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How does International Business differ from Domestic Busines

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Dzeneta Begic

on 1 April 2014

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Transcript of How does International Business differ from Domestic Busines

How does International business differ from Domestic business?
International business
- The exchange of goods and services among individuals and businesses in multiple countries. Scope of international business is quite wide. It includes not only merchandise exports, but also trade in services, licensing and franchising as well as foreign investments.
Domestic Business
- Domestic business refers to trade transactions within a nation's borders. This means that the trader deals only with local currency, customs, and regulation. Different from International Business, Domestic business pertains to a limited territory. Though the firm has many business establishments in different locations all the trading activities are inside a single boundary.
Major differences between International Business and Domestic Business:
-Market Intelligence
-Level of Competition
-Legal Systems
-International Law
Culture defines everything a society does, from its business practices, to its response to advertising and marketing, to negotiating sales. No two cultures are the same.

To enter international market one has to:
• Understand how the market works
• Who your direct competition is, and
• The best market entry strategy.

It is important to get as much information as
you can to successfully enter the international market.

Level of Competition
The level of competition you will experience in foreign markets is likely to be more dynamic and complex than you experience in domestic markets.
Politics/Government/Legal Systems
No two countries have the same political and legal systems. Each government has its own policies relating to foreign firms and products
The key is to understand that once you are in a foreign market you must abide by the rules and laws of that country, not the ones in your own market.
International Laws
There are numerous laws that affect international business.
Countries determine their laws based on the needs of their citizens not the concerns of foreign companies.

When a company is engaged in international business, what company representatives can legally do is controlled by both their nation and the foreign nation with which they are doing business.
The degree of technology can vary substantially in foreign markets. If your product or service requires a high degree of technology sophistication to use or implement, then markets with low levels of technology will not be suitable for your busines.
Like technology, business infrastructure in foreign markets will be at different levels of development. This may well have an impact on your ability to get your products to that market.
-New markets
When you expand the franchise internationally, you can sometimes take advantage of new markets that are unfamiliar with your business model.
-Favorable regulations
Depending on where you decide to expand, you may be able to take advantage of favorable government regulations. In many countries, you do not have to submit to the same types of regulations that are required in some countries like the United States.
-Meeting consumer needs
Many businesses can create a surplus inventory of goods and services within their own nation. They can expand their business internationally and eliminate surpluses.
-Diverse products and services
Foreign trade turns the world into a giant market, delivering food, fashions, etc. New services such as banking, travel, and consultation are also available now. Business competition is no longer on a city scale; instead, businesses compete against
worldwide businesses. The result is better quality goods, lower prices, and functional design.
-Product flexibility
If you have products that don’t sell well in your local or regional market, you may find greater demand abroad. You don’t have to dump unsold inventory at deep discounts.
-Market analysis
Understanding market's preferences poses a challenge when operating in international markets. Firms may need to invest substantial resources in analyzing what customers from other countries are most likely to purchase. This may require a significant investment of time in each country, whereas in the domestic environment, a firm can often predict customer preferences more easily.
-Cyclical changes
Predicting cyclical changes usually tends to be easier in the domestic business environment.
In the domestic business environment, communication is typically easier than in international environments. Employees in the domestic environment are typically from the same culture and speak the same language fluently, although exceptions do of course exist.
The basic difference in domestic and international business arrives from the differences in environment of their operations. International managers have to deal with environmental challenges, which are beyond the firm’s control and do vary significantly among countries.
-There are lots of differences in managing international business as compared to domestic business.
-Carrying out business internationally rather than just locally is preferred for many reasons, the business could be expanding to new markets, finding new suppliers or a new production capacity.
-However, International business is more complex due to the many factors that affect the undertakings of the business.
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