Question

1)- What defines an international business from domestic business, and why is international business important?

300 words

Answer 1

Let me begin the answer by pointing out the meaning of the two.

Domestic Business

It is a business activity taking place within the geographical boundaries of a country. It means that the trade activities takes place within the country say for eg; within USA. It means that the producer and the consumer belongs to the same country. Unlike International business, it has an advantage of following just one country's tax policies, currencies, regulations etc. A country following just following domestic business has certain advantages as there won't be much competition from outside countries like China.

As there are less competition, the quality of the products are relatively lower than the products that are available in the international market. The employees involved in domestic businesses are mostly from the same country. Compared to other businesses,the capital investment is relatively less and there are barriers in entry which means that the entry is restricted to few and the nature of customers are homogenous.

International Business

It refers to a business where the production and trade takes place beyond the borders of a particular country. Such companies are also known as Multinational Companies (MNC's). It also means that the producer and consumer belongs to two different countries dealing a trade in between. It possible that employees working for MNC's belongs to other countries. The trade generally takes place in foreign currency and not the domestic currency. Usually the standard currency for international trade is dollar.

International Business houses are liable to follow the culture, tax policies and regulations of the country they are going to trade with. The area of operation of International Business is very large and such business takes place in countries with liberal policies regarding licensing and trade. Such companies includes Dominos, KFC, McDonalds, Sony, LG, Samsung, Ford Motor Company etc.

Why is International Business Important?

International Business is important in a country for the following reasons.

• Higher sales volume: Having a sale at international markets increases exports and as a result increases the sales of a country. It also creates better employment opportunities to a large section of people.
• Wider selection of products: The consumers will get a chance to select from wide varieties of product and at the end of the day, getting better products at best prices.
• Better International Relations.
• Greater Benefits for the Government: As International Businesses provides greater foreign exchange to the country, it had became a great benefit for the govt.
• Better and Optimum utilisation of resources: The products are produced on a large scale basis by using the technology of the rich and labour of the poor.
• Increases competitive spirit to produce better products.
• It leads to Economic growth: The international businesses provides with lots of foreign investment which eventually increases the national income and in the end, leading to economic growth of a country.