Strategic Management - Pros & Cons

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Competing in international markets is one of the most important activities for a country’s economy. However, as with any other domain of business, there are many advantages and disadvantages of the process.

Advantage of International Business

• Earning valuable foreign currency − International business enables a country to earn valuable foreign currency by promoting and exporting its goods to other countries.

• Division of labor − Competing in international markets leads to specialization in the production of goods. Therefore, quality goods are produced by the best players.

• Optimum utilization of available resources − International marketing reduces waste of national resources. Each country tends to make the optimum use of its natural resources.

• Benefits to consumers − Consumers become the king due to international business. Better quality goods are available at reasonable prices.

• Encouragement to industrialization − In international marketing, the exchange of technological knowledge enables undeveloped and developing countries to establish new industries.

• Economies of large-scale production − Production on a large scale becomes the norm because of extensive demand. The advantages of large-scale production become available to all participants on international marketing.

• Stability in prices of products − International business diminishes the wide fluctuations in the prices of products. It offers stabilization of prices throughout the world.

• Widening the market for products − International marketing expands the market for products all over the world. With increasing scale of operation, the profitability of the business increases.

• Creating employment opportunities − International marketing leads to a boost in employment opportunities. It also raises the standard of living of the host countries.

Disadvantages of International Business

• Adverse effects on economy − One country’s illness affects the economy of another country. Also, large-scale exports discourage the development of importing country. Therefore, the economy of the importing country may suffer.

• Competition with developed countries −International business hampers the growth and development of developing countries, if international business is not regulated and controlled.

• Rivalry among nations − Cut-throat competition and tendency to export more commodities can increase the rivalry between nations. This may interrupt international peace and progress.

• Colonization − The importing country may become a colony due to economic and political dependence, and industrial backwardness.

• Exploitation − International business may result in exploitation of developing countries by the developed countries. The powerful and dominant economies regulate the economy of poor nations.

• Publicity of undesirable fashion − International business may lead to advertisements which may not be suitable for our atmosphere, culture, tradition, etc.

• Language problems − Different languages and cultures in different countries create barriers to establish trade agreements.

• Dumping policy − Developed countries may start dumping their products to developing countries below the cost of production. As a result, industries in developing countries may get evicted.

• Adverse effects on home industry − The survival of infant and nascent industries is endangered due to international business. Unrestricted imports and dumping may lead to collapse of domestic industries.