International business and domestic business
How does international business differ from a domestic business?
Trade is the exchange of services and goods for money, which can be done within a country or beyond the country’s Borders. A business whose transactions are conducted within the geographical boundaries of the home country is known as domestic business. International business, on the other handle, is not limited to any country, and its economic transactions can be made with several countries across the world. There are several key areas that the two differ; these include:
Domestic business is limited in the area of operation, which is the home country. On the other hand, international business is not limited to any country, and hence, their area of operation is often vast, serving many countries simultaneously.
Secondly, the standard of good and services offered by domestic companies are relatively low. Conversely, international companies invest in providing quality goods and services to their clients, and therefore, the standards are quite high and set according to the global standards.
The currency used by the domestic businesses is of the country they are based in. On the other hand, international businesses deal with multiple currencies.
In addition to that, domestic companies need to comparatively less capital to set up. International businesses, however, will need high capital investment to get running.
The restrictions put on domestic companies are fewer compared to the ones that international businesses have to abide by. This is because the domestic ones follow the rules and law taxation of one country, unlike the international businesses which are subject to law taxation, rules, quotas, and tariffs of several countries that they operate in. Therefore, they face many restrictions, which are a big barrier to them.
Moreover, the production factors are mobile for domestic business, while for international businesses, their mobility is restricted.
In conclusion, managing and running an international business is more difficult than running a domestic business. Due to the above-mentioned differences, among others, such as political, socio-cultural, and environmental differences between nations, expanding a business globally is often a laborious and expensive task.
Why it is important for business students to learn about international business
The world is changing, and people are interacting with each other. With the development of technology and diversity, it would be disadvantageous not to have a global mindset. To thrive in the world and especially in business, the best chance is to think with this international mindset, which is the reason why students should learn the international business. In addition to that, it is an option for students, current and upcoming, to build a career in the international business world. Therefore, students will need to be taught and develop this mind in order to be successful in business. Learning about international business will show them how globalization has increased the connectedness of markets, people, information, and businesses across the countries. Moreover, modern-day companies are more likely to hire students who have this global scale knowledge. These jobs include business advisers, human resource officers, business analysts marketing executive, purchasing managers, among others, at the global level. Therefore, business students have more to gain when they learn about international business.
Similarities and differences between the four systems of law that serve as the basis for the world’s legal system
There are several legal systems used in the world today. They include the common law, civil law, religious law, and customary law. Each country has its law of preference and others put weight on the judicial decisions compared to others. all the system differs significantly in that; civil law originated from Roman legal traditions and are frequently updated and comprehensive. In jurisdictions that use civil laws, such as Germany and France, case laws are often secondary sources. Common law relies mainly on the precedent judicial decisions made. They are often adversarial, and the judge is in charge of moderating the opposing parties. This is mainly used in the United States. Customary law is based on the behavior of people that are accepted as the legal requirements within a country. They are dispensed and written by the elders and are generational. These are practices in countries that combine common and civil law. The religious legal system is where the law is informed by traditions or texts within a religious tradition. This is mainly used in Islamic nations. The main similarity between the four systems of law is that they are all used to control human behavior, and breaking them has legal consequences.
How do domestic laws affect international business?
Despite globalization, businesses must abide by the local regulations and rules of the countries where they are based. The federal governments could enforce laws and regulations to fit their legal and political philosophies until recently. This could either be through taxes, tariffs, or quotas. This way, they could make the establishment of international businesses, either hard or essay. The host countries, however, still can regulate international companies into abiding by their laws. For instance, a change in taxation policies will directly affect the businesses because it will directly affect the amount of money that the businesses earn. The laws can also affect how the employers are going to relate to the employees and vice-versa. For example, the minimum wage, hiring mechanism, and treatment of employees are regulated by the government. This may affect the productivity of the business as well as profitability. Failure to follow the domestic rules may lead to the company being banned, sued, or unprofitable.
Five cultural dimensions according to Geert Hofstede
Culture is the shared and learned way of doing things, and acting amongst society members or a group of people. The Hostedes’ framework offers an approach for understanding how the differences in values across the national cultures may influence how humans behave at the workplace. The dimensions include:
Power distance is the willingness to accept power and status differences among its members. Cultures with low powers expect that power is equally distributed to the less powerful. People in the high-power distance cultures accept and expect that there are steep hierarchies and inequalities.
Avoidance of uncertainty refers to a lack of tolerance for ambiguity and the need for formal policies and rules. This measures the extent to which people feel threatened by ambiguous situations.
Femininity vs. masculinity is the tendency to be stereotypical about feminine and masculine traits. This translates to the emphasis on gender values as opposed to the humanistic and personal goals.
Collectivism v. individualism, whereby people are expected to represent themselves as individuals seeking to accomplish personal needs and goals in individualistic cultures. On the other hand, collectivistic cultures show a greater emphasis on the group welfares which individuals belong.
Short vs. long term orientation whereby the long-term orientation accepts that results in businesses may take longer to achieve and employs wish for a long-term relationship with a form. The short-term orientation assets that the achievements and results are set and can be achieved within a pre-determined timeframe and that the employees can change their employers anytime.
How the differences can trigger misunderstandings in international businesses
Culture of multifaceted and complex and therefore, cannot be used as a change control in a business. international businesses venture into different markets with different cultures. This means that they have to learn and adopt the culture of that market since bringing on their own may lead to misunderstandings, which may affect the purchase of their services or products.