Explain the nature and importance of …

nature of International Business.

(i) Exchange of Goods : It involves purchase of goods and sale of goods. Purchase of goods, from a foreign country is known as import trade and sale of goods to another country is known as ‘export trade’. But when the goods are imported from a country with the objective of exporting them to some other country is known as ‘entrepot trade’.

(ii) Involvement of two countries : International trade is carried on mostly in large quantities both on government to government account and on private account involving individuals and business houses.

(iii) Foreign Currency : Payment for imported goods is made in foreign currency. Similarly, payment for export of goods is received in foreign currency. In India conversion of money is regulated by RBI.

(iv) Restrictions : International business is not as free as international trade. In case of several items, license is also required for import or export many goods are subject to import and export duties.

(v) Lengthy procedure : Because of geographical distance and physical barriers, transport of goods between nations is a difficult and time consuming process. Moreover, permission of appropriate authorities for import and export of goods also take time.

(vi) Language Barrier : Each country has its own language. Because of differences in languages of two countries there may be problem in entering into import and export transactions.

(vii) Risks : International business is exposed to several risks such as fluctuations in the relative price of two currencies, perils of sea, fear of obsolescence etc.