What benefits do nations derive by entering into international business?



Nations derive the following benefits :

  1. Earning of foreign exchange : International business helps a country to earn foreign exchange, which it can later use for meeting its imports of capital goods, technology, petroleum products
    . and fertilisers, pharmaceutical products and a
    host of other consumer products which otherwise might not be available domestically.
  2. More efficient use of resources : As stated earlier, international business operates on a simple principle ‘Produce what your country can produce more efficiently and trade the surplus production so generated with other countries to procure what they can produce more efficiently’. When countries trade on this principle, they end up producing much more than what they can when each of them attempts to produce all the goods and services on its own. If such an enhanced pool of goods and services is distributed equally amongst nations,-it benefits all the trading nations.
  3. Improving growth prospects and employment
    potential : Producing solely for the purpose of domestic consumption severely restricts a country’s prospects for growth and employment. Many countries, especially the developing ones, could not execute their plans to produce on a large scale, and thus create employment for people because their domestic market was not large enough to absorb all the extra production. Later on, a few countries such as Singapore, South Korea and China, which saw markets for their products in the foreign countries, embarked upon the strategy ‘export and flourish’ and soon became the star performers on the world map. This helped them not only in improving their growth prospects, but also created opportunities for employment of people living in these countries.
  4. Increased standard of living : In the absence of international trade of goods and services, it would not have been possible for the world community to consume goods and services produced in other countries that the people in these countries are able to consume and enjoy a higher standard of living.