What is the Importance of International Business for economy?

Answer: The points below highlight the importance of international business:

a) Earn foreign exchange: International business exports its goods and services all over the world. This helps to earn valuable foreign exchange. This foreign exchange is used to pay for imports. Foreign exchange helps to make the business more profitable and to strengthen the economy of its country.

b) Optimum utilization of resources: International business makes optimum utilization of resources. This is because it produces goods on a very large scale for the international market. The international business utilizes resources from all over the world. It uses the finance and technology of rich countries and the raw materials and labor of the poor countries.

c) Achieve its objectives: International business achieves its objectives easily and quickly. The main objective of an international business is to earn high profits. This objective is achieved easily. This it because it uses the best technology. It has the best employees and managers. It produces high-quality goods. It sells these goods all over the world. All this results in high profits for the international business.

d) To spread business risks: International business spreads its business risk. This is because it does business all over the world. So, a loss in one country can be balanced by a profit in another country. The surplus goods in one country can be exported to another country. The surplus resources can also be transferred to other countries. All this helps to minimize the business risks.

e) Improve organization's efficiency: International business has very high organization efficiency. This is because, without efficiency, they will not be able to face competition in the international market. So, they use all the modern management techniques to improve their efficiency. They hire the most qualified and experienced employees and managers. These people are trained regularly. They are highly motivated with very high salaries and other benefits such as international transfers, promotions, etc. All this results in high organizational efficiency, i.e. low costs and high returns.

f) Get benefits from Government: International business brings a lot of foreign exchange to the country. Therefore, it gets many benefits, facilities, and concessions from the government. It gets many financial and tax benefits from the government.

g) Expand and diversify: International business can expand and diversify its activities. This is because it earns very high profits. It also gets financial help from the government.

h) Increase competitive capacity: International business produces high-quality goods at low cost. It spends a lot of money on advertising all over the world. It uses superior technology, management techniques, marketing techniques, etc. All this makes it more competitive. So, it can fight competition from foreign companies.

 

Question::01.05: What are the key differences between domestic and International Business?

Answer: Key Differences between Domestic and International Business

Definition of Domestic business and International business 

Domestic business is the kind of trade that is limited geographically within a country. A domestic business involves commercial exchanges that are only done within that country (1). A domestic business which can also be referred to as an internal business involves a producer and a client, who live within the same nation. This means that the laws, business practices, and customs used in a business transaction shall be of the designated country.

International business on the other hand is a business whose production and consumer base is drawn from more than one country (1). An international business does not fall so much to the dispensation of local law but within international agreements for business practice. International business involves transactions between two or more than two countries.

Comparison between Domestic and International Business

Both types of business involve a trade exchange between a willing buyer and a willing seller. Unless the two entities of the supplier and the consumer agree to do business, there will not be any transaction proceeding.
Also, business in both disciplines is completed after an agreement is made over the currency to be used.
Some local business may opt to receive payments in foreign currencies, just as how international business depends on foreign currency to harmonize trade.

Key Differences between Domestic and International Business

Topic	Domestic Business	International Business
Geography	Happens within one country.	Can happen in more than one country.
Quality of products/ services	Standards maybe lower.	Very high standards are expected and enforced.
Currency	Mostly depends on local currency for transactions.	It depends on foreign currencies for transactions.
Research	It is easy to conduct research for the business.	Research processes for the business is very expensive and hard to conduct.
Investment	The capital investment is not as high.	Capital investment is extremely high.
Production factors	There is free and easy movement of the factors of production.	The movement of production factors is limited.

 

While domestic business is defined with the view of geographic limits in mind, international business is not limited and exceeds beyond the geographical limits of a country (1). As well, while the international businesses operate over a wide scope of supply and consumerism between many countries, domestic businesses only stick to providing and facilitating limited exchanges between the people in a given country.

At the same time, domestic businesses do not have to be very cautious or stringent on the quality of products. International businesses must ensure, and maintain very high standards in the quality of products or services offered. The standards applied should fit the standards that are accepted globally.

Another difference between the two kinds of business stems from the capital and currency involved. In most cases, a domestic business costs less to establish and generally performs trade using local currency (2). On the other hand, international businesses ask for a lot of money, but they depend on foreign currency to harmonize their trade.

In the perspective of research done prior to the commencement of production operations, domestic business has an easier approach in doing consumer research, while determining the best product to use (2). An international business must research extensively, for the sake of understanding what the consumer demands, and behavior- when trying to establish the viability of the business.

Lastly, there are many factors that affect the production of a commodity or service by a business owner. In the context of domestic businesses, the mobility of these factors is easier to achieve, more than how you would achieve the mobility of production factors for international businesses. Things such as transport and installation of production implements are far easy to achieve in a domestic business than in an international business.

Source: http://www.differencebetween.net