International

Business
Definition
International business refers to those business activities that take
place beyond the geographical limits of a country.

“International business consists of transactions that are

devised and carried out across national borders to satisfy
the objectives of the individuals, companies and
organisations. These transactions take on various forms
which are often interrelated.” – Michael R. Czinkota
“International business involves commercial activities that cross
national frontiers” – Roger Bennett

It is a business which takes place outside the boundaries of a

country, i.e., between two countries. It includes the international
movements of goods and services, capital, personnel, technology
and intellectual property rights like patents, trademarks and
knowhow. It refers to the purchase and sale of goods and services
beyond the geographical limits of a country.
Reason for International Business

1. Uneven Distribution of Natural Resources

2. Uneven Distribution of Natural Resources
3. Specialization
4. Cost Advantages
Scope of International Business

•Imports and Exports of Merchandise

•Imports and Exports of Services
•Licensing and Franchising
•Foreign Investment
´Difference between International Trade and
International Business
´What is International Trade?
´The exchange of goods between different countries of the
world is known as International Trade. International trade,
comprising exports and imports of goods is an important
component of international business.
´What is International Business?
´Those business activities that take place beyond the
geographical boundaries of a nation are called International
Business. It involves movement of goods, services, capital,
technology, intellectual property, like patents, trademarks,
copyrights, etc. Foreign currencies are used in international
businesses. Such types of businesses require heavy
documentation and are subject to many formalities. It also
involves a high degree of risk but helps a business to earn
foreign exchange, utilise resources efficiently, and improve
growth prospects and employment potentials.
International Business vs Domestic Business:

1. Nationality of Buyers and Sellers

2. Nationality of other Stakeholders
3. Mobility of Factors of Production
4. Customer Heterogeneity Across Markets
5. Difference in Business Systems and Practices
different socio-economic development, economic
infrastructure, and market support services.
6. Political System and Risks
7. Business Regulations and Policies
8. Currency Used in Business Transactions
Modes of Entry into International Business:
1. Exporting and Importing
Direct Exporting/Importing
Indirect Exporting/Importing
2. Contract Manufacturing
3. Licensing and Franchising
4. Joint Ventures:
• A foreign company buying a stake in a domestic company.
• A domestic company buying a stake in an existing foreign
company.
• Both the foreign and domestic companies jointly establish a new
firm.

5. Wholly Owned Subsidiaries:

• Setting up of wholly-owned new firm in the foreign land, also
called Green Field Venture.
• Acquiring an established firm in a foreign country and using that
firm to do business in a foreign country.
Nature of International business
1. Legitimate purchase
2. Limitations
§ International Shipping Customs and Duties
§ Language Barriers
§ Cultural Differences
§ Servicing Customers
§ Returning Products
§ Intellectual Property Theft.

3. High risk
• country risk
• regulatory risk
• Currency risk
4. Plan of foreign currency
5. Contribution of two countries
Features of International Business
• Large Scale Operations
• Integration of Economies of Many Countries
• Dominated by Developed Countries and MNCs
• Benefits to Participating Countries
• Keen Competition
• Special Role of Science and Technology
• International Restrictions
• Sensitive Nature