Challenges of international business
Challenges of international business
October 28, 2017
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What is international business?

international business

Have you ever wondered what an international business is and how does it work? At A&P
International cross-cultural business solutions, experts in business management consulting
services, we always receive many questions, and this is one of them. That is why we prepared a
short article explaining the importance of international business management.

International business emerged from the need to be able to satisfy all the economic needs of a
country. Therefore, it is defined through the exchange of goods, services, and products between
two countries, one exporter (which is the one that sends) and one importer (which is the one that
receives). This process of external opening began in the second half of the 20th century and grew
in the 90’s when Latin America and Eastern Europe joined. The economies that carry out these
exchanges are called “open economies.”

International business has different theories that explain its functioning. Among these, we can see
the theory of Adam Smith with his classical theory of the absolute advantage model, where
countries that are able to produce a good using less productive factors and with a cost of lower
production are those that have the absolute advantage. We also find David Ricardo’s model with
his theory of comparative advantage, where the relative costs are defined by comparison with
other countries. And there are many other theories, where the base is given by perfect
competition, which seeks to increase the welfare of countries.

We find that there are certain restrictions for a company to carry out an international business
management, which implies established barriers against free trade such as tariff policy, contingent
policy, dumping, and commercial war. There is a component that is essential in international
business: the international transport of goods which is regulated by The Incoterms or International
Commercial Terms.

Incoterms are norms established to divide the costs of an international commercial transaction
between the buyer and the seller. There are 15 standards, which are: EXW (Ex Works); FCA (Free
Carrier); FAS (Free Alongside Ship); FOB (Free on Board); CFR (Cost and Freight); CIF (Cost,
Insurance & Freight); CPT (Carriage Paid To); CIP (Carriage and Insurance Paid to); DAF (Delivered
at Frontier); DAT (Delivered At Terminal); DAP (Delivered At Place); DES (Delivered Ex Ship); DEQ
(Delivered Ex Quay); DDU (Delivered Duty Unpaid); DDP (Delivered Duty Paid).
To conclude, we find that new technologies have become one of the most used tools in
international business, given that the internet is one of the tools that allows international
negotiations, merchandise tracking, and document handling to be easier, thanks to its constant
growth and consolidation.

We, at A&P International cross-cultural business solutions, professionals in business management
consulting services, are sure that with the best tools and help you can achieve any international
business goal. Feel free to check our website to know more about us and our international
business services: