International Business

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In order to better understand what business is and what it entails, it is good to clear up some basic concepts, such as international business, which is the subject of this article. To begin with, international business refers to any commercial transactions that occur between two countries, states, regions or nations. The commercial transactions in question can refer to sales, transportation, investments, logistics, and other private or governmental transactions. Private types of transactions usually occur solely for profit, whereas governmental ones may also have political reasons. The business activities that fall into this category include the transaction of products, services and even resources across borders.

This type of activity can take place between two or more countries or nations, and it is usually seen as an advantage to both producers and consumers because it brings profit for the first and products, services, and even employment for the latter. Generally, nations seek foreign investors and international business because it can lead to a rise in national economy; however, big transactions and investments always carry a big risk as well, so in case of failure both parties suffer. Moreover, in certain situations international business is difficult or impossible due to notable differences in local and corporate culture, commercial law and other legal systems, economic policy, language, labor and living standards, the foreign exchange market, import and export regulations, and even religion.

Certain countries may have free trade agreements, meaning that they managed to synchronize all aspects of trade and certain taxes and tariffs have been removed in order to encourage these transactions. However, this field is in continuous expansion, and many countries and continents still work on getting everything aligned. An example are Europe and the United States, which are at the moment discussing the possibility of establishing a free trade agreement.

The objectives of international business are sales expansion, risk minimization and the acquisition of resources. Some of the modes through which it operates are import and export, transportation, licensing, tourism, franchising, turnkey operations, or even direct investment. International trading is however subject to certain societal and physical factors such as cultural and economical factors, geographical influences, and other political policies and legal practices; other factors that it may be influenced by are competitive. Thus, a certain company may be attracted by the prices, the marketing, or the local taxes of a certain country; the competition may be weak or nonexistent for its goods or services, so it is advantageous for it to expand activity.

There are already numerous international businesses that have monopoly over certain parts of the market worldwide; they are called multinational enterprises, and some of the most renowned are represented by brands like Coca-Cola, McDonald’s, General Motors, Ford Motor Company, Samsung, Sony and many others. Furthermore, globalization has improved conditions for international business, especially since fields like technology have led to the development of communication and transportation. Other factors are that consumers are now aware of foreign goods and services and demand them in their countries; governments are starting to remove restrictions in this area and competition is more global than ever.

Some argue that multinationals infringe upon local economies by crowding and eventually swallowing local businesses, but it is also true that they bring variety and options where they go. There is no way of saying whether this practice is always good or always bad because it depends on the agreements themselves and the business practices, regulations and economy of the parties involved.

January 2022