INTERNATIONAL BUSINESS

International Business

Abstract

International trade is a trade which is largely established in one state but develops some significant contribution of its resources or revenues (or both) from other states. On the other hand, a domestic business is one which develops all of its resources and sells all of its services or products within one state. Thus the essential difference between the two is localized resource procurement and selling of products in the case of a domestic business and acquiring resources or selling or both, from and in international markets in the case of international business. The objective of this paper is to explore the concept of International business and discuss the differences between international business and domestic business.

Table of Contents

Introduction4

Discussion4

International Business5

Domestic vs. International Business6

Comparative Advantage7

The International Business Environment8

International Entry Choices11

Conclusion15

References16

Difference between International Business and Domestic Business

Introduction

Conducting and managing international business operations is more complex than undertaking domestic business (London and Hart 2004, Pp: 350-370). Differences in the nationality of parties involved, relatively less mobility of factors of production, customer heterogeneity across markets, variations in business practices and political systems, varied business regulations and policies, use of different currencies are the key aspects that differentiate international businesses from domestic business (Trade: At Daggers Drawn 2000, Pp: 17-20). These, moreover, are the factors that make international business much more complex and a difficult activity (Allen and Raynor 2004, Pp: 16-25).

Scope of international business is quite wide. It includes not only merchandise exports, but also trade in services, licensing and franchising as well as foreign investments (Trade: At Daggers Drawn 2000, Pp: 17-20). Domestic business pertains to a limited territory. Though the firm has many business establishments in different locations all the trading activities are inside a single boundary (Allen and Raynor 2004, Pp: 16-25).

Discussion

International trade has become one of the most important issues in domestic as well as international politics in recent decades (London and Hart 2004, Pp: 350-370). Although a growing number of historically oriented studies have shown that trade has been a salient issue among empires, states, and cities for centuries, it has become such a critical contemporary issue because countries' economies are now, more than ever, open to trade flows (Trade: At Daggers Drawn 2000, Pp: 17-20). They thereby create complex interdependence, defined as mutual dependence, between national economies (Allen and Raynor 2004, Pp: 16-25). Technological progress has resulted in dramatically falling transportation and communication costs, whereas various liberalization policies have freed the exchange of goods and services from various tariff and nontariff barriers (Allen and Raynor 2004, Pp: 16-25).

International Business

One simplistic view of world trade would be to expect that whatever country is “better” at producing a good in some absolute sense will end up specializing in the production of that good. If this were the case, it would spell bad news for poor developing countries considering opening up their borders to free trade (London and Hart 2004, Pp: 350-370). Because industrialized countries such as the United States have high levels of productivity across all sectors, a ...