Carlos-barraza-logo-50

What is international business and why should it be developed?

International business is what has allowed the entire planet to take steps together towards the evolution of the economy and the resolution of the needs of populations in different places.

Find out in this article what international business is, what is its importance and why every company should bet on it.

What is international business
Written by

This post is also available in: English Español

Table of Contents

What is international business?

International business is defined as private and governmental transactions involving two or more countries. This concept involves sales, investments and transportation.

Among the main types of international business we can find the export and import, as well as the case of foreign direct investment. Among the secondary types, to call them in a certain way, we can find management contracts, franchises, among others.

So, these businesses cover a wide range of border exchanges involving goods, services or resources between nations. Such exchanges have the capacity to go beyond the simple exchange of money for physical goods.

An example of international business that does not necessarily involve the acquisition of a good would be offering services to prospective foreign customers, the right to use an asset abroad, or a complex financial instrument, without the need to carry it with you.

In international negotiations we may encounter the fact that the intercultural communication, customs and cultural traditions of nations take precedence. In the case of the Americans, to give an example, we can verify how short-term results prevail and they are not so focused on cultivating personal relationships.

The opposite is true for the Japanese, for example, who always make decisions that will have a greater impact in the long term. But for them it is vitally important to be able to establish a certain level of friendship before closing any kind of deal.

International business meeting about railways

Importance of international business

The importance of international business can be seen when evaluating a country’s economy, as it has the capacity to promote growth, encourage foreign investment, and increase the quantity and quality of products on the market.

As much as a country is able to produce what it consumes, market variety is equally important to satisfy consumers. As well as to raise the quality standards of the products consumed within the territory.

Many people believe that international business has to do with major issues such as oil, but the reality is that it goes much further. It can even be a much more domestic product such as food dishes or cooking pots. It all depends on the interest shown by consumers.

The importance of international business is due to the fact that it has assumed a very important role in the growth of a country. With foreign trade and intercultural management, companies around the world can have a greater reach and penetration in global markets.

And in many cases they also serve to nurture the knowledge needs of other nations. As in those traditional products from certain places that are sold around the world and learn a little of the culture that consumers have in the country of origin of it.

Why should companies develop their international business?

Now that you know a little more about what they are and what their importance is, let’s move on to why companies should develop their international business.

There are three driving objectives that serve to justify the interest you may have in going beyond the boundaries of one country:

Sales expansion

It is no secret that companies’ sales will depend on consumers’ interest in their products and services, as well as their willingness and ability to buy them.

The number of people, as well as the amount of their purchasing power, will be greater if we think of the whole world compared to what we can find in a single country.

In this way, companies gain the opportunity to increase their market potential while looking for new potential markets to establish themselves in other places.

Resource procurement

Female human resources manager talking and introduction company to male applicant.

Both manufacturers and distributors intend to source products, services and components that are produced in foreign countries. They even seek capital, technology and information from abroad with the intention of using them in their home countries.

The reason for developing international business has to do with the need that many times they will seek to make deals of this type to reduce their costs.

And also because many times consumers or manufacturers will have the need to purchase something that is not available or not manufactured in their home country.

There is no problem with a company initially using its domestic resources if it intends to expand abroad, but once these foreign operations have begun, foreign resources, such as capital or skills, can be used to improve its domestic operations.

Risk minimization

International business partners team working together at boardroom meeting.

In order to minimize fluctuations in profit sales, companies have to look for foreign markets so that they can take advantage of the differences in economic cycles (recessions and expansions) in that country.

There are a large number of companies that enter international business for defensive reasons, intending to counteract the advantages that competitors have the ability to obtain in foreign markets, which, in turn, could harm them domestically. Therefore, it is important to develop intercultural skills.

More about Business Planning