GROUP5-BASIC CONCEPTS IN INTERNATIONAL BUSINESS.doc

GROUP5-BASIC CONCEPTS IN INTERNATIONAL BUSINESS.doc

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BASIC CONCEPTS IN INTERNATIONAL BUSINESS DEFINITION OF INTERNATIONAL BUSINESS International business includes any type of business activity that crosses national borders. Though a number of definitions in the business literature can be found but no simple or universally accepted definition exists for the term international business. At one end of the definitional spectrum, international business is defined as organization that buys and/or sells goods and services across two or more national boundaries, even if management is located in a single country. At the other end of the spectrum, international business is equated only with those big enterprises, which have operating units outside their own country. SPECIAL DIFFICULTIES IN INTERNATIONAL BUSINESS What make international business strategy different from the domestic are the differences in the marketing environment. The important special problems in international marketing are given below: 1. POLITICAL AND LEGAL DIFFERENCES The political and legal environment of foreign markets is different from that of the domestic. The complexity generally increases as the number of countries in which a company does business increases. It should also be noted that the political and legal environment is not the same in all provinces of many home markets. For example, the political and legal environment is not exactly the same in all the states of India. 2. CULTURAL DIFFERENCES The cultural differences, is one of the most difficult problems in international marketing. Many domestic markets, however, are also not free from cultural diversity. 3. ECONOMIC DIFFERENCES The economic environment may vary from country to country. 4. DIFFERENCES IN THE CURRENCY UNIT The currency unit varies from nation to nation. This may sometimes cause problems of currency convertibility, besides the problems of exchange rate fluctuations. The monetary system and regulations may also vary.
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5. DIFFERENCES IN THE LANGUAGE An international marketer often encounters problems arising out of the differences in the language. Even when the same language is used in different countries, the same words of terms may have different meanings. The language problem, however, is not something peculiar to the international marketing. For example: the multiplicity of languages in India. 6. DIFFERENCES IN THE MARKETING INFRASTRUCTURE The availability and nature of the marketing facilities available in different countries may vary widely. For example, an advertising medium very effective in one market may not be available or may be underdeveloped in another market. 7. TRADE RESTRICTIONS A trade restriction, particularly import controls, is a very important problem, which an international marketer faces. 8. HIGH COSTS OF DISTANCE When the markets are far removed by distance, the transport cost becomes high and the time required for affecting the delivery tends to become longer. Distance tends to increase certain other costs also.
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