At first all businesses enter in the domestic market; then they gradually expand their business shares to other nations in order to gain the use of market penetration. All the firms main aim is to become ahead of the competition by increasing the profit and sales. This fact applies for both domestic and international businesses. Within the business there are two types of studies which are shown as follows:
* Domestic Business
* International Business
I strongly believe that there is a huge difference between international and domestic business. This is because both studies focus on different aspects. I will be focusing on two key elements within the each area.
Aspects within the Study of Domestic Business
Domestic business is mainly focusing upon the sales figures therefore this is also known as the individual market. Domestic firms always try to develop their products than bringing new products into the market due to the affordability. Businesses within this particular sector targeted its products locally, deals with one currency, local customs and taxes. The main elements within the Domestic business are shown as follows:
Unemployment
All domestic businesses are concerned with the unemployment rate as a result of it represents a waste of scarce resources. Also increased number of unemployment would lead to a fall in the household disposable income. Therefore this can cause a shift in the demand curve for luxury products to the left which simply represents the poor economic performance. There is an inverse relationship between the unemployment rate and economic growth. This is because fast economic growth would lower the unemployment rate of a particular nation. Also output could be higher if most unemployed people are working within that nation. Below the diagram represents the claimant unemployment rate in the UK among the GDP growth from 1990 to 2006.
This diagram clearly represents the cyclical relationship between the unemployment rate and GDP growth. By looking at this we can say that there is a significant increase in the GDP growth when the unemployment level falls especially in the year of2004. However, I would say these figures are not accurate because there are unemployed people within the UK who didn t claim the allowance during this period of time.
Inflation
Inflation can be described as changes in the pricing strategy in an economy. Lower inflation rate would allow consumers to buy large quantity of goods for less price due to the lower pricing strategy. On the other hand, high inflation rates could bring adverse effects to the business. For example, increase in price would lead to value of what savings can buy falls. Also another problem would be if the price changes every month consumers often forgets what reasonable price for a product is when they come to purchase. Therefore this disrupts the consumer knowledge. In UK the highest inflation rate was in 24.1% in 1975 whereas some countries such as Brazil and Argentina experienced hyperinflation in 1980.
Aspects within the International Business
International business can be described as commercial trade between two or more nations but it has benefit of joining all countries around the world. International business will come under the globalisation. Globalisation can be described as the growing interdependence of world economy. Below the pie graph represents the key factors driving the growth of globalisation.
By looking at the chart we can say that globalisation is developing as a result of changes in trends and customer preferences. Therefore different categories in the chart have the power to maintain the global strategy and to compete in the world economy.
The two key elements within the study of international business are shown as follows:
Imports and Exports
Any goods and services purchased from one country and transporting it to another country is called imports. The main importing products In the UK are motor cars, crops and fuels. For example, in 2005, 49.3% of goods are imported from euro zone countries, 62.9% came from Western Europe, 9.7% from North America and 20% from developing countries to UK.
Any goods and services has been produced locally and sold it to foreign countries is called Exports. The main exporting products in the UK are medicines and petroleum products. In 2005, 51.1% of goods from the UK exported to euro zone countries, 61.2% to Western Europe, 16.6% to North America and 12.8% to developing country.
Below the graph represents the growth in imports and exports by region in between 1995 2005.
Exchange Rates
Exchange rate is a system which allows businesses to exchange one currency for another under the conditions. It is essential for international firms during their imports and exports. For example, if goods have to purchase from Japan, firms have to pay the yen to the supplier. World Bank is controlling the exchange rates; therefore they are constantly changing. Within this aspect of international business we also focus on two types of exchange rates; they are fixed, free-floating exchange rates. Below the demand and supply curve explains the fixed exchange rate system.
By looking at the graph we can see that the dollar is pegged at $0.60 but is only allowed to fluctuate a narrow band to $0.50. If the supply curve shifts from S to S1, the Bank of England will require to buy pounds in order to level the minimum price
Similarities of Domestic and International Business
