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Jan 16 2013

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Why International Business is Important for Economic Development

International business plays an important role in the economic development of a country as it gives greater businesses opportunity to sell the goods and services they produce. When a business organization is dependent on its domestic market, it is more likely to failure in this domestic market. Capable of selling internationally significantly reduces the chances of such business failure as market demands for goods and services are prone to change always. For example, China manufacturers who sell into American and Europe have seen some markets drop due to the economic crisis but have successfully increased sales to other countries where demand for Chinese goods has risen extensively.

Economic importance of international business

  • Opportunity to earn foreign exchange: International business creates an opportunity to export goods and services throughout the world. This kind of business opportunity assists to earn valuable foreign currency in exchange of goods and services. This foreign currency is used to pay for various kinds of imports for example, oil and lubricants and other essential commodity. Foreign exchange enables to make the domestic business more profitable and sustainable to strengthen the economy of a country.
  • Efficient utilization of scare resources: As international business is competitive and therefore business organization tries to utilize its resources more efficiently, because business has to produce a variety of goods on a large scale basis for the international markets. International business creates an urgency of optimum resources utilization in order to become more competitive in the international market.
  • Gain competitive advantage: International business helps to gain a competitive advantage over domestic market easily. The fundamental objective of an international business is to ensure high profits delivering best quality products. This unique feature of a business organization assists to gain competitive advantage over the domestic markets.
  • Allocation of business risks: International business reduces business risk through global operations. This is possible because of global operation throughout the world. So, a potential loss in one country can be minimized by a profit in another country.
  • Improve operational efficiency: International business requires efficient management in order to bring success in multidimensional business activities. Without strong and efficient operational teamwork, it will not be able to face the competition in the international market. Therefore, it needs efficient management techniques to improve operational efficiency in the recent competitive global business environment.
  • Obtain benefits from state: International business helps to bring huge amount of foreign currency for the country through exports. Therefore, business organizations who are involved in foreign exports are likely to get many business benefits and facilities from the state. It also gets many financial and tax benefits from the state in terms of cash incentives.
  • Business expansion and diversification: International business offers new geographical destinations in order to expand and diversify business activities. International business also searches new customers through entering into new global destinations.
  • Increase global competition: As international business face severe quality competition with its competitors and therefore business organization must produce high-quality goods at low cost to win global competition and gain large market share. It employs huge amount of money on advertising using different types of media in order to sustain such competitive business environment.

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