Importance of International Business

01/04/2020 1 By indiafreenotes
  1. Insufficiency of Domestic Demand

If the domestic demand for the product is not sufficient to consume the production, the firm may take a decision to enter the foreign market. In this way he can equalize the production and demand.

  1. To Utilize Installed Capacity

If the installed capacity of the firm is much more than the level of demand of the product in the domestic market, it can enter the international market and utilize its un-utilized installed capacity. In this way it can export the surplus production.

  1. Legal Restrictions

Sometimes the Government of a country imposes certain restrictions on the growth and expansion of certain firms or on the production and distribution of certain commodities in the domestic market in order to achieve certain social objectives.

  1. Relative Profitability

The export business is more attractive for its higher rate of profitability. The higher profitability rate also gives extra strength to the firm.

  1. Less Business Risk

A diversified export business helps the exporting firm in mitigating the risk of sharp fluctuations in the business activity of the firm.

  1. Increased Productivity

Due to certain social and technological developments the industrial production has increased to a great extent. The production will be higher at cheaper rate. The surplus production can be exported.

  1. Social Responsibility

In order to meet the social responsibility some business firms take the decision to contribute to the National Exchequer by exporting their products.

  1. Technological Improvements

Technological improvements also attract the business firm to enter foreign markets. It introduces new products with latest technological improvements and faces the competition successfully in the international markets.

  1. Product Obsolescence

If a product becomes obsolete in domestic market it may be in demand in International markets. The firm has to make a survey for introducing the product in those markets.

  1. International Collaboration

Developed countries fix their import quotas for different countries and for different commodities. A county can export various commodities to these developed countries to the extent of its quota.

  1. International Business Brings Various Countries Closer

Better business relations are established among the countries. Government and non-government business commissions or business representatives visit other countries from time to time. The local representatives and other related persons came into contact with foreign representatives and come to know their habits and customs.

  1. Helps in Maintaining Good Political Relations

The economic relations between two countries help each other to improve their political relations. Various countries having different political ideologies import or export their products. To conclude it is now undisputable that export business contributes to the national economy, national exchequer, individual exporting firms and maintains international, economic cultural and political relations among various countries. Countries have come closer on account of international business.

Importance of International Business: On the view of National Economy

  1. It is important to meet imports of industrial needs.
  2. Debt Servicing: This means to grant loan for and for their industrial development.
  3. For rapid economic growth.
  4. For profitable use of natural resources.
  5. To face competition successfully-better quality goods production having lower or moderate prices. To improve the image of the producer as well as of the country in the minds of foreign customers.
  6. Increase in employment opportunities.
  7. To increase national income.
  8. Increase in standard of living of the people.