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Differences in Domestic and International Trade

International business differs from domestic business in several key ways. Transactions in international business can involve parties from multiple countries, requiring businesses to deal with differences in currencies, legal systems, and cultures between nations. Specifically, international business may necessitate converting currencies, adjusting practices to comply with different laws, and accounting for variances in cultural norms across Western and Muslim societies. Additionally, the availability of resources can vary between countries, with some possessing natural resources and others enjoying skilled labor forces. Before engaging in international business, people must educate themselves on cultural, legal, political, and social differences among nations.

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Anson Robin D'Cruz
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327 views3 pages

Differences in Domestic and International Trade

International business differs from domestic business in several key ways. Transactions in international business can involve parties from multiple countries, requiring businesses to deal with differences in currencies, legal systems, and cultures between nations. Specifically, international business may necessitate converting currencies, adjusting practices to comply with different laws, and accounting for variances in cultural norms across Western and Muslim societies. Additionally, the availability of resources can vary between countries, with some possessing natural resources and others enjoying skilled labor forces. Before engaging in international business, people must educate themselves on cultural, legal, political, and social differences among nations.

Uploaded by

Anson Robin D'Cruz
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Many a people are involved in business but some of them dont know the actual meaning of business.

Because they are supposed to run their fathers or uncles business with due care, it does not matter whether they are familiar with this term or not. Their knowledge may be ample for domestic business but in case of an international business they must be acquainted of some differences. When business transactions are carried out among parties within a countrys borders is called domestic business. And when the business transactions occur between parties from more than one country or cross border activities is termed as International business. The business transactions comprise of buying materials in one country and transport them off to another country for dealing out, shipping finished products from one country to another for retail sales, installing a new plant in a foreign country to take advantage of lower labour costs, or borrowing money from a bank in one country for the funding of operations in another. These business transactions are not associated with only one type of party it may involve transactions between private business owners, governmental agencies, individual companies, and groups of companies. International business can differ from domestic business for a number of other reasons including the following: The first difference involves the dissimilarity in currencies. Countries involved in business may use different currencies; it may force at least one party to switch its currency into another. In other words, one of the parties would have to follow the prevailing market currency exchange rate to make its business transactions viable. Next you may face the difference in legal systems of countries; it may compel one or more parties to adjust their practices to comply with local law. Occasionally, the consent of the legal systems may act as a barrier and be irreconcilable, creating complications for international managers. Difference in cultures is also considered as dissimilarity in domestic and international business. The cultures of the countries may vary according to the use of trading product and it may force each party to adjust its behaviour to meet the expectation of the others. For example the difference in the use of pork and wine face different attitudes in western and Muslim cultures.

Last is the difference in availability of resources by country. One country may be rich in natural resources but poor in skilled labour, while another may enjoy a productive, welltrained work force but lack natural resources. Thus, the way products are produce and the types of products that are produced vary among countries. Currently, this is the major difference noticed in the business between developed and third world countries. Before going to start an International business, people must be well-informed about cultures, legal, political and social differences among countries. They must choose the countries in which to sell their goods and from which to buy inputs with assurance and hoping that a good business is waiting ahead for them. 1. Mobility in Factor of Production Domestic Trade: Free to move around factors of production like land, labour, capital and labour capital and entrepreneurship from one state to another within the same country. International Trade: Quite restricted. 2. Movement of Goods Domestic trade: easier to move goods without many restrictions. Maybe need to pay sales tax etc. International Trade: Restricted due to complicated custom procedures and trade barriers like tariff, quotas or embargo. 3. Usage of different currencies Domestic trade: same type of currency used. International trade: different countries used different currencies. 4. Broader markets Domestic trade: limited market due to limits in population etc. International trade: Broader markets. 5. Language and Cultural Barriers Domestic trade: speak same language and practice same culture International trade: Communication challenges due to language and cultural barriers

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