Dominated international business and trade for more than 600 years.

Arab Empire Trade Expansion

Connected traders from Portugal, Spain, Northern Africa, the Middle East, and China, expanding global trade networks.

Age of Exploration

Viking explorers reached Iceland and Greenland, contributing to early trade exploration.

Industrial Revolution (1769–1915)

Important inventions increased global trade and communication:

Cotton Gin

Steam Engine

Telephone

Modern International Business

Global trade today creates strong economic interdependence among countries

Market Price

The point where supply and demand intersect.

Demand-Pull Inflation

Prices rise because demand is greater than supply.

Cost-Push Inflation

Prices rise because production costs increase, such as wages or raw materials.

Factors of Production

• Natural Resources (Land) = Raw materials from nature.

• Human Resources (Labor) = People who work and provide skills.

• Capital Resources (Capital) = Tools, machines, and equipment used in production.

Economic System

The method a country uses to decide what, how, and for whom goods and services will be produced.

Command Economy

The government controls production, distribution, and prices.

Communism

A political and economic system where the government owns all resources and a single party controls the government.

Market Economy

Individuals and businesses make economic decisions.

Capitalism

An economic system based on private ownership and free markets.

Characteristics of Market Economy

Private Property
Profit Motive
Free Competitive Market

Mixed Economy

An economic system combining government involvement and private ownership.

Socialism

A system where major industries are owned and operated by the government but controlled by the people.

Privatization

The process of transferring ownership from the government to private businesses.

Economic Development

Economic Development

Factors influencing development:

Literacy Level
Technology
Agriculture dependency

Types of Countries

Industrialized Country
Less-Developed Countries (LDCs)
Developing Countries

Industrialized Country

A nation with advanced technology, strong business activity, and a high standard of living.

Less-Developed Countries (LDCs)

Countries with low standards of living that rely mainly on agriculture or mining.

Developing Countries

Nations transitioning from less-developed to industrialized through improved education, technology, and industry.

Absolute Advantage

When a country can produce a good or service at a lower cost than another country.

Comparative Advantage

When a country specializes in producing goods it can produce more efficiently compared to other goods.

Gross Domestic Product (GDP)

The total value of goods and services produced within a country’s borders, including production by foreign companies operating in the country.

Gross National Product (GNP)

The total value of goods and services produced by a country’s resources, including production both inside and outside the country.