2. Purpose of International Business:
International business is the commercial transactions of goods and services, capital, and other inputs and outputs across the national boarders without any specific investment. International business are only involve in import and export activities. Normally, those businesses with very limited resources are involve in such business. Both types of private and public business are involved in such kind of business. The sole aim of private firm is to earn profit and public companies are involved to earn profit but with political motivates.
Before entering into an international business, a firm needs to consider the following three things;
Inputs includes raw materials, labors, manufacturing equipment’s, fuel, buildings, etc. for the production of goods and services. Inputs are considered as the basic in order to produce a product. A firm must analyze quality and quantity of inputs in order to make a complete product.
Processing is the process of converting inputs into outputs. Processing defines where the production activities can be done effectively. Processing depends upon the technology used, motivation of leaders, labors, production volume, and so on.
In this scenario, output means how and where to find the best possible market. Business first try to gain and cover the maximum share in the domestic market before entering foreign market.
Generally, business goes international for the following purpose;
1. Expanding sales:
Most of the business aims to increase and expand sales of their products internationally. Once the domestic market is saturated, business try to go international. For example; Japanese company Sony derive most of the sales from foreign countries.
2. Acquiring Resources:
Companies tries to acquire resources at cheap in order to get competitive advantages. Companies like apple has shifted its production activities across China due to wide or large market, availability of skilled manpower at low cost and so on.
3. Minimizing Risk:
Business firms always seeks to minimize risk for the high gain. Sales and profit increases at countries with expanding economy whereas decreases at countries with recession.