Unit 1: Introduction to International Business

Study Notes

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.

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.

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.

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.

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.

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.

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.