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. The direct participants play the role of actors in the field of international business - these can be individuals, firms, and government agencies.
Main features
In this area, operations are carried out that are carried out between entities 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. While organizations in international business cross borders. This determines 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 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 move into a global form. And this means washing away borders and obstacles due to the fact that such institutions are not dependent 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 such a feature as the need to take into account several cultural factors of the interacting countries at once. After all, each cultural background will be different.
It is noteworthy that in the conduct of international business requires more professional knowledge when compared with national. The level of training should be higher. It concentrates all the best that was at the previous, national level.
In managing international business, strategy plays a critical role. The strategic resource here is information, and the weapon is adaptation. In addition, he is able to support the country through the fight against competition in the domestic market. It manifests itself in the economic and political sphere.
Reasons for the appearance
International business is a phenomenon whose occurrence was inevitable for a number of reasons. These include the fact that competition has intensified in the domestic market with an increase in the number of entrepreneurs. In addition, the national market is limited in size, and the giants at some point need more space to step forward. Resources here are also limited. International business development is also due to 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.
Forms
In total, two forms of international business are distinguished: 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 acquisition 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 wide variety of areas.
The second form of international business is investment. It consists in transferring capital to entrepreneurs of one state for the purpose of being used by business owners in other countries. Foreign direct investment in international business is invested in order to control assets and organizations based abroad.
Stages of development
Robins proposed dividing the development of this sphere into five stages. The first is the commercial phase, which began at the beginning of the 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 get as much profit as possible. This was a very risky venture, since sea voyages were unpredictable - often a tragic fate befell seafarers. But the profit from them was so huge that for many it justified the risks.
The second stage was expansion in 1850. Then the colonies were framed in 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 an international business with investments are considered to be the efficient use of resources, expansion of the sales market, and the ability to apply local laws for their own benefit.
The third stage is 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 the colonial and other states. At this stage, entrepreneurship began 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 that possessed an extensive base for that. The process was often accompanied by financial difficulties. For this reason, the 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 began in the 1970s, and the period continues to the present moment. Thanks to the development of computer technology and improved communications, the interaction of all countries in the world has radically changed.
Thanks to globalization, an international business environment has emerged across the globe, all states are dependent on it. All of them enjoy the many benefits of civilization, but they pay the price because the country depends on the world market.
Globalization development
Globalization has been stimulated by a number of driving factors, among which are: differences between states in the natural and economic spheres, a new milestone in the development of communications, the openness of many markets, and the need for cooperation between countries in the field of ecology.
Constraining factors include differences in the socio-economic situation of states, changes in exchange rates, the emergence of armed conflicts, and differences in ideological systems. A certain deterrent to both globalization and international business are religious differences.
In modern times
At the moment, the sphere is characterized by availability. Many enterprises have the ability to create representative offices in international business centers. A phased development of the sphere is also taking place, more and more global enterprises are emerging for which there are no borders, they are practically not affected by local legislation, they are represented in many countries of the world. To enter this market, it is necessary to overcome several obstacles. First of all, faced with the cost of production, the efficient use of capital, labor and so on.
Technologies in international business today can allow global operations to be carried out without leaving your office. Also, thanks to them, it became possible to conduct transactions with partners in many countries of the world in real time.
The strategies of enterprises, as a rule, are aimed at ensuring that national characteristics are used effectively. Sometimes cultural differences can lead to conflicts, and entrepreneurs with representative offices in international business centers must take this into account.
It is important that before entering the international market in the company, management is sufficiently developed. Employees must possess the basics of international business, be able to put their knowledge and skills into practice.
Conferences
In the field of international business, conferences are the most important events that connect startupers and investors. Leaders in this field share their experiences during speeches or at round tables. Dozens of similar events of various kinds take place annually.
Participants in such conferences are usually divided into 2 categories. Firstly, these are directly experienced speakers. During their speeches, they provide advertising for themselves or the company, and sometimes share their experiences. The second category is represented by startups, entrepreneurs who came to exchange experiences.
Operations
Any goals in the field of international business are achieved through operations between enterprises of different countries, which are significantly different from national transactions. International operations are basic - they are carried out on a reimbursable basis. They also provide the variety that provides them. Such operations are associated with the delivery of products from one side to the other. The main type of commercial operations is export-import. Foreign trade operations are able to cover a wide range of relations in the economic, financial and legal fields between participants. They are carried out on the basis of transactions. Transactions are contracts for the delivery of products, their distribution between partners.
As a rule, in the international market, there are two ways to conduct commercial transactions - 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 a large number of parties located in different states for the delivery of a certain volume 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 legislative framework that governs this process is presented by the Vienna Convention on International Sale of Goods. Typically, typical contracts are used for different types of transactions. They are examples of agreements that are taken as the basis for the preparation of documentation. Often they are changed and supplemented by participants in the transaction.
Theoretical basis
As the interaction between states develops and strengthens, internationalization intensifies, and the main trends manifested in world governance change. After many states moved to an open economy, transnational corporations began to grow particularly rapidly. As a result, many new questions appeared in managerial theory.
The most important among them is the question of the most efficient use of world resources, as well as directly the peculiarities of international business to extract the greatest profit. Many people ask which methods in management are local and which are common to all states of the world.
International management is an extremely broad field, and at the moment it is subject to trends in global manufacturing, as well as capital. The latter has become a critical management factor. Often, in decision-making in management, a conflict arises because capital and progress are international, and the complexes are national, isolated.
In different concepts
The theory of international business in various economic studies is presented from completely different points of view. So, Adam Smith put forward the point of view according to which some states are able to more effectively engage in sales due to the presence of special properties of the territory. So, sales, climate, soil quality, the presence of mineral wealth in the bowels, and so on. There are exporting countries, and there are importers. This is called the concept of absolute benefits.
D. Ricardo said that production volumes can grow due to international trade, even if the state does not have advantages at the production stage, natural resources, products. This is the concept of relative advantages, which is considered fair for all countries of the world, as well as for individual regions, regions in the same state. Specialization is often determined by the level of costs.
R. Vernon developed the concept of an international product life cycle. He said that any product overcomes several stages, and its production goes to different countries during this process. Four stages - introduction, development, maturity, decline - a single process, this is the general product life cycle.
Common goals and objectives
The main goal of international management is to describe the main ideas about the institutions that are part of international business, their structure, relationships, as well as effective management.
Its main objectives are analysis, assessment of the environmental organization of the environment in order to find and manifest the advantages of the company. In addition, the task proclaims the analysis and use of the cultural fund of states in order to extract as much benefit as possible.
The third task is to evaluate and select the organizational form for the institution in order to maximize the potential in economic terms.
Another task is the development of company personnel, which is represented by citizens of different nationalities in the host 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 these tasks. So, decisions that are made in order to achieve one goal should not impede the implementation of the rest. That is, you need to get rid of the internal inconsistency in the control apparatus.
In international business, there should be no contradictions in foreign activities. In addition, it is important to focus on assessing existing trends in situations in the external arena, as well as in the internal. In other words, an international enterprise should 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 the assessment of market conditions. The slightest changes can influence how the development of employees, pricing methods will occur. In order to successfully overcome difficulties, an international firm 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.
driving forces
Any modern person is involved in the exchange of international business. Everyone acquires 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 movies and listens to music from other countries. More and more companies are entering the international arena today.
The 21st century was the heyday of global organizations that spanned dozens of countries around the world for which interstate borders were no longer barriers. Financial flows have become open. All this gave rise to both positive and negative phenomena in society.
With similar changes, the very meaning has changed, which is embedded in the concept of “international business”. Initially, this was synonymous with "foreign business", but at the moment it is represented in many cases by holding organizations with a controlling 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 nominee managers.
Today, international organizations are often called just such structures that do not want to disclose their names, paying higher taxes.
Thanks to improved technological services, they are increasingly used in the production of machines, and this allows filling the market with goods in a fairly short time. Because of this, demand for products falls, like prices. But the decline in profits of entrepreneurs is not satisfactory, and they realize that there are regions in which there is a shortage of such a product.
The remote market is distinguished by its capacity, in it the owner of the enterprise sees many consumers, he is interested in how to deliver his products there even more.
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. So, the return on business is growing.
Due to the fact that differences in location, climate, and working conditions are determined by the fact that in some states there will be much more individual types of products than in others.
Sometimes the imbalances are extremely significant. So, oranges are not grown in the northern states, but in the southern markets are flooded with them. Some countries have an excess of metal, while other similar deposits have virtually no. This happens, for example, with Japan - it purchases almost all natural resources from other states. However, this country invested in its own intellectual potential, due to which it became the strongest manufacturer of machinery, automobiles, equipment.
The presence of significant differences in the level of remuneration across the world is recognized as another driving force of international business. Entrepreneurs of developed countries, 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 manufactured remains. As a result, the business becomes much more efficient, brings more profit. All this stimulates international business to develop very actively further.