what is international business

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What is International Business?

Any business activity that includes the movement of resources, products, services, knowledge, skills, capital, or information across national boundaries is referred to as international business.

These activities could include manufacturing physical products or providing services such as banking, finance, insurance, education, and construction, among others. International transactions are the operations that make up international business and include international exchange, international investment, joint ventures, or strategic alliances.

Main Players:

- Individuals (Through tourism or investments)

- Global Business Operations (MNCs)

- Global Financial Institutions (IMF, World Bank, Central Banks of different countries)

- Governments

Individuals and organisations engage in international business for profit. Governments indulge in international transactions with a service motive.

Primary Motive:

Geographic specialisation is the primary driver of international business. It entails manufacturing and trade that extends beyond a country's borders. Every country has a niche market for unique products and services that it can manufacture at a lower cost. It purchases other products and services from other countries that they (Host) cannot manufacture at a lower cost.

Natural resources vary greatly between countries. Further, labour productivity and production costs vary by country due to a variety of socioeconomic, geographical, and political factors.

Similarly, a business can import products that are cheaper in other countries. It may export items that sell for a higher price in other countries than at home.

How is Globalization different from International Business?

Politics are inextricably linked to international business. Globalization is a business-related political agenda. Globalization aims to integrate economic and financial systems around the world, lowering artificial barriers to goods and service trade.

Global and international business differ in that international trade does not necessitate globalisation. Monopolies, tariffs, government interference, and intellectual property theft all impede the globalised level playing field, but none of these factors prevent foreign trade.

Why do corporations adopt international business?

Higher Profitability: This may be attributed to the fact that foreign countries have higher and lower costs. A product or service may be sold at a higher price in a foreign market than in the domestic market. In international business, the most common explanation for profit advantage is cost reduction.

Better Growth Opportunities: As income and population in developing countries such as India expanding, more and more multinational corporations (MNCs) from developed countries such as the United States, Germany, and Japan establish operations in these countries. Foreign markets also have enormous growth opportunities for developing-country businesses.

As a result, many Indian companies (eg Infosys, TATA, Wipro, Reliance, and others) have opened offices abroad. Some Indian pharmaceutical companies, such as Ranbaxy, have grown faster outside of India than they have at home.

Saturation of Domestic Market: When the domestic market is limited, companies can often want to expand internationally. Companies are often prompted to enter international markets by economic downturns in their home countries.

Economies of Scale: In many industries, technological advancements have increased the optimal size of operations. Companies must seek international markets in addition to the domestic market in order to achieve the optimal scale. Many countries' businesses would be unable to benefit from economies of scale if they do not internalise.

Growing Competition: Until 1991, when the economy was liberalised, Indian companies had little incentive to look for business opportunities abroad. Since 1991, both domestic and international competition has risen significantly. As a result, many Indian companies have made significant inroads into international markets.

Counter-Competition: This strategy entails penetrating a potential foreign competitor's home market in order to weaken its dominant position and secure domestic market share from foreign competition.

Monopoly Power: To take advantage of their market power or dominant role in terms of patent rights, technology, product differentiation, and other resources, companies go global.

Government Policies & Regulations: Government policies can contribute to internationalisation of companies in both positive and negative ways.

Routes for Entry:

Exporting: Selling of goods produced in one’s own country for use or resale in other countries. It may be in the form of Direct, Indirect Exporting or Intra Corporate Transfers.

Licensing: A licence arrangement allows foreign companies to produce an Exporter's product in a particular market for a set period of time, either exclusively or non-exclusively.

Franchising: A firm in one country (the franchiser) authorizes a firm in another country to utilize its operating system as well as brand name, trademarks & logos etc.

Turnkey Projects: A turnkey project refers to a project when clients pay contractors to design & construct new facilities & train personnel. It is a way for a foreign company to export its process & technology.

Joint Venture: A company willing to enter foreign market sets up an enterprise in collaboration with the local firm of the host country. The two firms share the ownership & control of the joint venture.

Outsourcing or Contracting Manufacturing: The company enters into a contract with the firm in the foreign market to manufacture or assemble the product as per its specifications.

Wholly Owned Subsidiaries: The foreign company can establish a wholly owned subsidiary that is recognized under the host country's relevant laws. A foreign firm may also buy an existing company in the host country.

Hope this information helps!

All the best!

Hello,

International business is defined as where the production or distribution of goods or services crosses country borders. The four types of international businesses one can start are as follows: 1. Exporting 2. Licensing 3. Franchising 4. Foreign Direct Investment.

Hope this information helped you.

All The Best!!