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
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.
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.
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.
Characteristics and Features 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.
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.
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.
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 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.