International Trade and International Business

International trade is the system in which countries exchange goods and services. It occurs when a firm exports goods and services to consumers in another country.

International trade allows a country to specialize in the goods and services that it can produce at a relatively low cost and export those goods in return for imports, whose domestic production is relatively costly. International trade enables the country - and the world - to consume and produce more than would be possible without trade.

Aside from the tangible benefit of increasing the world’s output of goods and services, trade has intangible benefits as well.

·         Trade offers diversity to our lives and work. The advantages of particular climates and lands are shared: the United States imports oil from the hot desert of Saudi Arabia to drive cars in cool comfort. Ukrainians can en- joy coffee, bananas, and spices without living in the tropics; and we can have the economy and durability of Japanese cars without driving in hectic Tokyo. Thus, international trade enables us to enjoy a more diverge menu of goods and services than would be possible without trade

·         World trade also encourages the diffusion of knowledge and culture because trade serves as a point of contact between people of different lands.

     An international business is any firm that engages in international trade or investment.

The task of managing an international business differs from a domestic business in many ways.

International business is different from domestic business for at least four reasons:

I           Countries are different (in their culture, political systems, economic systems, legal systems and level of economic development).

II       The range of Problerns confronted by a manager in international business is wider and the problems themselves more complex than those confronted by a manager in a domestic business.

International business must decide:

·         Which foreign markets to enter and which to avoid;

·         Where to site its production activities to minimize costs and to maximize value added;

·         How best to coordinate and control its globally dispersed production activities;

·         How to choose the appropriate mode for entering a particular foreign country.

International business must find ways to work within the limits imposed by government intervention in the international trade and investment system.

International business

·         Involves transactions across national borders;

must deal with government restrictions on international trade and investment;

·         must find ways within the limits imposed by specific government interventions in the sphere of international trade and investments;

·         has to regulate cross-border trade and investment and to develop strategies and policies for dealing with restrictions.

I          International transactions involve converting money into different currencies.

Cross-border transactions require:

·         that money be converted from the firm’s home currency into a foreign currency and vice versa;

·         international business must develop policies for dealing with exchange rate movements since currency exchange rates are not stable over time and vary to changing economic conditions.