Natural resources are unevenly distributed in different parts of the world. This raises the need for these resources to be transported from the areas they are found in ,to where they are not found and are required . Also, some businesses may choose to relocate to where the resources are found to reduce the cost of operations.
When a business has been in one locality/region for too long, the domestic market gets saturated and the business may be forced to look for new markets to increase the demand of their goods and hence raise the profits. Businesses may also go global in search of cheap labour or to counter competition. This exchange/transaction of goods, services and resources between different regions or countries constitutes international business. International business has been on the rise in the recent past but it is faced by several barriers.
1. Import duties
These are taxes that federal governments impose on imports with the aim of raising government revenue and to limit the amount of imports hence protect local industries. Import duties raise the prices of the imported goods and hence lowers the demand for these goods. Here is how import duties can affect international trade.
2. Quotas and embargoes
Quotas refers to the limit of the amount of certain foods to be imported in a country. They are aimed at limiting the amount of imports here protecting the local industries. Quotas lower the supply of the targeted goods, this increases the price of these goods and consequently lowers the demand. Embargo refers to the complete ban on specific imports and exports. Quotas and embargoes discourage the movement of goods across boarders and hence is a barrier to international business.
3. Cultural, social and language barriers
The values, beliefs and concepts of people vary from place to place. This affects the flow of goods and services in that a certain highly demanded product in one place may not appeal to people in another place. The religion and education status of the people also determines the type of products and services they need and hence limits international business. Language barrier is also an hindrance to international business since both the buyer and seller need to understand each other properly and come to an agreement concerning the goods or services.
4. Political environment
The political environment of a country is a great determinant of the level of international business with other countries. Political unrest usually leads to loss of property and hence businesses are reluctant to move into politically volatile countries. The political and diplomatic relations between different countries determines how they trade with each other and the policies passed to promote or discourage this trade.
Various businesses and companies are going international. International business is flourishing now than never before. With technological advancements and relaxed trade barriers by most countries, international business can only grow bigger.