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International business is a business activity that encompasses the transfer of resources, goods, services, and information across countries. In simple terms, it is the carrying out of trade and investment activities across countries (Cavusgil et al., 2022). The business activity entails crossing geographical boundaries, and as a result, it is often referred to as a cross-border business. Corporations procure, manufacture and market their goods and services on an international level since they engage foreign customers and establish collaborative relationships with any potential foreign partner. Although international business is mainly carried out by individual corporations, the government and other international agencies often perform cross-border activities which involve the transfer of assets, both physical and intellectual, labor, services, and capital.
Cross-border business is characterized by six interlinked elements. These elements include globalization, international trade, international investment, international business risks, foreign market entry approaches, and business participants. To facilitate the exchange of products, and services across boundaries, firms require to undertake certain business activities which form part of what is referred to as key concepts in cross-border business. One of the key concepts is exporting goods and services. Exporting entails selling products or services to a foreign country from a domestic country. Alternatively, the exchange can happen through the importation of goods and services, which is the procurement of goods or services from the supplier in a foreign country to be consumed in the home country.
Another concept is an international investment, which is the transfer or acquisition of assets in a foreign country. International investment is further broken down into two types of investment; international portfolio and foreign direct investment. International portfolio investment revolves around ownership of foreign securities, and it does not involve absolute control of the assets. Lastly, foreign direct investment is more of a foreign market entry approach than an investment itself. In this investment, the firm acquires productive assets in a foreign country and creates a physical presence in that country.
Domestic business refers to a type of business or trade that is confined within the geographical location of a country. Technically, domestic business and international business are more similar since they are all based on the same basic principles of trading. For instance, both international business and domestic business are subject to a code of conduct and ethics including corporate governance. Furthermore, adherence to set regulations either local or international is a noticeable similarity.
However, the main differences arise from the risk exposure due to economic, cultural, and political conditions. The firms performing international business find themselves in unfamiliar environments that they firm has no control over, creating business risks (Cavusgil et al., 2022). One of the noticeable differences between the two is that in international business the buyer and the seller are from different national boundaries, while in domestic trade, the buyer and seller belong to the same national boundary (Kumar, 2020). In addition, different currencies are often used in cross boarder business, since the buyer and the seller are from different countries, while in domestic business, a single currency is often used.
In conclusion, both international and domestic business plays a critical role in developing a country’s economy. They are technically similar since they are based on the same principles of trade. However, there exist differences in terms of risk exposure, geographical location, and application of currencies.
References
Cavusgil, T. S., Knight, G., & Riesenberger, J. R (2022). International Business: The New Realities, Global Edition (4th ed.). Pearson India.
Kumar, N. (2020). Difference between Domestic & International Business. Enterslice. Web.
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