1.1 What is International Business?

International business consists of import and export of goods and services. Exporting is the shipment of goods out of a country or the providing of services to a foreign buyer located in another country. Importing is the entering of goods into a country or the receipt of services from a foreign provider. Exporting is often the first choice when businesses decide to expand abroad. It may provide businesses an opportunity to reach new customers and to explore new markets. Importing is also a regular and necessary part of international business. It involves purchasing goods or services on a worldwide basis to reduce production costs. Such a process is often described by the term of global outsourcing.

International business may be conducted between individuals, businesses and even governments in multiple countries. Businesses include the very small firm that exports (or imports) a small quantity to only one country, as well as the very large multinational corporations (MNCs) with integrated operations and strategic alliances around the world. It is reported that exports by MNCs accounts for one-third of world exports, and one–third of the world's production of goods and services.

International business is different from domestic business because the environment changes when a firm crosses national borders. An individual traveling from his home country to a foreign country needs to have the proper documents, to carry foreign currency, to be able to communicate in the foreign country, to be dressed appropriately, and so on. Doing business in a foreign country involves similar issues and is thus more complex than doing business at home. States generally have different economic environments, government systems, laws and regulations, currencies, taxes and duties as well as different cultures and practices. Companies doing business in a foreign country would encounter greatest distances, communication problems, language and cultural barriers, differences in ethics and religions, different currencies and exposure to strange foreign laws and government regulations. Typically, a company understands its domestic environment quite well, but is less familiar with the environment in other countries and must invest more time and resources into understanding the new environment. The following considers some of the important aspects of the environment that change internationally.