Domestic vs. International Business

A business that operates solely within its home country, engaging in transactions within its national boundaries.

A business that expands its operations beyond its home country, engaging in international trade and investment.

A business that is registered and operates in a country other than its country of origin.

The process of buying and selling goods and services within a country's borders, involving domestic companies and consumers.

The process of buying and selling goods and services across international borders, involving companies from different countries.

A company that operates in multiple countries, engaging in international trade, investment, and manufacturing.

Restrictions imposed by governments on the quantity of imported goods.

Taxes imposed by governments on imported goods, increasing their price.

Domestic businesses operate within a single country, while international businesses operate across multiple countries.

International business faces greater challenges, including currency fluctuations, legal complexities, and cultural differences, compared to domestic business.

International businesses must conduct thorough market research to understand customer preferences and adjust marketing strategies accordingly.

Predicting economic trends is often more complex in international business due to diverse economic cycles and political climates.

Companies may enter international markets through various strategies, each with its advantages and disadvantages.

Exploring markets with higher purchasing power can lead to increased profitability.

Operating in larger markets can lead to greater economies of scale, reducing per-unit costs.

Entering a new market might require adapting products or services to meet local preferences and regulations.

Expanding internationally diversifies revenue streams, reducing dependence on a single market.

International expansion allows access to a wider pool of talent and resources.

Globalization can lead to increased competition, necessitating strategic planning.

Companies must carefully assess the risks associated with international expansion, including political instability, currency fluctuations, and cultural barriers.

International businesses must navigate legal frameworks, tax regulations, and trade agreements.

Understanding the cultural context is crucial for effective communication and marketing.

Building strong relationships with foreign partners and customers is vital for successful international ventures.

Companies that leverage technology to easily reach a global customer base, often from their inception.

Reducing reliance on a single market to mitigate potential risks and uncertainties.

Directly exporting goods to a foreign market without intermediaries, often through a company's own sales force.

Granting a foreign company the right to use a company's brand, trademark, technology, or manufacturing processes in exchange for royalty payments.

A strategy where two or more companies collaborate to achieve a common goal, sharing resources and expertise.

A strategic alliance where companies agree to cooperate for a specific project or venture, without creating a new legal entity.

Direct investment made by a company in a foreign country, often through setting up a subsidiary or acquiring an existing company.

An agreement where a company grants a foreign distributor the right to sell its products in a specific territory, handling marketing and sales activities.

The process of identifying and evaluating potential entry modes into an international market, considering factors such as cost, risk, and reward.

The cost involved in implementing an international entry mode, including initial investment, ongoing expenses, and marketing costs.

The level of risk associated with an international entry mode, considering factors such as political stability, economic conditions, and competition.

The ease of execution of an international entry mode, considering factors such as administrative procedures, legal requirements, and logistics.

The potential financial returns and benefits of an international entry mode, considering factors such as market share, profitability, and brand recognition.

A business strategy where a company grants a foreign company the right to use its brand, trademark, technology, or manufacturing processes in exchange for royalty payments. This allows the company to enter new markets with minimal investment while the foreign company benefits from a proven business model.

A business strategy where a company acquires a controlling interest in an existing company in a foreign market. The acquiring company gains access to the target company's infrastructure, customer base, and market expertise.

A licensing or franchising partner may leverage the gained knowledge and build their own competitive business, potentially becoming a rival in the future.

Incompetent licensing or franchising partners can damage the brand's image and reputation in foreign markets, impacting the company's overall brand perception.

Joint ventures can experience challenges due to differences in organizational culture between the partnering firms.

Dissolving a joint venture due to disputes can be a lengthy and complex legal process, involving negotiations and legal proceedings.

Acquisitions can face cultural conflicts due to differing organizational cultures between the acquiring and acquired companies.

Integrating systems and processes smoothly after an acquisition can cause a ripple effect, with technology differences often being a major obstacle.

Foreign direct investment allows companies to maintain control over their overseas operations and strategies, unlike licensing or franchising.

Companies can benefit from lower labor costs, cheaper raw materials, and other advantages of operating in a foreign location.

Companies choose FDI when the market is large enough to justify significant investment, considering potential growth and demand.

Foreign direct investment can help companies overcome restrictions or import limits on certain goods and products by manufacturing directly in the foreign country.

Companies in many industries require a joint venture with a local partner to enter certain markets. This meets the legal requirements for foreign ownership restrictions.

This mode of entry is often chosen when companies want to leverage the expertise and knowledge of a local partner to navigate the complexities of a foreign market.