Difference Between Domestic and International Business

Domestic vs International Business
 

Trade is the buying and selling of goods and services. Trade may occur within domestic borders or among countries internationally. In today’s modern world companies generally trade in local and international markets so as to increase the market size to which products and services can be offered. Local firms also establish branches, manufacturing facilities, franchise outlets etc. overseas to make benefits of the cheap labor, materials, low costs, and other market opportunities. The article that follows clearly explains the terms domestic trade and international trade and highlights their benefits, disadvantages, similarities and differences.

Domestic Business

Domestic trade is the sale of goods and services within a country. In this case, trade can only happen within the territories of that country; therefore, both the buyer and the seller will have to reside in the country for it to become a domestic trade. In the early history, trades were purely domestic until transportation avenues opened up and people were able to transport goods across geographic regions. Nowadays majority of countries trade both in the domestic and international markets with the aim of achieving economic growth, maximize production, foreign exchange, etc.

There are a number of advantages of domestic trade; the transaction costs are much less since there are no barriers for domestic trade in terms of tariffs, duties, taxes, etc. The time taken for goods to be produced and sold is lesser and, therefore, products will reach the market within a shorter period of time. The transport costs are also lower since goods do not have to be transported across countries. Domestic trade is also beneficial to domestic producers and encourages the development of small and medium enterprises. However, strictly domestic trade will offer customers with fewer varieties of goods, and the potential market size for sellers will be much lesser than if they sold products across country borders.

International Business

International trade is the sale of goods and services across countries. An example from the earlier days is the Silk Road between Europe and Asia in which Asian silks and spices were sold to Europeans who in turn sold weapons and technology to Asia. International trade offers a greater potential for economic growth and can result in a greater gross domestic product. In addition to products, services are also traded across borders such as consultancy services, call center, customer care services etc. Trading securities and currencies in foreign markets are also a part of international trade. Individuals and corporations trade in the foreign money and capital markets with the aim of making larger profits. International trade also includes foreign investment, licensing, franchising etc.

There are, however, a number of restrictions that applies to any form of international trade. Tariffs, quotas, embargos, and duties can affect the volume of trade conducted across borders and restrictions on capital transfers, profit expatriation, transaction taxes etc. can affect foreign capital and forex transactions.

What is the difference between Domestic and International Business?

Domestic trade and international trade are both equally important for economic development, GDP, reducing unemployment, investment, expansion etc. Domestic trade is the trade that occurs within a country while international trade occurs across borders. There are no restrictions for domestic trade in comparison to international trade where there are a number of restrictions such as taxes, tariffs, duties, capital controls, foreign exchange controls, etc. Developing domestic trade can be beneficial to local producers and can help reduce unemployment levels. Developing international trade can be beneficial to consumers in terms of better variety; to producers in terms of more market potential, and for the overall economic growth and development of the country.

Summary:

Domestic vs International Business

• Domestic trade and international trade are both equally important for economic development, GDP, reducing unemployment, investment, expansion etc.

• Domestic trade is the sale of goods and services within a country. Domestic trade is beneficial to domestic producers, and encourages the development of small and medium enterprises.

• International trade is the sale of goods and services across countries. International trade offers a greater potential for economic growth and can result in a greater gross domestic product.

• There are no restrictions for domestic trade in comparison to international trade where there are a number of restrictions such as taxes, tariffs, duties, capital controls, foreign exchange controls, etc.

• Developing domestic trade can be beneficial to local producers and can help reduce unemployment levels while developing international trade can be beneficial to consumers in terms of better variety, and to the producers in terms of more market potential, and also beneficial for the overall economic growth and development of the country.