International business is a term used to collectively describe all commercial transactions (private and governmental, sales, investments, logistics,and transportation) that take place between two or more regions, countries and nations beyond their political boundary. Usually, private companies undertake such transactions for profit; governments undertake them for profit and for political reasons. It refers to all those business activities which involves cross border transactions of goods, services, resources between two or more nations. Transaction of economic resources include capital, skills, people etc. for international production of physical goods and services such as finance, banking, insurance, construction etc..
A multinational enterprise (MNE) is a company that has a worldwide approach to markets and production or one with operations in more than a country. An MNE is often called multinational corporation (MNC) or transnational company (TNC). Well known MNCs include fast food companies such as McDonald’s and Yum Brands, vehicle manufacturers such as General Motors, Ford Motor Company and Toyota, consumer electronics companies like Samsung, LG and Sony, and energy companies such as ExxonMobil, Shell and BP. Most of the largest corporations operate in multiple national markets.
Areas of study within this topic include differences in legal systems, political systems, economic policy, language, accounting standards, labor standards, living standards, environmental standards, local culture, corporate culture, foreign exchange market, tariffs, import and export regulations, trade agreements, climate, education and many more topics. Each of these factors requires significant changes in how individual business units operate from one country to the next.
The conduct of international operations depends on companies’ objectives and the means with which they carry them out. The operations affect and are affected by the physical and societal factors and the competitive environment.
- Objectives: sales expansion, resource acquisition, risk minimization
- Modes: importing and exporting, tourism and transportation, licensing and franchising, turnkey operations, management contracts, direct investment and portfolio investments.
- Functions: marketing, global manufacturing and supply chain management, accounting, finance, human resources
- Overlaying alternatives: choice of countries, organization and control mechanisms
Physical and societal factors
- Political policies and legal practices
- Cultural factors
- Economic forces
- Geographical influences
- Major advantage in price, marketing, innovation, or other factors.
- Number and comparative capabilities of competitors
- Competitive differences by country
- Local taxes
There has been growth in globalization in recent decades due to the following eight factors:
- Technology is expanding, especially in transportation and communications.
- Governments are removing international business restrictions.
- Institutions provide services to ease the conduct of international business.
- Consumers know about and want foreign goods and services.
- Competition has become more global.
- Political relationships have improved among some major economic powers.
- Countries cooperate more on transnational issues.
- Cross-national cooperation and agreements.
Studying international business is important because:
- Most companies are either international or compete with international companies.
- Modes of operation may differ from those used domestically.
- The best way of conducting business may differ by country.
- An understanding helps you make better career decisions.
- An understanding helps you decide what governmental policies to support.
Managers in international business must understand social science disciplines and how they affect all functional business fields.
Tom Travis, the managing partner of Sandler, Travis & Rosenberg, PA. and international trade and customs consultant, uses the Six Tenets when giving advice on how to globalize one’s business. The Six Tenets are as follows:
- Take advantage of trade agreements: think outside the border
- Familiarize yourself with preference programs and trade agreements.
- Read the fine print.
- Participate in the process.
- Seize opportunities when they arise.
- Protect your brand at all costs
- You and your brand are inseparable.
- You must be vigilant in protecting your intellectual property both at home and abroad.
- You must be vigilant in enforcing your IP rights.
- Protect your worldwide reputation by strict adherence to labor and human rights standards.
- Maintain high ethical standards
- Strong ethics translate into good business.
- Forge ethical strategic partnerships.
- Understand corporate accountability laws.
- Become involved with the international business self-regulation movement.
- Develop compliance protocols for import and export operations.
- Memorialize your company’s code of ethics and compliance practices in writing.
- Appoint a leader.
- Stay secure in an insecure world
- Security requires transparency throughout the supply chain.
- Participate in trade-government partnerships.
- Make the most of new security measures.
- Secure your data.
- Keep your personnel secure.
- Expect the Unexpected
- The unexpected will happen.
- Do your research now.
- Address your particular circumstances.
- All global business is personal
- Go to the source.
- Keep communications open.
- Keep the home office operational.
- Fly the flag at your overseas locations.
- Relate to offshore associates on a personal level.
- Be available to overseas clients and customers 24/7.
According to C.K. Prahalad & S. Hart,2002, The fortune at the bottom of the pyramid, Strategy & Business, 26: 54-67, and (2) S.Hart, 2005, Capitalism at the Crossroads (p. 111), Philadelphia: Wharton School Publishing.
Top Tier: Per capita GDP/GNI > $20,000 Approximately one billion people
Second Tier: Per capita GDP/GNI $2,000-$20,000 Approximately one billion people
Base of the Pyramid Per capita GDP/GNI < $2,000 Approximately four billion people
- ^ Daniels, J., Radebaugh, L., Sullivan, D. (2007). International Business: environment and operations, 11th edition. Prentice Hall. ISBN 0131869426
- ^ Joshi, Rakesh Mohan, (2009) International Business, Oxford University Press, ISBN 0195689097
- ^ Travis, T. (2007). Doing Business Anywhere: The Essential Guide to Going Global. Hoboken: John Wiley&Sons. ISBN 978-0-471-97317-1
- International Masters of Business Administration
- International trade
- Emerging Markets
- World economy
- 3G (countries)
- US Chamber of Commerce The world’s largest business federation representing more than three million businesses and organizations
- The International Trade Centre ITC is the joint agency of the World Trade Organization and the United Nations
- The U.S. Government’s export promotion and finance portal A government resource for U.S. exporters
- UK Trade & Investment A government resource for UK exporters
- globalEDGE Knowledge web-portal that connects international business professionals worldwide