International businesses conduct business transactions all over the world. From the total value of 62 trillion US$ created in 2010, about 22% was exported to other countries, (14 trillion US$; source: NationMaster link http://www.nationmaster.com/graph/eco_exp-economy-exports). These transactions include the transfer of goods, services, technology, managerial knowledge, and capital to other countries. International business involves exports and imports. Many companies also operate in foreign countries through agents, joint ventures or their own subsidiaries. Therefore international business is almost half of the world’s gross domestic product. The largest market is Europe, followed by the USA and China.
An international business has many options for doing business. These include:
- Exporting goods and services.
- Giving a license to produce goods in the host country.
- Starting a joint venture with a company.
- Opening a branch for producing & distributing goods in the host country.
- Providing managerial services to companies in the host country.
The largest part in value terms in international business is Business-to-Business (B2B) transactions; in units and quantity Business-to-Consumer (B2C) is the larger portion (100 million t-shirts are equal to one airplane). International business is dominated by developed countries and their multinational corporations (MNCs). At present, MNCs from the USA, Europe and Japan dominate foreign trade, but through the rise of Chinese and other companies from emerging countries, the dominance pattern is changing. The traditional MNCs still have large financial and other resources. They also have the best technology and research and development (R & D). They have highly skilled employees and managers because they give very high salaries and other benefits. Therefore, they produce good quality goods and services at low prices. This helps them to capture and dominate the world market.
It had been proven many times that international business benefits all participating countries. However, the developed (rich) countries get the maximum benefits. The developing (poor) countries also get benefits. They get foreign capital and technology. They get rapid industrial development. They get more employment opportunities. All this results in the economic development of the developing countries. Therefore, developing countries open up their economies through liberal economic policies.
International business faces many restrictions on the inflow and outflow of capital, technology and goods. Many governments do not allow international businesses to enter their countries. They have many trade blocks, tariff barriers, foreign exchange restrictions, etc. All this is harmful to international business.
The international business is very sensitive in nature. Any changes in economic policy, technology, political environment, etc. have a huge impact on it. Therefore, an international business must conduct marketing research to find out about and study these changes. It must adjust its business activities and adapt accordingly to survive changes.