Discuss the importance of international business to firms ?
OR
What benefits do firms derive by entering into international business ?
The importance of international business to firms are as follows:
- Increased capacity utilization: Generally, the firms whose products have good demand in the domestic market set up high production capacities for their products by planning for overseas expansion too. With the help of orders from foreign customers, they can utilize their surplus production capacities and hence earn higher profits.
- Prospects for higher profits : As compared to domestic business, international business can be more profitable. Business firms can earn higher profits by selling their products in countries where prices are high, particularly when the domestic prices are not satisfactory.
- Prospects for growth: Business firms with saturated
demand for their products in the domestic market can improve their prospects of growth by entering into foreign markets. This is the prime reason which has prompted many of the multinational companies from the developed countries to tap markets of developing countries. - Way out to intense competition in domestic market : The only way to achieve significant growth in intense competition in domestic market is internationalization. Hence, international business acts as a catalyst of growth for business firms facing tough competition in the domestic market.
- Improved business vision : Business policies and strategic management have resulted in the growth of international business of many companies. The need to grow, become competitive, diversify and gain strategic advantages has created an international vision.