INTERNATIONAL BUSINESS

THE DEFINITION OF INTERNATIONAL BUSINESS 

International business relates to any situation where the production or distribution of goods or services crosses
country borders. International business is equated only with those big enterprises, which have operating units
outside their own country. In the middle are institutional arrangements that provide for some managerial direction
of economic activity taking place abroad but stop short of controlling ownership of the business carrying on the
activity, for example joint ventures with locally owned business or with foreign governments.
In its traditional form of international trade and finance as well as its newest form of multinational business
operations, international business has become massive in scale and has come to exercise a major influence over
political, economic and social from many types of comparative business studies and from a knowledge of many
aspects of foreign business operations. In fact, sometimes the foreign operations and the comparative business are
used as synonymous for international business. Foreign business refers to domestic operations within a foreign
country. Comparative business focuses on similarities and differences among countries and business systems for
focuses on similarities and differences among countries and business operations and comparative business as fields
of enquiry do not have as their major point of interest the special problems that arise when business activities cross
national boundaries. For example, the vital question of potential conflicts between the nation-state and the
multinational firm, which receives major attention is international business, is not like to be centered or even
peripheral in foreign operations and comparative business.
These exchanges can go beyond the exchange of money for physical goods to include international transfers of other
resources, such as people, intellectual property (e.g., patents, copyrights, brand trademarks, and data), and
contractual assets or liabilities (e.g., the right to use some foreign asset, provide some future service to foreign
customers, or execute a complex financial instrument). The entities involved in international business range from
large multinational firms with thousands of employees doing business in many countries around the world to a small
one-person company acting as an importer or exporter. This broader definition of international business also
encompasses for-profit border-crossing transactions as well as transactions motivated by nonfinancial gains (e.g.,
triple bottom line, corporate social responsibility, and political favor) that affect a business’s future.
IMPORTANCE OF INTERNATIONAL BUSINESS
The following points highlight the three importance of International business. The importance are:
1. National Economy
2. Importance to Exporting Firm
3. Importance from Other Points of View.
International Business Importance # 1. National Economy:
1. It is important to meet imports of industrial needs.
2. Debt Servicing: This means to grant loan for and for their industrial development.
3. For rapid economic growth.
4. For profitable use of natural resources.
5. To face competition successfully-better quality goods production having lower or moderate prices. To improve the
image of the producer as well as of the country in the minds of foreign customers.
6. Increase in employment opportunities.
7. To increase national income.
8. Increase in standard of living of the people.
International Business Importance # 2. Importance to Exporting Firm:
Business and industrial firms/exporting firms are also benefitted from the international business,
(a) Insufficiency of Domestic Demand:
If the domestic demand for the product is not sufficient to consume the production, the firm may take a decision to
enter the foreign market. In this way he can equalize the production and demand.
(b) To Utilize Installed Capacity:
If the installed capacity of the firm is much more than the level of demand of the product in the domestic market, it
can enter the international market and utilize its un-utilized installed capacity. In this way it can export the surplus
production.
(c) Legal Restrictions:
Sometimes the Government of a country imposes certain restrictions on the growth and expansion of certain firms
or on the production and distribution of certain commodities in the domestic market in order to achieve certain
social objectives.
(d) Relative Profitability:
The export business is more attractive for its higher rate of profitability. The higher profitability rate also gives extra
strength to the firm.
(e) Less Business Risk:
A diversified export business helps the exporting firm in mitigating the risk of sharp fluctuations in the business
activity of the firm.
(f) Increased Productivity:
Due to certain social and technological developments the industrial production has increased to a great extent. The
production will be higher at cheaper rate. The surplus production can be exported.
(g) Social Responsibility:
In order to meet the social responsibility some business firms take the decision to contribute to the National
Exchequer by exporting their products.
(h) Technological Improvements:
Technological improvements also attract the business firm to enter foreign markets. It introduces new products with
latest technological improvements and faces the competition successfully in the international markets.
(i) Product Obsolescence:
If a product becomes obsolete in domestic market it may be in demand in International markets. The firm has to
make a survey for introducing the product in those markets.
International Business Importance # 3. Importance from Other Points of View:
The importance of export business can also be viewed from some other angles:
(i) International Collaboration:
Developed countries fix their import quotas for different countries and for different commodities. A county can
export various commodities to these developed countries to the extent of its quota.
(ii) International Business Brings Various Countries Closer:
Better business relations are established among the countries. Government and non-government business
commissions or business representatives visit other countries from time to time. The local representatives and other
related persons came into contact with foreign representatives and come to know their habits and customs.
(iii) Helps in Maintaining Good Political Relations:
The economic relations between two countries help each other to improve their political relations. Various countries
having different political ideologies import or export their products. To conclude it is now undisputable that export
business contributes to the national economy, national exchequer, individual exporting firms and maintains
international, economic cultural and political relations among various countries. Countries have come closer on
account of international business.
SCOPE OF INTERNATIONAL BUSINESS ACTIVITIES
The study of international business focus on the particular problems and opportunities that emerge because a firm is
operating in more than one country. In a very real sense, international business involves the broadest and most
generalized study of the field of business, adapted to a fairly unique across the border environment. Many of the
parameters and environmental variables that are very important in international business (such as foreign legal
systems, foreign exchange markets, cultural differences, and different rates of inflation) are either largely irrelevant
to domestic business or are so reduced in range and complexity as to be of greatly diminished significance. Thus, it
might be said that domestic business is a special limited case of international business.
The distinguishing feature is that international firms operate in environments that are highly uncertain and where
the rules of the game are often ambiguous, contradictory, and subject to rapid change, as compared to the domestic
environment.
In fact, conducting international business is really not like playing a whole new ball game, however, it is like playing
in a different ballpark, where international managers have to learn the factors unique to the playing field. Managers
who are astute in identifying new ways of doing business that satisfy the changing priorities of foreign governments
have an obvious and major competitive advantage over their competitors who cannot or will not adapt to these
changing priorities.
The guiding principles of a firm engaged in (or commencing) international business activities should incorporate a
global perspective. A firm‘s guiding principles can be defined in terms of three board categories products
offered/market served, capabilities, and results. However, their perspective of the international business is critical to
understand the full meaning of international business. That is, the firm‘s senior management should explicitly define
the firm‘s guiding principles in terms of an international mandate rather than allow the firm‘s guiding principles in
terms as an incidental adjunct to its domestic activities. Incorporating an international outlook into the firm‘s basic
statement of purpose will help focus the attention of managers (at all levels of the organization) on the opportunities
(and hazards) outside the domestic economy. It must be stressed that the impacts of the dynamic factors unique to
the playing field for international business are felt in all relevant stages of evolving and implementing business plans.