International Business: Objectives, Advantages and Disadvanatges

International business refers to business activities or transactions carried out beyond the national borders of a country. It is a much wider term comprising of all the commercial transactions taking place between two countries. International business can occur between different nodes, which can be exporting, licensing, contract, manufacturing, foreign assembly, foreign production, joint venturing and others. For a study of international business or trade, it is necessary to understand the nature and extent of economic interdependence among countries.
Countries depend on each other for a variety of economic transactions i.e. transactions is good, service and capital. Being a part of the world economy, no country live in economic isolation or afford to keep out of the global economy. Countries are highly interdependent for their economic growth.

Objectives of International Business:

Profit Advantage: International business could be more profitable than domestic. There is a number of cases, where more than 100% of the total profit of the company is made in the foreign market.
Growth opportunities: International business provide enormous growth potential of many foreign markets, which is a very strong attraction for foreign companies.
Helps in Removing Domestic Market Constraints: International business helps in removing domestic market constraints like constraints arising from the scale economies. Technological advances have increased the size of the optimum scale of operation substantially in many industries. With the help of foreign markets, one can easily take the advantage of the scale economies.
To Earn Foreign Exchange: International business exports its goods and services all over the world. This helps to earn valuable foreign exchange, which makes the business more profitable and strengthens the economy of its country.
To Make Optimum Utilisation of  Resources: International businesses make optimum utilization of resources. This is because it produces goods on a very large scale for the international market. Thus, it utilizes resources from all over the world. It uses the finance and technology of rich countries and the raw materials and labor of poor countries.
To spread business risks: International business spreads its business risks because it does business all over the world. So, a loss in one country can be balanced by profit in another country. The surplus goods in one country can be exported to another country. All this helps to minimize the business risks.

To Get Benefits from Government: International business brings a lot of foreign exchange to the country. Therefore, it gets many benefits, facilitates and concessions from the government. It gets many financial and tax benefits from the government.

Advantages of International Business:

Various advantages are made for the countries entering into trade relations on an international scale such as
A Country may Import Things which it cannot Produce: International trade enables a country to consume things, which either cannot be produced within its borders or production cost may be high. Therefore, it becomes cost cheaper to import from other countries through foreign trade.
Maximum Utilisation of Resources: International trade helps a country to utilizes its resources to the maximum limit. If the country does not take up its imports and exports then its resources remain unexplored. Thus, it helps to eliminate the wastage of resources.
Benefit to Consumers: Imports and exports of different countries provide opportunities to the consumer to buy and consume these goods, which cannot be produced in their own country. Therefore, they get diversity in choices.
Reduces Trade Fluctuations: By making the size of the market large with larger supplies and extensive demand, international trade reduces trade fluctuations. The prices of the goods tend to remain more stable.
Utilization of Surplus Produce: International trade enables different countries to sell their surplus produce to other countries and earn foreign exchange.
Fosters International Trade: International trade fosters peace, goodwill and mutual understanding among nations. The economic interdependence of countries often leads to close cultural relationships and thus, avoided war between them.

Disadvantages of International Business:

International trade does not always amount to blessings. It has certain drawbacks such as
Import of harmful Goods: Foreign trade may lead to import harmful goods like cigarettes, drugs, etc which may ruin the health of the residents of the country. e.g. the people of China suffered greatly through opium imports.
It may Exhaust Resources: International trade leads to intensive cultivation of land. Thus, it has the operations of the law of diminishing returns in agricultural countries. It also makes poor nations by giving too much burden over the resources.
Over Specialisation: Over-specialisation may be disastrous for a country. A substitute may appear and ruin the economic lives of millions.
Danger of Starvation: A country might depend on its food mainly on foreign countries. In times of war, there is serious starvation for such countries.
One Country may Gain at the Expense of Another: One of the serious drawbacks of foreign trade is that one country may gain at the expense of another due to certain accidental advantages. The industrial revolution in Great Britain ruined Indian handicrafts during the 19th century.
It may Lead to War: Foreign trade may lead to war in different countries competing with each other in finding out new markets and sources of raw material for their industries and frequently come into the clash. This was one of the causes of the first and second World Wars.

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