When it comes to business, the challenges of international business are huge, and everyone is linked. Whether you manufacture and sell items globally or not, global commerce has an influence on all businesses. In the online course Global Business, Harvard Business School Professor Forest Reinhardt argues, “Everybody needs to care about macroeconomics and the global economy.”
So, as a business owner, manager, or employee, how can you keep informed and determine your company’s position in the global market? Here’s an overview of international business, as well as some frequent issues to consider and tips on how to prepare. Read the International business the challenges of globalization.
WHAT IS THE DIFFERENCE BETWEEN INTERNATIONAL AND NATIONAL BUSINESS?
The production and selling of products and services between nations is referred to as international business. There are various methods for a company to become global:
- It manufactures things in the United States and sells them both locally and globally.
- It manufactures things in another nation but sells them in the United States.
- It manufactures products in another country and sells them both locally and globally.
Businesses generally create items in other countries owing to reduced labor costs or taxes, and they offer products and services in the global market due to the great potential for reaching a bigger audience, obtaining new consumers, and increasing income. “International business is thrilling, but it can also be perilous,” writes Reinhardt in Global Business.
Navigating the global business environment may be tough since each nation has its own government, regulations, laws, cultures, languages, currencies, time zones, and inflation rate. Here are five issues to think about.
5 COMMON INTERNATIONAL BUSINESS CHALLENGES
1. Language Disparities
When doing business internationally, it’s crucial to think about the languages spoken in the nations where you want to grow. Is it possible to convert your product message into another language? Hire an interpreter and get advice from a native speaker and resident of each nation. Mercedes-Benz is an example of a product that has been “lost in translation.”
The corporation adopted a Mandarin Chinese moniker that sounded close to “Benz” when entering the Chinese market: Bns. In Mandarin Chinese, the term means “rush to death,” which was not the image Mercedes-Benz intended to give to its new audience.
The firm soon changed, renaming itself Bnch, which means “run fast, speed, or gallop” in Chinese. It’s also important to think about the languages spoken by your company’s employees in overseas locations. Investing in interpreters will assist guarantee that your company runs effectively once again.
2. Differences in Culture
Each nation has its own unique linguistic makeup, as well as its own distinct culture or mix of civilizations. Holidays, arts, rituals, meals, and social conventions are all part of culture for a given group of people. Learning about the cultures of the nations where you’ll be conducting business is crucial and fascinating.
Demonstrating that you’ve taken the time to understand their cultures can project the respect and emotional intelligence needed to conduct business successfully when managing teams in international offices, selling products to an international retailer or potential client, or running an overseas production facility.
The hours of a regular workday are one example of a cultural difference between the United States and Spain. Working hours in the United States are 9 a.m. to 5 p.m., with many companies extending their hours earlier or later. Working hours in Spain, on the other hand, are normally 9 a.m. to 1:30 p.m. and 4:30 to 8 p.m. A siesta, which is a relaxation enjoyed after lunch in many Mediterranean and European nations, is possible during the working break.
3. Managing International Teams
Managing people from all over the globe is another issue of multinational company. It may be challenging to account for language difficulties, cultural variations, time zones, and varied degrees of technological availability and dependency while attempting to work as a team.
Facilitate frequent check-ins with your worldwide team to create and maintain a solid working connection, ideally utilizing a video conferencing technology so you can engage in real time. Employees who have frequent check-ins with their bosses are three times more likely to be engaged at work than those who don’t, according to Gallup research.
When teams are separated by distance, as many were during the coronavirus (COVID-19) epidemic, communication is critical to ensure that everyone feels valued and involved.
4. Rates of currency exchange and inflation
The value of a dollar in your nation will not always equal the same amount in another country’s currency, nor will the value of money be worth the same amount of products and services on a continuous basis. Get to know the currency conversion rates between your own nation and the countries where you want to conduct business. The exchange rate is the value of two currencies in relation to each other.
For example, the current exchange rate between the Canadian and US dollars is 0.77, which means that one Canadian dollar is worth 77 cents in US money. Make it a point to keep a constant eye on currency rates, since they might vary. It’s also crucial to keep an eye on inflation rates, which are the percentage increases in general price levels in an economy from year to year.
Inflation rates differ per country, and this may have an influence on material and labor expenses, as well as product price. Understanding and carefully tracking these two rates may provide you valuable insight about the worth of your company’s goods in different places over time.
5. Foreign Policy, Foreign Relations, and Foreign Politics Nuances
Politics, policies, regulations, and cross-national ties all have an impact on business. Because such ties may be complex, it’s critical that you keep up with news from the nations where you conduct business. Taxes, labor rules, raw material prices, transportation infrastructure, educational systems, and other factors may all be influenced by political actions.
In Global Business, Reinhardt uses the hypothetical example of the Chinese government subsidizing Chinese dairy farms, which would affect dairy producers in all neighboring nations. This is because more investment may lead Chinese dairy farmers to generate an excess of dairy products, forcing them to spread their markets to neighboring nations.
The fact that the complexities of worldwide politics, legislation, and relations may have an influence on your firm is both thrilling and terrifying. As new information becomes available, stay informed and make smart judgments.
GETTING READY FOR INTERNATIONAL BUSINESS DIFFICULTIES
Global business has its own set of obstacles, but it can also be a source of tremendous organizational development. To prepare for such hurdles, diversify your news intake and carefully monitor international politics, build relationships in countries where you wish to conduct business, invest in interpreters to overcome language barriers, and consider taking a global business course. These are the International business the challenges of globalization.