It is easier to understand what international business is all about, but difficult to define. Globalisation and international business have often been used in the similar sense, ignoring the fact that globalisation is the cause and international business is the effect. A survey of writings on international business shows that the writers put different emphasis on different aspects of international business.
A few define it in terms of transactions (Griffin and Pustay; Daniels and Radenbaugh); some others in terms of players, i.e., firms from two countries (Hill); and still others in terms of movement (Bennett, 1999). However, everyone agrees to its crossing the national borders and scope of operations.
We Would Prefer to Define International Business as Under,
Image Source: ebcborsrealconnection.files.wordpress.com
“International business refers to transactions (commercial or otherwise), that facilitate exchange of products, services, knowledge and information, and investment across national borders and/or beyond via legally accepted modes and players.”
On the basis of this definition, international business can be characterised as follows:
ADVERTISEMENTS:
First, business is always guided by profit motive and international business is no exception. However, many a times, governmental agencies may be involved in international business for non-profit motives. All such transactions, irrespective of consideration would be within the ambit of international business.
Second, scope of international business includes facilitating exchange. (Not donation or charity). The exchange includes everything on this earth and even beyond. International business, in its scope includes product, service, knowledge and information, and investment. To provide a ride to wealthy business tycoons in the spaceship comes in the arena of international business. We shall discuss them in detail while discussing modes of internationalisation/entry strategies or process of internationalisation.
Third, international business takes place when transaction is affected across the national borders-a transaction between two or more countries. It is this geographical dimension which makes international business so special and complex.
ADVERTISEMENTS:
Fourth, the IMF Balance of Payments Manual divides the transactions according to standard categories. Three types of transactions, important from international business view point, can take place through trade, income, and/or investment. Trade includes merchandise, services, and goods for processing transactions.
Income transactions include interest payments on debt, dividends for shareholders, royalty income, and expatriates’ wages, salaries, and benefits. Investment transactions include portfolio investments and direct investments. Due to environmental differences and forces, in what manner and to what extent these could be executed depends upon domestic, international and supranational regulations.
Fifth, the players or parties involved in international business may be individuals (American citizens buying shares of Reliance Industries), domestic firms (both privately and publicly held), a group of companies (strategic alliance partners), multinational contractual networks, multinational enterprises, or different entities of the same company in different countries.
Regulatory agencies include government agencies (like Central Banks) and international institutions (such as WTO, the World Bank, International Monetary Fund, International Chambers of Commerce and so on). However, dominant players are the firms who facilitate movement of products, services, knowledge and information, and capital across national borders to make profits (or losses).
ADVERTISEMENTS:
Sixth, companies involved in international business range from small firms making goods for export to very large MNCs.
International business can be differentiated from foreign business. While International Business involves business activities crossing national borders, i.e., between two or more nations, foreign business refers to domestic operations within a foreign country.