International Trade Overview

Question 1

What is International Business ?

Answer 1

• Performance of trade and investment activities by firms globally.

1. Acting internationally through various strategies (FDI, exporting, etc.).
2. Value-adding activities performed internationally (manufacturing, marketing, etc.).
3. Trading internationally in good and services. (capital, labor, technology, products, services, etc.).

Question 2

What is Globalization of markets ?

Answer 2

Ongoing economic integration and growing interdependency of countries worldwide.

Question 3

What is International Trade ?

Answer 3

Exchange of products and services across national borders. (Exporting & Importing).

Question 4

What is Exporting ?

Answer 4

Sale of G&S from a home country to another customers located abroad.

Question 5

What is Importing ?

Answer 5

Purchasing G&S from a suppliers located abroad to be consumed in a home country

Question 6

What is International Investment ?

Answer 6

Transfer or acquisition of assets to a foreign country. (FDI).

Question 7

What is International Portfolio Investment?

Answer 7

Passive ownership of foreign securities (stocks and bonds) to generate financial returns.

Question 8

What is Globalization and what does it allow firms to do ?

Answer 8

The interconnectedness of national economies and the growing interdependence of buyers, producers, suppliers, and governments around the world.

It allows firms to view the world as one large marketplace for goods, services, capital, labor and knowledge.

Question 9

What are the 5 Drivers of Market Globalization ?

Answer 9

• Worldwide reduction of barriers to trade and investment.
• Market liberalization and adoption of free markets.
• Industrialization, economic development, and modernization.
• Integration of world financial market.
• Advance in technology.

Question 10

The 4 Risks of International Business?

Answer 10

1. Cross-Country Risk
   - Cultural differences
   - Decision-making styles
2. Country Risk
   - Unstable political system.
   - Protectionism
3. Currency (Financial) Risk
   - Foreign taxation
   - Asset valuation
4. Commercial Risk
   - Weak partner
   -Poor execution of strategy

Question 11

Who Participates in International Business?

Answer 11

• MNE
• SME
• BGF (born global firm)
• N-GO (non-governmental organizations)

Question 12

What is a born global firm?

Answer 12

Those firms seeks to derive a significant portion of its revenue from international markets, rather than focusing solely on its domestic market.

Ex.: Spotify, Skype, Zooms…

Question 13

What are non-governmental organizations?

Answer 13

Independent, non-profit entities that operate outside the direct control of governments. They are typically formed by individuals or groups to address social, environmental, humanitarian, or developmental issues.
Funded from multiple sources.

Question 14

What is Free Trade ?

Answer 14

The elimination of most restrictions to the flow of goods and services among nations.

Question 15

What are the benefits of Free Trade ?

Answer 15

1. More and better choices for consumers and firms.
2. Lower prices of goods for consumers and firms.
3. Higher profits and better worker wages (because imported input goods are usually cheaper).
4. Higher living standards for consumers (because their costs are lower).
5. Greater prosperity in poor countries.

Question 16

What are 3 negative impact of globalization ?

Answer 16

• Social impact (poverty).
• Environment impact.
• National sovereignty and local culture.