29.International business

I nternational business is characterized by all business transactions that involve two or more countries and may be of governmental or private character.

The concept of international business includes the balance of trade (the relationship between exporters) and balance of payments (the difference between inward and outward cash flow). A company can engage in international business through various means, including exporting and/or importing merchandise and services, direct and portfolio investment, and strategic alliances with other companies.

Merchandise exports are tangible goods sent out of the country; merchandise imports are tangible goods brought in. Since these goods visibly leave and enter they are sometimes referred to as visible exports and imports.

Service exports and imports are international earnings other than those derived from goods sent to another country. Receipt of these earnings is considered a service export, whereas payment is considered a service import. Services are also referred to as invisibles.

International business comprises a lot of services: travel, tourism and transportation; performance of activities abroad; use of assets from abroad.

Foreign investment is the ownership of property abroad. Direct investment is a subset of foreign investment that takes place when control follows the investment. When two or more ownership share a direct investment, the operation is known as a joint venture.

Portfolio investment can be either debt or equity. The factor that distinguishes portfolio investment from direct investment is that control does not follow this kind of investment.

Countervailing forces influence the conditions in which companies operate their options for operating internationally. The main factors causing changes in the world trade and investment patterns are economic conditions, technology, wars and political relationships.