BUSINESS ADMINISTRATION & INTERNATIONAL BUSINESS
In the literal meaning, Business refers to an organized approach to providing customers with the goods and services they want. Business Administration has over the years taken the form of a formal field of knowledge, besides engineering medical and even closely-related Economics. In the 20th century, with the development and growth of business schools in America and Europe, the dynamics of business administration changed. With more research conducted in a professional way, Business Administration has also given birth to its branches. Among these, International Business is one such off-shoot or part of business administration, which has seen tremendous growth in this age of internet. This particular article refers to discussing various aspects of Business Administration and International Business. Business Administration can be simply described as all the activities and strategies which are part of running any business, vis-à-vis “providing customers with the goods and services they want”. In the more formal way, these activities can range from, but not limited to managing financial activities, marketing, human resource management and general management. Even in the contemporary field of business management which is a formal body of knowledge, these activities are the primary focus of business administration. International Business on the other hand, is a more focused branch of business administration. International Business (or International Business Administration) is focused primarily on the aspects of business dealing with the international trade, foreign markets, gaining competitive advantages, trade with foreign countries etc. Since the core focus is on foreign markets, so the activities are also bit different than conventional business administration.
AN UNORTHODOX YET IMPORTANT COMPARISON
The comparison between International Business and Business Administration is unorthodox because it is comparison of a tree to its branch! As mentioned before, that in its real sense, international business is nothing but a more specialized field of business administration. Yet, this analytical comparison is important as it brings forth the importance of International business and International trade. International business has many features which require specialized knowledge. Like Business Administration, as awhole requires knowledge of other fields like Economics, International Business also requires specialized knowledge. It is these factors which not only make these two areas comparable but also point out the important areas requiring focus in International Business. Era of Business Administration may be regarded as the time period in which Business Administration developed as a separate body of knowledge and this era is arguably that of twentieth century. With the advancement in technology and communications, Business Administration has now gone into specialties which are becoming complete fields of knowledge in themselves. Era of International Business has again no specific boundaries, but the modern day international business is far more dependent on the inventions in communication. In this way, it can be said that the era of International Business is the era of Internet and present-day communications. With the internet experiencing more growth, International Business is also expanding its frontiers. Besides computers and internet, international business has also been advanced from the treaties and agreements in the last few decades. Among these, World Trade Organization (WTO), General Agreement on Tariff and Trade (GATT) are some of the examples.
While studying the comparison of Business Administration and International Business, it is imperative that the peculiar areas of focus for both should be studied. Business Administration concentrates on certain aspects which are not necessarily covered by International Business.
Focus Areas of Business Administration
Typically, Business Administration has focused on Marketing, Finance and Human Resource Management, Production and General Management. Marketing covers many areas of business which to a great extent deal with the customers. These can range from pricing the product to conducting research about consumer needs. While some of aspects of Marketing may be common in International Business, there are areas like Marketing Research which differs greatly for International Business. In International Business since the business is conducted from different lands, so the seller may not be very well acquainted with the customer. Instead his focus is different, ashe is more inclined towards pushing his product to the seller and not much concerned about branding activities etc. still this is a very generic statement and may not apply for every case. Finance in Business Administration is primarily focused on gaining profits. It may be of decision-making nature that which areas of business are more profitable and which is not. Then the finance to a greater extent is focused on the day-to-day activities of keeping cash accounts etc. Human Resource Management is a crucial step in Business Administration, which focuses on hiring, training and retaining best manpower to carry out business activities.
Focus Areas of International Business
Once it comes to the International Business, the focus is more widened. The trading parties are concerned with far more issues than they are concerned while operating in local market. Although, Marketing, Finance and Human Resource Management activites are still very much there, but even their focus is different. Marketing in International Business may not be looking for sustainable or longer customer relations but it may be focused on finding customers with the best prices to offer. Finance is one area which is very specialized for International Business as people dealing in International Markets are supposed to be well acquainted with the international trade agreements, customs, duties, tariffs etc. They are also supposed to be knowledgeable about dealing with banks etc in terms of Letter of Credits. Human Resource Management may not be very different for International Business as producer/seller are typically using their own local Human Resources.
BUSINESS ADMINISTRATION & INTERNATIONAL BUSINESS –
FROM ACADEMIA’S EYES
Among many other comparisons possible, an interesting comparison comes from the course objectives of courses offered by a business school. The course objectives are given below for two courses. Both are courses in Marketing, Marketing Management can be said to be the course representing “Marketing as seen by Business Administration” and Export Marketing can be viewed as an example of “Marketing in terms of International Business”. MarketingManagement – The course takes an analytical approach to the study of Marketing problems of various organizations. It evaluates….marketing environment, decisions and determination of organizations’ products, prices, channels and communication strategies ……. Export Marketing – The course covers the procedures, policies and management problems faced by exporters. It studies…….export channels, sources of export information, locating sales channel through international publications, advertising for exporters, export terms and documents, banking services and transportation issues…… This comparison points out to an important issue, that while both are selling to consumers, international business requires different focus in terms of export issues.
BUSINESS ADMINISTRATION & INTERNATIONAL BUSINESS –
FROM STRATEGY POINT OF VIEW
Business in any form is like a war where strategies are made and implemented to achieve success. A brief comparison of strategies typically used in Business Administration with those used in International Business can help in understanding the difference further. In Business Administration, any set of strategy can be applied based on market condition and requirement. These can be Integration (adding more units etc), Intensive (Entering & developing a market), Diversification (exploring new markets) or Defensive (retrenchment, divestiture) etc. These same are available to International business also but these cannot be applied with ease in a foreign market which always has its own dynamics. For example, in local market the risk of failure for a Diversification strategy shall be considerably lower than that in a foreign market. Then in the international business, the means to achive these strategies are also different. For example, Joint Venture is the concept applied far more by International Business than local.
CONTEMPORARY TREND – ONLY INTERNATIONAL BUSINESS?
Why there is International trade? This question should have been answered at the onset, but it is placed here as it can tell show some important aspects of things yet to come. In 1776, Adam Smith, in The Wealth of Nations, proposed that specialization in production leads to increased output. He believed that in order to meet a constantly growing demand for goods, acountry’s scarce resources must be allocated efficiently. According to Smith’s theory, a country that trades internationally should specialize in producing only those goods in which it has an absolute advantage—that is, those goods it can produce more cheaply than can its trading partners. The country can then export a portion of those goods and, in turn, import goods that its trading partners produce more cheaply. Modification to this work led to many other ideas; among which principle of comparative advantage is noteworthy. Following this principle, a country can still gain from trading certain goods even though its trading partners can produce those goods more cheaply. The comparative advantage comes if each trading partner has a product that will bring a better price in another country than it will at home. If each country specializes in producing the goods in which it has a comparative advantage, more goods are produced, and the wealth of both the buying and the selling nations increases. Besides this fundamental advantage, further economic benefits result when countries trade with one another. International trade leads to more efficient and increased world production, thus allowing countries (and individuals) to consume a larger and more diverse bundle of goods. A nation possessing limited natural resources is able to produce and consume more than it otherwise could. Also, the establishment of international trade expands the number of potential markets in which a country can sell its goods. Within each economy, the importance of foreign trade varies. In recent years International trade has also been viewed as a means to promote growth within a nation’s economy. Developing countries and international organizations have increasingly emphasized such trade. Thus in order to capitalize on the chances available to expand to other markets; sellers are using International Trade and Business to earn more revenues and profits. In the present day, countries are using the strong support offered by internet, communications and such systems to expand the boundaries of their operations to the rest of the world. In such scenario, International Trade and Business is taking new course and is experiencing major transformations. More efficient systems are being developed to fulfill the needs of a customer, the seller has never seen. This was never the case with Business Administration in its typical form. Although Business Administration is the parent field of International Business, but it can be said that the way things are going, it wont be longbefore International Business becomes an entirely different field of knowledge.
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3.Institute of Business Administration, Program Announcement 2004-05, Karachi, Pakistan, 2004