International business is Concept, definition, management methods and investments

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

International business is a way of interaction between subjects of interstate relations aimed at making a profit. It also represents a certain structure with a whole set of rules for the interaction of subjects of interstate relations. In the role of subjects in the field of international business are direct participants - these can be individuals, firms, and government agencies.

Main Features

In this area, operations are carried out that are carried out between subjects of at least two states. A typical example of interaction between companies in international business is the acquisition of materials in one state, their transportation to another for the purpose of processing, and so on.

National transactions are carried out within just one country. Whereas organizations in international business cross borders. This is the reason for the whole complex of significant differences between these areas.

In addition, the main features are the use of many additional opportunities in the economy. International Business -it is an area in which there are many development options, the number of which depends on the number of states involved. There are all prerequisites for the enterprises involved in the process to go global. And this means washing away borders and obstacles due to the fact that such institutions do not depend on a single state - they are located outside countries. All their activities are determined by economic benefits.

In the economy of international business, there is also such a feature as the need to take into account several cultural factors of interacting countries at once. After all, each cultural background will be different.

It is noteworthy that international business requires more professional knowledge compared to national business. The level of preparation should be higher. It concentrates all the best that was at the previous, national level.

Strategy plays the most important role in the management of international business. The strategic resource here is information, and the weapon is adaptation. In addition, he is able to support the country by fighting competition in the domestic market. It manifests itself in the economic and political sphere.

Reasons for appearance

International business is a phenomenon that was inevitable for a number of reasons. These include the fact that competition in the domestic market has become tougher with an increase in the number of entrepreneurs. In addition, the national market is limited in size, and at some point the giants need more space to step forward. Resources here toolimited. International business development is also conditioned by the imperfection of laws at the national level.

Its capabilities are determined by the following reasons: firstly, it is technical progress, and secondly, the formation of the largest organizations with large resources. Also, the fact is that the policy of foreign economic relations remains liberal.

Shapes

In total, there are two forms of international business: export-import and investment. Export is the sale of goods produced in one state in another country. Also called the situation when the product is transported to the territory of another country for the purpose of processing.

Import is the purchase of goods produced abroad for processing or sale in a given country. Operations in these areas are represented by trade in both products - materials, clothing, and so on, and services in a variety of areas.

The second form of international business is investment. It consists in the transfer of capital to entrepreneurs of one state for the purpose of using it by business owners in other countries. Foreign direct investment in international business is invested in capital in order to maintain control over assets and organizations based abroad.

Stages of development

Robins suggested dividing the development of this area into five stages. The first is the commercial phase, which began in the early 16th century and ended in the middle of the 19th century. The reason for its beginning lies in geographical discoveries, the beginning of trade in products from new colonies in order to obtainas much profit as possible. This was a very risky undertaking, since sea voyages were unpredictable - sailors often suffered a tragic fate. But the profits from them were so huge that for many it justified the risks.

The second stage was the expansion in 1850. Then the colonies were formalized into special structures, and the industrial development of European states reached heights. Because of this, the extraction of raw materials developed, plantations appeared in the colonial empires.

The main motives that contributed to the emergence of international business with investments are considered to be the efficient use of resources, the expansion of the sales market, the ability to apply local laws to their own benefit.

Third stage - the era of concessions, which lasted from 1914 to 1945. Then the role of the largest organizations that existed in the colonial empires changed radically. Because of the Second World War there was a stimulation of colonial and other states. At this stage, entrepreneurship has begun to gravitate towards globalization.

The fourth stage is called the era of nation-states. The international business environment of this stage was manifested in the improvement of nation states, which had an extensive base for that. The process was often accompanied by financial difficulties. For this reason, colonial empires became separate, independent entities that sold their products, and also acted as objects for investment.

The fifth stage in the development of international business is the current era of globalization. It started in the 1970s and continues up to the present day. Thanks to the development of computer technology, improved communications, the interaction of all countries in the world has changed radically.

Thanks to globalization, an international business environment has emerged all over the globe, all states depend on it. All of them enjoy many benefits of civilization, but pay for this by the fact that the country depends on the world market.

Development of globalization

Globalization was stimulated by a number of driving factors, including: differences between states in the natural and economic spheres, a new milestone in the development of communications, the openness of many markets, the need for cooperation between countries in the field of ecology.

Restraining factors are differences in the socio-economic situation of states, changes in exchange rates, the emergence of armed conflicts, differences in ideological systems. A definite deterrent to both globalization and international business is religious differences.

In modern times

At the moment, the sphere is characterized by accessibility. Many enterprises have the opportunity to create a representative office in international business centers. There is also a phased development of the sphere, there are more and more global enterprises for which there are no borders, local legislation practically does not apply to them, they are represented in many countries of the world. To penetrate this market, several obstacles must be overcome. First of all, face the costs ofproduction, capital efficiency, labor resources and so on.

Technology in international business today can enable global operations without leaving your office. They also made it possible to conduct transactions with partners in many countries of the world in real time.

Strategies of enterprises tend to be aimed at ensuring that national characteristics are used effectively. Sometimes cultural differences can lead to conflicts, and entrepreneurs who have representative offices in international business centers must take this into account.

It is important that before entering the international market, the company's management is developed at a sufficient level. Employees must master the basics of international business, be able to apply their knowledge and skills in practice.

Conferences

In the field of international business, conferences are the most important events that connect startups and investors. Leaders in this field share their experience during speeches or at round tables. Dozens of similar events of various kinds take place every year.

Participants of such conferences, as a rule, are divided into 2 categories. First, these are directly experienced speakers. During their speeches, they provide advertising for themselves or the company, and sometimes share their experience. The second category is represented by startups, entrepreneurs who came to exchangeexperience.

Operations

Any goal in the field of international business is achieved through transactions between enterprises of different countries, which are significantly different from national transactions. International operations are the main ones - they are carried out on a reimbursable basis. They also distinguish the variety that provides them. Such operations are associated with the delivery of products from one side to another. The main type of commercial operations is export-import. Foreign trade operations are able to cover the most diverse sphere of relations in the economic, financial and legal field between the participants. They are carried out on the basis of transactions. Deals are contracts for the delivery of products, their distribution between partners.

As a rule, two ways of carrying out commercial transactions are used in the international market - direct and indirect sales. The remaining varieties are represented by a combination of these two.

Any international exchange operation is carried out through contracts. A contract is a transaction between 2 or more parties located in different countries for the delivery of a certain amount of goods or the provision of services. The contract is recognized as concluded at the moment when agreement is reached on each important condition.

The legal framework that governs this process is represented by the Vienna Convention "On Contracts for the International Sale". As a rule, standard contracts are used for different types of transactions. They are examples of agreements that are taken as the basis for the formationdocumentation. Often they are changed and supplemented by the participants in the transaction.

Theoretical foundations

As interaction between states develops and strengthens, internationalization intensifies, and the main trends that are manifested in world governance are changing. After many states moved to an open economy, transnational corporations began to grow especially rapidly. As a result, many new questions appeared in management theory.

The most important among them is the question of the most efficient use of world resources, as well as the specific features of international business to extract the greatest profit. Many are wondering which management methods are local and which are common to all countries of the world.

International management is an extremely broad field, and at the moment it is subject to trends taking place in the activities of global production, as well as capital. The latter has become the most important control factor. Often in decision-making in management there is a conflict due to the fact that capital and progress are international, and the complexes are national, isolated.

In different concepts

The theory of international business in various economic doctrines is presented from completely different points of view. Thus, Adam Smith put forward the point of view according to which some states are able to engage in sales more efficiently due to the presence of special properties of the territory. So, sales are influenced by climate, qualitysoil, the presence of fossil goods in the bowels, and so on. There are exporting countries and there are importers. This is called the concept of absolute advantage.

D. Ricardo stated that production volumes can grow due to international trade, even if the state does not have advantages at the stage of production, natural resources, products. This is the concept of relative advantages, which is considered fair for all countries of the world, as well as for certain regions, regions in the same state. Specialization is often determined by the level of costs.

R. Vernon developed the concept of the international product life cycle. He stated that any product overcomes several stages, and its production moves to different countries during this process. Four stages - introduction, development, maturity, decline - a single process, this is the overall life cycle of the product.

Common goals and objectives

The main goal of international management is to describe the main ideas about institutions that are part of international business, their structure, relationships, as well as effective management.

The main tasks of it are considered to be the analysis, assessment of the environment surrounding the organization in order to find and display the advantages of the company. In addition, the task is also proclaimed to analyze the cultural fund of states and use it in order to extract as much benefit as possible.

The third task is to assess and select the organizational form for the institution in order to maximize the potential in economic terms.

One more task– development of the company's personnel, which is represented by citizens of different nationalities in the founding country and in the host countries. This is important in order to maximize the effect of his activities.

The next task is to identify the capabilities of the business service, as well as its application. This applies to operations in the economic, financial, technological fields.

It is necessary to take into account the main requirements for the listed tasks. Thus, decisions that are made in order to achieve one goal should not interfere with the implementation of others. That is, it is necessary to get rid of internal inconsistencies in the administrative apparatus.

In international business there should be no contradictions in external activities. In addition, it is important to focus on assessing the existing trends in situations in the external arena, as well as in the internal one. In other words, the international enterprise must function in a situational form. Thanks to this, it will be able to make timely adaptation to constantly changing conditions.

It is necessary to focus on assessing market conditions. The slightest changes can have an impact on how the development of employees will take place, pricing methods. An international firm, in order to successfully overcome difficulties, must ask itself the question of finding a balanced system of characteristics. In addition, she needs a system of standards. Each enterprise will have its own.

Drivers

Any modern person is involved in the exchange of international business. Everyone buys foreign cars, foreign clothes, food, works at a foreign enterprise, travels to different countries. Every day, an Internet user visits foreign sites, uses foreign programs, watches films and listens to music from other countries. More firms are entering the international arena today.

The 21st century has become the heyday of global organizations, covering dozens of countries of the world, for which interstate borders have ceased to be barriers. Financial flows have become open. All this gave rise to both positive and negative phenomena in society.

With such changes, the very meaning that is invested in the concept of "international business" has changed. Initially, it was synonymous with "foreign business", but at the moment it is represented in many cases by holding organizations with a control element in offshore jurisdiction. Often, for this reason, the name of the real owner is difficult to identify: it is hidden behind a series of nominal managers.

International business today is often referred to as just such structures that do not want to reveal their names, paying higher taxes.

Thanks to the improvement of technological services, more and more machines are being used in production, and this allows filling the market with goods in a fairly short time. Because of this, the demand for products falls, like prices. But the decrease in profits of entrepreneurs does not suit them, and they realize that there are regions in which there is a shortage of such a product.

The remote market is distinguished by itscapacity, the owner of the enterprise sees many consumers in it, he is even more interested in ways to deliver his products there.

Foreign markets are able to consume a very significant part of the goods. In addition, the expansion of the target audience leads to a deepening of specialization. This means that the return on business is growing.

Due to the fact that differences in location, climate, labor conditions determine the fact that in some countries there will be much more certain types of products than in others.

Sometimes the disproportions are extremely significant. So, oranges are not grown in the northern states, but in the southern states the market is flooded with them. Some countries have an excess of metal, while others have practically no such deposits. This is what happens, for example, with Japan - it buys almost all natural resources from other states. However, this country has invested in its own intellectual potential, thanks to which it has become the strongest manufacturer of machinery, cars, equipment.

Another driving force behind international business is the wide variation in wages around the world. Entrepreneurs from developed countries, by transferring production to developing ones, achieve that they pay half or three times less for the same work. This allows you to reduce costs, prices, increase competitiveness to a large extent. However, the quality with guarantees remains exactly the same, and the brand under which the products are produced is also preserved. As a result, the business becomes much more efficient, brings more profit. Allthis stimulates international business to develop and continue to be very active.