Scope and Importance of International Business Notes

IMPORTANCE OF INTERNATIONAL BUSINESS

International business notes:

Business is defined as an organization or enterprising entity engaged in commercial,  industrial, or professional activity. Business can be for-profit entities or non-profit organizations that operate to fulfill a charitable mission or further a social cause.

International business:-

• The exchange of goods and services, resources, knowledge, & skills, among individuals and organizations.
• Transaction that is carried out across national borders to satisfy the objectives of individuals and organization
• All commercial transactions that take place between two or more countries.

Importance of international business

     1.       Exports increase sales:-

Exporting opens new markets for a company to increase its sales. economies rise and fall, and a company that has a good export market is in a better position to weather an economic downturn

     2.      Job creation:-

company that increase its exports needs to hire more people to handle a higher workload. Businesses that export have a job growth 2 to 4 percent higher than companies that don’t; these export-related jobs pay about 16 percent more than jobs in companies with fewer exports.

    3.      Benefit consumer:-

Imported products result in lower prices and expand the number of product choices for consumers. The lower price has a significant effect. Particularly for middle and low-income households.

     4.     Improve international relation:-

International business removes rivalry between different countries and promotes international peace and harmony. Mutual trade creates a dependence on each other, improves confidence and fosters good faith.

Scope of international business

International business is much broader than international trade. It includes not only international trade (i.e., export and import of goods and services) but also a wide variety of other ways in which the firms operate internationally. International Management professionals are familiar with the language, culture, the economic and political environment, and business practices of countries in which multinational firms actively trade and invest in.

Major forms of business operations that constitute international business is as follows:

1     1. merchandise exports and imports:

 Merchandise means goods that are tangible, those that can be seen and touched. When viewed from this perceptive, it is clear that while merchandise exports mean sending tangible goods abroad, merchandise imports mean bringing tangible goods from a foreign country to one’s own country.

2. service exports and imports:

 Service exports and imports involve trade-in intangibles. It is because of the intangible aspect of services that trade-in services are also known as invisible trade.

      3. licensing and franchising:

Permitting another party in a foreign country to produce and sell goods under your trademarks, patents or copyrights in lieu of some fee is another way of entering into international business. It is under the licensing system that Pepsi and Coca Cola are produced and sold all over the world by local bottlers in foreign countries.

       4. foreign investments:

 Foreign investment is another important form of international business. Foreign investment involves investments of funds abroad in exchange for financial return. Foreign investment can be of two types: direct and portfolio investments.