Which statement expresses one of the reasons why managing an international business is different from managing a purely domestic business?

Domestic business involves those economic transactions that take place inside the geographical boundaries of a country. Both the buyer and seller belong to the same country in this form of business. Domestic business is also known as ‘Internal Business’ or ‘Home Trade’. It is relatively easier to conduct business research in domestic business when compared to companies from abroad, and the degree of risk is also much lower. The selling process, currency, type of customers, taxation laws, and other regulations are more or less uniform, which can significantly benefit any organisation.

International Business

International business involves those economic transactions that take place outside the geographical boundaries of a country. The buyer and seller do not belong to the same country in this form of business. Companies involved in international business are known as ‘Multinational’ or ‘Transnational’ companies. It is much more difficult to conduct business research on international business firms when compared to domestic companies, and the degree of risk is also higher. The selling process, currency, type of customers, taxation laws and other regulations are different for the buyer and seller, which can be a hindrance for any organisation to conduct business.

Differences between Domestic and International Business

The main differences between Domestic and International Business are as follows:

Domestic Business

International Business

Definition

Domestic business involves those economic transactions that take place within the geographical boundaries of a country.

International business involves those economic transactions that take place outside the geographical boundaries of a country.

Buyer and Seller

Both the buyer and seller belong to the same country in domestic business.

The buyer and seller belong to different countries in international business.

Currency

Domestic businesses deal with the same currency since both the buyer and seller are from the same country.

International businesses deal with different currencies since the buyer and seller are not from the same country.

Customers

There is greater homogeneity in terms of the nature of customers of domestic businesses.

There is greater heterogeneity in terms of the nature of customers of international businesses.

Geographical Boundaries

Geographical boundaries limit domestic businesses.

Geographical boundaries do not limit international businesses.

Business Research

Business Research is less complex and relatively cheaper for domestic businesses compared to international organisations.

Business Research is more complex and relatively expensive for international businesses compared to domestic companies.

Capital Investment

Capital investment is lower for companies that are involved in domestic business.

Capital investment is higher for companies that are involved in international business.

Factors of Production

The domestic business has greater mobility of factors of production compared to international business.

The international business has lesser mobility of factors of production compared to domestic business.

Restrictions

Domestic business involves lesser restrictions than international business.

International business involves greater restrictions than domestic business.

Quality Standards

The quality standards for domestic business tend to be relatively lower than international business.

The quality standards for international business tend to be relatively higher than domestic business.

Conclusion

The difference between Domestic and International Business indicates that a company must do both to survive and grow in the market. Both these forms of businesses have their advantages, for any organisation that wants to succeed in these markets must design its business strategies accordingly.

Also See:

  • Difference between Traditional Commerce and E-Commerce
  • Meaning and Characteristics of Not for Profit Organisations
  • Nature and Significance of Principles of Management
  • The Law of Diminishing Marginal Product and the Law of Variable Proportions

Why is managing an international business different from managing a domestic business?

Answer and Explanation: Managing an international business is different from a domestic business since the investors operate in a foreign land which is governed by different laws, as compared to the domestic country. Thus, the investor must familiarize him or herself with those policies to avoid legal problems.

Is managing an international business is quite similar to managing a domestic business?

Managing an international business is quite similar to managing a domestic business. According to globalization critics, the decline in unskilled wage rates is due to the migration of low-wage manufacturing jobs offshore and a corresponding reduction in demand for unskilled workers.

What is the difference between international business and globalization of markets?

The primary aim of internationalization of business is expansion, whereas globalization aims at free movement of goods and services, people, and capital. Internationalization may result in increases in the presence of the enterprise and pushes the world economy towards globalization.

Who of the following has defined international business as any firm that engages in international trade or investment?

Answers
Questions
TRUE
An international business is any firm that engages in international trade or investment.
Globalization of Production
It refers to the sourcing of goods and services from location around the globe to take advantage of national differences in the cost of production.
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