Scope of International Business
The scope of international business is wider than domestic business as it includes the following:
- Imports and Exports of Merchandise: Merchandise refers to physical products, such as those that can be seen and felt. Therefore, imports and exports of merchandise mean the transfer or exchange of tangible goods from and to different countries of the world. It is also called trade in goods as it excludes buying and selling of services.
- Imports and Exports of Services: Imports and exports of services involve intangible goods that cannot be seen, felt, or touched. It is also known as invisible trade. Services such as tourism and travel, transportation, communication, etc. are imported and exported.
- Licensing and Franchising: Licensing is a contractual agreement between two firms, where the licensor (one firm) grants the licensee (another firm), access to trademarks, copyrights, patents, etc. in a foreign country in exchange for a fee. The fee charged by the licensor is known as royalty. For example, Microsoft grants a license to different companies in exchange for royalty.
Franchising is also similar to licensing. However, it provides services rather than access to patents, etc. For example, Subway has various franchises all over the world where it provides the same services to the customers. - Foreign Investment: It means investing money into a foreign country in exchange for a profit. Foreign investment can be of two types Direct and Portfolio Investment.
Direct investment occurs when a firm invests directly in the machinery and plant in another country to produce and market goods and services in that country.
A portfolio investment is a foreign investment where a company buys shares of another company in a different country or lends money to another company. The return on portfolio investment is received in the form of dividends or interest respectively.
International Business: Meaning, Reason, Scope, and Benefits
International business refers to those business activities that take place beyond the geographical boundaries of a country. It involves not only the international movements of goods and services but also capital, technology, IP like patents, trademarks, copyright, etc.
For example, India selling agricultural products to foreign countries is an international business. Advancements in technology and better communication facilities have increased international business with great success in various countries. International business provides a wide market range to organizations and gives them an opportunity to satisfy the needs of customers all over the world.