International business is much broader than international trade. It includes not only international trade (i.e., export and import of goods and services), but also a wide variety of other ways in which the firms operate internationally.

Major forms of business operations that constitute international business are as follows.

(i) Merchandise exports and imports:

Merchandise means goods that are tangible, i.e., those that can be seen and touched. When viewed from this perceptive, it is clear that while merchandise exports mean sending tangible goods abroad, merchandise imports mean bringing tangible goods from a foreign country to one’s own country.

(ii) Service exports and imports:

Service exports and imports involve trade in intangibles. It is because of the intangible aspect of services that trade in services is also known as invisible trade.

(iii) Licensing and franchising:

Permitting another party in a foreign country to produce and sell goods under your trademarks, patents or copy rights in lieu of some fee is another way of entering into international business. It is under the licensing system that Pepsi and Coca-Cola are produced and sold all over the world by local bottlers in foreign countries.

(iv) Foreign investments:

Foreign investment is another important form of international business. Foreign investment involves investments of funds abroad in exchange for financial return. Foreign investment can be of two types: direct and portfolio investments