Lecture 1

Introduction on the international business:

Study the relation between two different economic agents in two different countries
Consumer : import producer - seller : Export
Study the economic relationship between one country and another

A ` B
Economic Relation
International trade international finance
Outflow and inflow of goods and services outflow and inflow of foreign currencies
Between countries

International business build on two corner stone: Export and FDI “Foreign direct investment”,
those two things consider the rescue kit for the economic problem in Egypt.
The current problem in Egypt:
1) Recession: purchase power decline, demand decline, discourage of producer-to-
producer, demand on labour decline, income decline, and demand decline.
Deflation could be the solution of the recession

2) Depression: greater than the recession in duration and scale

The international business consist of:
1) International economics:
Economic relation between two countries
In order to make economic relation between two countries, we have to know three things.
a) Economic position
b) Standard of living
c) Participation in international trade

2) International finance: relation between the lending and borrowing countries

Advantages of the international business: - international trade or finance
1) Facilitate the import of raw material and capital goods and intermediates product.
2) Technology diffusion – spreading
3) Lead and allow the producers to reach to economies of scale (mas production)
Mass production: decrease in the level of cost, using resources more efficient.
Producer: productivity capacity to produce 1000 unit, if the country isolated, this lead to
produce according to local demand, which could be 600 units.
4) International business act as procompetitive for the monopoly in the domestic market.
Chepsy: 80’s
5) Enlarge the pool of saving by increase the real income. International business lead to
increase variety of choices from the local and imported goods. Cheap cloth, frozen
meat.
Real income, which is how much products could you, buy using certain income at certain
price level.
6) Allow the lending and borrowing process.
7) Political gain. As we become interrelated, so no hostile, action would be taken.

Disadvantages of the international business:

1) Lead to increase international dependency
2) Lead to loss the culture identity
3) Lead to increased risk of international financial crisis

Dimensions of the international business:

1) Globalization of the markets
2) International trade
3) International investment – FDI or FII/ foreign direct investment or indirect investment.
4) International business risks: risk management
5) International portfolio. Diversification – spread the investment or what is call, don’t put
all your eggs in one basket
6) Exporting: dumping.
7) Import or global sourcing – service. USA import the outsourcing function of call centre
from India