1.1.

International Business

International business is all commercial transactions private and governmental between two or more countries. Private companies undertake such transactions for profits; governments may or may not do the same in their transactions. These transactions include sales, investments and transportation. International business includes any type of business activity that crosses national borders. Though a number of definitions in the business literature can be found but no simple or universally accepted definition exists for the term international business. At one end international business is defined as, the organization that buys and/or sells goods and services across two or more national boundaries, even if management is located in a single country. At the other end international business is defined as, it is equated only with those big enterprises which have operating units outside their own country. In the middle, there 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, e.g., joint ventures with locally owned businesses or with foreign governments. 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 better understanding and to develop a new perspective of home institutions and enrichments that is frequently secured. At the same time, foreign 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. International business has emerged as a special branch of study due to its growth and importance in national economies. International business is also called global business.

1.2.
1) 2) 3) 4) 5) 6) 7) 8) 9) 10 ) 11 ) 12 ) 13 ) 14 )

Difference between International Business and Domestic Business

Domestic The domestic businesses follow the marketing principles. No such differences. In large countries like India, we have many languages. Selling procedures remain unaltered. No such changes are necessary. In few cases of restrictions exist due to area development, forest, land, etc. These have little or no impact on domestic trade. Short distances. Quick business is possible. No such experience or exposure. No such advantage, once plant is built, it cannot be easily shifted. It is possible to get this benefit through collaborators. Cost advantage by automation, new methods, etc. No such advantage. No such advantage. No such advantage and get competition from some spurious or SSI Unit who get patronage of Government.

The differences between international business and domestic business are detailed below:
International It is an extension of domestic business and marketing principles remain same. Differences in customs, cultural factors. Conduct and selling procedures changes. Working environment and management practices change to suit local conditions. Will have to face restrictions in trade practices, licenses and government rules. Currency, interest rates, taxation, inflation, and economy have impact on trade. Long distances and hence more transaction time. MNCs have perfected principles, procedures and practices at international level. MNCs take advantage of location economies wherever cheaper resources available. Large companies enjoy benefits of experience curve. High volumes cost advantage. Global standardization (coke soft drink of same standard 160 countries). Global business seeks to create new values and global brand image. Can shift production bases to different countries whenever there are problems in taxes or markets.

1.3.

Nature of International Business

The complexity of the international business environment means that international ventures are inherently more risky than purely domestic ones. For example, international managers need to consider the political risk of operating in foreign environments, they have to factor changes in foreign exchange values into their decisions, and they have to be aware of how cultural and national forces affect their marketing efforts. These are only a few of the changes that occur as companies move across national borders. All these changes make international business complex and risky. For rational business decisions to justify international activities, therefore, there must be perceived benefits that outweigh the risks. International expansion generally can be seen as either proactive or reactive. Proactive international ventures take advantage of perceived opportunities; reactive ventures respond to actions taken by other parties or defend against perceived threats. There are major proactive and reactive motives that account for companies becoming international in their operations. Proactive motives include taking advantage of resource availability, lower costs, and new markets, as well as exploiting firm-specific advantages, incentives, and international tax advantages. Reactive motives include responding to trade barriers, international customers, or competitors, and seeking to avoid home country regulations. The nature of international business can be briefly explained as: 1) International business involves commercial activities that cross national frontiers. It concerns the international movements of the goods, capital, services, employees and technology; importing and exporting; cross borders transactions in intellectual property (patents, trademarks, know-how, copyright materials, etc.) via licensing and franchising; investments in physical and financial assets in foreign countries; contract manufacture or assembly of goods abroad for local sale or for export to other nations; buying and selling in foreign countries; the establishment of foreign warehousing and distribution system; and the import to one foreign country of goods from a second foreign country for subsequent local sale. 2) International business helps the individual supplement his or her knowledge of general business functions (accounting and finance, personnel, marketing, etc.) through examining issues, practices, problems and solutions relating to these functions in foreign states. 3) International business as a field of study and practice encompasses that public and private business activity affectivity affecting the persons or institutions of more than one national state, territory, or colony. The effect may be in terms of their economic well-being, political status, convictions, skills, or knowledge. 4) International business differs from the purely domestic because it involves operating effectively within different national sovereignties; under widely disparate economics; with people living within different value systems and institutions; as part of an industrial revolution set in the contemporary world, often over greater geographical distance; and in national markets varying greatly in population and area.

1.4.

Characteristics of International Business

The characteristics of international business are elucidated by the following points: 1) Involvement of Two Countries: Two countries are required to prove international business successful. Thus, international business is possible only when there is a business transaction between two countries. 2) Many Bases: There are many basis which help to make international business possible like unequal distribution of natural resources. Because of this unequal distribution of natural resources there is no country which is self-dependent to produce all the goods of its own need. It has to take the help of some other nations. In the same way varied cost of production encourages international business. 3) Language Difference: Every country has its own different language. It is mandatory for a successful businessman to know the languages of different nations. Language difference is a main feature to understand the nature of international business because the awareness about international languages play a significant role in the success of international business. 4) Comparative More Risk: International business involves more risk in comparison to domestic business. Often, the material comes from a distant place and that too from the sea route. The glaciers, waves and climate/environment/weather of sea can cause great harm to the material.

5) Government Intervention: International business is totally monitored by the government. Prior approval of the government is needed before sale-purchase with a foreign country. Apart from this, for the exportimport of the products license needs to be taken from time-to-time. 6) Payment in Foreign Currency: Every country has its own different currency. Export-import, to arrange foreign currency is one of the most important feature of international business.

1.5.

Need of International Business

1) To Integrate Economies: International business is exciting because it combines the science and the art of business with many other disciplines, such as economics, anthropology, geography, history, language, jurisprudence, statistics, and demography. International business is important and necessary because economic isolationism becomes impossible. Failure to become a part of the global market assures a nation of declining economic influence and a deteriorating standard of living for its citizens, successful participation in international business, however, holds the promise of improved quality of life and a better society, even leading, some believe, to a more peaceful work. 2) To Offer New Markets: International business offers companies new markets. Since the 1950s, the growth of international trade and investment has been substantially larger than the growth of domestic economies. Technology continues to increase the reach and the ease of conducting international business, pointing to even larger growth potential in the future. A combination of domestic and international business, therefore, presents more opportunities for expansion, growth, and income than does domestic business alone. 3) To Facilitate Interchange of Ideas, Service and Capital Across the World: International business causes the flow of ideas, services, and capital across the world. As a result, innovations can be developed and disseminated more rapidly, human capital can be used better, and financing can take place more quickly. International business also offers consumers new choices. It can permit the acquisition of a wider variety of products; both in terms of quantity and quality, and do so at reduced prices through international competition. 4) To Facilitate Mobility of Factors of Production: International business facilitates the mobility of factors of production except land and provides challenging employment opportunities to individuals with professional and entrepreneurial skills. At the same time, international business reallocates resources, makes preferential choices, and shifts activities on a global level. It also opens up markets to competition, which, in many instances has been unexpected and is difficult to cope with. As a result, international business activities do not benefit everyone to the same degree.

1.6.

Importance of International Business

Main importance arising-out of international business is as follows: 1) Maximum Utilization of Natural Resources: Due to international business, maximum utilization of natural resources is possible. Each producer will produce only those products, which will give him the maximum profit. This process is not only beneficial for individual producer but also for country. By doing so, the goods which were being manufactured at higher cost, now can be procured from other countries at lower cost. Benefits of specialization can also be achieved if one product is produced repeatedly and sold in the market. 2) Stability in Prices: The whole world has turned into a local market due to prevalence of international trade. Due to open export-import, things from places of excess supply are transported to places of excess demand. This has helped in stabilizing the prices of products in various countries. 3) Encouragement to Industrialization: With the help of international trade, machinery, raw materials and modern techniques are imported and industrialization is encouraged. The natural resources available in country are also utilized optimally. 4) Benefits of Large Scale Production: Due to availability of export facilities, the industrialists of the country can concentrate more on the products which are demanded in foreign countries and for which suitable production facilities are also present in the country. In this manner, industrialist can produce such commodities on large scale and can enjoy the benefits of large scale production.

5) Check on Monopoly: International trade can help in checking the evils of monopoly. In monopolistic market, only one seller is present and one can charge desired prices. If international trader is present in market, monopolist will always be afraid of import of product if the price rises. 6) Friend in Difficulty: During difficult times, international trade proves to be a good friend. For example, if production of any country destroys due to drought, famine or earthquake, lives can be saved by importing goods from abroad. 7) Earning of Foreign Exchange: Foreign currency or foreign exchange is important for every country. Valuable foreign exchange can be received by international trade. By exporting more than required, gold and silver can be procured. The more the foreign exchange with a country, the more well-off that country will be. 8) Establishment of International Cooperation: Due to international trade, people of one country meet with people of other countries regularly. This enhances the mutual cooperation among people. They start understanding each others feeling and exchange of thoughts takes place. This all increases the world peace. 9) Less Cost due to the use of Modern Techniques: For making good reputation in international market, each producer uses modern machines and advance techniques of production. This increases not only production but also reduces the cost. 10) Development of Transport and Communication: Development of international trade helps in developing the transport and communication. For sending information and commodities from one place to another place faster, these mediums are required.