Posted by Timebusinesstoday.com – Today’s world is increasingly connected thanks to advances in internet networks. Regardless of whether it is an individual, a company, a group of companies, or even a government agency, all are involved in relationships that stretch across national borders. One important aspect of this interconnectedness is international business.
International business covers a variety of scenarios that reflect the diversity of business relationships across countries. Such as ordering raw materials for making products to selling to customers directly via E-commerce.
In this article, we will learn more about the importance of international business and why it has become so attractive in an increasingly connected world.
What is International Business?
International business is an economic domain that involves companies and organizations in a series of activities that include trade transactions, investments, and operations operating in more than one country.
International business involves companies as well as countries transacting, investing, or operating in more than one country. It involves the exchange of goods, services, or resources between countries with the aim of making a profit.
Within the scope of international business, there is an exchange of various kinds of commodities, services and resources between participating countries, with the main aim of making a profit. In the process, international business has become a major driver in economic globalization, linking the economies of various countries in an increasingly integrated trade and investment network.
Differences between International Business and International Trade
The difference between international business and international trade is very basic. International business embraces a wider spectrum compared to international trade.
International trade, in essence, is a special component of international business that focuses on the exchange of goods and services between countries without involving direct ownership or operation by companies in the destination country.
Meanwhile, international business includes various aspects such as direct investment, managing overseas operations, as well as management strategies involving various countries, of which international trade is only one element.
In other words, international business includes all activities involved in carrying out business operations at a global level, while international trade is only a specific segment related to the movement of goods and services across national borders.
Examples of International Business
Examples of diversified international businesses are extensive and cover a wide range of scenarios. For example, a leading multinational company like Apple is one of the main illustrations of international business. Apple has operations and customers spread across the world, conducting business in various countries with a very extensive global network. This reflects the large scale and complexity that can be encountered in international business.
Additionally, international business can also cover a number of diverse situations. This can start from purchasing raw materials from one country to be processed or processed in another country, to establishing factories abroad to produce goods which are then sold back to the country of origin or to other countries. Another example is the production or purchase of goods from the country of origin for sale on international markets, or even accessing funding sources from foreign financial institutions to support investments or operations, both domestically and abroad. All of these examples show the extent to which international business can involve very diverse types of activities on the global stage.
Importance of International Business
In many studies that have been conducted, strong reasons have been revealed why companies are interested in entering foreign markets, even though they realize that international business also contains large risks, commensurate with the potential for large profits. To better understand the impetus behind these steps, here is an overview of the key benefits that encourage companies to do business internationally:
1. Increase Profits and Sales
Every company is under pressure to increase sales and profits. When the domestic market has reached a level of maturity, companies start looking for opportunities abroad.
Opening access to international markets could result in increased sales as many countries experience increased per capita income, population growth, and faster economic growth.
2. Protection of the Market
Sometimes companies have to enter international markets to protect their domestic market share. This can be done in various ways, such as following key consumers or disrupting a major competitor’s domestic market.
3. Access to Raw Material Sources
Abundant natural resources are often located in developing countries. To ensure supplies of raw materials, companies often have to invest abroad.
4. Technology and Management Skills Development
Investments abroad can also give companies access to technological and management skills that are difficult to find or expensive to purchase.
5. Geographic Diversification
An international geographic diversification strategy helps companies maintain the stability of their sales and earnings, reducing the risks arising from seasonal fluctuations in one market.
6. Management Ambition for Expansion
Shareholders often desire rapid company growth, which encourages management to look to international markets as a path to rapid expansion.