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BusinessInternational Business vs. Domestic Business: What’s the Difference

April 4, 2019

Choosing a major in college can be difficult, and it can be even tougher when your area of interest is a large one. Most business​​​​ programs specialize in domestic business, but international business degrees are out there as well. We explore the nuanced differences and help you decide which program fits you the best. 

International Business vs. Domestic Business: What’s the Difference

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Whether you’re just starting to think about college majors or you’re heading back to school post-bachelor’s to earn a higher-level degree and advance your career, business school can be a fulfilling and lucrative step toward success in the so-called real world.

Business degrees come in many shapes and sizes, but the most common business majors focus solely on the aspects of business done on a domestic level, including accounting, finance, marketing, economics, and human resources. These are all integral parts of doing business within the United States.

However, more and more businesses are becoming global entities, and the need for the individuals, who work within them and run them to understand the global economy, as well as various cultures and laws, is becoming more important as well.

International business degrees and international MBAs are available to those who would like to take a more global outlook on business. Having an international perspective adds new levels of information to the already jam-packed curriculum of a general business degree, and encourages students to think beyond the US.

There are quite a few things that set an international business apart from a domestic business. As we look at the differences and similarities in the programs, we will focus on international business first, and then compare domestic business strategies as the differences arise.

Unique Topics of International Business

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Traditional business degree programs are set up to give students a solid foundation in successful business practices within the United States. This means learning about organizational theory and business ethics within the realm of what we see as ethical or our laws within the US only.

International business, however, means focusing on a variety of areas that are different throughout the world than they are in the US, and how to adapt the strategies you’ve learned in traditional business classes for use in an international marketplace. This involves taking on topics unique to international businesses.

Systems of Government

Not every government throughout the world uses a capitalist system. International business degrees will help you to see the implications various forms of government can have on business practices and business ethics. Depending on the system of government you are working with, there can be several implications.

Politics is a large part of international business in that there is a certain political risk to doing business in other countries. The political risks start with government stability and how involved the government is in the private sector business practices within it.

There is also a political risk in terms of the country’s ability to enforce rules and policies, and how they go about doing so. In democratic countries, we tend to see more stability versus other systems of government, so those countries pose less of a political risk to businesses looking for international growth.

Along those same lines, contracts are another important aspect of international business that you will need to understand. Since business deals are done through contracts, you will need to have an awareness of the country’s contract laws ahead of time to engage in a successful business transaction.

Some pieces of contracts on an international level are the same or similar to those that exist domestically, but not all. In establishing a contract internationally, you will need to decide which country’s laws apply, who has court jurisdiction, and what currency will be exchanged for the goods or services in question.

In addition to these pieces, you will need to include terms of arbitration or mediation, much like in domestic business contracts. You will also want to include a clause that can excuse either party from their obligations due to circumstances beyond that party’s control; again, similar to domestic contracts.

The variety of systems of government throughout the world also means a variety of taxes and tax laws. The United States is the highest in terms of corporate income tax in the world, but business leaders will need to understand the tax incentives and types of taxes that exist in countries where they engage in business transactions.

Other areas where systems of government may affect business deals are environmental regulations, market forces, and logistics. Although environmental regulations domestically are increasing, those regulations are much more strict in countries like China and the United Kingdom.

Marketing and Cultural Divides

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Although marketing is a major in and of itself at many institutions, it is also an integral part of any domestic or international business degree. Marketing principles teach us how to attract and retain customers through market research and advertising strategies.

Anything that you have learned about marketing domestically can theoretically be applied to international business, but not all strategies will work globally, and very few will work in every country in which you do business. Cultural differences make a great deal of difference in how to market products across the globe.

There are a couple of terms that may or may not be interchangeable in marketing on an international level. Some consider international marketing and global marketing to be the same thing. However, most international business texts find that the two have some fundamental differences based on their strategies for success.

When looking to go international with a product, a company needs to research whether there is a market for that product in a specified country or set of countries before they can launch a business there. Some products simply do not bridge the international or cultural divide, and only make sense domestically.  

In addition to factors like the market for a given product, language barriers and cultural divides like religion, education, and technology can affect business success in certain countries. Material culture is another factor, meaning not all countries place the same value on “things” as we do domestically, and that can be bad for business.

Cultural Dimensions

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In international business, there is a generally accepted standard in place that helps us understand global cultures. The standard is called “cultural dimensions” and consists of six dimensions by which a country’s culture can be measured in a way that helps businesses to understand how to market to it.

  • Power distance: how individuals within a country respond to power
  • Individualism: how much citizens within a country care about the well-being of other citizens
  • Masculinity: Whether a culture believes in the equality of men and women
  • Uncertainty Avoidance: Whether and to what extent individuals within a culture need structure and rules
  • Pragmatism: How much respect a culture has for traditions
  • Indulgence: To what extent people within a culture control their impulses and wishes

When dealing with international business, it is important to understand how these cultural dimensions may affect your relationship with businesses and governments of certain counties.

For instance, a country with a high uncertainty avoidance number may need extra reassurance and contracts to feel comfortable engaging in business transactions versus a country with a lower uncertainty avoidance score.

Countries with lower indulgence scores may require more marketing toward why the product is necessary or will make their lives simpler in a way that can help them achieve other goals or necessities, where a country with a higher indulgence score may simply need to see a product as hip and the “latest and greatest.”

International Branding

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One thing that affects global businesses much more strongly than domestic businesses is branding. For domestic business professionals, encountering counterfeit items means understanding basic trademark infringement laws and the court system, but not so for international business professionals.

Counterfeit products on an international level can cost a company billions of dollars a year and can cost governments money as well. International business leaders need a strong foundation in trademark infringement laws in all countries where they do business to understand how to address this topic in other markets.

Cultural differences, laws, and business policies, as well as the overall level of government regulation that exists within a culture, can all affect how counterfeiting is dealt with internationally. Business professionals working globally must understand all of these facets to be successful.

Final Thoughts

Pursuing a business degree is a fantastic way to understand how businesses work on many levels, including marketing, economics, finance, supply chain, and more. However, all of these factors intensify and become more complex as you move away from domestic business toward international markets.

International business can seem complicated, and it takes someone with a solid foundation in organizational theory, business ethics, and economics on a general level to truly begin to understand the nuances of business as it happens on an international level.

There are so many factors that vary between domestic and international business, such as marketing, which relies on different principles depending on the culture being marketed to, and contract negotiations, which take on new levels when you add in different currencies and levels of government control.

Although business, at its core, focuses on many of the same factors whether that business is domestic or international, the many additional complexities and facets of international business are hard to ignore, even in the classroom.A business degree of any kind will help to prepare you for the corporate or non-profit world, but an international business degree can put you a step ahead of your peers by giving you the skills to work within an increasingly global marketplace with the sensitivity and understanding it takes to succeed.

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