What is international business? What are the primary reasons that companies engage in international business?
Answer: International business is all commercial transactions—private and governmental—between two or more countries. Private businesses undertake such transactions for profit; governments may or may not do the same in their transactions. These transactions include sales, investments, and transportation.
Firms engage in international business for three main reasons.
1. To expand sales—The number of people and the amount of their purchasing power are higher for the world as a whole than for a single country, so companies may increase their sales by reaching international markets.
2. To acquire resources—Manufacturers and distributors seek out products, services, and components produced in foreign countries.
3. To minimize competitive risk—Many companies enter into international business for defensive reasons. They want to counter advantages competitors might gain in foreign markets that, in turn, could hurt them domestically.