Difference between domestic_and_international_business

Conducting and managing international business operations is more complex than undertaking domestic business.

1. Difference between Domestic and International Business

2. CONTENTS Introduction Domestic Business International Business Scope Differences between Domestic and International Business

3. INTRODUCTION Conducting and managing international business operations is more complex than undertaking domestic business. Differences in: the nationality of parties involved, relatively less mobility of factors of production, customer heterogeneity across markets, variations in business practices and political systems, varied business regulations and policies,

4. Use of different currencies are the key aspects that differentiate international businesses from domestic business. Moreover , these are the factors that make international business much more complex and a difficult activity.

5. Domestic Business Performing business transactions with in the boundaries of a nation.

6. International Business International Business can be defined as business transactions beyond national boundaries of a country. Simply, it is the business carried out across the national boundaries between two or more nations.

7. Scope Scope of international business is quite wide. It includes not only exports, but also trade in services, licensing and franchising as well as foreign investments. Domestic business pertains to a limited territory. Though the firm has many business establishments in different locations all the trading activities are inside a single boundary.

8. Market Fluctuations Firms conducting trade internationally can withstand these situations and huge losses as their operations are wide spread. Though they face losses in one area they may get profits in other areas, this provides for stabilizing during seasonal market fluctuations. Firms carrying business locally have to face this situation which results in low profits and in some cases losses too.

9. DOMESTIC BUSINESS V/S INTERNATIONAL BUSINESS

10. Dimension Domestic business operations International business operations Environment The economic, political, legal, socio-cultural, competitive and technology environments are known, hence one can take necessary precautions The environment is not fully known. Innumerable hidden factors which may emerge at times to pose threats Competition The maximum domestic competitive forces operate and one can understand their movement International competitive forces play a vital role and it is very difficult to understand their motive and movement

11. Currency Local currency is used for transactions. Costing, pricing, revenue and margins are computed in single currency Transactions are carried out in various currencies. Fluctuations in cross country movement and associated risks are common. Business risks Comparatively one can predict future risk and shock and they will not have a major impact on the business houses Very difficult to predict and risks may crop up any time, due to the political situation, the society itself or other unknown factors Research It is reasonable and easy to conduct business research, demand analysis and customer survey. It is also reliable for business ventures Very difficult and costly to conduct. Reliability depends on individual countries and the output has no uniformity

12. Human resources Due to past laurels and established systems, corporate can succeed even if the human resources have minimum skills and knowledge Multilingual, multi strategic and multi-cultural human resources are necessary and they should be able to withstand large risks Organizational vision and objective Narrowed down to work in a single country with a steady growth objective. Each one will understand the vision and objective very quickly Broadened cover many countries and geographic and cultural diversity may influence the vision and objective Product development Adapted to the local environment , as per the requirements of domestic customer’s affordability, beliefs, values and cultural elements Varies from countries to countries subject to the regulations of the host country . This is especially true for consumer and medicinal items.

13. Legal aspects Only local regulations are fully applicable to conduct business. There is minimum adherence to international regulations related to IPR. International regulations and host countries regulations are applicable. Investment Depending on the size of the business one can start with a minimum investment. Involvement of regulatory bodies is minimal. All overseas operations except exports, call for huge investments to set up and expand the business in many countries . Special regulatory bodies are involved in the process since foreign currency is transacted. Pricing A majority of companies use cost plus margin pricing or competitive pricing. Companies use marginal cost pricing or competitive pricing or transfer pricing to succeed.

14. Distribution The business houses can use its discretion to select any channel to reach the customer The distribution channel is governed by the government or market practice. Cash and carry, shopping malls and mail order services are becoming popular in international business. Promotion Advertising, personal selling, and other promotion al methods are not restricted through strict legal frame work if they are not socially objectionable Different countries have different restrictions, For example, advertisement of liquor and cigarettes are not permitted in some countries and campaign using female models are banned in others. Logistics Domestic players are involved in all activities International players with advanced technology are involved

15. Nationality of the participants Nationality of the participants is limited to domestic country only. Nationality of the participants here is of foreign origin. Nationality of the stakeholders It is of domestic market only. Here, it is of varied origin. Heterogeneity of the customers Degree is low in domestic business. Degree is higher in international business. Business Regulations Controllability is higher in domestic business Controllability is lower here in international business.