Why international companies differ from domestic companies?

The companies doing their business in two or more country are international companies and the companies doing business in a single country only are domestic companies. There are many differences between these two types of companies. These differences occur due to the difference across borders. Nation-states generally have unique government systems, laws and regulations, currencies, taxes and duties, and so on, as well as different cultures and practices. So, What is Domestic Business: Domestic business is the exchange of goods, services, or
both within the confines of a single national territory. It is always aimed at a single market and deals with only one set of competitive, economic, and market issues. The exchange is always with a single set of customers all the time, though the company may have several segments in a market.

Domestic business may be sub-divided into Wholesale business, and Retail business. Wholesale is concerned with buying goods from manufacturers or dealers in large quantities and selling them in smaller quantities to others who may be sub-dealers, retailers or even consumers. Wholesale trade may be undertaken by wholesale merchants or wholesale commission agents. The wholesale merchant makes outright purchases from dealers or manufacturers or in wholesale commodity markets, and arrange their reselling to the best advantage on his own account. The wholesale commission agents act as selling agents of producers or dealers, arrange the sale of goods on best possible terms on behalf of the principal, and earn a commission for their services. Retail business is concerned with the sale of goods in small quantities to the actual users or consumers. It is generally carried on by a class of traders known as retailers. In actual practice, however, manufacturers and wholesalers may also undertake retail distribution of goods to bypass the intermediary retailers.

What is International Business: All commercial transactions- including sales, investments and transportation- that take place between two or more countries is called international business. These cross border business transactions may happen between governments or individuals. Trade that includes exchange of capital, goods, and services across nations is called International Trade. It is always a major source of economic revenue for any nation and in absence of the same nations would be limited to the goods and services produced within their own boundaries.

This system is often much costlier than local Business since it includes additional costs such as tariffs, and costs associated with country differences such as the legal systems or a different culture, financial policies etc. Industrialization, Globalization, and Outsourcing are the products of international trade system. International business grew over the last half of the twentieth century partly because of liberalization of both trade and investment, and partly because doing business internationally had become easier.

Differences between international and domestic companies: There are many

reasons that make the international business different from domestic business. Some of these reasons are:-

Dissimilarity in currencies: Difference between international and domestic business involves the dissimilarity in currencies. As international companies doing business in two or more countries, countries involved in business may use different currencies. So it may force at least one party involved in the trade to switch its currency into another. In other words, one of the parties would have to follow the prevailing market currency exchange rate to make its business transactions viable.

Difference in legal systems: Companies doing international business operate business in different countries, so they may face the difference in legal systems of countries. It may compel one or more parties to adjust their practices to comply with local rules and regulations. Occasionally, the consent of the legal systems may act as a barrier and be irreconcilable, creating complications for international managers. As domestic business is operated within a single country, it does not have to face different legal systems. Differences in business systems and practices: Countries differ from one another in terms of their socio-economic development, availability, cost and efficiency of economic infrastructure and market support services, and business customs and practices due to their socio-economic milieu and historical coincidences. All such differences make it necessary for firms interested in entering into international markets to adapt their production, finance, human resource and marketing plans as per the conditions prevailing in the international markets.

Difference in cultures: Difference in cultures is also considered as dissimilarity in domestic and international business. The cultures of the countries may vary according to the use of trading product and it may force each party to adjust its behavior to meet the expectation of the others. For example the difference in the use of pork and wine face different attitudes in western and Muslim cultures. Culture in different countries may vary based on difference in religion, social values and so on. So, these are the reasons why international companies differ from domestic companies.