how does international business differ from domestic business

How Does International Business Differ From Domestic Business

The difference between domestic business and international business is obvious. Business is an activity of making money by producing or buying and selling products or services. Domestic business is business activities that take place within a geographical area or country, that is called domestic business. International business is exactly the opposite.

The business that occurs beyond the national boundaries that are called international business. Normally, international business is more complex than domestic business.

Today I will show you how does international business differ from domestic business. So read till the end to get a clear idea between two.

Comparison Table Between Domestic and International Business

BasisDomestic business International business
DefinitionDomestic business can be defined as the business activity that happens within a national boundariesInternational business can be defined as the business activity that happens beyond or across the national boundaries
AreaHome countryAround the world
RiskLessMore
CurrencySingle currencyMultiple currencies
Product qualityLowHigh
CompetitionLowHigh
InvestmentLowVast amount
Rules and restrictionsLessHuge
Market entryEasyDifficult
Market researchEasyComplex
Mobility of factors of productionFreeNot free
Supply chainComparatively easyVery complex
ManagementComparatively easyDifficult
Nature of customerHomogeneousHeterogeneous
Form of productsBoth (tangible or intangible)Both (tangible or intangible)
Cost advantageNoYes
EnvironmentLinearVersatile
Level of progressSameDifferent
PricingSame priceDifferent price
PromotionDomestic marketing and advertisingMarketing policy varies by country to country
Domestic business can succeed with low skillNeed a high-level of employee skill. Multilingual, multicultural and multi-strategic skill
CultureUniform cultureVaries by country to country
TechnologyAverage technologyCutting edge technology
Political riskRisk is lowHigh political risks. Because if a country changed by revolutionary force, then the business entity can be confiscated
CommunicationSingle language and easy to communicateMulti-language. Have to know the different language of different countries
Size of businessSmallLarge

Definition of International business

It refers to the transactions of goods, services, technology, or knowledge across the national boundaries. It is a trend now. Every business firm, irrespective of its size, small or big want to go international. With the rise of information and technology, it is now much easier to enter the international market.

The companies that are engaged in international business are known as multinational companies (MNC) or transnational companies or global companies. Although, there is a difference between multinational, transnational, and global companies.

For example, A software firm can easily export software across the national border. Even it does not need to physically move to another country. As software is a digital product, it can run ads campaign through google ads, if any customer wants to buy it, then he/she can just pay through the digital gateway and instantly receive the product. Very easy approach for digital entrepreneurs.

Factors that help toward international business:

  • Technology is rapidly expanding, especially, in the field of transportations and communications
  • Governments are removing restrictions for businesses.
  • Customers are interested in international companies.
  • As the world becomes a global village, so going globally is a trend
  • Political relations between countries are improving
  • Treaty and agreements are increasing.

 

Definition of domestic business

Domestic business is as opposed to international business. International business is operated in several countries but domestic business is operated in its home country only. Normally, any business firm born as domestic business. Very few businesses are made to operate internationally at the beginning.

Domestic business refers to the trade that is happened within a specific country. For starting a domestic business, one does not need a huge investment. One can start a business with a trade license.

Domestic business is sometimes called home trade or internal business. As sellers/producers and customers reside in the same country in domestic business, so trade agreements are based on the same laws.

The advantages of domestic business include low transaction costs, low investment, easy market entry, low transportation cost, encourage small and medium enterprises, etc.

 

Key Difference Between Domestic and International Business

  1. Domestic business is limited to a single country or geographical location, where international business is worldwide and not limited to any specific location.
  2. Domestic business is generally operated by a single currency. Because a country generally has only a currency. On the other side, international business needs multi-currency and exchange of currencies. Because different countries hold different currencies.
  3. The product quality and standard of a domestic company are low. Because a domestic company does not need to pass a high-quality test but to enter the international market a company must have high quality and standards. Because international companies have to pass the different product quality tests of different countries.
  4. To start a domestic business, a low amount of investment is enough but international businesses need vast investment. Because the arrangement is huge here.
  5. Market competition for a local company is low in comparison to an international company
  6. There are very few regulations in the case of domestic business but huge rules and restrictions are available in the international business. Because each country has a set of restrictions and regulations.
  7. Movement of factors of production like goods, manpower, machinery, etc is free for a domestic business but the mobility of factors of production is not free. It has restrictions and needs to pay taxes.
  8. Market research for a local business is comparatively easy. Because language, culture, history, economic conditions are easy to understand but it is not easy in case of international business.
  9. Supply chain, logistics, and management of the domestic business are comparatively easy and simple in contrast to international business.
  10. Domestic businesses do not have a comparative advantage in production cost but the international business has this opportunity to use local cheap resources, experiences, and expertise.
  11. As the environment for domestic business is the same where it operates its business, so the level of development of the business is the same. On the other hand, the level of development is not the same in international business. Because it faces unique challenges in each country.
  12. The price of the product is the same in domestic business but the price varies from country to country in case of international business because each country has unique economic conditions and purchasing power parity which is considered at the time of pricing.
  13. Promotional activities of the domestic business are the same in the case of domestic business but the marketing of international business differs from country to country and it needs market research.
  14. Human resources of a domestic company do not need very skilled people all the time but international businesses look for highly skilled and well-trained employees.
  15. As competition is low in domestic business, so the use of cutting edge technology is not necessary but international businesses must be technologically strong to compete in the market.
  16. Political risk for domestic business is low and it is so risky for international business. Because political power change can damage the business opportunity.

 

Wrapping up

Although domestic business is easy to start due to capital investment and other things, the international business is trendy and popular worldwide. Every domestic business owner dream to establish his/her business into international business. I hope now you are clear how does international business differ from domestic business

 

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