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Differences between International Trade and Domestic Trade Scope: Scope of international business is quite wide.

It includes not only merchandise exports, but also trade in services, licensing and franchising as well as foreign investments. Domestic business pertains to a limited territory. Though the firm has many business establishments in different locations all the trading activities are inside a single boundary. Benefits: International business benefits both the nations and firms. Domestic business have lesser benefits when compared to the former.
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To the nations: Through international business nations gain by way of earning foreign exchange, more efficient use of domestic resources, greater prospects of growth and creation of employment opportunities. Domestic business as it is conducted locally there would be no much involvement of foreign currency. It can create employment opportunities too and the most important part is business since carried locally and always dealt with local resources the perfection in utilisation of the same resources would obviously reap the benefits. To the firms: The advantages to the firms carrying business globally include prospects for higher profits, greater utilization of production capacities, way out to intense competition in domestic market and improved business vision. Profits in domestic trade are always lesser when compared to the profits of the firms dealing transactions globally.

Market Fluctuations: Firms conducting trade internationally can withstand these situations and huge losses as their operations are wide spread. Though they face losses in one area they may get profits in other areas, this provides for stabilizing during seasonal market fluctuations. Firms carrying business locally have to face this situation which results in low profits and in some cases losses too. Modes of entry: A firm desirous of entering into international business has several options available to it. These range from exporting/importing to contract manufacturing abroad, licensing and franchising, joint ventures and setting up wholly owned subsidiaries abroad. Each entry mode has its own advantages and disadvantages which the firm needs to take into account while deciding as to which mode of entry it should prefer. Firms going for domestic trade does have the options but not too many as the former one. To establish business internationally firms initially have to complete many formalities which obviously is a tedious task. But to start a business locally the process is always an easy task. It doesn't require to process any difficult formalities. Purvey: Providing goods and services as a business within a territory is much easier than doing the same globally. Restrictions such as custom procedures do not bother domestic entities but whereas globally operating firms need to follow complicated customs procedures and trade barriers like tariff etc. Sharing of Technology: International business provides for sharing of the latest technology that is innovated in various firms across the globe which in consequence will improve the mode and quality of their production. Political relations: International business obviously improve the political relations among the nations which gives rise to Cross-national cooperation and agreements. Nations co-operate more on transactional issues. FDI vs FII

Both FDI and FII is related to investment in a foreign country. FDI or Foreign Direct Investment is an investment that a parent company makes in a foreign country. On the contrary, FII or Foreign Institutional Investor is an investment made by an investor in the markets of a foreign nation. In FII, the companies only need to get registered in the stock exchange to make investments. But FDI is quite different from it as they invest in a foreign nation. The Foreign Institutional Investor is also known as hot money as the investors have the liberty to sell it and take it back. But in Foreign Direct Investment, this is not possible. In simple words, FII can enter the stock market easily and also withdraw from it easily. But FDI cannot enter and exit that easily. This difference is what makes nations to choose FDIs more than then FIIs. FDI is more preferred to the FII as they are considered to be the most beneficial kind of foreign investment for the whole economy. Foreign Direct Investment only targets a specific enterprise. It aims to increase the enterprises capacity or productivity or change its management control. In an FDI, the capital inflow is translated into additional production. The FII investment flows only into the secondary market. It helps in increasing capital availability in general rather than enhancing the capital of a specific enterprise. The Foreign Direct Investment is considered to be more stable than Foreign Institutional Investor. FDI not only brings in capital but also helps in good governance practises and better management skills and even technology transfer. Though the Foreign Institutional Investor helps in promoting good governance and improving accounting, it does not come out with any other benefits of the FDI. While the FDI flows into the primary market, the FII flows into secondary market. While FIIs are shortterm investments, the FDIs are long term. Summary 1. FDI is an investment that a parent company makes in a foreign country. On the contrary, FII is an investment made by an investor in the markets of a foreign nation. 2. FII can enter the stock market easily and also withdraw from it easily. But FDI cannot enter and exit that easily. 3. Foreign Direct Investment targets a specific enterprise. The FII increasing capital availability in general. 4. The Foreign Direct Investment is considered to be more stable than Foreign Institutional Investor An example of FDI is an American company taking a majority stake in a company in China. Definition of 'Foreign Institutional Investor - FII' An investor or investment fund that is from or registered in a country outside of the one in which it is currently investing. Institutional investors include hedge funds, insurance companies, pension funds and mutual funds. Investopedia explains 'Foreign Institutional Investor - FII' The term is used most commonly in India to refer to outside companies investing in the financial markets of India. International institutional investors must register with the Securities and Exchange Board of India to participate in the market. One of the major market regulations pertaining to FIIs involves placing limits on FII ownership in Indian companies.

INTERNATIONAL COMPETITIVE ADVANTAGE OF NATIONS: MULTIDIMENSIONAL VIEW OF COMPETITIVENESS

Porter introduced what has become known as the diamond of national competitiveness with four facets determining the competitive strengths and weaknesses of countries and their major sectors. According to Michael E. Porter, four broad attributes, individually and interactively determine national competitive advantage. These 4 broad attributes of a nation shape the environment in which local firms compete, promote or impede the creation of competitive advantage. These factors are:
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FACTOR CONDITIONS DEMAND CONDITIONS RELATED & SUPPORTING INDUSTRIES FIRM STRATEGY, STRUCTURE & RIVALRY

Porter represents these elements as the four corners of a diamond. 1. FACTOR CONDITIONS: include land, labor, natural resources and infrastructure. y Sustained competitive advantage comes from advanced or specialized factors like skilled labor, capital and infrastructure. y These are created not just inherited. Competitive advantage from factors depends on how effectively & efficiently they are employed. ADVANCED FACTORS (e.g. highly educated personnel and research industries in sophisticated disciplines. SPECIALIZED FACTORS- knowledge based in particular fields are more critical in determining competitive advantage than basic factors (such as highway systems, supply of debt capital or a pool of well motivated educated employees. Its also important to note that selective disadvantages in the more basic factors can prod a country to innovate and upgrade e.g. in Japan poor position in natural resources spurred competitive innovation. Denmarkhas hospitals that specialize in studying and treating diabetes;Denmarkalso is a world leading exporter of insulin. By creating specialized factors and then working to upgrade them, country has maintained its premier position in health care field. 2. DEMAND CONDITIONS: includes size and sophistication of its market. y Nations gain competitive advantage in industries where the home demand gives their companies an earlier picture of emerging buyer needs & where demanding buyers pressurize companies to innovate faster & achieve sophisticated competitive advantage than their foreign rivals. y The size & pattern of growth of home demand can reinforce national advantage in an industry. Large home market size can lead to competitive advantage in industries where there are economies of scale. y Sweden long concerned with helping the disabled, has now spawned a competitive industry that focuses on the special needs of these people. y Denmarks environmental concern has resulted in Danish companies developing highly effective water pollution control equipment and windmills. 3. RELATED & SUPPORTING INDUSTRIES: These enhance competitive advantage thru working relationships, joint research and problem solving, close proximity and sharing of knowledge and experience. 4. FIRM STRATEGY, STRUCTURE & RIVALRY: Vigorous domestic competition compels the firm to become vibrant n proactive. Structure refers to mgmt. style being practiced by the firm. National policies tend to affect the firms international strategies. In Italy, successful firms typically are small or medium sized; operate in fragmented industries such as furniture, lighting, footwear etc. are managed like extended families and employ a focus strategy geared towards meeting the needs of small market niches. Germany tends to have hierarchical organizations that emphasize technical or engineering content (optics, chemicals, complicated machinery and

demand precision manufacturing). Competitors: Switzerland: pharmaceuticals firms of HoffmanLa Roche, Ciba-Geigy & Sandoz help the country to maintain its internationally competitive edge. Germany-BASF, Hoechst & Bayer, help the country to keep ahead in chemicals. Along with 4 elements in the diamond, Porter brings 2 more elements: Role of govt. and role of chance (random events such as major technological breakthroughs, political decisions by governments, war & destruction, fluctuation in exchange rates etc.) that enhances or impedes a firms competitiveness. Limitations: 1. Focus more on developed countries. 2. Natural resources are too important. 3. Govt. has a role in determining competitiveness. 4. Chance factors play their role in promoting or hampering competitive strengths of firms. PORTERS DETERMINANTS AS A SYSTEM: Each of the determinants often depend on the others e.g. even if a country has sophisticated buyers that can provide a company with feedback about how to modify or improve its products (demand conditions) , this information will not be useful if the firm lacks personnel with the skills to carry out these functions (factor conditions) . Similarly, if suppliers can provide the company with low-cost inputs & fresh ideas for innovation (related & supporting industries) but the firm clearly & easily dominates the industry (firm strategy, structure & rivalry) and does not feel a need to upgrade the quality of its products and services, it will eventually loose this competitive advantage. http://www.makemynotez.com/international-business-management/international-competitive-advantageof-nations/ Competitiveness is considered as a key criterion for appraising the success degree of countries, industries and enterprises in the political, economical and commercial competition fields. Research findings show that competitiveness has been discussed in three levels of national, industry and enterprise (organization or company). Among all the enterprise level seems to more considerable. In this study enterprise competitiveness has been viewed from two main perspectives: construct and behavioral. According to construct perspective, competitiveness includes two groups of factors which are composing and affecting factors. Based on behavioral perspective an enterprise faces two types of factors in its decisions and actions which are strategic and operational factors. As a result of literature review, summarization and complementary edition, totally 28 factors has been identified as competitiveness factors ({16 composing f. and 12 affecting f.} and {15 strategic f. and 13 operational f.}). The questionnaire has been developed based on these factors. The findings show that in Iran business environment, all competitiveness factors of enterprises are highly important but very weak

What is Foreign Direct Investment (FDI)? Instead of investing in local businesses, putting money in a company functioning or incorporated in another country is foreign direct investment. For the country which is attracting the investment, the investor is a considered a "foreign direct investor". The foreign direct investor can have influence in the management of the companies invested in. The foreign direct investor may have a varying amount of stake in the invested company - stakes can be as low as 10% or may also cross 49% of the shares or stock ownership. Some countries may have caps on the amount of equity a foreign direct investor may hold. For example, the Reserve Bank of India allows foreign equity only up to 50% in investment in specific mining sector in India. It totally forbids FDI in mining of iron and manganese.

The foreign direct investor seeks to have a controlling stake in the entity invested. This distinguishes it from an ordinary foreign investment. The flow of capital from the foreign investor to the company invested in becomes an FDI inflow. FDI has three parts - equity capital investment, reinvested earnings and intra-company loans. Advantages of Foreign Direct Investment In the global economy today, we see many developing countries competing for foreign direct investment. FDI is said to be an important factor for spurring the development of a nation. Let's take a look at some advantages of foreign direct investment to a host country:
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Integration into global economy - A developing country, which invites FDI, can gain a greater foothold in the world economy by getting access to a wider global market. Technology advancement - FDI can introduce world-level technology and technical know-how and processes to developing countries. Foreign expertise can be an important factor in upgrading the existing technical processes in a host country. For example, the civilian nuclear deal between India and the United States would lead to transfer of nuclear energy know-how between the two countries and allow India to upgrade its civilian nuclear facilities. Increased competition - As FDI brings in advances in technology and processes, it increases the competition in the domestic economy of the developing country, which has attracted the FDI. Other companies will also have to improve their processes and products in order to stay competitive in the market. Overall, FDI improves the quality of a products and processes in a particular sector. Improved human resources - Employees of a host country in which there is an FDI get exposure to globally valued skills. The training and skills upgradation can enhance the value of the human resources of the host country.

The advantages of foreign direct investment to the investor includes access to a larger market in the host country, ability to tap the potential of a cheap and skilled labour, making use of resources in the host country and pursuing growth goals by diversification and optimising costs.

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