Managing international business operations involves making strategic decisions, taking calculated risks, and assessing the on-going challenges of doing so. In today’s connected world of global trade and commerce, businesses of all sizes, from small start ups to large multinationals, face the constant challenge of adjusting to international opportunities and challenges to ensure the longevity of their growth. This article outlines the strategies and challenges in the international business arena and provides insight to help business owners better understand the potential benefits and pitfalls associated with doing business abroad.
Understanding The Benefits Of International Business
Before delving into strategies and challenges of managing an international business, it is important to first understand the advantages associated with such a venture. Generally, these advantages result from the differences in scale and levels of sophistication between organizations domestically and abroad, multiple currencies and legal systems, cultural differences, and technology.
The following are some of the most commonly cited benefits:
- Access To Larger Markets
The most obvious benefit of conducting business globally is the ability to tap into the myriad of opportunities available in overseas markets. By focusing on larger markets, companies are able to reach larger volumes of customers, leading to greater profits.
- Cost Reduction
The use of cheaper labor in overseas markets can provide a significant cost advantage for companies looking for an edge on their domestic competitors. In addition, the reduction in cost of materials, shipping and other goods due to economies of scale is also a great benefit associated with taking business overseas.
- Diversification
Global operations provide businesses with a greater ability to diversify their offerings and reduce the risk associated with their core products and services. This is especially true in industries that are heavily reliant on one particular market or economy, such as those in the oil, gas, and technology sectors.
- Developing New Expertise
Conducting business abroad can also sometimes provide a unique opportunity to learn new skills and technology. In a rapidly-changing global business landscape, staying abreast of the most up-to-date trends and advancements can be a great way to gain a competitive advantage over local competitors.
Strategies For Managing An International Business
Businesses looking to successfully expand overseas must first consider what strategies will ensure the success of their venture. The strategies employed will depend heavily on the size of the business, but all should be mindful of these areas:
- Establishing An International Vision
As with any other business activity, success depends on having a clear mission, vision, and goals. When taking a business overseas, it’s important to have a roadmap with benchmarks and objectives to follow. This roadmap should identify which markets, products, and services the business intends to pursue and how they plan to grow and develop while in those markets.
- Evaluating Domestic and Global Competitors
By evaluating the current market conditions, both domestically and globally, business owners can make more informed business decisions. This means taking a look into factors such as competition, market saturation, cost of capital, regulations and taxation, as well as consumer preferences and demands abroad.
- Understanding Currency and Payment Fluctuations
The cost of goods and services fluctuate all the time, and currencies change constantly. Businesses operating globally must develop systems that allow for the seamless transition from one currency to another in order to minimize the risk of pricing their products lower than the actual cost due to currency fluctuation.
- Utilizing Available Resources
Making use of the resources available in the local market, such as advisors and consultants, can help business owners better understand the business environment and regulations that apply. Businesses should also take advantage of any industry grants and subsidies that may be available.
- Developing an Effective International Sales and Marketing Strategy
An effective sales and marketing strategy can help a business in a foreign market reach its target customers quickly and more cost-effectively. This means leveraging methods such as PR, advertising, promotions, and digital marketing to create awareness and reach potential customers.
- Providing Quality Customer Service
As with any other business, customer service should always be a priority. It is important to develop a service system that is tailored to the needs of the local market in order to ensure customer satisfaction.
Challenges To Overcome In Managing An International Business
Although there are many advantages to conducting business overseas, the following challenges can pose significant barriers to achieving success:
- Unique Regulatory Requirements
Each country or region may have its own set of legal and regulatory requirements for businesses, some of which cannot be complied with unless the organization moves operations to that location. This can involve hiring specialized legal and accounting firms to manage the compliance.
- Cultural Hurdles
Cultural differences can often lead to difficulties in communicating with potential customers or resolving issues in a satisfactory manner. Additionally, cultural norms may also have an impact on marketing efforts, so it is essential to learn the local customs and language to have a better understanding of what really works in the particular market.
- Landlord and Labor Negotiations
In certain cases, the business may need to negotiate with local landlords or labor providers. Companies should always employ a professional advisor to ensure the terms of any agreement do not expose the business to excessive risk.
- Managing Multiple Currencies
The most prevalent currency in any given market does not always remain the same. This is especially true in countries with volatile currencies, as sudden changes in exchange rates can have a significant impact on the cost of doing business. Companies should plan for such events accordingly.
- Overseas Expenses
In addition to the costs associated with establishing a presence in the global market, businesses may also find themselves dealing with additional costs for shipping, travel, and accommodation when operating in multiple markets.
Managing an international business can be a challenging yet rewarding endeavor. Business owners must plan ahead, be mindful of potential risks, and understand the strategies and challenges associated with doing business abroad. by doing so, they can make better informed decisions and have a greater chance of achieving success in the global market.
