NCERT Textbook - International Business | Business Studies (BST) Class 11 - Commerce PDF Download

 Page 1


Chapter 11
Internat Ional Bus Iness LEARNING OBJECTIVES
After studying this chapter, you should be able to:
•	
State the meaning of International Business
•	
Distinguish between Internal and International Business
•	
Discuss the scope of International Business 
•	
Enumerate 	the 	benefits 	 of 	 International 	Business
•	
Discuss the documents required for import and export transactions
•	
Identify 	 the	incentives 	 and 	schemes 	 available	 for	international	firms
•	
Discuss the role of different organisations for the promotion of 
International Business
•	
List the major international institutions and agreements at the global 
level for the promotion of international trade and development.
Chapter 11.indd   246 9/2/2022   2:24:10 PM
2024-25
Page 2


Chapter 11
Internat Ional Bus Iness LEARNING OBJECTIVES
After studying this chapter, you should be able to:
•	
State the meaning of International Business
•	
Distinguish between Internal and International Business
•	
Discuss the scope of International Business 
•	
Enumerate 	the 	benefits 	 of 	 International 	Business
•	
Discuss the documents required for import and export transactions
•	
Identify 	 the	incentives 	 and 	schemes 	 available	 for	international	firms
•	
Discuss the role of different organisations for the promotion of 
International Business
•	
List the major international institutions and agreements at the global 
level for the promotion of international trade and development.
Chapter 11.indd   246 9/2/2022   2:24:10 PM
2024-25
247 INTERNATIONAL BUSINESS
11.1 Introduct Ion Countries all over the world are 
undergoing a fundamental shift in 
the way they produce and market 
various products and services. The 
national economies which so far were 
pursuing the goal of self-reliance are 
now becoming increasingly dependent 
upon others for procuring as well as 
supplying various kinds of goods and 
services. Due to increased cross border 
trade and investments, countries are 
no more isolated.
The prime reason behind this 
radical change is the development 
of communication, technology, 
infrastructure etc. Emergence of 
newer modes of communication and 
development of faster and more 
efficient 	 means 	 of 	 transportation	 have 	
brought nations closer to one another. 
Countries that were cut-off from one 
another due to geographical distances 
and socio-economic differences have 
now started increasingly interacting 
with others. World Trade Organisation 
(WTO) and reforms carried out by the 
Mr. Sudhir Manchanda is a small manufacturer of automobile components. His 
factory is located in Gurgaon and employs about 55 workers with an investment 
of Rs. 9.2 million in plant and machinery. Due to recession in the domestic 
market, he foresees prospects of his sales going up in the next few years in the 
domestic market. He is exploring the possibility of going international. Some 
of his competitors are already in export business. A casual talk with one of his 
close friends in the tyre business reveals that there is a substantial market for 
automobile components and accessories in South-East Asia and Middle East. 
But his friend also tells him, “Doing business internationally is not the same as 
carrying out business within the home country. International business is more 
complex as one has to operate under market conditions that are different from 
those that one faces in domestic business”. Mr. Manchanda is, moreover, not sure 
as to how he should go about setting up international business. Should he himself 
identify and contact some overseas customers and start exporting directly to them 
or else route his products through export houses which specialise in exporting 
products made by others? 
Mr. Manchanda’s son who has just returned after an MBA in USA suggests that 
they should set up a fully owned factory in Bangkok for supplying to customers 
in South-East Asia and Middle East. Setting up a manufacturing plant there will 
help them save costs of transporting goods from India. This would also help them 
coming 	 closer 	 to 	 the	 overseas	 customers.	 Mr.	 Manchand a	 is	 in	 a 	 fix 	 as 	 to 	 what	 to 	
do.	 In	 the 	 face	 of 	 difficulties 	 involved	 in 	 overseas	 ventures	 as	 pointed	 out 	 by 	 his 	
friend, he is wondering about the desirability of entering into global business. He 
is also not sure as to what the different ways of entering into international market 
are and which one will best suit his purpose.
Chapter 11.indd   247 9/2/2022   2:24:10 PM
2024-25
Page 3


Chapter 11
Internat Ional Bus Iness LEARNING OBJECTIVES
After studying this chapter, you should be able to:
•	
State the meaning of International Business
•	
Distinguish between Internal and International Business
•	
Discuss the scope of International Business 
•	
Enumerate 	the 	benefits 	 of 	 International 	Business
•	
Discuss the documents required for import and export transactions
•	
Identify 	 the	incentives 	 and 	schemes 	 available	 for	international	firms
•	
Discuss the role of different organisations for the promotion of 
International Business
•	
List the major international institutions and agreements at the global 
level for the promotion of international trade and development.
Chapter 11.indd   246 9/2/2022   2:24:10 PM
2024-25
247 INTERNATIONAL BUSINESS
11.1 Introduct Ion Countries all over the world are 
undergoing a fundamental shift in 
the way they produce and market 
various products and services. The 
national economies which so far were 
pursuing the goal of self-reliance are 
now becoming increasingly dependent 
upon others for procuring as well as 
supplying various kinds of goods and 
services. Due to increased cross border 
trade and investments, countries are 
no more isolated.
The prime reason behind this 
radical change is the development 
of communication, technology, 
infrastructure etc. Emergence of 
newer modes of communication and 
development of faster and more 
efficient 	 means 	 of 	 transportation	 have 	
brought nations closer to one another. 
Countries that were cut-off from one 
another due to geographical distances 
and socio-economic differences have 
now started increasingly interacting 
with others. World Trade Organisation 
(WTO) and reforms carried out by the 
Mr. Sudhir Manchanda is a small manufacturer of automobile components. His 
factory is located in Gurgaon and employs about 55 workers with an investment 
of Rs. 9.2 million in plant and machinery. Due to recession in the domestic 
market, he foresees prospects of his sales going up in the next few years in the 
domestic market. He is exploring the possibility of going international. Some 
of his competitors are already in export business. A casual talk with one of his 
close friends in the tyre business reveals that there is a substantial market for 
automobile components and accessories in South-East Asia and Middle East. 
But his friend also tells him, “Doing business internationally is not the same as 
carrying out business within the home country. International business is more 
complex as one has to operate under market conditions that are different from 
those that one faces in domestic business”. Mr. Manchanda is, moreover, not sure 
as to how he should go about setting up international business. Should he himself 
identify and contact some overseas customers and start exporting directly to them 
or else route his products through export houses which specialise in exporting 
products made by others? 
Mr. Manchanda’s son who has just returned after an MBA in USA suggests that 
they should set up a fully owned factory in Bangkok for supplying to customers 
in South-East Asia and Middle East. Setting up a manufacturing plant there will 
help them save costs of transporting goods from India. This would also help them 
coming 	 closer 	 to 	 the	 overseas	 customers.	 Mr.	 Manchand a	 is	 in	 a 	 fix 	 as 	 to 	 what	 to 	
do.	 In	 the 	 face	 of 	 difficulties 	 involved	 in 	 overseas	 ventures	 as	 pointed	 out 	 by 	 his 	
friend, he is wondering about the desirability of entering into global business. He 
is also not sure as to what the different ways of entering into international market 
are and which one will best suit his purpose.
Chapter 11.indd   247 9/2/2022   2:24:10 PM
2024-25
248 BUSINESS  STUDIES
governments of different countries 
have also been a major contributory 
factor to the increased interactions 
and business relations amongst the 
nations.
We are today living in a world 
where the obstacles to cross-border 
movement of goods and persons have 
substantially come down. The national 
economies are increasingly becoming 
borderless and getting integrated into 
the world economy.  Little wonder 
that the world has today come to be 
known as a ‘global village’. Business in 
the present day is no longer restricted 
to the boundaries of the domestic 
country. More and more firms are 
making forays into international 
business which presents them with 
numerous opportunities for growth 
and	increased 	 profits. 	
India has been trading with other 
countries for a long time. But it has 
of late considerably speeded up its 
process of integrating with the world 
economy and increasing its foreign 
trade and investments (see Box A: 
India Embarks on the Path to 
Globalisation). 
11.1.1 Meaning of International 
Business
Business transaction taking place 
within the geographical boundaries 
of a nation is known as domestic or 
national business. It is also referred 
to as internal business or home trade. 
Manufacturing and trade beyond the 
boundaries of one’s own country is 
known as international business. 
International or external business can, 
Box A
India Embarks on the Path to Globalisation
International business has entered into a new era of reforms. India too did not 
remain cut-off from these developments. India was under a severe debt trap and was 
facing crippling balance of payment crisis. In 1991, it approached the International 
Monetary 	 Fund	 (IMF) 	 for	 raising 	 funds	 to	 tide 	 over	 its 	 balance	 of	 payment 	 deficits. 	
IMF agreed to lend money to India subject to the condition that India would undergo 
structural changes to be able to ensure repayment of borrowed funds. 
India had no alternative but to agree to the proposal. It was the very conditions 
imposed by IMF which more or less forced India to liberalise its economic  
policies. Since then a fairly large amount of liberalisation at the economic front 
has taken place. 
Though the process of reforms has somewhat slowed down, India is very much 
on the path to globalisation and integrating with the world economy. While, on 
the one hand, many multinational corporations (MNCs) have ventured into Indian 
market for selling their products and services; many Indian companies too have 
stepped out of the country to market their products and services to consumers in 
foreign countries.
Chapter 11.indd   248 9/2/2022   2:24:10 PM
2024-25
Page 4


Chapter 11
Internat Ional Bus Iness LEARNING OBJECTIVES
After studying this chapter, you should be able to:
•	
State the meaning of International Business
•	
Distinguish between Internal and International Business
•	
Discuss the scope of International Business 
•	
Enumerate 	the 	benefits 	 of 	 International 	Business
•	
Discuss the documents required for import and export transactions
•	
Identify 	 the	incentives 	 and 	schemes 	 available	 for	international	firms
•	
Discuss the role of different organisations for the promotion of 
International Business
•	
List the major international institutions and agreements at the global 
level for the promotion of international trade and development.
Chapter 11.indd   246 9/2/2022   2:24:10 PM
2024-25
247 INTERNATIONAL BUSINESS
11.1 Introduct Ion Countries all over the world are 
undergoing a fundamental shift in 
the way they produce and market 
various products and services. The 
national economies which so far were 
pursuing the goal of self-reliance are 
now becoming increasingly dependent 
upon others for procuring as well as 
supplying various kinds of goods and 
services. Due to increased cross border 
trade and investments, countries are 
no more isolated.
The prime reason behind this 
radical change is the development 
of communication, technology, 
infrastructure etc. Emergence of 
newer modes of communication and 
development of faster and more 
efficient 	 means 	 of 	 transportation	 have 	
brought nations closer to one another. 
Countries that were cut-off from one 
another due to geographical distances 
and socio-economic differences have 
now started increasingly interacting 
with others. World Trade Organisation 
(WTO) and reforms carried out by the 
Mr. Sudhir Manchanda is a small manufacturer of automobile components. His 
factory is located in Gurgaon and employs about 55 workers with an investment 
of Rs. 9.2 million in plant and machinery. Due to recession in the domestic 
market, he foresees prospects of his sales going up in the next few years in the 
domestic market. He is exploring the possibility of going international. Some 
of his competitors are already in export business. A casual talk with one of his 
close friends in the tyre business reveals that there is a substantial market for 
automobile components and accessories in South-East Asia and Middle East. 
But his friend also tells him, “Doing business internationally is not the same as 
carrying out business within the home country. International business is more 
complex as one has to operate under market conditions that are different from 
those that one faces in domestic business”. Mr. Manchanda is, moreover, not sure 
as to how he should go about setting up international business. Should he himself 
identify and contact some overseas customers and start exporting directly to them 
or else route his products through export houses which specialise in exporting 
products made by others? 
Mr. Manchanda’s son who has just returned after an MBA in USA suggests that 
they should set up a fully owned factory in Bangkok for supplying to customers 
in South-East Asia and Middle East. Setting up a manufacturing plant there will 
help them save costs of transporting goods from India. This would also help them 
coming 	 closer 	 to 	 the	 overseas	 customers.	 Mr.	 Manchand a	 is	 in	 a 	 fix 	 as 	 to 	 what	 to 	
do.	 In	 the 	 face	 of 	 difficulties 	 involved	 in 	 overseas	 ventures	 as	 pointed	 out 	 by 	 his 	
friend, he is wondering about the desirability of entering into global business. He 
is also not sure as to what the different ways of entering into international market 
are and which one will best suit his purpose.
Chapter 11.indd   247 9/2/2022   2:24:10 PM
2024-25
248 BUSINESS  STUDIES
governments of different countries 
have also been a major contributory 
factor to the increased interactions 
and business relations amongst the 
nations.
We are today living in a world 
where the obstacles to cross-border 
movement of goods and persons have 
substantially come down. The national 
economies are increasingly becoming 
borderless and getting integrated into 
the world economy.  Little wonder 
that the world has today come to be 
known as a ‘global village’. Business in 
the present day is no longer restricted 
to the boundaries of the domestic 
country. More and more firms are 
making forays into international 
business which presents them with 
numerous opportunities for growth 
and	increased 	 profits. 	
India has been trading with other 
countries for a long time. But it has 
of late considerably speeded up its 
process of integrating with the world 
economy and increasing its foreign 
trade and investments (see Box A: 
India Embarks on the Path to 
Globalisation). 
11.1.1 Meaning of International 
Business
Business transaction taking place 
within the geographical boundaries 
of a nation is known as domestic or 
national business. It is also referred 
to as internal business or home trade. 
Manufacturing and trade beyond the 
boundaries of one’s own country is 
known as international business. 
International or external business can, 
Box A
India Embarks on the Path to Globalisation
International business has entered into a new era of reforms. India too did not 
remain cut-off from these developments. India was under a severe debt trap and was 
facing crippling balance of payment crisis. In 1991, it approached the International 
Monetary 	 Fund	 (IMF) 	 for	 raising 	 funds	 to	 tide 	 over	 its 	 balance	 of	 payment 	 deficits. 	
IMF agreed to lend money to India subject to the condition that India would undergo 
structural changes to be able to ensure repayment of borrowed funds. 
India had no alternative but to agree to the proposal. It was the very conditions 
imposed by IMF which more or less forced India to liberalise its economic  
policies. Since then a fairly large amount of liberalisation at the economic front 
has taken place. 
Though the process of reforms has somewhat slowed down, India is very much 
on the path to globalisation and integrating with the world economy. While, on 
the one hand, many multinational corporations (MNCs) have ventured into Indian 
market for selling their products and services; many Indian companies too have 
stepped out of the country to market their products and services to consumers in 
foreign countries.
Chapter 11.indd   248 9/2/2022   2:24:10 PM
2024-25
249 INTERNATIONAL BUSINESS
therefore, 	 be 	 defined 	 as 	 those 	 business	
activities that take place across the 
national frontiers. It involves not 
only the international movements of 
goods and services, but also of capital, 
personnel, technology and intellectual 
property like patents, trademarks, 
know-how and copyrights.
It may be mentioned here that 
mostly people think of international 
business as international trade. But 
this is not true. No doubt international 
trade, comprising exports and imports 
of goods, has historically been an 
important component of international 
business. But of late, the scope 
of international business has 
substantially expanded. International 
trade in services such as international 
travel and tourism, transportation, 
communication, banking, ware-
housing, distribution and advertising 
has considerably grown. The other 
equally important developments are 
increased foreign investments and 
overseas production of goods and 
services. Companies have started 
increasingly making investments into 
foreign countries and undertaking 
production of goods and services in 
foreign countries to come closer to 
foreign customers and serve them 
more effectively at lower costs. All these 
activities form part of international 
business. To conclude, we can say 
that international business is a much 
broader term and is comprised of both 
the trade and production of goods and 
services across frontiers. 
11.1.2 Reason for International 
Business
The fundamental reason behind 
international business is that the 
countries cannot produce equally well 
or cheaply all that they need. This is 
because of the unequal distribution 
of natural resources among them 
or differences in their productivity 
levels. Availability of various factors 
of production such as labour, capital 
and raw materials that are required for 
producing different goods and services 
differ among nations. Moreover, labour 
productivity and production costs 
differ among nations due to various 
socio-economic, geographical and 
political reasons.
Due to these differences, it is not 
uncommon to find one particular 
country being in a better position to 
produce better quality products and/
or at lower costs than what other 
nations can do.  In other words, we 
can say that some countries are in an 
advantageous position in producing 
select goods and services which 
other countries cannot produce that 
effectively 	 an d 	 effi cien tly, 	 an d 	 vice-
versa. 	 As 	 a 	 result, 	 each 	 country 	 finds 	 it	
advantageous to produce those select 
goods and services that it can produce 
more effectively and efficiently at 
home, and procuring the rest through 
trade with other countries which the 
other countries can produce at lower 
costs.  This is precisely the reason as 
to why countries trade with others 
and engage in what is known as 
international business. 
Chapter 11.indd   249 9/2/2022   2:24:10 PM
2024-25
Page 5


Chapter 11
Internat Ional Bus Iness LEARNING OBJECTIVES
After studying this chapter, you should be able to:
•	
State the meaning of International Business
•	
Distinguish between Internal and International Business
•	
Discuss the scope of International Business 
•	
Enumerate 	the 	benefits 	 of 	 International 	Business
•	
Discuss the documents required for import and export transactions
•	
Identify 	 the	incentives 	 and 	schemes 	 available	 for	international	firms
•	
Discuss the role of different organisations for the promotion of 
International Business
•	
List the major international institutions and agreements at the global 
level for the promotion of international trade and development.
Chapter 11.indd   246 9/2/2022   2:24:10 PM
2024-25
247 INTERNATIONAL BUSINESS
11.1 Introduct Ion Countries all over the world are 
undergoing a fundamental shift in 
the way they produce and market 
various products and services. The 
national economies which so far were 
pursuing the goal of self-reliance are 
now becoming increasingly dependent 
upon others for procuring as well as 
supplying various kinds of goods and 
services. Due to increased cross border 
trade and investments, countries are 
no more isolated.
The prime reason behind this 
radical change is the development 
of communication, technology, 
infrastructure etc. Emergence of 
newer modes of communication and 
development of faster and more 
efficient 	 means 	 of 	 transportation	 have 	
brought nations closer to one another. 
Countries that were cut-off from one 
another due to geographical distances 
and socio-economic differences have 
now started increasingly interacting 
with others. World Trade Organisation 
(WTO) and reforms carried out by the 
Mr. Sudhir Manchanda is a small manufacturer of automobile components. His 
factory is located in Gurgaon and employs about 55 workers with an investment 
of Rs. 9.2 million in plant and machinery. Due to recession in the domestic 
market, he foresees prospects of his sales going up in the next few years in the 
domestic market. He is exploring the possibility of going international. Some 
of his competitors are already in export business. A casual talk with one of his 
close friends in the tyre business reveals that there is a substantial market for 
automobile components and accessories in South-East Asia and Middle East. 
But his friend also tells him, “Doing business internationally is not the same as 
carrying out business within the home country. International business is more 
complex as one has to operate under market conditions that are different from 
those that one faces in domestic business”. Mr. Manchanda is, moreover, not sure 
as to how he should go about setting up international business. Should he himself 
identify and contact some overseas customers and start exporting directly to them 
or else route his products through export houses which specialise in exporting 
products made by others? 
Mr. Manchanda’s son who has just returned after an MBA in USA suggests that 
they should set up a fully owned factory in Bangkok for supplying to customers 
in South-East Asia and Middle East. Setting up a manufacturing plant there will 
help them save costs of transporting goods from India. This would also help them 
coming 	 closer 	 to 	 the	 overseas	 customers.	 Mr.	 Manchand a	 is	 in	 a 	 fix 	 as 	 to 	 what	 to 	
do.	 In	 the 	 face	 of 	 difficulties 	 involved	 in 	 overseas	 ventures	 as	 pointed	 out 	 by 	 his 	
friend, he is wondering about the desirability of entering into global business. He 
is also not sure as to what the different ways of entering into international market 
are and which one will best suit his purpose.
Chapter 11.indd   247 9/2/2022   2:24:10 PM
2024-25
248 BUSINESS  STUDIES
governments of different countries 
have also been a major contributory 
factor to the increased interactions 
and business relations amongst the 
nations.
We are today living in a world 
where the obstacles to cross-border 
movement of goods and persons have 
substantially come down. The national 
economies are increasingly becoming 
borderless and getting integrated into 
the world economy.  Little wonder 
that the world has today come to be 
known as a ‘global village’. Business in 
the present day is no longer restricted 
to the boundaries of the domestic 
country. More and more firms are 
making forays into international 
business which presents them with 
numerous opportunities for growth 
and	increased 	 profits. 	
India has been trading with other 
countries for a long time. But it has 
of late considerably speeded up its 
process of integrating with the world 
economy and increasing its foreign 
trade and investments (see Box A: 
India Embarks on the Path to 
Globalisation). 
11.1.1 Meaning of International 
Business
Business transaction taking place 
within the geographical boundaries 
of a nation is known as domestic or 
national business. It is also referred 
to as internal business or home trade. 
Manufacturing and trade beyond the 
boundaries of one’s own country is 
known as international business. 
International or external business can, 
Box A
India Embarks on the Path to Globalisation
International business has entered into a new era of reforms. India too did not 
remain cut-off from these developments. India was under a severe debt trap and was 
facing crippling balance of payment crisis. In 1991, it approached the International 
Monetary 	 Fund	 (IMF) 	 for	 raising 	 funds	 to	 tide 	 over	 its 	 balance	 of	 payment 	 deficits. 	
IMF agreed to lend money to India subject to the condition that India would undergo 
structural changes to be able to ensure repayment of borrowed funds. 
India had no alternative but to agree to the proposal. It was the very conditions 
imposed by IMF which more or less forced India to liberalise its economic  
policies. Since then a fairly large amount of liberalisation at the economic front 
has taken place. 
Though the process of reforms has somewhat slowed down, India is very much 
on the path to globalisation and integrating with the world economy. While, on 
the one hand, many multinational corporations (MNCs) have ventured into Indian 
market for selling their products and services; many Indian companies too have 
stepped out of the country to market their products and services to consumers in 
foreign countries.
Chapter 11.indd   248 9/2/2022   2:24:10 PM
2024-25
249 INTERNATIONAL BUSINESS
therefore, 	 be 	 defined 	 as 	 those 	 business	
activities that take place across the 
national frontiers. It involves not 
only the international movements of 
goods and services, but also of capital, 
personnel, technology and intellectual 
property like patents, trademarks, 
know-how and copyrights.
It may be mentioned here that 
mostly people think of international 
business as international trade. But 
this is not true. No doubt international 
trade, comprising exports and imports 
of goods, has historically been an 
important component of international 
business. But of late, the scope 
of international business has 
substantially expanded. International 
trade in services such as international 
travel and tourism, transportation, 
communication, banking, ware-
housing, distribution and advertising 
has considerably grown. The other 
equally important developments are 
increased foreign investments and 
overseas production of goods and 
services. Companies have started 
increasingly making investments into 
foreign countries and undertaking 
production of goods and services in 
foreign countries to come closer to 
foreign customers and serve them 
more effectively at lower costs. All these 
activities form part of international 
business. To conclude, we can say 
that international business is a much 
broader term and is comprised of both 
the trade and production of goods and 
services across frontiers. 
11.1.2 Reason for International 
Business
The fundamental reason behind 
international business is that the 
countries cannot produce equally well 
or cheaply all that they need. This is 
because of the unequal distribution 
of natural resources among them 
or differences in their productivity 
levels. Availability of various factors 
of production such as labour, capital 
and raw materials that are required for 
producing different goods and services 
differ among nations. Moreover, labour 
productivity and production costs 
differ among nations due to various 
socio-economic, geographical and 
political reasons.
Due to these differences, it is not 
uncommon to find one particular 
country being in a better position to 
produce better quality products and/
or at lower costs than what other 
nations can do.  In other words, we 
can say that some countries are in an 
advantageous position in producing 
select goods and services which 
other countries cannot produce that 
effectively 	 an d 	 effi cien tly, 	 an d 	 vice-
versa. 	 As 	 a 	 result, 	 each 	 country 	 finds 	 it	
advantageous to produce those select 
goods and services that it can produce 
more effectively and efficiently at 
home, and procuring the rest through 
trade with other countries which the 
other countries can produce at lower 
costs.  This is precisely the reason as 
to why countries trade with others 
and engage in what is known as 
international business. 
Chapter 11.indd   249 9/2/2022   2:24:10 PM
2024-25
250 BUSINESS  STUDIES
The international business as it 
exists today is to a great extent the 
result of geographical specialisation as 
pointed out above. Fundamentally, it 
is for the same reason that domestic 
trade between two states or regions 
within a country takes place. Most 
states or regions within a country 
tend to specialise in the production 
of goods and services for which they 
are best suited. In India, for example, 
while West Bengal specialises in jute 
products; Mumbai and neighbouring 
areas in Maharashtra are more involved 
with the production of cotton textiles. 
The same principle of territorial 
division of labour is applicable at the 
international level too. Most developing 
countries which are labour abundant, 
for instance, specialise in producing 
and exporting garments. Since they 
lack capital and technology, they 
import textile machinery from the 
developed nations which the latter 
are in a position to produce more 
efficiently. 	
What is true for the nation is more 
or 	 l e s s 	 t r ue 	 f or 	 fir m s . 	 Fi r m s 	 t o o 	 e ng ag e	
in international business to import 
what is available at lower prices in 
other countries, and export goods to 
other countries where they can fetch 
better prices for their products. Besides 
price considerations, there are several 
other 	 benefits 	 which 	 nations 	 and 	 firms 	
derive from international business. In 
a 	 way, 	 these 	 other 	 benefits 	 too 	 provide 	
an 	 impetus 	 to 	 nations 	 and 	 firms 	 to	
engage in international business. We 
shall turn our attention to some of 
t he s e 	 be ne fit s 	 ac c r ui ng 	 t o 	 na t i o ns	 and 	
firms 	 from	 engaging 	 in 	 international	
business in a later section. 
11.1.3 International Business vs. 
Domestic Business
Conducting and managing international 
business operations is more complex 
than undertaking domestic business. 
Because of variations in political, social, 
cultural and economic environments 
across	 countries,	 business	 firms 	 find 	
it 	 difficu lt 	 to 	 extend 	 th eir 	 domestic	
business strategy to foreign markets. 
To be successful in the overseas 
markets, they need to adapt their 
product, pricing, promotion and 
distribution strategies and overall 
business plans to suit the specific 
requirements of the target foreign 
markets (see Box B on Firms need 
to be Cognisant of Environmental 
Differences). Key aspects in respect 
of which domestic and international 
businesses differ from each other are 
discussed below.
(i) Nationality of buyers and sellers: 
Nationality of the key participants (i.e., 
buyers and sellers) to the business 
deals differs between domestic and 
international businesses. In the case 
of domestic business, both the buyers 
and sellers are from the same country. 
This makes it easier for both the parties 
to understand each other and enter 
into business deals. But this is not the 
case with international business where 
buyers and sellers come from different 
countries. Because of differences 
in their languages, attitudes, social 
customs and business goals and 
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