Page 95 - Business Principles and Management

Unit 1

4.1 The Importance of International Business

Goals Terms
• Describe the nature, • international • euro
growth, and importance business • North American Free
of international trade and • Pacific Rim Trade Agreement
investment. • World Trade (NAFTA)
• Explain the reasons for the Organization (WTO) • International Mone-
growth of international • trading bloc tary Fund (IMF)
business.
• European Union (EU) • World Bank

nternational business is not new. People around the world have been trading
since the beginning of history. Phoenician and Greek merchants were sailing
Ithe seas to sell and buy products in Africa and Europe long before recorded
history. In 1600, the British East India Company was formed in order to estab-
lish branches and trade with countries in Asia. As Europeans discovered sea
routes around the world, trade flourished among the nations of Europe and
countries such as China, India, and Indonesia. American colonial traders began
operating in a similar way.
Similarly, people throughout the world were investing in businesses abroad.
An early example of successful American investment abroad was a factory built
in Scotland by the Singer Sewing Machine Company in 1868. By 1880, Singer
had become a worldwide organization with several sales offices and factories
in other countries. During the 18th and 19th centuries, a great economic expan-
sion occurred in the United States. Largely financed by foreign money, busi-
nesses laid railway lines, opened mines to extract coal and iron ore, and built
factories.

The Scope of International Business

International business typically means business activities that occur between two or
more countries. Every country has its own laws and rules, its own currency, and
its own traditions of doing business. When a restaurant in New Jersey buys lob-
sters from Maine, everyone understands the rules of business, because they are
similar from state to state. When the restaurant buys salmon caught by Chilean
fishermen, the rules of business are not as clear, because they differ from country
to country.
Only since the end of World War II in 1945 has international business be-
come a dominant aspect of economic life. Foreign trade has flourished. Compa-
nies have grown rapidly and operate on a global scale. Countries have become
highly interdependent, so that events in one place have an impact in another
place. Almost every business and individual is affected directly or indirectly by
international business. As you saw in the opening vignette, although Jake was
not directly involved in international business, his business was being hurt by
the availability of cheaper products from Thailand.

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