Globalization has connected regions geographically, physically, and culturally diverse around the world. Companies and organizations which operate across the globe through these various locations to provide the best services. With a proper understanding of local customs, laws, and culture, the managers can successfully execute the businesses from these locations. The textbook definition of international trade is any transaction that involves two or more nations. These businesses can occur in the form of payments transfer of goods and services between private firms or even the governments.
Large companies and the governments of specific countries trade with other countries regularly for raw materials, technologies, and even labour. With increased globalization, the importance of international business rises throughout the world. Open markets nearly in all countries have made even the small to medium businesses take leaps towards global business.
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The growing relevance of international business has led to the development of a newer form of management strategy called international management. This mostly deals with setting up businesses and running them smoothly by focusing on the company motives as well as local agendas and laws.
In this section, the different features of global business practices have been discussed.
The primary difference that international businesses have from the domestic one is the sheer difference in the scale of operations. Being simultaneously operational in different countries, these have to handle multiple jurisdictions.
The second feature of international business is that the firms have to take into account the different economic factors and levels of the involved countries. Managing all these economies helps in smooth functions of importing, exporting, financing, hiring, selling, and managing.
When international businesses come into the market, local small businesses have to face fierce competition from these large corporations which have unlimited resources and funds in comparison.
Lastly, the international business market is not evenly spread throughout the world. Not every country provides opportunities for local industries to grow and expand overseas. Therefore the international is dominated by the USA, UK, Japan, China, Germany, India, etc.
There are innumerous benefits that the organization and the economy as a whole get when it deals with International business. Few of these are stated below-
International business helps in foreign exchange of currency. When the two or more countries carry out transactions between them, multiple currencies are used. All these currencies exchanged in payment of goods and services help to keep the currency value stable. Therefore the economy of the countries remain stable and even get a boost over time.
For industries, international markets are huge customer bases and a chance to obtain large sums of profits. This is only possible when the company carries out international business with other countries selling and gaining popularity for its products in new parts of the world.
The importance of international business can be seen in the utilization of resources of a country. In the case of surplus resources in a country, the government can form trade relations with other countries and sell its surplus in exchange for some products, services, or goods it needs.
The relevance of international business is ever increasing. With more unified notions and culture around the world and a chance to boost the economy and give the population a better life with cheaper services, even the governments of several countries encourage international trade and businesses.
The high profits these businesses earn keep the economy running. Therefore the government encourages large as well as medium enterprises to reach out to foreign markets by giving them several exemptions and benefits.
Risk management is another integral factor that makes international business beneficial even if the local market fails due to bad economic conditions. Diversification of the market by the company helps it to maintain some of its profit in the international markets.
With better technology, employees can conduct international businesses without ever physically being in the meeting locations. Better communication, companies can now connect over long distances easily and save a lot on transport and other overseas costs required previously for international trade.
The significance of international business can be understood by the change in the industry operating methods. Remotely working using computers has become a possibility with the help of technology. With better connectivity, companies need not be established all around the world anymore. Even a medium-sized company based in a single country can ship its products around the world with the help of technology. It has made remote working accessible, which in return has made International business more accessible.
Information technology companies hiring professionals is not limited to just a single country anymore. Employees with the usage of the internet and other technologies can operate without ever physically being in the office. This helps the enterprises to save funds reserved for buying offices.
1. What is a global strategy in International Business?
Ans: Global strategy in international business helps to account for globalization and works in a way to keep in mind the local customs and values.
The strategy must include to what degree the global presence of the company is necessary and what locations are best for setting up new chains around the world. The system takes into account the cultural preferences and the selling points of the target population. It moulds the services in a way to give maximum success to the international business environment. All this is done keeping in mind the core customers so that the company never strays away from its core principles.
2. What are the four types of International Businesses?
Ans: The four types of international businesses one can start are as follows:
Exporting: When firms sell their products to international markets either directly to the customers or via registered foreign sales distributors, it exports its products in different parts of the world.
Franchising: This is closely related to licensing, though, in this case, the parent company decides what exactly the other firm should do while carrying out a process. The rules to follow are stricter than licensing.
Licensing: Licensing is arranged by a company to allow other enterprises in foreign markets to produce goods using their parents and processes for a specific period. In return, the company can charge a royalty.
Foreign Direct Investment (FDI): When companies directly set up foreign branches and start operating in international markets, it is known as foreign direct investments.