Essay International Business

Since 1980s the global competition is becoming very important for the world and national economics’ development. It begins to have a decisive influence on the strategic planning and management not only in the largest transnational corporations, but also in companies that have traditionally relied upon the national market. Companies are involved in the processes taking place in international business either directly or indirectly.

International business is similar to the national business in many ways, but there are significant differences that must be taken into account for the successful implementation of international strategies.

The main problem is to overcome differences in national cultures, which manifest themselves quite often. International business operates in countries with different cultures, so the same formal parameters of starting a new business (the amount of capital raised, number of employees, production assets, performance incentives, etc.) can be implemented, when used in different cultural environments, and lead to different results.

International businesses face some serious challenges – issues and solutions about what products (services) should be attractive for various foreign markets, possible problems with the transfer of currency, the uncertainties associated with predicting the costs and profitability, creating significant management problems, the impact of different cultures, the complexity of choosing the optimal structure for international business, taxation and pricing, high political risks, etc.

Specifics of financial planning is determined by the following problems: volatility in exchange rates, revaluation of currencies, particularly the national taxation, possible difficulties with the export of funds from abroad, problems with in-house transfer pricing, problems in terms of estimating performance of foreign subsidiaries, etc.

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International Business

The paper on International Business is designed for those who intend to gain knowledge in International Business and for those who believe, to be successful it is necessary to understand the globalization, its evolution, patterns, drivers and linkages as the future consists of economies that will be absolutely interdependent due to rapid dismantling of all kinds of barriers to trade.

For survival, businesses will have to look beyond national boundaries and an international mindset will be required to be developed since the products, services, markets, consumers, collaborators, competitors, logistics, operations, alliances and resources will not be bounded by geographical limitations. This will cut across all businesses and industries without discrimination of being emerging or declining, small, medium or large, slow moving or fast, technology oriented or not, in developed countries or in emerging economies.

Objectives

  • To define International business

  • To understand factors that affect international business

Performance of trade and investment activities by firms across national borders. Since the most conspicuous aspect of international business is the crossing of national boundaries. While the IB has been around for centuries, it has gained much complexity amd speed over the past two decades. Firms seek international market opportunities more today than before touching the lives of billions of people around the world. Organizational compulsions of international expansion is related to Spreading of risk that is periodic cyclic downturns and upward swings, to strengthen bottom line and to strengthen resource base

Influences on International Business are the technological developments and their rapid diffusion at global scale.Dismantling of trade barriers, emergence of business facilitators and increasing limitation in terms of growth presented by domestic markets.

Conducting of International Business

  • Goods

  • Services

  • Portfolio Capital

  • Direct Investment

Who participates in International Business?

A key participant in international business is the multinational enterprise (MNE)-a large company with many resources whose business activities are performed by a network of subsidiaries located in multiple countries.And also very active in international business are small and mediun sized enterprises (SMEs) companies with 500 or fewer employees. Born globals are entrepreneurial firms that initiate international business from or near their founding.Non-government organizations (NGOs) are non-profit organization that pursue special causes and serve as an advocate for the arts, education, politics, religion, and research.

  • Global and Multi Domestic Organizations both can be part of this

  • Global in some operational domains and multidomestic in other operational domains

Why Nations trade:

The basis for trade is specialization. Each nation specializes in producing certain foods and services, and then trades with other nations to acquire those goods and services in which it is not specialized. Classical explanation of international trade began with mercantilism, which argued with nations should seek to maximize their wealth by exporting more than they import. Absolute advantage principle argues that a country benefits by producing only those products in which it has absolute advantage, or can produce using fewer resources than other country. Nations benefit by trading with one another. Comparative advantage derives from natural advantages and acquired advantages.Competiive advantage derives from distinctive assets or competencies of a firm, such as cost, size or innovation strengths, that are difficult for competitors to replicate or imitate. Factor proportions theory holds that nation specialize in he production of goods and services whose factors of production they hold in abundance. The international product cycle theory describes how a product may be invented in one country and eventually mass – produced in other countries, with the innovating country losing its initial competitive advantage. MNEs have value chains that span geographic locations worldwide. FDI means that firms invest at different locations to develop production, marketing or other types of subsidiaries. The internalization theory explains the tendency of MNEs to internalize stages in their value chain when it is to their advantage. Currently, many international Companies engage in collobrative ventures, interfirm partnerships that allow access to assets and other advantages held by foreign partners.

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