Importance of international business
Posted Date: 31-Oct-2009
Wondering about what is the importance of having an international business or even why International business is important for the survival and growth of any country? Check out this article for more information about importance of International business.
International business is defined as ‘any commercial transaction taking place across boundary lines of a sovereign entity.
Importance of international business
Every company is trying to expand its business by entering foreign markets. International business helps in the following ways:-
Helps as growth strategy: -
Geographic expansion may be used as a business strategy. Even though companies may expand their business at home.
Helps in managing product life cycle:
- every product has to pass through different stages of product life cycle-when the product reaches the last stages of life cycle in present market, it may get proper response at other markets.
Technology advantages: -
some companies have outstanding technology advantages through which they enjoy core competency. This technology helps the company in capturing other markets.
New business opportunities:
- business opportunities in overseas markets help in expansion of many companies. They might have reached a saturation point in domestic market.
Proper use of resources:
-Sometimes industrial resources like labor, minerals etc. are available in a country but are not productively utilized.
Availability of quality products:
- when markets are open, better quality goods will be available every where. Foreign companies will market latest products at reasonable prices. Good product will be available in the markets.
Earning foreign exchange: -
international business helps in earning foreign exchange which may be used for strategic imports .India needs foreign exchange to import crude oil, deface equipment, raw material and machinery.
Helps in mutual growth: -
countries depend upon each other for meeting their requirements. India depends on gulf countries for its crude oil supplies.
Investment in infrastructure:
- international business necessitates proper development of infrastructure. A company entering international business must invest in roads.
Complexities involved in international business
International business by multinational so the complexities are also related to their working. Some of these complexities are discussed as follow:-
Controlling the market:-
multinational try to control the market of the host country. Whenever they enter a new country, the first strategy is to eliminate the competitors either by taking over their business or forcing them out of market by following price reduction policies.
Exhausting natural resources: -
multinational corporations set up their production facilities in those countries where natural resources are available in sufficient quantities.
Importance to luxuries: -
multinational corporations enter those areas where margin of profits is high.
Trade practices:- since multinational corporations have their head office in one country and the trade practices followed there are adhered to.
Economic development: - it is generally felt that the entry of businessmen from outside may help in the economic development of that country . The actual practice in many countries is different.
Shifting of investment: - international business is related to profitability of its operations. If a business is getting sufficient profits in a particular country then the investment remain there.
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