Unit 1: Introduction to International Business

Questions and Answers

What is international business trade?

The exchange of goods and services across national borders.

Which of the following is NOT a key component of international business trade?

Local Selling (correct)

Foreign Direct Investment (FDI)

Exporting

Importing

Foreign Direct Investment (FDI) involves investing in a foreign country by acquiring assets or establishing a business there.

True

Name one benefit of international business trade.

Economic growth. Signup and view all the answers

List one challenge of international business trade.

Cultural differences. Signup and view all the answers

Which theory suggests that countries should specialize in producing goods and services in which they have a comparative cost advantage?

Comparative Advantage Signup and view all the answers

Match the following components of international business with their definitions:

Exporting = Selling goods or services produced in one country to another. Importing = Buying goods or services produced in another country for domestic consumption. International Licensing = Granting a foreign company the right to use intellectual property in exchange for a fee. International Franchising = Granting a foreign company the right to use a business format, trademarks, and operating procedures in exchange for a fee. Signup and view all the answers

What does global sourcing involve?

Procuring goods or services from around the world. Signup and view all the answers

Study Notes

Definition and Scope of International Business

International business involves the transfer of goods, services, technology, and knowledge between countries.
Key components include exporting, importing, foreign direct investment (FDI), international licensing, and franchising.
Global sourcing and international joint ventures are common strategies for businesses to optimize resources across borders.

Historical Evolution of International Trade

International trade has evolved from basic trade routes to complex global supply chains.
Historical practices such as mercantilism laid the groundwork for modern trade theories and practices.

Benefits and Challenges of Globalization

Economic growth is stimulated through increased market access and reduced costs.
Job creation occurs in sectors related to importing, exporting, and supporting activities, boosting local economies.
Exposure to diverse markets drives innovation and the development of new products.
Cultural exchange fosters mutual understanding among nations, enhancing global cooperation.

Key Components of International Business Trade

Exporting: Selling domestically produced goods/services to foreign markets.
Importing: Purchasing goods/services from global suppliers for local consumption.
Foreign Direct Investment (FDI): Major investments in foreign countries via asset acquisition or business establishment.
International Licensing: Allows foreign firms to utilize intellectual property in exchange for fees.
International Franchising: Permits foreign companies to operate under a recognized business format for a fee.

Importance of International Business Trade

Enhances economic growth and job creation.
Drives innovation through diverse market exposure.
Creates cultural understanding and exchange.

Challenges of International Business Trade

Cultural differences can complicate market entry and operations.
Political instability, trade barriers, and economic fluctuations introduce risks.
Currency exchange rate fluctuations can impact transaction profitability.
Managing logistics and supply chains across borders poses operational difficulties.

Key Theories of International Trade

Mercantilism: Advocates for a focus on exports over imports to achieve favorable trade balances.
Absolute Advantage: Countries should specialize in goods/services they can produce most efficiently.
Comparative Advantage: Researches highlight specialization in goods/services with lower opportunity costs.
Heckscher-Ohlin Theory: Countries export goods/services that use their abundant production factors effectively.

Scope of International Business

Encompasses various industries such as manufacturing, services, agriculture, and technology.
Involves activities like producing goods for export, providing international services, and developing technology for global markets.

Description

Explore the fundamentals of international business with this quiz on its definition, historical evolution, and the benefits and challenges of globalization. Understand how international trade shapes the global economy and drives innovation. Test your knowledge on key concepts related to business across national borders.