International Trade vs International Business

International trade is a term that basically deals with the movement of goods and services between countries distinct from normal corporate transactions involving buyers and sellers in different countries. The international trade primarily reflects macro or aggregate supplies and demand in different countries. The global trade, thus, involves major policy decisions by governments of nations with regards to imports and exports as also national economic development. These days, the trend is towards globalization of trade. This has resulted in regional as well multilateral global agreements. A predominant role has been accorded to WTO while determining trade policy by each nation

International business may be defined as those business transactions among individuals, firms or corporate entities in private or public sector that result in movement of goods or services across national boundaries. The business activity can take any of the form: import, export of different goods services, the investment of capital; and transactions in intangible assets (e.g. trademarks, patents are the licensing of manufacturing technology).

The field of international business is a broad area of study that covers a wide range of activities. The execution of business activities between sovereign nations takes place within specific environments, and pose challenges with which a firm in international business must deal. Dealing with these problems requires an understanding of the environmental variables that affect international business. These variables are economic, political, legal, sociocultural, technological and geographic. Although such environmental variables are often beyond control of an individual firm, the consideration and recognition of such factors enables the managers to work more effectively within the constraints posed by these variables. In order to incorporate the probable effects of external environment, a working knowledge of relevant descriptions such as economics, political science, history, geography, law, and anthropology is desirable.

The scope of international business can be divided into two categories-real and financial.

1.  The real or non financial side of the theory of international business studies trade theories, theory of the multinational enterprises including the reasons for choice of entry mode.
2. The financial side of the theory covers study of environmental factors affecting the multinational enterprises such as foreign exchange rates, the balance of payments and international marketing systems. It also involves the study of internal decisions affecting the MNE, such as its appropriate cost of capital and the opportunities of international diversification.

Since international business deals across nations , the role of governments and their relationships with MNEs also comes under the scope of study of international business