Different Approach of International Business

6472 Words Apr 10th, 2010 26 Pages
Different approach of International Business

In truth, we have become part of a global village and have a global economy where no organization is insulted from the effects foreign markets and competition. Indeed, more and more firm are reshaping themselves for international competition and discovering new ways to exploit markets in every corner of the world. Failure to take a global perspective in one of the biggest mistakes managers can make. Thus we start laying the foundation for our discussion by introducing and describing the basic of international business.

International Business:
An international business is one that is based primarily in a single country but acquires some meaningful share of its resources or revenues (or both)
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• Basic statistics on international trade normally do not record smuggled goods or international flows of illegal services. A small fraction of the smuggled goods and illegal services may nevertheless be included in official trade statistics through dummy shipments or dummy declarations that serve to conceal the illegal nature of the activities.

Balance of trade

Balance of trade represents a difference in value for import and export for a country. A country has demand for an import when domestic quantity demanded exceeds domestic quantity supplied, or when the price of the good (or service) on the world market is less than the price on the domestic market.
The balance of trade, usually denoted NX, is the difference between the value of the goods (and services) a country exports and the value of the goods the country imports:
NX = X − I, or equivalently I = X − NX
A trade deficit occurs when imports are large relative to exports. Imports are impacted principally by a country's income and its productive resources. For example, the US imports oil from Canada even though the US has oil and Canada uses oil. However, consumers in the US are willing to pay more for the marginal barrel of oil than Canadian consumers are, because there is more oil demanded in the US than there is oil produced.
In macroeconomic theory, the value of imports I can be modeled as a function of the domestic absorption A and the real exchange rate σ. These are the

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