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International Business Meaning and Definition

International business involves transactions of goods and services between countries. It provides employment and income for many people globally. International business can take different forms like imports, exports, franchising and foreign direct investment. It allows for the integration of economies and growth opportunities between participating countries.

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20 views5 pages

International Business Meaning and Definition

International business involves transactions of goods and services between countries. It provides employment and income for many people globally. International business can take different forms like imports, exports, franchising and foreign direct investment. It allows for the integration of economies and growth opportunities between participating countries.

Uploaded by

Ancy
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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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
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 favorable currency exchange rate.

REASONS FOR THE EMERGENCE OF INTERNATIONAL


BUSINESS
To achieve higher rate of profits
The basic objective of the business firm is to earn profit. The domestic markets do
not promise a higher rate of profits. Business firms search for foreign market
which hold promise for higher rate of profits. Thus the objective of profits affects
and motivates the business to expand its operations to foreign countries.
Expanding the production capacity
Domestic companies expanded their production capacities more than the demand
for product in domestic countries. In such cases, these companies are forced to sell
their excessive production in foreign developed market.
Severe competition in home country
The countries oriented towards market economies since 1960’s, experience severe
competition from other business firm in the home country. The weak companies
which could not meet the domestic countries started entering the markets of
developing countries.
Limited home market
When the size of the home market is limited either due to the smaller size of the
population or due to lower purchasing power of the people or both, the companies
internationalize their operations.
Political Stability v/s Political Instability
Business firms prefer to enter the politically stable countries and are restrained
from locating their business operations in politically instable countries. In fact,
business firms shift the operations from politically instable countries to the
politically stable countries.
Availability of Technology and Managerial Competency
Availability of advanced technology and competent human resource in some
countries acts as pulling factors for business firms from the home country. The
developed countries due to these reasons attract companies from developing world.
In fact, American and European countries depend on Indian Companies for
software products and services through their BPO’s.
Nearness to Raw materials
The source of highly qualitative raw materials and bulk raw materials is a major
factor for attracting the companies from the various foreign countries. Most of the
US based companies open their manufacturing unit in Middle East countries due to
the availability of petroleum. These companies, thus, reduces the cost of
transportation.
Availability of Quality HR at less cost
This is the major factor, in recent times, for software, high technology and
telecommunication companies to locate their operations in India. India is a major
source for high quality and low cost human resources unlike USA and other
developed countries.
To achieve higher rate of economic development
International Business helps the governments to achieve higher growth rate of the
economy, increases the total and per-capita income, GDP, industrial growth,
employment and income levels.

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