INTERNATIONAL

BUSINESS
MODULE 1
LEARNING OBJECTIVES
1. Define international business and explain its key components and activities.
2. Analyze the significance of international business in fostering global trade, economic growth, and cultural exchange.
3. Evaluate the impact of international business on resource utilization, technological advancement, and risk
diversification.
4. Identify the key drivers of globalization and explain their role in shaping interconnected economies.
5. Discuss the benefits of globalization for businesses, consumers, and economies worldwide.
6. Critically analyze the challenges and risks associated with globalization, including its effects on inequality, local
industries, and the environment.
7. Compare and contrast domestic and international business in terms of scope, market environment, regulatory
frameworks, and cultural factors.
8. Explain the challenges businesses face when transitioning from domestic to international operations.
9. Assess the implications of cultural, economic, and legal differences on global business strategies and decision-making.
INTERNATIONAL BUSINESS
➢ A business that is carried out across national borders
➢ Includes not only international trade and foreign manufacturing but also the
growing service industry in areas such as transportation, tourism, advertising,
consulting, construction, retailing, wholesaling, and mass communications.
➢ Refers to commercial activities conducted across national borders to satisfy
the needs and wants of consumers in multiple countries. It includes trade
(exporting and importing goods and services), foreign direct investments, joint
ventures, licensing agreements, and franchising. Essentially, it involves the
exchange of goods, services, technology, capital, and knowledge across nations.
INTERNATIONAL BUSINESS
INTERNATIONAL BUSINESS differs from domestic business in that a
firm operating across borders must deal with the forces of three
kinds of environments: domestic, foreign, and international.
INTERNATIONAL BUSINESS
EXTERNAL FORCES CONSIST OF THE FOLLOWING:
1. Competitive: kinds and numbers of competitors, their locations, and their
activities
2. Distributive: national and international agencies that distribute goods and
services
3. Economic: variables (such as Gross National Income [GNI], unit labor cost, and
personal consumption expenditure) that influence a firm’s ability to do business
4. Socioeconomic: characteristics and distribution of the human population
5. Financial: variables such as interest rates, inflation rates, and taxation
 INTERNATIONAL BUSINESS
6. Legal: the many foreign and domestic laws governing how international firms must operate
7. Physical: elements of nature such as topography, climate, and natural resources
8. Political: elements of nations’ political climates such as nationalism, forms of government,
and international organizations
9. Sociocultural: elements of culture (such as attitudes, beliefs, and opinions) important to
international managers
10. Labor: composition, skills, and attitudes of workers
11. Technological: the technical skills and equipment that affect how resources are converted
to products
INTERNATIONAL BUSINESS
DOMESTIC ENVIRONMENT
All the uncontrollable forces originating in the home country
that surround and influence the life and development of the firm

The forces with which managers are most familiar.

INTERNATIONAL BUSINESS
FOREIGN ENVIRONMENT
All the uncontrollable forces originating outside the
home country that surround and influence the firm.

The forces are the same as those in the domestic

environment except they occur outside the firm’s home
country.
INTERNATIONAL BUSINESS
INTERNATIONAL ENVIRONMENT
Interaction between domestic and foreign
environmental forces, as well as interactions
between the foreign environmental forces of two
countries.
INTERNATIONAL BUSINESS
International organizations whose actions affect the
international environment include:
1. Worldwide bodies (e.g. World Bank)
2. Regional Economic Grouping of Nations (NAFTA, EU,
Mercosur)
3. Organizations bound by industry agreements (OPEC)
INTERNATIONAL BUSINESS
Decision Making is Complex
Those who work in the international environment find that decision making is more
complex than it is in a purely domestic environment.

Self-Reference Criterion
Another common cause of the added complexity of foreign environments is managers’
unfamiliarity with other cultures.
The unconscious reference to manager’s own cultural values called self-reference
criterion, is probably the biggest cause of international business blunders.
Successful managers are careful to examine a problem in terms of the local cultural
traits as well as their own.
INTERNATIONAL BUSINESS
IMPORTANCE:
1. Access to New Markets
2. Economic Growth
3. Resource Utilization
4. Technological Advancement
5. Cultural Exchange
6. Risk Diversification
INTERNATIONAL BUSINESS
BENEFITS OF TRADE:
1. A greater amount of choice in the availability of goods and
services
2. Lower prices for goods and services consumed
3. Higher living standards
 ❖ The socioeconomic reform process of
eliminating trade, investment, information,
technology, and cultural and political barriers
across countries, which in turn can lead to
increased economic growth and geopolitical
GLOBALIZATION integration and interdependence among nations of
the world.
❖ The process of increasing interconnectedness
and interdependence among countries, economies,
DEFINITION and societies. It is driven by advancements in
technology, communication, and transportation,
leading to greater economic, cultural, and political
integration.
 ❖ The fundamental basis of globalization
represents freer international trade and
investment of the free flow of goods and
services (including cultural and belief
GLOBALIZATION systems) between countries.
❖ Globalization and international trade and
investment are interlinked.
❖ Globalization includes a process of
integrating the nations of the world so that
they become more economically efficient,
interdependent, and perhaps relatively more
inclusive and homogenous.
 Drivers of Globalization

GLOBALIZATION [Link] Advancements

[Link] of Trade Policies
[Link] Expansion
[Link] Efficiency
[Link] Institutions
 Drivers of Globalization

GLOBALIZATION [Link] Advancements

[Link] of Trade Policies
[Link] Expansion
[Link] Efficiency
[Link] Institutions
 EMERGING ECONOMIES are countries
that are implementing more open trade
and free-market policies.
GLOBALIZATION
According to Boston Consulting Group,
EMERGING nowadays, business centers around
ECONOMIES
“competing with everyone from
everywhere for everything.”
 1. International Monetary Fund
(IMF)
GLOBALIZATION
2. World Bank
KEY INTERNATIONAL 3. World Trade Organization
INSTITUTIONS THAT
(WTO)
FACILITATE
GLOBALIZATION
 International Monetary Fund (IMF)
The International Monetary Fund (IMF) is an
international financial institution established in
1944 at the Bretton Woods Conference to
GLOBALIZATION promote global economic stability and
cooperation. It currently has 190 member
countries and plays a central role in the global
KEY INTERNATIONAL economy.
INSTITUTIONS THAT
INTERNATIONAL MONETARY SYSTEM is the
FACILITATE
system of exchange rates and international
GLOBALIZATION
payments that enable countries and their citizens
to purchase goods and services from one another.
 International Monetary Fund (IMF)

PURPOSE:
GLOBALIZATION
1. Economic Surveillance

KEY INTERNATIONAL
2. Financial Assistance
INSTITUTIONS THAT 3. Capacity Development
FACILITATE
GLOBALIZATION 4. Fostering International Cooperation
 World Bank
The World Bank is an international financial
institution that provides financial and
GLOBALIZATION technical assistance to developing countries
to promote economic development and
reduce poverty. Established in 1944
KEY INTERNATIONAL alongside the International Monetary Fund
INSTITUTIONS THAT (IMF) at the Bretton Woods Conference, it
FACILITATE is headquartered in Washington, D.C., and
GLOBALIZATION
currently consists of 189 member
countries.
 World Bank
The World Bank is part of the World Bank Group,
which includes five closely affiliated institutions
(Developmental Institutions)
GLOBALIZATION [Link] Bank for Reconstruction and
Development (IBRD):
[Link] Development Association (IDA):
KEY INTERNATIONAL
INSTITUTIONS THAT [Link] Finance Corporation (IFC):
FACILITATE [Link] Investment Guarantee Agency
GLOBALIZATION (MIGA):
[Link] Centre for Settlement of Investment
Disputes (ICSID):
 World Bank
KEY FUNCTIONS:
1. Financial Support
GLOBALIZATION
2. Knowledge Sharing

KEY INTERNATIONAL
3. Capacity Building
INSTITUTIONS THAT 4. Addressing Global Challenges
FACILITATE
GLOBALIZATION
 World Trade Organization (WTO)
The World Trade Organization (WTO) is an
international organization that governs and
GLOBALIZATION facilitates global trade between nations.
Established on January 1, 1995, it replaced
the General Agreement on Tariffs and Trade
KEY INTERNATIONAL (GATT), which had been in place since
INSTITUTIONS THAT 1948. The WTO is headquartered in
FACILITATE Geneva, Switzerland, and has 164 member
GLOBALIZATION
countries, representing the majority of
global trade.
 World Trade Organization (WTO)
The WTO’ primary mission is to ensure that
international trade flows as smoothly, predictably,
and freely as possible.
GLOBALIZATION Key objectives include:
[Link] Free Trade
KEY INTERNATIONAL [Link] Fair Competition
INSTITUTIONS THAT
FACILITATE [Link] Trade Disputes
GLOBALIZATION [Link] Economic Development
[Link] Predictability and Transparency
 World Trade Organization (WTO)
Functions:
[Link] Negotiations
GLOBALIZATION [Link] Resolution
[Link] Trade Policies
KEY INTERNATIONAL
INSTITUTIONS THAT
[Link] Building and Technical Assistance
FACILITATE [Link] Trade Data and Research
GLOBALIZATION
 World Trade Organization (WTO)
Importance:
1. Boosts Global Trade
GLOBALIZATION 2. Stabilizes International Relations
3. Promotes Development
KEY INTERNATIONAL
INSTITUTIONS THAT
FACILITATE
GLOBALIZATION
 BENEFITS:

1.. Economic Growth

2. Access to Resources

3. Cultural Exchange

GLOBALIZATION 4. Innovation

5. Consumer Benefits

CHALLENGES:

1. Income Inequality

2. Loss of Local Industries

3. Environmental Impact

4. Cultural Homogenization

5. Political Instability
DIFFERENCES BETWEEN DOMESTIC
AND INTERNATIONAL BUSINESS
DIFFERENCES BETWEEN DOMESTIC
AND INTERNATIONAL BUSINESS