International Business and Trade Prelims (MODULE 1)

International Business

Commercial activities conducted across national borders to

satisfy needs/wants; involves exchange of goods, services, technology, capital, and knowledge

Components of International Business

International trade, foreign manufacturing, and services (transportation, tourism, advertising, consulting, construction, retailing, wholesaling, mass communications).

Three Environmental Forces

• Domestic Environment

• Foreign Environment

• International Environment

Domestic Environment

Uncontrollable forces originating in the home country

Foreign Environment

Uncontrollable forces originating outside the home country

International Environment

Interactions between domestic and foreign forces, or between two

foreign countries’ forces.

Competitive

Interactions between domestic and foreign forces, or between two

foreign countries’ forces.

Distributive

National/ international agencies distributing goods/services.

Economic

Variables like Gross National Income (GNI), unit labor cost, and personal

consumption expenditure.

Socioeconomic

Characteristics and distribution of human population.

Financial

Variables like interest rates, inflation rates, and taxation.

Legal

Foreign and domestic laws governing operations.

Physical

Nature elements (topography, climate, natural resources

Political

Nationalism, government forms, international organizations.

Sociocultural

Attitudes, beliefs, and opinions.

Labor

Composition, skills, and attitudes of workers.

Technological

Technical skills and equipment for resource conversion.

Self-Reference Criterion (SRC)

Unconscious reference to one's own cultural values; the primary

cause of IB blunders

Globalization

Process of eliminating barriers (trade, investment, technology, culture)

leading to geopolitical integration and interdependence.

Drivers of Globalization

Technological advancements, liberalization of trade policies, market

expansion, cost efficiency, and global institutions.

Emerging Economies

Countries implementing open trade and free-market policies.

International Monetary Fund (IMF)

Promotes global economic stability; functions include Economic Surveillance, Financial Assistance, Capacity Development, and International Cooperation

International Monetary System

System of exchange rates and payments for international

purchases.

World Bank

Provides financial/technical assistance to developing countries

World Bank Group (5 Institutions)

• IBRD

• IDA

• IFC

• MIGA

• ICSID

World Trade Organization (WTO)

Governs global trade; replaced GATT in 1995; 164 member

countries.