International business

International business is business across borders: trade, investment and operations in more than one country. It grows from globalisation — the integration of markets through falling trade barriers, cheaper transport and communication, and multinational firms. Trade theories explain why nations trade: absolute advantage (Adam Smith: each country exports what it produces most efficiently), comparative advantage (David Ricardo: even a country worse at everything gains by specialising in what it is least bad at), factor proportions (Heckscher-Ohlin: countries export goods using their abundant factors — labour-abundant countries export labour-intensive goods) and product life cycle (Vernon: new products start in innovating countries, then production moves to cheaper locations as the product standardises). Worked example: if Country A makes cloth at lower opportunity cost than wine and Country B makes wine at lower opportunity cost than cloth, both gain by specialising and trading — even if one country is better at both, because what matters is relative, not absolute, cost.