Colin Barrow - The 30 Day MBA in International Business: Your Fast Track Guide to Business Success

I nternational business is both big business and in the hands of big business. The World Trade Organization (WTO), who keep track of the activities of their 160 country members in their latest annual report published in January 2015, note the following:

• China became the worlds biggest merchandise trader in 2013, with imports and exports totalling US$ 4,159 billion. It recorded a trade surplus of US$ 259 billion, 2.8 per cent of its GDP.
• The United States is the second-biggest merchandise trader, with imports and exports totalling US$ 3,909 billion in 2013. The US trade deficit was US$ 750 billion (4.5 per cent of its GDP).
• Germany is in third place, with a trade surplus of US$ 264 billion in 2013, 7.3 per cent of its GDP.
• Japan ranks fourth, with merchandise trade totalling US$ 1,548 billion in 2013.It recorded a trade deficit of US$ 118 billion, 2.4 per cent of its GDP.

Two further revealing facts were that the top 10 countries dealing in merchandise trade accounted for a little over half of the worlds total trade in 2013. The 100 or so developing economies accounted for 43 per cent of world merchandise trade in 2013.

The figures for the service sector are similarly polarized. The top 10 traders in world commercial services represent half of the worlds total trade in commercial services in 2013. North America alone has a world share of commercial service exports of 16.4 per cent.

World exports of commercial services totalled US$ 4,645 billion in 2013 with:

• Europes exports of commercial services grew by 7 per cent in 2013 with very variable rates of growth by member countries. One of the highest growth rates was achieved by the Netherlands (12 per cent) followed by France (10 per cent) and Germany (8 per cent). The United Kingdom saw more modest growth of 2 per cent.
• In North America, exports expanded by 5 per cent.
• Asias exports grew by 5 per cent, a slightly lower rate than in 2012.
• In Central and South America, exports grew by only 2 per cent.
• In the Middle East, exports rose by 4 per cent, compared with almost 9 per cent the previous year.
• The Commonwealth of Independent States (CIS) recorded the highest growth in exports of commercial services in 2013 (9 per cent), repeating the growth achieved in 2012. This growth was mostly due to Russias increase in transport exports, which represents the regions most important services sector.
• In contrast, Africas exports of commercial services contracted by 3 per cent.

No self respecting MBA student would be without a modest grasp of how international business came about. Although it is tempting to believe that international business is the creation of recent developments, that is not quite so. Improved communication and travel, telephones, the Internet, air and fast sea transport combined with sophisticated financial systems for dealing with foreign exchange and moving money around the globe must surely have given rise to the importance of the sector.

That may well be, but international business and instruments to facilitate its execution have been in place for several millennia and the process of international trade has benefited domestic business from the outset.

TABLE 1.1 Growth in the volume of world merchandise trade 20052013 for selected economies (agricultural products, food, fuels, iron, steel, chemicals, office and telecoms equipment, automotive products, textiles, clothing etc)

(Hong Kong, China; Malaysia; Republic of Korea; Singapore; Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu (Chinese Taipei) and Thailand.)

SOURCE : World Trade Organization (https://www.wto.org/english/res_e/statis_e/its2014_e/its2014_e.pdf)

TABLE 1.2 Growth in the volume of world commercial services 20052013 for selected economies (transportation, tourism, insurance, financial services, computer and information services etc)

SOURCE: Source: World Trade Organization (https://www.wto.org/english/res_e/statis_e/its2014_e/its2014_e.pdf)

For thousands of years bc , trade between continents was initiated and in many cases flourished. One example is the Silk Road, so named in 1877 by Ferdinand von Richthofen the German geographer. From the 2nd century bc to the end of the 14th century ad , this important trade route starting out from Changan (now Xian) in the east and ran to the Mediterranean in the west, linking the Roman Empire and China, transferring not only goods, but also informing the cultures of China, India, Persia, Arabia, Greece and the Roman Empire. The tin mines of Cornwall, believed to have been established earlier than 2000 bc , were sought out by metal traders from the Eastern Mediterranean soon after and are thought to be one reason the Romans invaded the British Isles.

From these very early times the effect of international trade on business life in general was disproportionate. From these early trading times to the present day the most popular legal structure under which to operate has been as a sole trader, which in effect means every man for himself. In the beginning merchants always risked their own money, if they had any to invest: if they travelled, as most did, they risked their life on the journey. The caravan trade of Asia, Asia Minor and North and Central Africa ploughed their way through the sands that separated distant cities and seaports. The largest caravans comprised thousands of camels and required careful administration. They also stimulated people to band together in partnerships, pooling protection costs and profits to spread the risks. The partnerships would usually last only for the particular journey. Later on, older merchants who had made money from earlier ventures could join such expeditions by putting up money, without the hardship of making the trip themselves. This could be seen as an early form of limited partnership.