Paper Example. Small Business in International Setting

International business is the production and distribution of goods and services beyond a country's borders. Globalization has played a significant role in the development of international business where there are interdependence and integration of various economies of different countries hence creating an opportunity for international trade. International trade is prevalent mainly in developed countries where their economies have grown as a result of the same. In such economies, there are both small- and large-scale businesses.

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International business grew and developed as a result of different factors. Such include a reduction in the trade barriers. Here, some countries reached agreements where they could exchange goods and services among themselves without any form of restrictions or government-imposed trade barriers like tariffs, subsidies, or quotas. There was the saturation of the domestic markets where the surplus could be used in other countries.

International business was also boosted by the development and growth of communication and technology. Here, there was increased mobility of goods and services together with labor. There were also opportunities in other countries that are not found in other countries. Some of the possibilities include a large population of people and the availability of demand or supply of certain goods or services. Major world marketplaces in the world are the most developed countries such as China, the United States of America, Japan, and the European nations.

Other developing countries, such as those in Africa, also form marketplaces since they have people that demand goods and services. Some of the major trade agreements and alliances include the North American Free Trade Agreement (NAFTA). There is also the Trans-Pacific Partnership (TPP), which is made up of the United States and eleven other Asian countries. Additionally, there is also the Transatlantic Trade and Investment Partnership (TTIP), which is made up of the European Union and the American states.

Differences

Import-export balance is also referred to as trade balance. It is the value of all the goods and services that are exported out of the country less than the value of the products and services that are imported into the country. It is also the official term for net exports, which makes up the balance of payments. Import-export balance can either be favorable where there is a surplus, or rather the exports exceed the imports. On the other hand, it can also be unfavorable where there is a deficit or rather the imports exceed exports. The balance is measured in the customs office since all goods, and many services are verified in the offices.

The exchange rate is also known as foreign exchange. It refers to the value of the currency belonging to a particular nation versus the value of the currency of another country. The foreign exchange market determines floating exchange rates. They rise and fall at any moment due to the changes in the foreign exchange markets. Restricted currencies have their values set by the government and do not change relative to the forex markets. Forex determines the response of business to the international environment in the sense that they determine the value of the imports and exports hence the balance of payment.

Foreign competition, on the other hand, is the one that arises in the international trade where it is either between two foreign business in a different country like Samsung and Apple in African countries or between the local and domestic companies. In most cases, competition arises where the goods and services are similar or substitute, targeting a common market. Foreign competitions determine the standards and business ethics that are set by the trade alliances and the possible barriers to maintain healthy competition in these markets.

Barriers to International Trade

As much as international trade is encouraged and continues to grow among partner countries, some restrictions have been set by the governing bodies for various reasons such as improving the standards and ethics of business activities, protecting infant industries, taking care of domestic employment, national security, and controlling the growth of the local economies. Some of the international barriers include;

• Tariffs- these are the fees that are added to the prices of the products and services that have been imported in a bid to decrease the demand of the product or services in the domestic market and increase demand for the local products.
• Import quotas- this is the restriction to the quantity of the products or services that are imported in a particular country. It is to ensure that each state at least gets a share of the market similar to the domestic businesses.
• Taxes-is the money remitted to the government as a fee for operating business in the country. For foreign companies, the taxes can be raised and lowered for the local businesses in a bid to protect them and enable small businesses to grow.
• Embargo-this is a total ban on importing and exporting any product or service from a country. Similarly, it is a defense mechanism for the local industries. A good example is a ban imposed on high-tech products and supercomputers by the United States.

References

Kavas, F. (2017, February 22). Trade Barriers and Applications to International Trade. Retrieved from https://www.morethanshipping.com/trade-barriers-and-applications-to-international-trade/What is International Business? From Carpenter, M., and Dunung, Sanjyot(2012) Challenges and Opportunities in International Business, Chapter One, pp. 18-47 and Chapter 10-11, pp. 506-609

Small Businesses Key Players in International Trade from Delehanty, P. (2015) Small Business Administration (SBA), Office of Advocacy, Office of Economic Research,