Module 1 -INTERNATIONAL BUISINESS

Meaning of International Business:

International business refers to the trade of goods, services, technology, capital and/or
knowledge across national borders and at a global or transnational scale.
It involves cross-border transactions of goods and services between two or more countrie
International business refers to commercial activities that go beyond the geographical limits of a
country.

Therefore, it includes not only the international movement of goods and services but also the
capital, personnel, technology, and intellectual property such as patents, trademarks, technical
knowledge, and copyrights.

It is a business that takes place outside the border, that is, between two countries. This includes
the international movement of goods and services, capital, personnel, technology, and
intellectual property rights such as patents, trademarks, and know-how. It refers to the purchase
and sale of goods and services that exceed the geographical limits of the country.

FEATURES OF
INTERNATIONAL
BUSINESS
1 Large scale
operations:
 international
business, all the
operations are conducted
on a very huge scale.
Production
and marketing activities
are conducted on a large
scale. It first sells its
goods in the local
market. Then the surplus
goods are exported.
2 Integration
of economies:
International
business integrates
(combines) the
economies of many
countries. This is
because it uses finance
from one country, labour
from another country,
and infrastructure
from another country. It
designs the product in
one country, produces
its parts in many
different countries and
assembles the product in
another country. It sells
the product in many
countries, i.e., in the
international market.
3 Dominated
by developed
countries
FEATURES OF INTERNATIONAL BUSINESS
1 Large scale operations:
international business, all the operations are conducted on a very huge scale. Production
and marketing activities are conducted on a large scale. It first sells its goods in the local
market. Then the surplus goods are exported.
2 Integration of economies:
International business integrates (combines) the economies of many countries. This is
because it uses finance from one country, labour from another country, and infrastructure
from another country. It designs the product in one country, produces its parts in
many
different countries and assembles the product in another country. It sells the product in many
countries, i.e., in the international market.
3 Dominate by developed countries and MNCs:
International business is dominated by developed countries and their
multinational corporations (MNCs). At present, MNCs from USA, Europe and
Japan dominate (fully control) foreign trade. This is because they have large financial
and other resources. They also have the best technology and research and development (R
& D). They have highly skilled employees and managers because they give very high
salaries and other benefits. Therefore, they produce good quality goods and services at low
prices. This helps them to capture and dominate the world market.
4 Benefits to participating countries:
 International business gives benefits to all participating countries. However,
the
developed (rich) countries get the maximum benefits. The developing (poor) countries also
get benefits. They get foreign capital and technology. They get rapid industrial development.
They get more employment opportunities. All this results in economic development of the
developing countries. Therefore, developing countries open their economies through liberal
economic policies.
5 Keen competition:
International business must face keen (too much) competition in the world market. The
competition is between unequal partners i.e., developed and developing countries. In this
keen competition, developed countries and their MNCs are in a favorable position because
they produce superior quality goods and services at very low prices. Developed countries also
have many contacts in the world market. So, developing countries find it very difficult to face
competition from developed countries.
6 Special role of science and technology:
International business gives a lot of importance to science and technology. Science and
Technology (S & T) help the business to have large-scale production. Developed countries
use high technologies. Therefore, they dominate global business. International business helps
them to transfer such top high-end technologies to the developing countries.
7 International restrictions:
International business faces many restrictions on the inflow and outflow of capital,
technology, and goods. Many governments do not allow international businesses to enter their
countries. They have many trade blocks, tariff barriers, foreign exchange restrictions, etc. All
this is harmful to international business.
8. Sensitive nature:
The international business is very sensitive in nature. Any changes in the economic policies,
technology, political environment, etc. has a huge impact on it.
Therefore, international business must conduct marketing research to find out and study these
changes. They must adjust their business activities and adapt accordingly to survive changes.
Benefits of International Trade
1. More Job Opportunities
Beyond the job opportunities available in a career in international trade, the industry
helps to generate jobs as companies expand their available markets. As the available
market grows and market share increases, naturally manufacturing and service
capabilities expand as well. The end result is more job opportunities are available for the
working class.
2. Expanding Target Markets & Increasing Revenues
As mentioned in the previous benefit, more jobs are created when companies expand
their target markets and demand increases. Beyond job creation, a larger target market
allows companies to run production without the fear of overproduction as any excess
products produced can be sold internationally. Each country a business adds to their list
opens up new potential for business growth and increased revenue.
3. Improved Risk Management
In addition to a larger target market size, international trade offers the opportunity for
market diversification. When a company focuses only on the domestic market, there is
increased risk from economic downturns, environmental events, political influence, and
many more risk factors. By becoming less dependent on a singular market, companies
reduce the potential risks associated with their core market.
4. Greater Variety of Goods Available
Trading internationally provides consumers and countries with the opportunity to
purchase goods and services that are either not available or more expensive to produce in
their own countries. A simple trip to a local supermarket or electronics store will quickly
demonstrate the impact of international trade.
5. Better Relations Between Countries
The economic interdependence of countries that results from international trade can lead
to strong relationships of cooperation in other areas. When countries engage in a
substantial amount of trade, they are more likely to avoid other areas of conflict between
the nations.
6. Enhanced Company Reputation
Trading globally can provide a boost to a company’s reputation within the international
market. When a company has success doing business in one country, it can significantly
influence the success of that company in neighbouring and nearby countries as well.
While difficult to quantify, the rise in company credibility can have a huge impact when
targeting an entire region as opposed to singular countries.
7. Opportunities to Specialize
By participating in international markets, companies may be presented with opportunities
to specialize in a particular area to serve a particular market. When countries cannot
 efficiently produce a good or service, they can seek to acquire it through trade with
another country. These opportunities to specialize often lead to greater efficiency in
production, higher levels of innovation, and increased quality of development. This may
provide companies with a long-term competitive advantage and growth in terms of their
global market share.

Difference between Domestic Business

and International Business
1. Domestic Business: Domestic business refers to the business
where economic transactions are conducted within the geographical
boundaries of one country. The buyer and seller in domestic business
belong to the same country. It is limited to the territory. In the
domestic business, it is very easy to conduct business research. The
nature of customers in domestic business is homogeneous. In this
currency of parent/home country is used for doing business.
2. International Business: International business refers to the
business where economic transactions are conducted across borders
with several countries in the world. The buyer and seller in
international business belong to different countries. It is quite wide. In
international business, business research is very expensive and hard to
conduct. The nature of customers in international business is
heterogeneous. In this different types of currencies of different
countries are used for doing business.
Differences between Domestic Business and International Business are
as follows:

Basis Domestic Business International Business

Both buyers and sellers

Both buyers and sellers belong to different
belong to the same countries, which makes
country. It makes it business dealings
easier for both parties to relatively difficult due to
Nationality understand each other differences in their
of Buyers and enter into business languages, attitudes,
and Sellers deals. customs, etc.

Nationality Stakeholders Stakeholders (employees,

of other (employees, suppliers, suppliers, creditors, etc.,)
Basis Domestic Business International Business

Stakeholder creditors, etc.,) are from are from different

s one nation. nations.

Degree of mobility of Degree of mobility of

factors of production factors of production
Mobility of (land, labour, etc.) is (land, labour, etc.) is less
Factors of more as compared to as compared to domestic
Production international business. business.

Customers are not

Customers are homogeneous due to
homogeneous in their different socio-cultural
taste, preferences, backgrounds, tastes,
Nature of consumption patterns fashions, languages,
Customers and buying behavior. beliefs, customs, etc.

Business systems and

practices are less
homogeneous as there is
Business systems and difference in
Business practices are development level,
Systems and homogeneous within a infrastructure, market
Practices country. facilities, etc.

Domestic business firms

are familiar with political International business
system of their country. faces difficulties in
As a result, they are in a understanding and
Political better position to coping with different
System and understand and predict political systems of every
Risks its impact on business. country.

Business Rules, laws or taxation Rules, laws or taxation

Regulations policies of a single policies of various
Basis Domestic Business International Business

countries prevail in the

country prevail in case of international
and Policies domestic business. business.

Currency Currency of domestic Currency of more than

used country is used. one country is used.

It involves comparatively It involves a high degree

Risk less degree of risk. of risk.

Order There is a less time gap There is a wide time gap

processing in order and supply of between order and
time goods. supply of goods.

Effect on It has no effect on the It has a direct impact on

Foreign foreign reserves of a the foreign reserves of a
Reserve country. country.
INTERNATIONAL BUSINESS ENVIRONMENT