International Business consists of the trade of goods, services, technology, capital, and/or knowledge at a global level. It is one of the things that has emerged to be a huge advantage to semi-developed or developing nations. 

International business involves cross-border transactions of goods and services between two or more countries. The international production of physical goods and services (such as finance, banking, insurance, and construction) also requires economic resources in the business world (including capital, skills, and people). People also refer to international business as globalization. 

We can say that globalization began with the capitalist society, where traders started going to different countries to make more profit through the goods and services they provided. In order to conduct business overseas, multinational companies need to treat national markets as one global marketplace. 

Two main factors underline the trend of greater globalization:

• The first can be seen as eliminating barriers to make cross-border trade easier, and 
• The second is a technological change like development in communication, information processing, and transportation technologies.

One of the major issues hindering global businesses is that there are growing protests against it day by day and hence, there is an urgent need to tackle this issue before stakeholders in these businesses start to lose out.

Governments of different countries play an active role in global businesses as they are the ones who set the rules for engagement with other countries. Therefore, along the lines of what the Supreme Court in India has done, they need to pose questions and find universally acceptable answers about the pricing of resources and their proper and sustainable management.

International business has many advantages and benefits for a production or manufacturing company. It makes it easy to find cheaper labor and raw material in developing countries. This is one of the major reasons large-scale companies invest in countries like India. 

Another big reason is that with local markets being saturated, many companies think of expansion via international business.

10 Top Reasons Why Companies Engage in International Business

1. To expand their sales: The first and foremost reason for any multinational to set up industries in different countries would be because they like to expand their sales and acquire newer markets so that they can record impressive growth rates for the company.

With the huge impact of globalization, the consumers of developing countries aspire to live Western lifestyles. It is natural that Western companies would like to target this need and hence, expand their markets even further. Moreover, with declining sales in one region, western companies hope to recoup the losses by expanding into other markets.

 2. To expand their market share: Everyone wants to expand their market share so they can sell more and more products and reach more audiences. The importance of International business lies in the fact that you get a new market to enter and expand. However, it sometimes may not work as planned and can also lead the company to huge losses.

No matter what your position is in the old market, the new market acts as a new playing field for any company in which they can either make huge profits out of it or lose all that they had.

3. To acquire resources: This is one of the most important reasons for companies to expand internationally. Many developing and new emerging countries have large deposits of minerals, metals, and land for agricultural production which is why the western multinationals eye markets of the developing countries to get access to these resources.

This is the reason why many international businesses operate in Africa and South Asia where they can find humungous deposits of minerals and metals that are attractive for the profits that these multinationals can make.

Many emerging markets and developing countries do not have the expertise or the resources needed to tap their reserves of minerals and metals profitably.

4. Non-availability of the product in the target market: A major advantage for a company choosing to go for international business is that the product it produces is not available in the international market. This makes the company and the product more in demand and can expand their services to the targeted audience.

The firm, therefore, has a “production advantage” that it can use for maximum benefit. As a result, it is one of the benefits of International business that the firm can establish a monopoly or a duopoly in the target market.

5. Minimizing risk: Businesses expand internationally to offset the risks of stagnating growth in their home country as well as in other countries where they are operating and setting up their industries.

Firms exist to make profits and grow their bottom line. It is natural for them to expand internationally into countries that have better growth rates than their home country.

Further, by operating in a basket of countries they can manage political, economic, and societal risks better than just by operating in their home country. As they vary from country to country, it makes sense to spread risk across countries and diversify the portfolio rather than placing all eggs in one basket.

6. Product differentiation: Product differentiation in the international business context refers to the strategy of creating unique and distinctive characteristics or features for a product or service to distinguish it from competitors in the global marketplace. It involves highlighting the unique selling points, benefits, or attributes of a product or service to make it more attractive and appealing to customers.

Product differentiation becomes crucial due to the presence of diverse markets, cultural differences, and varying customer preferences across countries. By differentiating their products, businesses aim to create a competitive advantage, enhance market position, and increase customer loyalty and demand.

This can be done through superior quality standards in manufacturing, materials used, and product performance. These qualities breed trust and reliability among customers. Unique and appealing product design, packaging, and visual presentations also create a distinct image and attract customer attention, especially in industries such as fashion, technology, and consumer goods.

7. Growth of the economy of developing countries: When South Africa belonged to the primitives and native tribes, there was no business being conducted there. also, we couldn’t see any growth in the social welfare structures.

However, with globalization, we can see the growth and development of Ghana and Nigeria as well as other African cities. The growth of these cities and flourishing commerce is another proof of the importance of International business and how multinationals change the future of developing nations.

8. Capacity of production: One reason for large companies to look towards international business is to utilize the excess production capacity of their manufacturing plants in other countries and gain more profit.

Companies like Ultratech, Blue Star, Garment manufacturers, and Chocolate manufacturers have huge production capacities. When you have such huge production potential, utilizing that potential becomes important. As a result, many companies take the benefits of international business by utilizing their manufacturing potential and starting the sale of their brand in International markets.

9. Economies of scale: When we are talking of operations and growth, one factor which helps the profitability of the company to a great extent is economies of scale.

With the business growing and you increasing your fixed costs, the concept of economies of scale sets in. The fixed cost goes down when the manufacturing goes up from the same assets. This benefits the company because the company gets a cost advantage over competitors and it also improves its scale of operations.

10. Purchasing power: The last reason and one of the more important ones for doing International business is the purchasing power rising in targeted markets. The best example of this is Dubai which as a country has grown exponentially in the last several years and today is a huge tourist market.

Conclusion

International business has a plethora of benefits and opportunities, from accessing new markets to spreading risk. It enables companies to benefit from economies of scale, increased purchasing power, product differentiation, and the growth of the economy in developing nations.

All these factors contribute to making international business a lucrative prospect for companies. Thus, many multinational corporations are embracing this strategy to gain a competitive advantage in the market and reap long-term profits.