International Business and Trade

International Business 
 the trade of goods, services, technology, capital and/or knowledge across national borders
and at a global transnational level.
 the study of the internationalization process of multinational enterprises.
Multinational Enterprises - a company that has a worldwide approach to markets, production
and/or operations in several countries.
Globalization - the socio economic reform process of eliminating trade, investment, information
technology and cultural and political barriers across countries which in turn can lead to increase
economic growth , geopolitical integration and interdependence among nations of the world. 
Emerging economies – countries that are implementing more open trade and free market
policies

Key International Institutions that Facilitate Globalization

International Monetary Fund (IMF)
 Conceived - 1944
 Formal existence - December 1945, 29 member countries signed the Articles of
Agreement
 Began operations – March 1, 1947, Washington DC.

Primary Role: Provide global and financial stability

IMF continues to:
 Provide a forum for cooperation of international monetary problems;
 Facilitate the sustainable growth of international trade- promoting job creation, economic
growth and poverty reduction;
 Promote exchange rate stability and an open system of international payments; and
 Lend countries foreign exchange when needed to help address balance of payments
problems.
The World Bank (WB)
 Conceived – Bretton Woods Conference in 1944
 Initial primary role: Reconstruction of Europe after World War II
 First loan - $250 Million to France in 1947 for post war reconstruction.
 Headquarter – Washington, D.C

The World Bank Group’s Developmental Institutions

INSTITUTION
International Bank for Reconstruction and
Development (IBRD)
International Development Assistance (IDA)
International Finance Corporation (IFC)
ROLE
Support reconstruction and restructuring of
member countries using funds raised in
international capital markets.
Provide long-term low-interest social sector and
infrastructure loans to poorest members using
foreign aid funds
Provides loans and takes equity position in
 private companies of developing countries and
works toward developing capital markets in those
economies.
Multilateral Investment Guarantee Agency Provides political risk coverage for private
(MIGA) investments made in developing countries.

International Center for the Settlement of Works on issues related to foreign investment
Investment Disputes (ICSID) disputes
World Trade Organization (WTO)

 Operation – January 1, 1995

 Trading system – began in 1948 under the General Agreement on Tariffs and Trade (GATT)
 Geneva, Switzerland
Role:
 Administer trade agreements
 Act as a forum for trade negotiations
 Settle trade disputes
 Review national trade policies
 Assist developing countries with trade policy issues through technical assistance and training
programs
 Cooperate with other international organizations like the IMF and World Bank.

Factors Affecting the Activities of International Business

In conducting business overseas, there are factors that would affect business activities
of international businesses:
1. economic policy
2. language
3. accounting standard
4. labor standard
5. living standard
6. environmental standard
7. local culture
8. corporate culture
9. foreign exchange markets
10. tariff
11. import and export regulations
12. trade agreement
13. climate and education

Motives for Engaging in International Business

1. Market seeking
2. Resource seeking
3. Efficiency seeking
4. Asset seeking