International Business - Definition, Importance & Example
Published in Marketing and Strategy Terms by MBA Skool Team
What is International Business?
International business is the trade between buyer and seller across international boundary or from different nations. For International business, a company has to consider some situations like whether to expand its products globally or not, learning newer rules and regulations of international market, political, social, technological and cultural situations of different nations, etc. International business is the business which takes place between customer and a seller from different countries, and marketing typically involves a company to start a joint venture, partnership with a local firm, foreign direct investment etc in a few selected countries abroad.
Reasons why companies opt for International business are better economies of scale, more profit changes globally than in the domestic market, large market share due to the expansion of products and services, untapped international geographies etc.
Importance of International Business
International business gives the company a wider market and better reach to people. It supports the sales target or boosts the sales when the demand for that product decreases in the domestic market. Many companies have production advantage and customers get exposed to new products that are not available in domestic market.
The difference strategies for a company for International business are:
i. Exports: Exports can be two types- Direct and Indirect. In direct exports, the company itself manages to sell its products and services globally while in indirect exports, the selling and buying of products and services are facilitated by trading companies.
ii. Global web strategy: Companies can create awareness of their products and services among people worldwide by using internet.
iii. Licensing and Franchising: In licensing, the foreign company has the license to use the trademark, brand name, logo of the domestic company while enabling the business growth. Here, the foreign company has more control than domestic company. While in franchising, the foreign company is given franchisee to sale the products but in accordance with the rules and regulations of the foreign company. The foreign company has less control than domestic company.
iv. Joint ventures: Companies can expand internationally by merging with a domestic company to gain more local customers.
v. Foreign Direct investment: The firms can directly set up their own business or own a part of the domestic company or acquire some local company to expand the sale of goods and services in that country.
Advantages & Disadvantage of International Business
Some advantages of International business are:
1. Diversifying into new markets will help company grow.
2. If the demand of any product in the domestic country decreases then the international market will neutralise the target.
3. Expand brand recognition to attract new customers and establish credibility in the marketplace.
4. Cost effective manufacturing or production of good
Disadvantages of international business are as follows:
1. The company has to learn all the rules and laws of the international market
2. Cultural and language barrier among countries
3. Tight immigration rules make it difficult for companies to set new branches and assign new employees
Examples of International Business
Taking example of Maruti Suzuki. Maruti and Suzuki started a joint venture in India under the brand name Maruti Suzuki. This basically ensures that there is better chance of survival in a new environment and the risk involved in expanding its business in a new place doesn’t cost its growth.
Another example can be of Starbucks which changes its menu according to the place or country it establishes its franchise. Like in Hong Kong, they sell ‘dragon dumplings.’ Starbucks is known for the engagement of local cultures. The advertising strategies adopted by the company was more local and differentiated rather than being standardized for all places.
Hence, this concludes the definition of International Business along with its overview.
This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.
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