InternationalBusiness. What are they, how are they made, components
International business is all commercial transactions, including trade, investment, and transportation, private or governmental, involving two or more countries. (Daniels & Radebaugh, 2013)
International business consists of transactions that are designed and carried out across national borders to meet the goals of individuals, businesses, and organizations. These transactions take various forms, which are often interrelated. The main types of international business are export-import trade and foreign direct investment. Other types of international business
are licenses, franchises, and management contracts. (Czinkota, Ronkainen, & Moffett, 2003)
International business encompasses a wide range of cross-border exchanges of goods, services, or resources between two or more nations. These exchanges can go beyond the exchange of money for physical goods to include international transfers of other resources, such as people and intellectual property. For
example, patents, copyrights, trademarks, and data. And contractual assets or liabilities. For example, the right to use some foreign asset, provide some future service to foreign customers, or execute a complex financial instrument. (Mason & Sanjyot, 2011
Globalization is a factor to take into account in the field of international business as it generates advantages by facilitating the trade of goods and services, the movement of capital and direct investment, as well as the mobility of people, especially in countries with free trade agreements. . However, international business is more complex than domestic business due to the differences that can arise between countries, such as currencies, tax regimes, the legal system, and even the culture that implies a diversity of customs, traditions, and different forms. to make agreements. What Is International Business?
Components of international business
International business is made up of two main parts:
- Foreign trade. It refers to the conditions, forms, and content presented by the exchange of goods and services; exactly, are the national laws and regulations for handling international trade.
- International trade. It refers to all commercial operations, imports and exports, direct investment, international financing, marketing, etc., that are carried out worldwide and in which the different national communities participate.
But international businesses are this and much more. Cultural customs and traditions take precedence in international negotiations. With Americans, for example, competition prevails, and short-term results and personal relationships are not cultivated. The opposite is true of the Japanese, who make group decisions with long-term results; for them, it is essential to develop friendships before negotiating.
To broaden the concept of what international business is and how it works, we invite you to watch the following video from the National Institute of Foreign Trade and Customs of Mexico:
International business has existed, in a sense, since prehistoric times, when trade in flint, pottery, and other goods took place over great distances. Even during the Roman Empire, merchants brought their wares to consumers around the world. However, multinational companies, as we know them today, were rare until the 19th century. By then, American companies such as General Electric, International Telephone and Telegraph, and the Singer Sewing Machine Company had begun to invest in manufacturing facilities abroad, as did Western European companies such as Ciba, Imperial Chemicals, Nestlé, Siemens, and Unilever. (Stoner, Freeman and Gilbert, p.151)
Why do international business
There are 3 general objectives as drivers of international business in companies:
- Sales expansion. The sales of companies depend on the interest of consumers in their products and services and their willingness and ability to buy it. The number of people and the amount of their purchasing power are greater throughout the world than in any one country, so companies can increase their market potential by seeking international markets.
- Obtaining resources. Manufacturers and distributors seek products, services and components produced in foreign countries. In addition, they seek capital, technology, and information from abroad that they can use in their countries of origin; sometimes they do it to reduce their costs, sometimes to acquire something that is not available in their country of origin. Although a company may initially use domestic resources to expand abroad, once it begins operations abroad, foreign resources, such as capital or skills, can be used to improve its domestic operations.
- Risk minimization. To minimize fluctuations in sales and profits, companies should look to foreign markets to take advantage of the differences in business cycles (recessions and expansions) that exist between countries. Many companies enter international business for defensive reasons, wanting to offset advantages that competitors might gain in foreign markets that, in turn, might harm them domestically.
How international business is conducted
There are basically 3 different activities or operating modes to do international business, which are imports and exports of goods or merchandise, services and investments.
1. Exports and imports of merchandise
Most companies are more involved in export and import than in any other mode of international operation. This is especially true for small companies, although they participate less in exporting than large companies. These have greater capacity to participate in other forms of operations abroad, in addition to export and import. Exports consist of sending merchandise (goods) out of the country; imports consist of bringing goods into the country. For most countries, exports and imports of goods are the main sources of income and expenses in international business.