If customers are in short supply, it may hit a company’s potential for growth. In such a case, companies may look for internationalization. Expanding into markets of foreign countries leads to exposure to more customers, better revenues, increased profits, and lateral growth. This scenario is ideal when the company has already established products in its domestic market.
International Business
Cambridge dictionary defines international business as – “the activity of trading goods and services between countries.” However, international business is beyond this definition; it has a wide scope. International business also has its own advantages and disadvantages. In this article, let’s understand the different areas of international business.
Imports and Exports
The simplest and most commonly used method, imports and exports, can be seen as the foundation of international business. Imports are an inflow of goods into the markets of the home country for consumption. In contrast, export means selling goods to foreign countries. In short, imports means inflow, whereas export means outflow of goods in any form.
Licensing
Licencing is one of the easiest ways to expand a business internationally. When a company has a standardized product with ownership rights, it can use licensing to distribute and sell the products in the international market. Licenses come in many forms, some of which are patent, copyright, trademark, etc. Products such as books and movies are usually distributed internationally through licensing agreements.
Franchising
A very effective method to expand a business nationally and internationally, franchising is similar to licensing. In this, a parent company gives the right to another company to conduct business using the parent company’s name/ brand and products. The parent company becomes the franchiser, and the receiving company becomes the franchisee. Many of the biggest restaurant chains in the world have used the franchisee model to expand internationally. Some examples include – McDonald’s, Pizza Hut, Starbucks, Domino’s Pizza, etc.
Outsourcing and Offshoring
Outsourcing means giving out contracts to international firms for certain business processes, for example, giving out accounting functions to an international firm. This is usually effective when the cost of conducting these processes is comparatively much cheaper in some other country than in the home country. For example, many developed countries such as the USA, Australia, the UK, etc., outsource their functions to companies in India, China, etc., because it is cheaper.
Offshoring is similar to outsourcing in the sense that a function is moved away from the home country. However, it is different in the sense that the facility is physically moved to another country, but the management stays with the company itself. For example, Apple Inc. is conducting its manufacturing function in China. However, it is entirely controlled by Apple Inc.
Joint Ventures and Strategic Partnerships
A joint venture is a contract between two parties. One is an international company, while another company is local to where the business has to be conducted. Both parties contribute to the equity and management of the company. As a result, both share the profit as well. These parties can mutually decide the percentage of equity and profit-sharing.
These types of ventures and partnerships come into existence when both parties have something to offer. For example, the local company may have the brand name and network within the country, while the international company may have advanced technology. A classic example of a joint venture is the Tata Jaguar collaboration in India. Sometimes there are government restrictions on international companies against holding 100% equity in certain areas such as defense. In such cases, international companies can take the benefit from the new market through a joint venture.
Multinational Companies
As the name suggests, multinational companies are companies that are conducting business in multiple countries. They actually set up the whole business in multiple countries. Some such examples are Amazon, Citigroup, Coca-Cola, etc.
These companies have independent operations in each country, and each country has its own set of offices, employees, etc. In fact, even the products and marketing campaigns are customized as per local needs. For example, Nestle introduced a Matcha flavor Kit Kat in Japan as the flavor is very popular in that country. However, they don’t offer the same flavor in India. This customization is one of the many benefits of being a multinational company.
Foreign Direct Investment
Foreign direct investment is an investment made by an individual or a company located in one country to the business interest located in another foreign country. In this, the investing company usually commits more than capital; they share management, technology, processes, etc., with the company they have invested in. Foreign direct investments can take many forms, such as a subsidiary company, associate company, joint venture, merger, etc.
Factors to Consider before Starting International Business Operations
Geographical Factors
Simple challenges that come with the change in geography have to be studied when considering international business. There are differences in storage requirements, supply chain requirements, connectivity issues, etc., from country to country. Colgate-Palmolive will face a thousand challenges even before its soaps and shampoos can reach rural areas of India where there is a lack of basic necessities such as water, electricity, transportation, etc.
Social Factors
Social factors are very important in international business. It is very difficult to set up shops in politically disturbed countries or are going through some tensions. For example, most companies don’t want to expand their business in Afghanistan, as there is so much disturbance.
Legal Policies
Every country has different laws and governing policies. A company should check all the legal requirements in the country where it wants to conduct business. The basic laws that need attention are organization laws, securities laws, consumer protection laws, employee protection laws, etc. The process can be lengthy, but it is necessary.
Behavioral Factors
Every country has different cultures and beliefs, and people can be very sensitive to these beliefs. An international company, if not careful, can land a lot of issues if they don’t take care of the country’s behavioral factors. For example, McDonald’s cannot sell its beef burgers in India; else, it will have to face the brunt of the Indian population that is majority Hindu.
Economic Forces
These factors include the county’s currency values, market size, cost, inflation, etc. These are important because it directly affects the profitability of operations. Every company should consider these factors before expanding internationally if they want to manage its bottom line.
All these factors mentioned above play an important role in how successful or unsuccessful an entity will be in its international business adventures. All these factors should be a consideration in the research and planning stage to get the maximum benefit out of it.
5 International Business Examples to Learn From
Yet, other forms of international business do exist. For example, a business that produces components or products overseas but sells them domestically can be considered an international business, as can an organization that outsources services, such as customer service, to locations where labor expenses are cheaper.
For most organizations, decisions around building, producing, and selling products or services are informed by many factors. Cost is an important one because businesses that primarily operate in developed markets, like the United States and Europe, can often source cheaper labor abroad.
Other factors play a role in decision-making, too. For example, an organization that makes a conscious effort to become more sustainable may produce its product as close as possible to the end user to reduce greenhouse gas emissions related to transportation, even if it might result in higher labor costs. Likewise, a business may take pride in sourcing local labor to create jobs and support the economy.
Although international business can benefit the global economy, it also carries inherent risks. The fact that each country has its own government, regulations, inflation rates, and currency can complicate business models and must be weighed against the perceived benefits of operating internationally. Some of the most common challenges of international businesses include language and cultural barriers, currency exchange rates, and foreign politics and policies.
Because of these challenges, those who have a successful career in international business need various skills and expertise, such as strong communication skills, emotional intelligence, an understanding of other cultures, and thorough knowledge of finance, accounting, entrepreneurship, and global economics. Acquiring these combined skills, along with international business experience, can lead to career success.
Are you interested in working with an international organization? Do you have plans and aspirations to take your business international? Here’s a look at five well-known international businesses that have successfully—and not so successfully—navigated the global market.
Examples of International Businesses
1. Apple
Apple Inc. was founded by Steve Jobs, Steve Wozniak, and Ronald Wayne in the 1970s and is now considered one of the most influential international companies. Headquartered in the United States, Apple designs, develops, and sells electronics, software, streaming, and online services worldwide.
Apple opened its first international location in Tokyo, Japan, in 2003 after saturating the American market. Under Jobs, Apple touted ease-of-use, innovative design, and customer loyalty with the marketing slogan, “Think Different,” and it continues to use visionary strategic marketing and a tight ecosystem to overcome competition and attract creative audiences around the globe.
Apple not only sells products internationally but has supply chains from 43 countries that ship supplies to China for final production and assembly. By keeping a tight-knit and strong relationship with suppliers, strategic inventory, and a focus on sustainability, Apple stands as one of the world’s most successful companies.
2. Financial Times
The Financial Times is a formerly British daily newspaper that’s now owned by Japanese holding company Nikkei. The Financial Times’ mission is to deliver unbiased, informed investment and economic information to empower individuals and companies to make secure investment decisions.
The Financial Times had a rocky start trying to break into the international market. Andrew Gilchrist, former managing director of the Financial Times, describes his experience at the publication in the online course Global Business.
During his tenure, the Financial Times prioritized entering the international market in India. Despite a large English-speaking population and strong government support, domestic journalism was considered culturally and legally suspect. In fact, the Financial Times was eventually tied up in legal knots because the local newspaper barons were able to challenge every move through the courts.
3. McDonald’s
The McDonald brothers focused on creating a better business system geared toward self-service and efficient and repeatable processes that relied on heating lamps instead of waiters. This model, known as “Speedee,” led to lower costs, cheaper products, and faster growth, and it became the epitome of “fast food.”
Soon after, Ray Croc took McDonald’s a step further by bringing in franchisees and suppliers, leading to the creation of restaurants across the United States. McDonald’s model continued to expand, and, in 1967, the company opened locations in Canada and Puerto Rico.
McDonald’s has been internationally successful, thanks in large part to the consistency its business model allows. The fact that a Big Mac tastes the same regardless of which country you order it in is a testament to the company’s long history. Today, there are 38,000 restaurants in over 120 countries.
4. Coca-Cola
Coca-Cola was created by pharmacist John Pemberton in 1886 at a soda fountain in Atlanta, Georgia. It was used as a tonic for common ailments due, in part, to the addition of cocaine and caffeine derived from the kola nut, which was a major ingredient at the time. (This was later removed from the recipe in 1903.)
Although popular at its inception, Coca-Cola became the company it is today because of the marketing and business leadership of Asa Griggs Candler and future investors, who dramatically increased sales and expanded syrup factory production into Canada.
Eventually, an independent bottle company licensed the rights to Coca-Cola’s syrup production and distribution, streamlining production and generating massive profits. Coca-Cola later remarketed for Germany, China, and India, and it’s now sold everywhere except Cuba and North Korea.
5. H-E-B
The primary driver of international expansion wasn’t a desire to capture greater market share, but rather, a desire to gain access to foreign produce markets in warmer climates, from which the company could source produce during its domestic suppliers’ off-season in the northeastern United States.
Craig Boyan, president of H-E-B, explains in Global Business that, upon becoming an international business, H-E-B bought blueberries from Chile and Peru to sell year-round. Despite it being expensive to ship blueberry crates to Texas, this enabled the company to continue meeting its customers’ needs. Since then, production has increased with demand, especially in Mexico, which has an ideal climate to produce blueberries year-round. H-E-B now sources blueberries mostly from Mexico, making them more available and affordable for customers.
What is International Business?
The world is fast becoming a global village where there are no boundaries to stop free trade and communication. Keeping pace with it, the way we do business has changed in an unprecedented manner. The competition, in the global marketplace, is at its peak where all companies want to sell their goods to everyone, everywhere on the globe. International business is mainly concerned with the issues that are related to international companies and governments’ cross border transactions. It is a broad term including not only movement of goods and services but various other aspects.
International business can be defined as any business that crosses the national borders of a country. It includes importing and exporting; the international movement of goods, services, employees, technology, licensing, and franchising of intellectual property (trademarks, patents, copyright and so on). International business includes investment in financial and immovable assets in foreign countries. Contract manufacturing or assembly of products for local sale or for export to other countries, the establishment of foreign warehousing and distribution systems, and import of goods from one foreign country to a second foreign country for subsequent local sale is part of international business. Apart from individual firms, governments and international agencies may also get involved in international business transactions. Companies and countries may exchange different types of physical and intellectual assets. These assets can be products, services, capital, technology, knowledge, or labour.
The fundamental and the largest international business activity in many countries is the foreign trade comprising exports and imports. Physical goods/commodities or merchandise leave the country in the form of export. Imports are those goods brought across the national borders into a country.
The international firms also trade in services banking, insurance, consulting, travel and transportation, etc. earn in the form of fees and royalties. The fees are earned through short or long term contractual agreements such as consultancy or management contracts or turnkey projects. Royalties are received from the use of one company’s name, trademark, patent or process by someone else. Similarly, a firm can earn royalties from abroad by licensing the use of its name, trademark, patent, technology information, Franchise in overseas markets.
Foreign direct investment or direct investment is one in which the investor is given collecting interest in foreign company. FDI may be in the form of a Joint Venture or a wholly-owned subsidiary. A wholly-owned subsidiary can be established in foreign markets either in the form of a totally new operation or acquisition of an established firm and use the firm to promote its products. The subsidiary, if it is established starting from the ground up is called a Greenfield investment.
The countries cannot produce equally well or cheaply all that they need. There is not even a single country, which is in a better position to produce better quality products at a lower cost because there is an unequal distribution of natural resources among different countries. The availability of different factors of production such as land, labour, capital, and raw material are not the same everywhere. The difference in labour, productivity, and production cost due to socio-economic, geographical and political reasons make International Business important.
It refers to getting into a new market and enjoying the advantages of being first. It is easy to quickly start doing business and get early adopters by being first. International markets can have less competition where the businesses can capture a market share quickly. This factor is particularly advantageous when high-quality and superior products are available. Local companies may have the same quality products, but international businesses may have little competition in a market where an inferior product is available. A company with unique competencies and capabilities gain benefits in the international market. For example, Intel’s (USA) competencies and capabilities in semiconductors and chips have propelled it to global market leadership in microprocessors.
The international business exports its goods and services all over the world. It helps a country to earn valuable foreign exchange which can be used to pay for imports. Foreign exchange helps to make the business more profitable and to strengthen the economy of the country. Local and foreign It increases investment in the business which is important for the economic stability of the country.
Some demographic trends such as contraction in birth rate decline in domestic demand, fully tapped market potential, etc. have adverse effects on some businesses. When domestic market is small or saturated, international business is the alternative for growth. Recession in the home market drives companies to explore foreign markets. Foreign markets both developed country & developing country provide substantial growth opportunities for the firms from a developing country. MNCs are interested in developing countries due to fast-rising in disposable income and population.
Sources:
https://efinancemanagement.com/international-financial-management/international-business
https://online.hbs.edu/blog/post/international-business-examples
https://thefactfactor.com/facts/management/international-business/international-business/1532/
International business
The international business exports its goods and services all over the world. It helps a country to earn valuable foreign exchange which can be used to pay for imports. Foreign exchange helps to make the business more profitable and to strengthen the economy of the country. Local and foreign It increases investment in the business which is important for the economic stability of the country.
International Business
Cambridge dictionary defines international business as – “the activity of trading goods and services between countries.” However, international business is beyond this definition; it has a wide scope. International business also has its own advantages and disadvantages. In this article, let’s understand the different areas of international business.
Imports and Exports
The simplest and most commonly used method, imports and exports, can be seen as the foundation of international business. Imports are an inflow of goods into the markets of the home country for consumption. In contrast, export means selling goods to foreign countries. In short, imports means inflow, whereas export means outflow of goods in any form.
Licensing
Licencing is one of the easiest ways to expand a business internationally. When a company has a standardized product with ownership rights, it can use licensing to distribute and sell the products in the international market. Licenses come in many forms, some of which are patent, copyright, trademark, etc. Products such as books and movies are usually distributed internationally through licensing agreements.
Franchising
A very effective method to expand a business nationally and internationally, franchising is similar to licensing. In this, a parent company gives the right to another company to conduct business using the parent company’s name/ brand and products. The parent company becomes the franchiser, and the receiving company becomes the franchisee. Many of the biggest restaurant chains in the world have used the franchisee model to expand internationally. Some examples include – McDonald’s, Pizza Hut, Starbucks, Domino’s Pizza, etc.
Outsourcing and Offshoring
Outsourcing means giving out contracts to international firms for certain business processes, for example, giving out accounting functions to an international firm. This is usually effective when the cost of conducting these processes is comparatively much cheaper in some other country than in the home country. For example, many developed countries such as the USA, Australia, the UK, etc., outsource their functions to companies in India, China, etc., because it is cheaper.
Offshoring is similar to outsourcing in the sense that a function is moved away from the home country. However, it is different in the sense that the facility is physically moved to another country, but the management stays with the company itself. For example, Apple Inc. is conducting its manufacturing function in China. However, it is entirely controlled by Apple Inc.
Joint Ventures and Strategic Partnerships
A joint venture is a contract between two parties. One is an international company, while another company is local to where the business has to be conducted. Both parties contribute to the equity and management of the company. As a result, both share the profit as well. These parties can mutually decide the percentage of equity and profit-sharing.
These types of ventures and partnerships come into existence when both parties have something to offer. For example, the local company may have the brand name and network within the country, while the international company may have advanced technology. A classic example of a joint venture is the Tata Jaguar collaboration in India. Sometimes there are government restrictions on international companies against holding 100% equity in certain areas such as defense. In such cases, international companies can take the benefit from the new market through a joint venture.
Multinational Companies
As the name suggests, multinational companies are companies that are conducting business in multiple countries. They actually set up the whole business in multiple countries. Some such examples are Amazon, Citigroup, Coca-Cola, etc.
These companies have independent operations in each country, and each country has its own set of offices, employees, etc. In fact, even the products and marketing campaigns are customized as per local needs. For example, Nestle introduced a Matcha flavor Kit Kat in Japan as the flavor is very popular in that country. However, they don’t offer the same flavor in India. This customization is one of the many benefits of being a multinational company.
Foreign Direct Investment
Foreign direct investment is an investment made by an individual or a company located in one country to the business interest located in another foreign country. In this, the investing company usually commits more than capital; they share management, technology, processes, etc., with the company they have invested in. Foreign direct investments can take many forms, such as a subsidiary company, associate company, joint venture, merger, etc.
Factors to Consider before Starting International Business Operations
Geographical Factors
Simple challenges that come with the change in geography have to be studied when considering international business. There are differences in storage requirements, supply chain requirements, connectivity issues, etc., from country to country. Colgate-Palmolive will face a thousand challenges even before its soaps and shampoos can reach rural areas of India where there is a lack of basic necessities such as water, electricity, transportation, etc.
Social Factors
Social factors are very important in international business. It is very difficult to set up shops in politically disturbed countries or are going through some tensions. For example, most companies don’t want to expand their business in Afghanistan, as there is so much disturbance.
Legal Policies
Every country has different laws and governing policies. A company should check all the legal requirements in the country where it wants to conduct business. The basic laws that need attention are organization laws, securities laws, consumer protection laws, employee protection laws, etc. The process can be lengthy, but it is necessary.
Behavioral Factors
Every country has different cultures and beliefs, and people can be very sensitive to these beliefs. An international company, if not careful, can land a lot of issues if they don’t take care of the country’s behavioral factors. For example, McDonald’s cannot sell its beef burgers in India; else, it will have to face the brunt of the Indian population that is majority Hindu.
Economic Forces
These factors include the county’s currency values, market size, cost, inflation, etc. These are important because it directly affects the profitability of operations. Every company should consider these factors before expanding internationally if they want to manage its bottom line.
All these factors mentioned above play an important role in how successful or unsuccessful an entity will be in its international business adventures. All these factors should be a consideration in the research and planning stage to get the maximum benefit out of it.
International business
Академический директор и тренер программ NIMA в Украине, маркетолог, специалист по управлению продажами, организационному развитию и проектному менеджменту, бизнес-тренер, консультант. Профессор Conservatoire National des Arts et Métiers (CNAM, France), тренер компании Highware (Paris, France), партнер Oxford Academics UK. канд. физ.- мат. наук, консультант по маркетингу и стратегическому развитию Netton CG
Известный профессионал в области маркетинга и коммуникаций. Входит в рейтинг ТОП-10 специалистов по маркетингу журнала «Компаньон». В прошлом – член правления и директор по маркетингу METRO Cash & Carry Украина. В 2005 году получил премию International SABRE Award – европейскую награду в PR. Работал с Rothmans International, L’Oreal Cosmetics, Canal +. Тренер NIMA в Украине
Бизнес-тренер, сертифицированный тренер Hogeschool Rotterdam "onderwijsbevoegdheid voor docenten in de BVE", MBO и HBO в Europort Business School. Директор и акционер ETCN BV, в Центральной и Восточной Европе и Центральной Азии. Ответственный за стратегию компании и вывод новых программ на рынок Украины, Азербайджана, России, Беларуси, Армении, Грузии, Казахстана и Азербайджана. Тренер NIMA в Украине
Академический директор программ NIMA в Украине, Маркетолог, специалист по маркетинговому планированию, управлению продажами, организационному развитию и проектному менеджменту, бизнес-тренер, консультант. Приглашенный профессор магистерской программы Conservatoire National des Arts et Métiers (CNAM, France), тренер компании Highware (Paris, France), партнер Oxford Academics UK. канд. физ.- мат. наук, консультант по маркетингу и стратегическому развитию Netton CG. Тренер модулей программ NIMA
Известный профессионал в области маркетинга и коммуникаций. Входит в рейтинг ТОП-10 специалистов по маркетингу журнала «Компаньон». В прошлом – член правления и директор по маркетингу METRO Cash & Carry Украина. В 2005 году получил премию International SABRE Award, это европейская награда в Public Relations. В 2003 году – награда в области E-mail публикации ("E-mail Publishing Award"). Работал с Rothmans International, L’Oreal Cosmetics, Canal +. Тренер NIMA в Украине
ETCN BV
Бизнес-тренер, сертифицированный тренер Hogeschool Rotterdam "onderwijsbevoegdheid voor docenten in de BVE", MBO и HBO в Europort Business School. Директор и акционер ETCN BV, в Центральной и Восточной Европе и Центральной Азии. Ответственный за стратегию компании и вывод новых программ на рынок Украины, Азербайджана, России, Беларуси, Армении, Грузии, Казахстана и Азербайджана. Тренер NIMA в Украине
Authorship:
https://efinancemanagement.com/international-financial-management/international-business
https://thefactfactor.com/facts/management/international-business/international-business/1532/
https://imbacademy.com.ua/
