international business and trade

Republic of the Philippines

President Ramon Magsaysay State University
(Formerly Ramon Magsaysay Technological University)
College of Accountancy and Business Administration
Iba, Zambales, Philippines
Tel/Fax No.: (047) 811-1683

College/Department College of Accountancy and Business Administration

Course Code AE 5
Course Title INTERNATIONAL BUSINESS AND TRADE
Semester & Academic
First Semester AY 2021-2022
Year
Author JOHN REY MERCURIO

CHAPTER II
International Business: Overview
OBJECTIVES
After studying this unit, you should be able to:
 Enumerate the concept of international business
 Analyze the evolution of international business
 Discuss the drivers of globalization
 Explain the difference between domestic and international business
Introduction
One of the most dramatic and significant world trends in the past
two decades has been the rapid, sustained growth of international
business. Markets have become truly global for most goods, many
services, and especially for financial instruments of all types. World
product trade has expanded by more than 6 percent a year since 1950,
which is more than 50 percent faster than growth of output the most
dramatic increase in globalization, has occurred in financial markets. In

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the global forex markets, billions of dollars are transacted each day, of
which more than 90 percent represent financial transactions unrelated to
trade or investment. Much of this activity takes place in the so-called
Euromarkets, markets outside the country whose currency is used.
Evolution of International Business
International Trade to International Marketing:
- Originally the producers used to export their products to the nearby
countries and gradually extended the exports to far-off countries.
Gradually, the companies extended the operations beyond trade.
International Marketing to International Business:
- The multinational companies which were producing the products
in their home countries and marketing them in various foreign
countries before 1980s started locating their plants and other
manufacturing facilities in foreign/host countries. Later, they
started producing in one foreign country and marketing in other
foreign countries.
Drivers of Globalization
 To Achieve Higher Rate of Profits:
 Expanding the Production Capacities Beyond the Demand of the
Domestic Country:
 Severe Competition in the Home Country:
 Limited Home Market:
 Political Stability vs. Political Instability:
 Availability of Technology and Managerial Competence:

Influences of International Business

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 Growth of Overseas Markets

 Sales and Profit
 Diversification
 Inflation and Price Moderation
 Employment
 Standards of Living
Differences between Domestic and International Business
Difference between domestic trade and foreign trade and their
peculiar problems. Trade, no doubt, implies exchange of goods between
persons, but there are marked differences between domestic trade and
international trade. The differences and the complications arise therein
are as follows:
Distance:
- The distance involved in export of goods in external trade is
generally greater than on the domestic trade.
Language differences:
- There are differences in the languages of the nations of the world.
The overseas traders should be very careful in preparing the
publicity material in the languages of the trading country.
Cultural difference:
- A producer should have full knowledge about the market of his
products. For exporting goods particularly, a thorough research is
undertaken.
Technical difference:
- In the national market the difference in the technical specification
for goods and their requirements is not wide.
Tariff barriers:

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- In the national trade, there are no custom duties, exchange

restrictions, fixed quotas or other tariff barriers.
Documentations:
- In the home trade there are few documents involved in the
exchange of goods.
Payments:
- In the internal trade, the goods are exchanged in the currency unit
of the country. In case of foreign trade currencies differ widely
throughout the world and those also vary in value
Transport and insurance cost:
- The transport and insurance costs are less in case of domestic
trade. For the exports, on the other hand the cost of transport is
high and the insurance is complicated.
Assignment #1
Deadline: May 11, 2022
1. International Business Approaches
 Ethnocentric Approach
 Polycentric Approach
 Regio centric Approach
 Geocentric Approach
2. Stages of internationalization can be followed as:
 Stage 1 – Domestic Company
 Stage 2 – International Company
 Stage 3 – Multinational Company
 Stage 4 – Global Company
 Stage 5 – Transnational Company

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