This article discusses the concept of international business and trade, emphasizing the importance and benefits of engaging in global trade. It also explores the barriers and challenges associated with international business. The forms of international business, including direct and indirect exports, licensing, franchising, turnkey projects, joint ventures, strategic alliances, and wholly owned subsidiaries, are examined. The article highlights the significance of international business in achieving balanced demand and supply, overcoming legal restrictions, increasing comparative profit base, boosting productivity, decreasing business risk, accessing latest technologies, establishing relationships with other nations, and promoting collaboration. The differences between handling domestic and international business are also addressed.
The concept of international business and trade involves trading goods and services globally, crossing borders to satisfy worldwide customers rather than focusing solely on local consumers. It encompasses marketing and trading products in other countries to maximize market share and increase earnings through global trade. International business plays a significant role in a country’s gross domestic product (GDP) by selling goods and services produced within its borders overseas. It also generates tax revenue for governments through import and export transactions.
International trade has its advantages and disadvantages. One of the main benefits is the potential for higher returns and reduced expenses. International businesses adopt a universal approach to manufacturing and market values, incorporating both domestic and foreign market principles. Managing the production and distribution of international goods and services requires analyzing and collaborating with other businesses in areas such as fiscal policies, monetary decisions, human resources, and marketing. By doing so, businesses can expand globally and move beyond domestic trading.
Balancing demand and supply are crucial in international business. When the production rate of a product exceeds its demand in the market, prices may decline, negatively impacting the company’s economy. To address this issue and maintain a stable profit base, brands enter external markets to promote their products, increase sales, and keep demand and supply in balance. International business involves dealing with legal restrictions, which can be more complex than a simple give-and-take system. However, it also provides guidance on navigating overwhelming government restrictions and policies that hinder brand expansion and growth.
Export business receives significant attention due to its profitability. The more a brand exports, the more profit it generates for itself, the government, and the GDP. International businesses also benefit from increased productivity to meet the needs of new customers and retain them through competitive pricing. Despite selling products at lower prices, the high sales volume compensates for any potential losses. Operating in the global market reduces the risk of business decline due to the diversity of customers and stability offered by the global market. Additionally, international business provides access to the latest technologies, enabling companies to gain an advantage over competitors in both domestic and global markets.
From a different perspective, the importance of international business cannot be neglected in terms of establishing good relations with other nations. Engaging with other entities and offering products or services fosters mutual relationships. Governments also leverage international business to form alliances and maintain positive relations with other countries, collaborating for mutual benefit. Similarly, entering the global market allows brands to gain insights from competitors, improve their business environment, and gather valuable information for growth.
While international business offers numerous benefits, there are also barriers and risks to consider. However, these obstacles are gradually declining due to advancements in communication and distribution modes. Cultural differences between countries pose one of the main challenges when planning for international business. Although cultures may appear similar on the surface, hidden hindrances can arise due to differing cultural beliefs and practices. Implementing international business plans can be more challenging than initially anticipated.
International business aims to unify the world as a single market by establishing business operations and production activities in other countries to generate revenue. This approach capitalizes on innovative international markets to introduce products, taking advantage of lower production costs or dominating competitors to expand market share overseas. International business can take various forms based on resource utilization and control. Exporting products in direct or indirect forms is one approach. Direct exports offer control over foreign markets by allowing companies to choose their distribution and marketing channels. In contrast, indirect exports lack this control, leading to faulty decisions regarding markets and distribution channels, potentially resulting in failure in the international market. Other entry modes include licensing, which covers markets that are challenging to reach through exporting. Licensing is beneficial for international expansion as it requires lower capital outlays and entails lower risk. Franchising is another successful mode for global expansion, enabling penetration into foreign markets by delivering operational knowledge and intellectual properties. Turnkey projects, joint ventures, strategic alliances, and wholly owned subsidiaries are additional options for entering the international market.
International business is a beneficial concept that not only helps brands but also contributes to the government by boosting GDP and overall economic development. It addresses issues such as unemployment, wages, and investments within a country. Developing strong international business and trade relations brings entities together and forms alliances with different countries, stabilizing their economies. A stable economy provides better guarantees for investors and attracts funds from outside the country, making the market for loanable funds more attractive.
Reference: http://www.businessstudynotes.com
