Though international business are most important for a country’s economy but there are some advantages and disadvantages of international business which are described in detail below:
Following are the advantages of international business:
- Earning valuable foreign currency: A country is able to earn valuable foreign currency by exporting its goods to other countries.
- Division of labor: International business leads to specialization in the production of goods. Thus, quality goods for which it has maximum advantage.
- Optimum utilization of available resources: International business reduces waste of national resources. It helps each country to make optimum use of its natural resources. Every country produces those goods for which it has maximum advantage.
- Increase in the standard of living of people: Sale of surplus production of one country to another country leads to increase in the incomes and savings of the people of the former country. This raises the standard of living of the people of the exporting country.
- Benefits to consumers: Consumers are also benefited from international business. A variety of goods of better quality is available to them at reasonable prices. Hence, consumers of importing countries are benefited as they have a good scope of choice of products.
- Encouragement to industrialization: Exchange of technological know-how enables underdeveloped and developing countries to establish new industries with the assistance of foreign aid. Thus, international business helps in the development of the industry.
- International peace and harmony: International business removes rivalry between different countries and promotes international peace and harmony. It creates dependence on each other, improves mutual confidence and good faith.
- Cultural development: International business fosters exchange of culture and ideas between countries having greater diversities. A better way of life, dress, food, etc. can be adopted from other countries.
- Economies of large-scale production: International business leads to production on a large scale because of extensive demand. All the countries of the world can obtain the advantages of large-scale production.
- Stability in prices of products: International business irons out wide fluctuations in the prices of products. It leads to stabilization of prices of products throughout the world.
- Widening the market for products: International business widens the market for products all over the world. With the increase in the scale of operation, the profit of the business increases.
- Advantageous in emergencies: International business enables us to face emergencies. In the case of natural calamity, goods can be imported to meet necessaries.
- Creating employment opportunities: International business boosts employment opportunities in an export-oriented market. It raises the standard of living of the countries dealing international business.
- Increase in Government revenue: The Government imposes import and export duties for this trade. Thus, Government is able to earn a great deal of revenue from international business.
- Other advantages:
- Effective business education
- Improvement in production systems.
- Elimination of monopolies, etc.
A flowchart given below will give at a glance idea about advantages of international business.
Disadvantages of international business are as follows:
- Adverse effects on the economy: One country affects the economy of another country through international business. Moreover, large-scale exports discourage the industrial development of importing country. Consequently, the economy of the importing country suffers.
- Competition with developed countries: Developing countries are unable to compete with developed countries. It hampers the growth and development of developing countries unless the international business is controlled.
- Rivalry among nations: Intense competition and eagerness to export more commodities may lead rivalry among nations. As a consequence, international peace may be hampered.
- Colonization: Sometimes, the importing country is reduced to a colony due to economic and political dependence and industrial backwardness.
- Exploitation: International business leads to exploitation of developing countries the developed countries. The prosperous and dominant countries regulate the economy poor nations.
- Legal problems: Varied laws regulations and customs formalities followed different countries, have a direct b earring on their export and import trade.
- Publicity of undesirable fashions: Cultural values and heritages are not identical in all the countries. There are many aspects, which may not be suitable for our atmosphere, culture, tradition, etc. This indecency is often found to be created in the name of cultural exchange.
- Language problems: Different languages in different countries create barriers to establish trade relations between various countries.
- Dumping policy: Developed countries often sell their products to developing countries below the cost of production. As a result, industries in developing countries of the close down.
- Complicated technical procedure: International business in highly technical and it has the complicated procedure. It involves various uses of important documents. It required expert services to cope with complicated procedures at different stages.
- Shortage of goods in the exporting country: Sometimes, traders prefer to sell their goods to other countries instead of in their own country in order to earn more profits. This results in the shortage of goods within the home country.
- Adverse effects on home industry: International business poses a threat to the survival of infant and nascent industries. Due to foreign competition and unrestricted imports upcoming industries in the home country may collapse.
Related Content of International Business:
- Reasons for International Business
- Features of International Business
- Forms of International Business
- Basic Concept of International Business
- Barriers to International Trade
- Positive and Negative Effects of Globalization on Industries