Modes of International Business

Topics: Subsidiary, Corporation, International trade Pages: 8 (1599 words) Published: April 10, 2011
1. Introduction :

In this world of scarcity no nation can produce all the products and services they need, moreover the price and availability of labor, the cost of raw materials, desired market for the products and services they produce are not same for all the nations. So different nations as well as different companies want to sale their products or services in different countries or collect raw materials needed to produce their products from different countries. They can also start their business in the suitable country by direct investment.

2. Meaning of International business :
International business is a term used to collectively describe all commercial transactions (private and governmental, sales, investments, logistics, and transportation) that take place between two or more nations. Usually, private companies undertake such transactions for profit; governments undertake them for profit and for political reasons. It refers to all those business activities which involves cross border transactions of goods, services, resources between two or more nations. Transaction of economic resources include capital, skills, people etc. for international production of physical goods and services such as finance, banking, insurance, construction etc.

Corporate Giants Worldwide


Largest US Organizations Doing Business Overseas

|Ford Motor |Procter & Gamble | |General Motors |Exxon Mobil | |General Electric |IBM | |Texaco |DuPont | |Citigroup |Xerox | |Hewlett-Packard |Lucent | |Wal-Mart |Coca-Cola | |Compaq |Johnson & Johnson | |AIG |Dow Chemicals | |Chevron |Ingram Micro | |Philip Morris |Pfizer |

3. Objectives of International Business :

Companies engage in International Business for the following reasons –

To Expand Sales – The sales of any organization depends on the number of customers, their interest in the product service and their level of income. The number of customers and their purchasing power are higher for the world as a whole than any single nation. This has been realized by most of the organizations across the world and that’s why we observe that many of the world’s largest companies (like Nestle, Unilever etc.) get 50 percent of their sales from foreign countries.

To Acquire Resources – Another important reason for entering into the International Business is to acquire resources such as raw materials, capital, products, services etc. The reason may be –

• Non-availability of resources in the home country.
• The high prices of inputs in the home country.
• To enhance the quality of resources.

To minimize Risk – Another important motive behind International Business is that organizations want to minimize their risk by minimizing the swings in sales and profit. They try to reduce their vulnerability to a single economy by having broader base in...
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