Contents
Meaning of International Business
International business is the process of implying business across the boundary of the country at a global level. It focuses on the resources of the globe and objectives of the organization on the global business.
International business refers to the global trade of goods/services outside the boundaries of a country. International business conducts business transactions all over the world, it is also known as Global Business. It includes transaction between the parties in different global location.
If you are making a transaction with the International e-commerce websites i.e, AliExpress, Amazon, E-bay than you are making an International transaction. The trade allows a country to specialize in producing and exporting the most efficient products that can be produced in that country. International business consists of the movement to other countries of goods, products, technology, experience of management and resources.
Scope of International Business
Foreign Investments
Foreign investment is an important part of international business. Foreign investment contain investments of funds from the abroad in exchange for financial return. Foreign investment is done through investment in foreign countries through international business. Foreign investments are two types which are direct investment and portfolio investment.
Exports and Imports of Merchandise
Merchandise are the goods which are tangible. (those goods which can be seen and touched.) As mentioned above merchandise export means sending the home country’s goods to other countries which are tangible and merchandise imports means bringing tangible goods to the home country.
Licensing and Franchising
Franchising means giving permission to the new party of the foreign country in order to produce and sell goods under your trademarks, patents or copyrights in exchange of some fee is also the way to enter into the international business. Licensing system refers to the companies like Pepsi and Coca-Cola which are produced and sold by local bottlers in foreign countries.
Service Exports and Imports
Services exports and imports consist of the intangible items which cannot be seen and touched. The trade between the countries of the services is also known as invisible trade. There is a variety of services like tourism, travel, boarding, lodging, constructing, training, educational, financial services etc. Tourism and travel are major components of world trade in services.
Growth Opportunities
There are lots of growth opportunities for both of the countries, developing and under-developing countries by trading with each other at a global level. The imports and exports of the countries grow their profits and help them to grow at a global level.
Benefiting from Currency Exchange
International business also plays an important role while the currency exchange rate as one can take advantage of the currency fluctuations. For example, when the U.S. dollar is down, you might be able to export more as foreign customers benefit from the favourable currency exchange rate.
Limitations of the Domestic Market
If the domestic market of a country is small then the international business is a good option for the growth of the business in the host country. Depression of domestic market firms will force to explore foreign markets.
Importance of International Business
Market Expansion
International businesses are opened to perform business in different countries across the globe. These business keeps on expanding its activities and explore new markets for selling more and more products. The international business earns high amount of profits which helps them in expanding their market share.
Brings Foreign Exchange
The international business earns large amount of foreign exchange by selling its products among different countries. All payments are received in terms of foreign currency which are used by its home country for payment of imports. The foreign exchange earned by these businesses helps in the overall economic development of the country.
Spreading of Business Risks
Presence of international businesses around the globe helps in spreading its risk. In case, if there is a loss incurred by this business in any one of the countries then that can be easily adjusted with the profit earned in other countries. International business transferred their surplus goods or resources in one country to another country which helps them in reducing their risk.
Economies of Scale
These business are able to enjoy economies of scale due to their large scale production. International businesses produce large amount of goods for selling in different countries. With the increase in amount of production, per unit cost of producing goods goes down which helps them in earning large profits.
Cost Advantage
International business takes cost advantage over its competitors by producing goods in one country and exporting them in another country. They carry on their production in a country where factors of production are easily and cheaply available. This helps in minimizing the cost of product and earn huge profits by selling them at better prices in other countries.
Improves International Relations
International business helps in strengthening the economic relations among nations. These business helps other nations by exporting them goods of their requirements. It helps in developing better mutual understanding among countries due to which they are ready to support each other in time of needs.
Provide Employment Opportunities
International business employs large number of people for carrying out its operations across the globe. They perform large scale operations in many countries for which they require large amount of human resource.
Government Support
These businesses also enjoy government support for carrying out their operations and expanding their size. The government provides tax and financial benefits to these businesses as they earn a large amount of foreign reserves for the country.