NAME :Sindhu.

P
ENROLLMENT NO: IIT2021234
ASSIGNMENT :02

Benefits of international business for firms

Que. What benefits do firms derive by entering into international business?

Ans:
1.Prospects for higher profits :International business could be more profitable than
domestic business. When the domestic prices are lower,business firms can earn more
profits by selling their products in countries where prices are high.

2. Increased capacity utilization:Many firms set up production capacities which are

quite in excess of demand for their products in the domestic market. By planning
overseas expansion and procuring orders from the foreign customers ,they can think of
making use of their surplus production capacities and also improving profitability of their
operations.Production on a large scale often leads to economies of scale,which in turn
lowers the cost of production and improves per unit profit margin.

3.Prospects for growth:Business firms find it quite frustrating when demand for their
products starts saturating in the domestic market.Such firms can considerably improve
prospects of their growth by plunging into overseas markets.This is precisely what has
prompted many of the multinationals from the developed countries to make an entry into
markets of the developing countries.While demand in their home countries has got
almost saturated,they found their products were in fancy in the developing countries and
demand was picking up quite fast there.

4.Intense competition in the domestic market : When competition in the domestic

market is very intense, internationalization seems to be the only way to achieve
significant growth.Highly competitive domestic market drives many companies to go
international in search of markets for their products. International business thus acts as
a catalyst of growth for firms facing tough market conditions on the domestic turf.

5. Improve business vision: The growth of international business of many companies

is essentially a part of their business policies or strategic management.The vision to
become international comes from the urge to grow, the need to become more
competitive,The need for diversity and to gain strategic advantages of
internationalization.

6.Earning of foreign exchange:International business helps a country to earn foriegn

exchange.it can use it for meeting its payments abroad.

7. Better utilization of resources:It is based on the principle of comparative cost

advantage. It implies that it produces what your country can produce more efficiently.
When countries produce on these principles it increases their resource utilization.
Producing solely for the purposes of domestic consumption severely restricts a
country’s prospects for growth and employment.

8..Increased Standard of Living: In the absence of international trade of goods and

services it would not have been possible to enjoy the standard of living it is enjoying
now.

9.Learning New Methods: When you do business in another country, you learn new
ways of doing things, You can apply this new knowledge to other markets.

10.Protection From National Trends and Events: When you market to several
countries, you are not as vulnerable to events in any one country.For example, if u sell
soft drinks with high sugar content,you could discover that your home country frowns
upon come to drinks that offer extra calories.You may be able to sell the same product
in another country that has a much different attitude toward these drinks.In addition, a
natural disaster in any can compensate by focusing your sales efforts in another part of
the world.

11. Product Flexibility: If you have products that don’t sell well in your local or regional
market, you find greater demand abroad.You don't have to dump unsold inventory at
deep discounts. You may find new products to sell abroad that you don't offer where you
are based.You can offer a wide range of products when you market globally.

12.Less Competition:You may have come to view competition as a local

phenomenon. You can find international markets that have less competition and move
quickly to capture i market share.This can be particularly advantageous when you have
access to high quality versions of products that are superior to versions in other
countries.Through your local competition may have access to the same quality as you
have,you will have little competition if you find an international market that has been
buying an inferior product.