2. Definition of International Business
. The exchange of goods and services among
individuals and businesses in multiple countries. . A
specific entity, such as a multinational corporation or
international business company that engages in
business among multiple countries. International
Business conducts business transactions all over the
world. These transactions include the transfer of
goods, services, technology, managerial knowledge,
and capital to other countries. International business
involves exports and imports
3. International Business is the process of focusing on
the resources of the globe and objectives of the
organizations on global business opportunities and
threats. International business defined as global trade
of goods/services or investment. More comprehensive
view does not focus on the “firm” but on the exchange
process Free Trade occurs when a government does not
attempt to influence, through quotas or duties, what
its citizens can buy from another country or what they
can produce and sell to another country
4. International business consists of transactions that are devised and
carried out across national borders to satisfy the objectives of individuals,
companies, and organizations. These transactions take on various forms,
which are often interrelated. Primary types of international business are
export–import trade and direct foreign investment. The latter is carried
out in varied forms, including wholly owned subsidiaries and joint
ventures. Additional types of international business are licensing,
franchising, and management contracts. The definition of international
business focuses on transactions. The use of this term recognizes that
doing business internationally is an activity, not merely a passive
observation. Closely linked to activity is the term “satisfaction.” It is
crucial that the participants in international business are satisfied. Only
if they feel they are better off after the transaction than they were before,
will individual business transactions develop into a business relationship.
The fact that the transactions are across national borders highlights a key
difference between domestic and international business. The
international executive is subject to a new set of macro environmental
factors, to different constraints, and to quite frequent conflicts resulting
from different laws, cultures, and societies. The basic principles of
business are still relevant, but their application, complexity, and intensity
5. An international business has many options for doing
business, it includes,
1. Exporting goods and services.
2. Giving license to produce goods in the host country.
3. Starting a joint venture with a company.
4. Opening a branch for producing & distributing
goods in the host country.
5. Providing managerial services to companies in the
6. Today, business is acknowledged to be international
and there is a general expectation that this will
continue for the foreseeable future. International
business may be defined simply as business
transactions that take place across national borders.
This broad definition includes the very small firm that
exports (or imports) a small quantity to only one
country, as well as the very large global firm with
integrated operations and strategic alliances around
7. International business grew over the last half of the twentieth
century partly because of liberalization of both trade and
investment, and partly because doing business internationally
had become easier. In terms of liberalization, the General
Agreement on Tariffs and Trade (GATT) negotiation rounds
resulted in trade liberalization, and this was continued with the
formation of the World Trade Organization (WTO) in 1995. At
the same time, worldwide capital movements were liberalized by
most governments, particularly with the advent of electronic
funds transfers. In addition, the introduction of a new European
monetary unit, the euro, into circulation in January 2002 has
impacted international business economically. The euro is the
currency of the European Union, membership in March 2005 of
25 countries, and the euro replaced each country's previous
currency. As of early 2005, the United States dollar continues to
struggle against the euro and the impacts are being felt across
8. Domestic Business
Domestic business involves those economic transactions that take
place inside the geographical boundaries of a country. Both the buyer
and seller belong to the same country in this form of business.
Domestic business is also known as ‘Internal Business’ or ‘Home Trade’.
It is relatively easier to conduct business research in domestic business
when compared to companies from abroad, and the degree of risk is
also much lower. The selling process, currency, type of customers,
taxation laws, and other regulations are more or less uniform, which
can significantly benefit any organisation.
International business involves those economic transactions that take
place outside the geographical boundaries of a country. The buyer and
seller do not belong to the same country in this form of business.
Companies involved in international business are known as
‘Multinational’ or ‘Transnational’ companies. It is much more difficult
to conduct business research on international business firms when
compared to domestic companies, and the degree of risk is also higher.
The selling process, currency, type of customers, taxation laws and
other regulations are different for the buyer and seller, which can be a
hindrance for any organisation to conduct business.
The difference between Domestic and International
Business indicates that a company must do both to
survive and grow in the market. Both these forms of
businesses have their advantages, for any organisation
that wants to succeed in these markets must design its
business strategies accordingly.
13. Need for International Business
1. To achieve higher rate of profits
2. Expanding the production capacity beyond the demand of the
3. Severe competition in the home country
4. Limited home market
5. Political conditions
6. Availability of technology and managerial competence 7. Cost of
8. Nearness to raw material
9. Liberalization, Privatization and Globalization (LPG)
10. To increase the market share
11. Increase in cross border business is due to falling trade barriers
(WTO), decreasing costs in telecommunications and transportation;
and freer capital markets
14. Features of International Business
1. Large scale operations: In 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.
Dominated 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
15. 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 up their
economies through liberal economic policies.
5. Keen competition: International business has to 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
16. 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
Sensitive nature: The international business is very
sensitive in nature. Any changes in the economic policies,
technology, political environment, etc. have 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.
17. . Language Barriers
When engaging in international business, it’s important to consider the languages spoken in the
countries to which you’re looking to expand.
Does your product messaging translate well into another language? Consider hiring an interpreter
and consulting a native speaker and resident of each country.
One example of a product “lost in translation” comes from luxury car brand Mercedes-Benz. When
entering the Chinese market, the company chose a Mandarin Chinese name that sounded similar to
“Benz”: Bēnsǐ. The name translates to “rush to death” in Mandarin Chinese, which wasn’t the
impression Mercedes-Benz wanted to make with its new audience. The company quickly adapted,
changing its Chinese name to Bēnchí, which translates to “run quickly, speed, or gallop.”
It’s also critical to consider the languages spoken by your company’s team members based in
international offices. Once again, investing in interpreters can help ensure your business continues to
2. Cultural Differences
Just as each country has its own makeup of languages, each also has its own specific culture or blend
of cultures. Culture consists of the holidays, arts, traditions, foods, and social norms followed by a
specific group of people. It’s important and enriching to learn about the cultures of countries where
you’ll be doing business.
When managing teams in offices abroad, selling products to an international retailer or potential
client, or running an overseas production facility, demonstrating that you’ve taken the time to
understand their cultures can project the respect and emotional intelligence necessary to conduct
One example of a cultural difference between the United States and Spain is the hours of a typical
workday. In the United States, working hours are 9 a.m. to 5 p.m., often extending earlier or later. In
Spain, however, working hours are typically 9 a.m. to 1:30 p.m. and 4:30 to 8 p.m. The break in the
middle of the workday allows for a siesta, which is a rest taken after lunch in many Mediterranean and
18. 3. Managing Global Teams
Another challenge of international business is managing employees who live all over the world. When trying to function as a team, it
can be difficult to account for language barriers, cultural differences, time zones, and varying levels of technology access and reliance.
To build and maintain a strong working relationship with your global team, facilitate regular check-ins, preferably using a video
conferencing platform so you can interact in real time.
Research by Gallup shows that employees who have regular check-ins with their managers are three times more likely to be engaged
at work than employees who don’t.
When distance divides teams, as it has for many during the coronavirus (COVID-19) pandemic, communication is key to ensuring
everyone feels valued and engaged.
Related: How to Foster Employee Engagement When Your Team Is Remote
4. Currency Exchange and Inflation Rates
The value of a dollar in your country won’t always equal the same amount in other countries’ currency, nor will the value of currency
consistently be worth the same amount of goods and services.
Familiarize yourself with currency exchange rates between your country and those where you plan to do business. The exchange
rate is the relative value between two nation’s currencies. For instance, the current exchange rate from the Canadian dollar to the US
dollar is 0.77, meaning one Canadian dollar is equal to 77 cents in US currency. Make it a point to watch exchange rates closely, as
they can fluctuate.
It’s also important to monitor inflation rates, which are the rates that general price levels in an economy increase year over year,
expressed as a percentage. Inflation rates vary across countries and can impact materials and labor costs, as well as product pricing.
Understanding and closely following these two rates can provide important information about the value of your company’s product in
various locations over time.
5. Nuances of Foreign Politics, Policy, and Relations
Business doesn’t exist in a vacuum—it’s influenced by politics, policies, laws, and relationships between countries. Because those
relationships can be extremely nuanced, it’s important that you closely follow news related to countries where you do business.
The decisions made by political leaders can impact taxes, labor laws, raw material costs, transportation infrastructure, educational
systems, and more.
One hypothetical example Reinhardt presents in Global Business is that if the Chinese government decided to subsidize Chinese dairy
farms, it would impact dairy farmers in all surrounding countries. This is because, with extra funding, Chinese dairy farms may
produce a surplus of dairy products, causing them to expand their markets to neighboring countries.
It’s both exciting and intimidating that the nuances of international politics, policies, and relations can impact your business. Stay
informed and make strategic decisions as new information arises.
19. Benefits of International Trade
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
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.
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.
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.
20. 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
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.
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.