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International Business Meaning and Definition
Business which is conducted internationally in more than one country is termed as an International business. It involves transactions of goods & services between the two countries. These transactions are conducted at the global level & across national borders. International businesses are very large in size as they are performed at a global level.
Their scales of operation are vast in size. International businesses provide employment to a large number of peoples. It is served as an important source for earning foreign exchange for the country. All payments in these businesses are done in foreign currencies of different countries.
These businesses help in improving the standard of living of people in different countries by supplying high-quality goods. International business is of different types like imports & exports, franchising, licensing, foreign direct investment, etc.
International businesses provide employment to a large number of peoples. It is served as an important source for earning foreign exchange for the country. All payments in these businesses are done in foreign currencies of different countries.
Nature of International Business
International Restrictions
In international business, there is a fear of the restrictions which are imposed by the government of the different countries. Many country’s governments don’t allow international businesses in their country. They have trade blocks, tariff barriers, foreign exchange restrictions, etc. These things are harmful to international business.
Benefits to Participating Countries
It gives benefits to the countries which are participating in the international business. The richer or developed countries grow their business to the global level and they get maximum benefits. The developing countries get the latest technology, foreign capital, employment opportunities, rapid industrial development, etc. This helps developing countries in developing their economy. Therefore, developing countries open up their economy for foreign investments.
Large Scale Operations
International business contains a large number of operations at a time because it is conducted on a large scale globally. Production of the goods at a large scale, they have to fulfill the demand at a global level. Marketing of the product is also conducted at a large scale to make them aware of the product. First, they fulfill the domestic demand and then they export the surplus in the foreign markets.
Integration of Economies
International Business combines the economies of many countries. The companies use the finance, labor, resources, and infrastructure of the other countries in which they are working. They produce the parts in different countries, assembles the product in other countries and sell their product in other countries.
Dominated by Developed Countries
International business is dominated by developed countries and their MNC’s. Countries like U.S.A, Europe, and Japan all are the countries that are producing high-quality products, they have people working for them on high salaries. They have large financial and other resources like the best technology and Research and Development centers. Therefore, they produce good quality products and services at low prices. They help them to capture the world market.
Market Segmentation
International business is based on market segmentation on the basis of the geographic segmentation of the consumers. The market is divided into different groups according to the demand of the consumers in different countries. It produces goods according to the demand of the consumers of the different market segmentations.
Sensitive Nature
International Business is highly affected by economic policies, political environment, technology, etc. It can play a positive role to improve the business and can also be negative for the business. It totally depends on the policies made by the government, it can help in expanding the business and maximizing the profits and vice-versa.
Scope of International Business
- Foreign Investments
- Exports and Imports of Merchandise
- Licensing and Franchising
- Service Exports and Imports
- Growth Opportunities
- Benefiting from Currency Exchange
- Limitations of the Domestic Market
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Characteristics of International business
Large scale operations
International businesses are conducted on a very large scale. They perform their operations in different countries globally. Their business activities are very large in size ranging from production, marketing & selling of their products. These businesses serve the demands of local markets also where they are present & also demands of different countries globally. That’s why they produce a large amount of goods & services to cater to the large demands.
Earns foreign exchange
International businesses are served as an important source for earning foreign exchange. Foreign Currencies of different countries are involved in transactions in these businesses. This helps in getting enough foreign exchange reserves for the country.
Integrates economies
Another important feature of international business is that it integrates the economies of different countries worldwide. It takes advantage of different economies & aims at providing its services economically. It takes labor from one country, technology from one country & finance from another country. Also, it designs, produces, assembles its products not only in one country but in different-different countries. This helps in taking advantage of different economies & becoming economical.
Large number of middlemen
International businesses are very large in size. Their scale of operations is not limited to one country but performs in different countries globally. There is a large number of middlemen involved in international businesses. These all person renders their services properly for the efficiency of the business. Their services help the business in easy expansion & growth.
High risk
The degree of risk associated with international business is very high. These businesses require a large amount of resources both in terms of money & manpower for carrying out its operations. These need to carry out trade in different countries at large distances. It requires a huge cost & time to carry these goods & services. Also, sometimes different economies face unfavorable conditions which affect the business conditions.
Intense competition
International business faces a large number of risks internationally. These businesses invest large amounts in advertising their products. There are a large number of competitors in the international market. There is tough competition in terms of price, quality, design, packing, etc. Business needs to focus on these things to face the tough competition going on.
International restrictions
International businesses face large restrictions while carrying out there operations in different countries. Sometimes they are not allowed to inflow & outflow goods, technology & different resources. There are restricted by the government of different countries to not enter into their countries. They face several foreign exchange barriers, trade barriers & trade blocks which are harmful for international business.
Highly sensitive nature
International businesses are highly sensitive in nature. Proper market research is very essential for carrying out these businesses effectively. Any unfavorable economic conditions in one country will adversely affect the business. If there is any economic, political or technological change will directly influence the functioning of the business. Therefore, these businesses should change their activities from time to time to survive the change.
Features of International Business
Separates Producers From Buyers
In international business, producers and buyers are at distant places. This business involves the production of products in one country and is sold in another country. Buyers and producers are not in close contact with each other like in case of Domestic business. They belong to different nations which make it difficult to contact with each other.
Immobility Of Factors
There is a large degree of immobility of factors in international business. Factors like labour and capital cannot move freely like in case of inland trade. There are certain laws and regulations like immigration laws, qualification, citizenship etc. which impose several restrictions on the movement of these factors. Government of different countries have different fiscal policies and therefore they accordingly prohibit the flow of capital in their countries.
Heterogeneous Markets
International markets are homogeneous in nature and differ from each other. These markets lack homogeneity due to difference in culture, tradition, climate, habits, preferences, weigh and measures etc. These markets are different from those which are in a single country. Behaviour of buyers in international business differs from country to country due to difference in the socio-economic environment of different nations.
Large Operations
International businesses are conducted at a very large scale. They perform their operations in different countries globally. Their business activities are very large in size ranging from production, marketing and selling of their products. These businesses along with the demands of local markets where they are present also serve the demands of different countries globally. That’s why they produce a large amount of goods and services to cater to the large demands.
Foreign Currency Payments
International Business involves different currencies of different countries as all payments are done in foreign currency. These businesses serve as an important source of earning foreign exchange for the country. Foreign currencies of many countries are involved for transactions in these businesses. This helps in maintaining adequate foreign exchange reserve for country.
International Rules And Regulations
International businesses are bound to follow several international rules and regulations of different countries where they operate. They face large restrictions while carrying out there activities and are not allowed to inflow and outflow goods, technology and several resources in different countries. International businesses are also restricted by government of many countries to not enter into their countries. They face several foreign exchange barriers, trade barriers and trade blocks which are harmful for international business.
Large Middlemen
There are large numbers of persons involved in International business for their proper functioning in different countries. These businesses are very large in size and their scale of operations is not limited to one country but performs in several countries globally. This requires a large no. of middlemen’s for performing different activities. These all person renders their services properly for the efficiency of business. Their services help the business in easy expansion & growth.
Multiplicity Of Documents
International business requires large no. of documents from importing and exporting goods among different countries. These documents are like commercial invoice, shipping bill, Certificate of origin, inspection and insurance certificate, mate receipt etc. There is a series of documentation followed right from the point when an order for goods is received by exporter till the time when they are finally delivered at their destination.