Trade refers to the activities of buying and selling, or exchanging, goods or service between people or countries. It can be undertaken within the geographical limits of the countries or beyond the boundaries and can take place within an economy between consumers and producers. International business allows countries to expand markets for goods and services that otherwise may not have been available.
The trade which takes place within the geographical boundaries of the country is known as domestic business. The buyer and seller belong to the same country and so the trade agreement is based on the laws and customs, practices that are followed in the country. Domestic business enjoys many privileges such as:less period between production and sale of goods, low transportation cost, encourages small-scale enterprises, low transaction cost, etc.
Trade that occurs beyond the boundaries of the home country is known as international business. It includes all the commercial activities like sales, investment, logistics, etc., in which more than one country is involved. However, there are several factors that affect the international business which act as a barrier to entry in the international market like tariffs and quota, political, socio-cultural, economic, etc.
The difference between domestic and international business is that domestic business takes place within the geographical boundaries of one country, whereas trade which occurs between two countries internationally, is called international business.
Comparison Table Between Domestic and International Business
|Parameters of Comparison||Domestic Business||International Business|
|Definition||When the economic transactions are conducted within the geographical boundaries of the country, it is known as Domestic Business||When the engagement of an economic transaction is with more than one country it is called International business.|
|Geographical location||Domestic businesses are operated within the boundaries of one country.||International businesses are operated in more than one country.|
|Currency||The currency involved in domestic business is of the same country it is operating.||The currency involved in international business is of different countries.|
|Capital||The capital invested in domestic business is comparatively low.||The capital invested in international business is huge.|
|Quality of service||The quality of service rendered is comparatively low.||The quality of service rendered is high.|
|Nature of customers||Homogeneous customers are involved in domestic businesses.||Heterogeneous customers are involved in international businesses.|
|Business research||Business research can be conducted easily.||Business research is difficult to conduct.|
What is Domestic Business?
A domestic business is a company or business organization that operates only within the borders of a single country. It is a company that conducts its affairs in its home country.
A domestic business is taxed differently than that of a non-domestic business and may be required to pay duties or fees on the products it imports. In general, a domestic corporation can easily conduct business in other states or parts of the country where it has filed its articles of incorporation.
Domestic business owners have the free hand to choose where to domesticate their corporations and, as a result, will seek to analyze corporate laws in different states to determine which state represents the most suitable home. But, domestic business that is deciding where to incorporate, weighing which states have lower corporate tax rates is not a big consideration. Under federal tax laws, organizations are subject to taxation rates in the place where they do business, not where they were formed.
There are many privileges which a domestic business enjoys, they are: low transaction cost, low transportation cost, less period between production and sale of goods, encourages small-scale enterprises, etc.
Characteristics of Domestic Business
- conducts its affairs in its home country
- Easy to conduct
- lower corporate tax rates
- Limited regional access
- Local currency is involved
What is International Business?
An International business is a company or business organization that operates internationally in more than one country.It involves transactions of goods and services among the two or more countries.
The transactions in international business are conducted at the global level & across national borders. Nations that were away from each other, because of their geological separations and financial and social contrasts are now connecting with each other by international business. The World Trade Organization established by the administration of various nations is one of the major contributory factors towards international business and expanded connections.These kinds of businesses are very large in size as they are performed at a global level. Their operating scales are vast in size.
International businesses provide employment to a huge mass of people. It has served as an important source for earning foreign exchange for the country. Payments for goods or service in these businesses are done in foreign currencies of different countries.
International businesses help in improving the standard of living of people in different countries by supplying high-quality goods. It has different categories such as imports & exports, foreign direct investment, franchising, licensing, etc.
Characteristics of International Business
- Its a large scale operation
- Integrates economy
- Earns foreign exchange
- This kind of business incorporates a high risk
- There is intense competition
- It has a highly sensitive nature
- There are international restriction
Main differences Between Domestic and International Business
- Domestic business refers to the economic transactions that are conducted within the geographical boundaries of the country. As against, international business is one whose economic transactions are conducted with several countries in the world.
- While doing domestic business, there are few restrictions imposed as it is subject to rule, law and taxation. Whereas, in international business there are more restrictions imposed.
- The capital investment in domestic business is comparatively lesser than that of international.
- The quality of goods and services provided by international business is higher as compared to domestic business. It is said that the standard of living has increased by the interference of international business.
- Domestic business deals with the single currency. On the other hand, international business deals with multiple currencies of the world.
- It is easy to conduct research for domestic businesses, whereas the research conducted in international business is difficult.
- The cost incorporated in domestic business is lesser as compared to international businesses.
- There is easy and free movement of factors of production in domestic businesses. But, in international businesses, the movement of production is limited.
Carrying out the activities of domestic business and its management is far more easier than conducting an international business. Due to changes in political, socio-cultural environment across the nations, economic, most business entities find it difficult to expand their business globally.