Explain the benefits of international business both to nations and firms. (2024)

Benefits to Nations :a Earning of foreign exchange.d More efficient use of resources.c Improving growth prospects and employment potentials.d Increased standard of living.Benefits to firms :a Prospects for higher profits.b Increased capacity utilisation.c Prospects for growth.d Improved business vision.e Wayout to intense competition in domestic market.Detailed Answer :Benefits to Nations :a Earning of foreign exchange : International business helps a country to earn foreign exchange which it can later use for meeting its imports of capital goods technology petroleum products and fertilizers pharmaceutical products and a host of other consumer products which otherwise might not be available domestically.b More efficient use of resources : As stated earlier international business operates on a simple principle Produce what your country can produce more efficiently and trade the surplus production generated with other countries to procure what they can produce more efficiently. When countries trade on this principle they end up producing much more than what they can when each of them attempts to produce all the goods and services on its own. If such as enhanced pool of goods and services is distributed equally amongst nations it benefits all the trading nations.c Improving growth prospects and employment potentials : Producing solely for the purpose of domestic consumption severely restricts a countrys prospects for growth and employment. Many developing countries could not execute their plans to produce on a large scale and thus create employment of people because their limited domestic market to absorb all the extra production. The strategy export and flourish will help them not only in improving their growth prospects but also to create opportunities for employment of people living in these countries.d Increased standard of living : In the absence of international trade of goods and services it would not have been possible for the world community to consume goods and services produced in other countries that the people in these countries are able to consume and enjoy a higher standard of living.Benefits to Firms :a Increased capacity utilization : Generally the firms whose products have good demand in the domestic market set up high production capacities for their products by planning for overseas expansion too. With the help of orders from foreign customers they can utilize their surplus production capacities and hence earn higher profits.b Prospects for higher profits : As compared to domestic business international business can be more profitable. Business firms can earn higher profits by selling their products in countries where prices are high particularly when the domestic prices are not satisfactory.c Prospects for growth : Business firms with saturated demand for their products in the domestic market can improve their prospects of growth by entering into foreign markets. This is the prime reason which has prompted many of the multinational companies from the developed countries to tap markets of developing countries.d Improved business vision : Business policies and strategic management have resulted in the growth of international business of many companies. The need to grow become competitive diversify and gain strategic advantages has created an international vision.e Way out to intense competition in domestic market : The only was to achieve significant growth in intense competition in domestic market is internationalization. Hence international business acts as a catalyst of growth for business firms facing tough competition in the domestic market.