The business may be defined as the art of making money by manufacturing or by the process of selling and purchasing goods, or by providing services in desired fields. In simpler terms, it is setting up an organization with the sole goal of earning profits.
Starting a business involves a lot of risks, and any name may start the business, but the proprietor is liable to pay all debts from all the concerned suppliers. The income tax and various other taxes have to be cleared by the owner to facilitate the smooth functioning of an organization.
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The process that involves the trade of products, services, technology, or knowledge across national borders at an international level is called international business. It demands transborder interchanges of goods and services among two or more nations. Commerce affairs incorporate economic assets, including expertise, capital, and management required for the motive of international manufacturing of physical products and services such as finance, banking, insurance, construction, and technology. International commerce and trade are key factors that have led to ever-increasing globalization.
The basic market has to be studied in detail concerning many aspects to carrying trades with different nations. A characteristic report attributing demands of particular products region-wise has to be prepared and in accordance to the plan, the further strategies have to be executed. Understanding the end users’ needs and the innovation or production of the products has to be following the demands of the products or services that the organization plans to launch in that particular region or nation.
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The organization has to function in such a way that the process of bridging the gap between the demands and supply has to be fulfilled by keeping the quality of products to a satisfactory level. The organizations have to work in such a manner that they should try to merge the national markets into one global marketplace.
Many factors are affecting International business. One among them is understanding the hurdles in carrying out trade globally and finding ways to eliminate the obstacles that avoid the smooth operation of cross-border business. There has to be a simple way of transportation of goods and services from one nation to the other including less paperwork and involving region-wise involving fewer formalities.
The other deciding and most positively affecting factor in International business is the revolution in technology, which has facilitated smoother and swifter operations concerning international trade. The advancements in information, telecommunications and transportation technologies have made many companies establish their business globally.
International Business and Types
Multinational companies like Pepsi, Coca-Cola, Nike, Reebok, to name a few, had their base only in the United States but gradually expanded their business internationally, and now they have become household names in almost every country of the world.
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International business may be described as the learning of Globalization of the organization. The goal is to make the company trading in many nations globally, also called the Multinational Companies (MNC’S). The views of the Multinational companies are to manufacture a product with international quality and promote and deliver the goods globally. The functioning of the entire chain of the organization has to be planned in such a manner that the production, supply, and after-sales are of world-class concern.
McDonald’s, Starbucks has their supply in almost all countries and caters to the local population customizing and altering their menus as per their demands. Similarly, in the automotive sector, manufacturers like Mercedes Benz and General Motors have their plants worldwide providing world-class vehicles. Consumer electronics companies have not been left behind in this trend of International Business; brands such as Samsung, Sony, LG have been for more than decades in almost all countries and have provided products that are at par with the consumer’s demands.
Any business model can be made international, be it a product manufacturing company or a service-providing company. Therefore, to carry out International business a company has to carry out a detailed survey with the nation they have to expand their business in with respect to many factors including the study of the nation’s political conditions, legal systems, language barriers, economic policies, corporate culture, tariffs, import-export duties, climate, education and trade agreements to name a few. All the mentioned factors play a vital role in establishing a Multinational Company on foreign land and have to be studied carefully. Qualifications like leadership and management courses can help in establishing the business with a clearer picture.
Kinds of operations
- The import and export of goods from one country to another and the taxes levied.
- The import of services but not goods falls under what category of taxes, as many products require installation and after-sales service.
- Merchandise imports, a particular automobile being imported.
Methods of trade
- Introduction method, whether the goods or services are imported or exported, is it a joint venture, or alliance.
- Modes, management contracts, direct investment, portfolio management, franchising, etc
- Functions: Human resource management, services related to accounting and finance, marketing.
Corporal and Communal factors
- There are many factors that affect the organization which has to be considered before setting up business in a particular country or region of the world. The geographical impact has to be taken into consideration with regard to the natural resources available, climatic conditions, language barriers, population distribution, and their taste in the selection of products.
- The political policies, political disputes which could lead to destabilizing of the business proceedings and operations have to be taken into consideration before investing.
- The trade policies involving domestic and international trade play an important role in attracting foreign investment.
- The economy of a particular nation with respect to its currency value, inflation rate, and market potential also have to be taken into account before investing.
Setting up a business on a foreign land provides global exposure to the company, but it is also associated with many risks involved which have to be duly monitored before investing.
Uncooperative organization- To acquire aimed profits, proper planning and functioning have to be executed right from the initial stage. The research and analysis with respect to demands and supply have to be keenly studied, which would result in reducing the risk of any failure. Expenditure in regard to marketing, selecting brand ambassadors, cost of product development, the demand of the product, vandalism of physical property due to instability of governing authority, also involved in the study and research. These factors come in the strategic risks, which have to be well assessed.
Risk in operations includes the study of production cost, which saves time and resources of the organization and produces efficient products of good quality.
Political risk – the good governing authority attracts foreign investments as they provide a sense of security to the organizations with respect to their investments. A government having a negative image around the world may seriously affect foreign investments negatively.
A risk involving technologies- The expense to invent new technology, the expenditures regarding maintenance and providing security to the technological assets may also impact foreign investments.
Risks regarding the Environment, like noise pollution, air pollution, no clean water to drink and use for domestic purposes, Economic risk due to bad policies introduced by the governing bodies, financial risk involving currency value, inflation rate, terrorism due to an unstable government and bribery in the functioning of the governing body may be some factors which should be studied before investing in International business.