Why international business knowledge required for Agribusiness?

Why international business knowledge required for Agribusiness?

Agribusiness is doing business with agricultural products.  Agribusiness is a term that bridges Agriculture and Business. Why international business knowledge required for Agribusiness?  The success of business activities across national borders means international business. International business consists of better identifying and addressing global consumer needs than rivalry, both domestic and international, and managing business operations within the global environment’s constraints. International business is the execution of business activities aimed at organizing, pricing, promoting, and directing the flow of the goods and services of a corporation to customers or users in more than one country for a profit. On the other hand, if an organization produces products and meets the needs of the country and finds any extra, then the organization exports its extra goods and imports those goods that are needed in the country. International business happens in this way.

Reasons for International Business: 

1. No nation can manufacture all of the goods its people want and need in the world.
2. If the country becomes self-sufficient, then another nation will need the country to trade to fulfill the wishes of its citizens.
3. Some countries have an abundance of natural resources and a lack of technical skills, and some other countries have adequate technology, but little natural resources, such as Japan.

Two other main explanations for international business are—

1. Absolute advantage
2. Comparative advantage

Absolute advantage:

when a nation has a monopoly on the production of a particular commodity or when a country produces a product cheaper than any other nation in the world, the absolute product is called absolute.

Absolute products are provided primarily by nature. Like- diamond is produced by South Africa, oil is produced by Saudi Arabia and some diddle east nations, etc.

Comparative advantage:

when a country produces and sells the kinds of products and services that it produces more efficiently and effectively than any other country. And by rivalry, it can be updated. Like-Aircraft developed by USA, machine.

Importance of International Business

• Innovation in new goods
• First-mover gains
• Technical experience
• Producing items at a low cost.
• Market growth in international countries.
• Increases export earnings.
• Awareness & cultural change.
• Enhances world peace & assistance.
• Improvement in technological skills.
• Picture growth.
• Chance of employment.
• Economic creation.

Why we’re investigating International Business?

• Opportunity for Careers
• Company expansion
• Awareness of the new company instruments and techniques
• Obtain cultural literacy
• Forms of International Business
• Export and Import
• Licensing
• Franchise
• Management contracts

International Trade Barriers

We face certain barriers to wanting to enter foreign trade and those are addressed below:

Cultural and Social Obstacles:

The cultural and social forces of a nation will limit foreign business. Culture consists of the general definition and principles of a nation and tangible products such as food, clothes, construction, etc.

Selling goods from one country to another country is often difficult when the culture of two countries varies greatly. Social forces include family, schooling, and faith and customs.

Political barriers: 

A country’s political climate plays a major role in foreign trade. Political violence can, at any moment, alter attitudes towards foreign companies. And this effect can produce an unfavorable climate for international business.

Tariffs and trade restrictions: Internal trade barriers are also threats to tariffs and trade restrictions. It is addressed below:

A) Tariffs on imports: a duty or tax imposed on products imported into a country. It is possible to use tariffs to prevent international rivals from entering the domestic market. There are two types of import tariffs —

– The Defensive Tariffs

– Tariffs on sales

B) Embargo and quotas:

Quotas:

a limit on the quantity of a commodity that is able to leave or enter a country.

Embargo:

an utter suspension on such imports or exports.

For boycotts:

A total ban on the purchase and import of such goods from other countries is a government boycott. A public boycott can be either formal or informal and may be industry-sponsored by the government. For example, a certain group that found the way Nestle marketed baby milk formula to be misleading to mothers and detrimental to their babies in less developed countries boycotted Nestle products.

Standards:

In this category, non-tariff barriers provide standards for the protection of health, safety and product quality. The criteria are often used to regulate trade in an unduly rigid or discriminating manner.

Penalties for Antidumping:

It is one form of practice in which a retailer purposely sells its goods for less than the cost of the product in order to undermine competition and gain control of the market.

Monetary Barriers

There are three challenges to take into account, such as—

Blocked Currency:

As a response to the difficult balance of payments situation, the blocked currency is used as a political weapon. By refusing to allow importers to swap their national currency for the currency of the seller, the blockage is accomplished.

Level of Differential Exchange:

An especially ingenious method of regulating imports is the differential exchange rate. The government finds it desirable to promote the importation of goods and prevent the importation of goods that the government does not like. The basic process allows the importer to pay differing quantities of foreign currency in domestic currency for the purchase of goods in various categories. Such as desired and less desirable items.

Requirements for government approval for obtaining foreign exchange:

Countries that face extreme foreign exchange shortages also use it. Most Latin American and Eastern European countries have, at one time or another, required all foreign exchange transactions to be authorized by the Central Minister. Importers who wish to purchase foreign goods must then apply for an exchange permitted to exchange the sum of local currency for foreign currency.

Basic International Business concepts:

For understanding international trade, several basic concepts are essential and these are discussed below:

Export and Import:

Exporting is concerned with the export of products produced domestically in another country.

Importing relates to the procurement of items made in another country.

Balance of Trade:

The balance of trade comes from imports and exports. The difference between the quantity exported by a nation and the quantity imported by a country. The balance of trade is of two kinds—

(a) Favorable trade equilibrium: Favorable trade equilibrium implies when the export of a nation is greater than its import.

(b) Unfavorable trade balance: if a country’s imports are higher than its exports, it is considered an unfavorable trade balance.

Balance of Payment:

It is a country’s total inflow and outflow of money.

A) Beneficial payment balance: if there is more cash coming in than flowing out.

B) Unfavorable balance of payment: When more money is going out of the country than is flowing in, an unfavorable balance of payment occurs.

Exchange rate:

This is the rate at which one nation can exchange its currency with the currency of another country. There are four kinds of exchange rates:

I) Devaluation:

reducing the value of the currency of the country compared to other countries’ currencies.

(ii) Revaluation:

Revaluation raises the value of the currency of a nation compared to that of another country.

(iii) Fixed exchange rate:

This is the unchanging exchange rate set by the government.

(iv) Floating exchange rate:

an exchange rate that varies with the conditions of the market.