INTERNATIONAL TRADE & ECONOMICS ● Development of regional trading
ORGANIZATION blocs
● Effects of European Monetary
MODULE 1: Introduction to Integration
International Economics ● UK's decision not to adopt the Eur
Learning Objectives ● Spread of international financial
● Understand the evolution of crises
international trade ● Effects of the U.S. subprime crisis
● Compare different trade theories
● Identify the most relevant Two Main Branches of International
international trade theory today Economics
1. International Trade
Definition of International Economics International trade studies:
● Patterns of production between
International Economics is the study of countries
economic interactions between ● Trade flows of goods and
countries. services
It helps explain: ● Foreign investment
● Trade flows ● Effects of trade on income
● Capital movements distribution
● Exchange rates ● Effects of trade policies
● Economic policies between nations ● Regional trade agreements
● Trade negotiations through
International economics is important organizations like the World Trade
because globalization has made countries Organization (WTO)
economically interconnected.
2. International Finance
Key Global Issues Studied International finance focuses on:
International economics helps analyze ● Financial flows between
issues such as: countries
● Rapid growth of trade with China ● Exchange rates
and India ● Balance of payments
● Impact of trade on wages and ● International capital movements
production ● Exchange rate systems
● World Trade Organization (WTO) ● Role of the International
negotiations Monetary Fund (IMF)
An international company operates across
MODULE 2: International Business national borders.
Definition of Business These companies participate in global
markets.
Business refers to:
Any activity that seeks profit by Home Country vs Host Country
providing goods or services.
Home Country
Definition of International Business The country where a company originates.
International business refers to:
Any business activity involving Host Country
production or distribution of The foreign country where the company
goods and services across operates or sells products.
national borders.
Example:
Examples of International Companies If a U.S. company opens a branch in Japan:
Examples include: ● U.S. = Home country
● Apple ● Japan = Host country
● McDonald's
● Coca-Cola MODULE 3: Globalization
● Starbucks
Definition of Globalization
These companies operate in multiple
countries. Globalization refers to:
The increasing integration and
Domestic vs International Companies interdependence of economies
worldwide.
Domestic Company
A domestic company operates only within Countries become connected through:
its home country. ● Trade
● Investment
Example: ● Technology
A small local restaurant serving customers ● Communication
in one country.
Global Dependence
International Company
Global dependence means countries rely Characteristics:
on each other for goods and services. ● Driven by nationalism
Examples: ● Focus on industrial power of
● One country provides raw materials nations
● Another manufactures products
● Another specializes in technology Globalization 2.0 (1800–2000)
Characteristics:
History of Global Business ● Rise of multinational
International trade has existed for corporations
thousands of years. ● Industrial revolution
Early trading countries included: ● Advances in transportation
● China ● Development of communication
● India technologies
● Japan
This period was interrupted by:
Trade involved goods such as: ● World Wars
● Silk ● The Great Depression
● Spices
● Gold Globalization 3.0 (2000–Present)
● Jewelry Characteristics:
● Medicines ● Digital technology
● Internet connectivity
Expansion of Trade ● Individuals participating globally
By the 11th century, countries such as:
● England Technology allows people to connect
● France internationally in real time.
● Spain
● Portugal MODULE 4: Global Business
Environment
expanded trade through maritime
transportation. International business is affected by three
major environmental factors.
Stages of Globalization
1. Cultural and Social Environment
Globalization 1.0 (1492–1800) Includes:
Started with Christopher Columbus’ ● Language
discovery of the New World. ● Religion
● Customs
● Traditions Importer
● Values An importer sells products sourced from
● Social norms foreign countries.
These influence consumer behavior and Example:
business practices. A Philippine store selling Korean
electronics.
2. Political and Legal Environment
Includes: Exporter
● Government policies An exporter sells domestic products in
● Political stability foreign markets.
● Laws and regulations
● Trade restrictions Example:
These determine how businesses operate Philippine companies exporting bananas or
in different countries. coconut products.
3. Economic Environment Foreign Direct Investment (FDI)
Includes: Foreign Direct Investment occurs when a
● GDP company invests directly in foreign
● Inflation assets.
● Currency values
● Economic growth Examples include investing in:
● Employment levels ● Factories
● Equipment
These determine market opportunities ● Buildings
and risks. ● Businesses
MODULE 5: Forms of International Location Advantages
Trade Companies choose locations based on
advantages such as:
Companies participate in international trade ● Lower labor costs
through: ● Access to natural resources
● Importing ● Access to raw materials
● Exporting ● Proximity to customers
● Foreign investment ● Proximity to suppliers
● International operations
● Availability of energy resources Observed that the United States imported
capital-intensive goods, contradicting the
MODULE 6: International Trade Heckscher-Ohlin theory.
Theories
Possible explanation:
Trade theories explain why countries U.S. workers were highly productive and
trade with each other. skilled.
Absolute Advantage (Adam Smith) Modern Trade Theories
A country has absolute advantage when it
can produce a product more efficiently Country Similarity Theory
than another country. Countries with similar income levels tend
to trade more with each other.
Example:
If one country produces computers faster Product Life Cycle Theory (Raymond
than another, it has an absolute advantage. Vernon)
Products pass through three stages:
Comparative Advantage (David 1. New product stage
Ricardo) 2. Maturing product stage
A country should specialize in producing 3. Standardized product stage
goods with the lowest opportunity cost.
Even if one country produces everything Production often shifts to other countries as
better, trade can still benefit both countries. products mature.
Heckscher-Ohlin Theory Global Strategic Rivalry Theory
Also called Factor Proportions Theory. Companies compete through strategic
Countries export products that use their advantages such as:
abundant factors of production. ● Research and development
● Economies of scale
Examples: ● Patents
● Labor-rich countries export ● Brand reputation
labor-intensive goods ● Industry experience
● Capital-rich countries export Porter’s National Competitive
capital-intensive goods Advantage Theory
Leontief Paradox
A country's competitiveness depends on its
ability to innovate and upgrade Acculturation
industries. Adapting to a new culture.
Four determinants: Culture as an Iceberg
1. Factor conditions Visible elements:
2. Demand conditions ● Food
3. Related industries ● Language
4. Firm strategy and rivalry ● Clothing
MODULE 7: Cross-Cultural Environment Hidden elements:
● Values
Cross-Cultural Risk ● Beliefs
Cross-cultural risk occurs when cultural ● Attitudes
misunderstandings create problems in
international business. Hofstede Cultural Dimensions
Developed by Geert Hofstede.
Culture Five cultural dimensions:
Culture refers to: 1. Power Distance
The shared values, beliefs, 2. Individualism
norms, and behaviors of a 3. Masculinity
group of people. 4. Uncertainty Avoidance
5. Long-Term Orientation
Characteristics of Culture
Culture includes: Hall’s Cultural Framework
● Attitudes Edward Hall focused on communication
● Beliefs patterns.
● Laws
● Traditions High Context Cultures
● Social habits Communication relies on context and
● Historical influences non-verbal cues.
Examples:
Culture is Learned ● Japan
Two processes explain cultural learning: ● China
● Arab countries
Socialization
Learning the norms of a society. Low Context Cultures
Communication is direct and explicit. Governments influence international
Examples: business through:
● United States ● Laws
● Germany ● Regulations
● Trade policies
Time Orientation
Political Systems
Polychronic Culture Political systems determine how
Multiple tasks performed at the same time. governments exercise power and
manage economic activity.
Monochronic Culture
Focus on one task at a time. Government Institutions
Examples include:
MODULE 8: Ethics in International ● Legislative bodies
Business ● Political parties
● Lobbying groups
Business Ethics ● Trade unions
Business ethics refer to principles of right
and wrong behavior in business. Political Risk
Political risk refers to uncertainty caused
Ethics and Corruption by political changes that may affect
Corruption can occur in international businesses.
business due to:
● Bribery Examples:
● Fraud ● Government instability
● Lack of regulation ● Policy changes
● Nationalization of industries
Corporate Social Responsibility (CSR)
CSR refers to businesses acting MODULE 10: Economic Environment
responsibly toward society. Economic conditions influence business
Examples include: operations.
● Environmental protection
● Fair labor practices Important indicators include:
● Community development ● GDP
● Inflation
MODULE 9: Political Environment ● Exchange rates
● Income levels
● Resolution of trade disputes
Classification of Economies
Countries are classified based on economic Post-World War II Global Economy
indicators such as: After World War II, the world economy was
● GDP divided into two geopolitical blocs,
● Per capita income shaping international economic relations.
● Economic growth
Major World Economies
Developed economies include:
● United States
● Germany
● Japan
● European Union countries
Developing Economies
Developing economies are countries with
lower industrialization and income
levels.
Emerging Markets
Emerging markets are developing
countries experiencing rapid economic
growth.
Examples:
● China
● India
● Brazil
International Institutions
Important global organizations include:
World Trade Organization (WTO)
The WTO promotes:
● Free trade
● Fair trade practices