International business can be described as the commercial activities that are performed with the aim of promoting the transfer of services, goods, technologies, people, resources and ideas across national boundaries. International business takes place under various formats. They include the movement of goods or services from one nation to another (exporting and importing), contractual agreements that give firms in foreign countries legal permission to use services, processes and products from other nations (e.g. licensing, franchising and subcontracting production), and companies putting up manufacturing, sales, research and development, and distribution facilities in foreign markets (Cavusgil et al., 2008). This flow of services, technologies, people, resources, ideas and goods in foreign markets has significant effects on countries and their companies, individuals and governments. Due to globalization, international business has thrived greatly and has seen the formation of economic blocks, trading blocks and trading partnerships. Examples of these economic blocks include NAFTA, the EU, ECOWAS, COMESA, EAC, the Arab Union and BRIC.
International business is characterized by agreements and treaties that guide business relations between various countries. Countries often have bilateral and multilateral trading agreements with other countries, and they are constantly seeking to establish new trade ties. International business has a number of benefits. At the national level, participating in international business activities assists countries to take advantage of national expertise in commerce to deliver services and goods into the international market place. Also, it increases the variety of services and goods that are available in national markets and exposes consumers to new ideas and lifestyles. With time, these exposures have an effect on national cultures including economic and political institutions, and impact on a society’s attitudes, lifestyles and behaviors. Governments have significant impacts on international activities since they are the determining factor on how open or closed national economies are to external influences such as investment and trade.
For companies and organizations, international business enhances competition in domestic markets and opens up new opportunities across the borders and over the seas. Due to increased global competition, firms and companies are forced to be more innovative and efficient in their use of resources. For consumers and customers, international business creates an availability of a variety of services and goods into the global market place. This in turn leads to the adoption of competitive market prices and thus improves the living standards of consumers. Also, it increases their exposure and thus helps them in making choices when seeking services or goods.
However, the international business environment presents a couple of challenges. First, the international marketplace is diverse. International executives have to cope with political diversity, economic diversity, regional diversity, cultural/linguistic diversity, diversities in country size and populations and developmental diversities especially between developing and developed nations (Cavusgil et al., 2008). Second, the international marketplace is changing. The global marketplace constantly changes as a result of cultural, political, economic and financial uncertainties. Third, international business is guided by international business ethics. International businesses and multinational companies have ethical responsibilities when carrying out business with and in various countries. Ethical issues include environmental protection, human rights protection and social responsibility. As multinationals are expanding globally and entering foreign markets, the ethical conduct of employees and officers is significant since the cultural diversity that is linked to such expansion can undermine shared ethical and cultural values. Ethical issues that may arise include employee conflict of interest, affirmative action, unauthorized payments, sexual harassment, environmental issues and employee privacy. Therefore, an ethical international business climate needs to be emphasized for the achievement of the full benefits of international trade.
References
Cavusgil, S.T., Knight, G.A. & Riesenberger, J.R. (2008) International Business: Strategy, Management, and New Realities. New Jersey: Pearson Prentice Hall.
