International businesses conduct business transactions all over the world. From the total value of 62 trillion US$ created in 2010, about 22% was exported to other countries, (14 trillion US$; source: NationMaster link http://www.nationmaster.com/graph/eco_exp-economy-exports). These transactions include the transfer of goods, services, technology, managerial knowledge, and capital to other countries. International business involves exports and imports. Many companies also operate in foreign countries through agents, joint ventures or their own subsidiaries. Therefore international business is almost half of the world’s gross domestic product. The largest market is Europe, followed by the USA and China.
Source of the graph
An international business has many options for doing business. These include:
- Exporting goods and services.
- Giving a license to produce goods in the host country.
- Starting a joint venture with a company.
- Opening a branch for producing & distributing goods in the host country.
- Providing managerial services to companies in the host country.
The largest part in value terms in international business is Business-to-Business (B2B) transactions; in units and quantity Business-to-Consumer (B2C) is the larger portion (100 million t-shirts are equal to one airplane). International business is dominated by developed countries and their multinational corporations (MNCs). At present, MNCs from the USA, Europe and Japan dominate foreign trade, but through the rise of Chinese and other companies from emerging countries, the dominance pattern is changing. The traditional MNCs still have large financial and other resources. They also have the best technology and research and development (R & D). They have highly skilled employees and managers because they give very high salaries and other benefits. Therefore, they produce good quality goods and services at low prices. This helps them to capture and dominate the world market.
It had been proven many times that international business benefits all participating countries. However, the developed (rich) countries get the maximum benefits. The developing (poor) countries also get benefits. They get foreign capital and technology. They get rapid industrial development. They get more employment opportunities. All this results in the economic development of the developing countries. Therefore, developing countries open up their economies through liberal economic policies.
International business faces many restrictions on the inflow and outflow of capital, technology and goods. Many governments do not allow international businesses to enter their countries. They have many trade blocks, tariff barriers, foreign exchange restrictions, etc. All this is harmful to international business.
The international business is very sensitive in nature. Any changes in economic policy, technology, political environment, etc. have a huge impact on it. Therefore, an international business must conduct marketing research to find out about and study these changes. It must adjust its business activities and adapt accordingly to survive changes.
How to understand foreign markets
and do business around the globe
Waldemar Pfoertsch (Ed.) ©2012 – Published at iBooks and Kindle
One of the most significant trends in the economic world in the past decades has been the rapid growth of international business. Markets have become the battle ground for companies from all over the world, and we talk today about the globally interconnected world. Markets have become truly global for consumer and business-to-business goods, many services and financial instruments of all types. This has not only created opportunities, but also expanded the risk and vulnerability of local markets. The importance of understanding the international business environment and the difference that might exist in the business environment in the domestic and international contexts is becoming an important asset for small and large companies in all places of the world.
As everybody knows, we live in economically difficult times and may enter into an entirely new era, an age of increasingly frequent and intense periods of turbulence in the global economy. The complete set-up of international relationships is changing on country and company level. The economic development of the 80s, which led to the establishment of the “Triade”, consisting of the developed nations of the USA, Europe and Japan have metamorphosed into a kind of “constellation”, including BRIC countries (Brazil, Russia, India, China) and the Next Eleven (N-11) a group of developing countries with great prospects for the future. They consist of Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, the Philippines, Turkey, South Korea and Vietnam. This “constellation of markets” has become the target for product and service offerings for companies from around the world. The companies which understand the various market conditions and players will be the ones to prosper.
Economic globalization began 30 years ago, but it was not widely recognized until about 15 years ago. The Organization of Economic Cooperation and Development (OECD) defines economic globalization as an ongoing process. In this process, economic activities, markets, technology and forms of communication acquire increasingly global characteristics, while the national ones decline. It is an unstoppable trend in the development of the world economy. However, for each country, it is also a double-edged sword, both an opportunity and a challenge at the same time. In past years, overseas investments and enterprise mergers and acquisitions, which benefit companies in trading, cash flow, technology transfer or simply cost reduction, have become the important strategies for enterprises’ developments. ‘Going abroad’ is a trend, a need and a privilege, no matter whether the company is focusing on steady growth or on an ambitious expansion. However ‘going abroad’ is not as simple as stepping out of the house and greeting the neighbors. There is much more to be considered and prepared before and after the decision has been made. The book is a treasure book which comprehensively covers every stage and every detail required for going abroad, while it is also a simple handbook, which can be referred to easily if needed. The reader will learn from many examples and descriptions about international business activities. Many companies and places are mentioned. You will even understand why Enzo Ferrari did not sell his company to Ford, and what the intercultural mishaps were when US-centric business men wanted to be successful in Europe and vice versa.
In twelve chapters the “how to do business abroad” is described in a very illustrative way. The reader will experience difficult and funny situations and can learn for his own business developments abroad. There are hints and rules to be learned. It is your choice whether or not to follow them, but many managers who did are in a much more comfortable position today than they were before.
This book is based on the research of many scholars put together for practical use in the international battleground. It is based on Lennie Copeland’s and Lewis Griggs‘ book “Going International”, which was published by Plume Printing in the year 1985 when many US companies were expanding globally. Now it is the task of many more companies from many more countries, and the practical and theoretical experience of other researchers and practitioners has been put together by international business students of Pforzheim University to develop the basis for business around the globe in 2015. Of course not all subjects could be covered, but this overview will lay the ground work for further understanding of doing business abroad.
Pforzheim, October 2012
Professor for International Business
Sample chapter of Going Abroad
This is the most comprehensive case selection for International Business issued. For this reason I translated this case selection for the German reader:
Strategien für die internationale Weltwirtschaft
The German edition of „Global Strategies“, published in the fall of 1998, differs from the original American edition in several, not inconsiderable ways. The formal structure may have been maintained, in that only articles from Harvard Business were chosen, but from the point of view of the content, in fact more than four years have passed in between the two publications. Eight of the fourteen articles in the American edition were from the 80’s and were strongly characterized by the Japanese threat. The rise of China and other emerging countries in Eastern Europe and Asia with their own entitlements and crises was not yet clearly noticeable. On the other hand many authors were recognizing that the global activity and cooperation of companies would have to be reorganized. The network organization was described and recommended from an early stage.
The newer articles from Harvard Business Review clearly show these two important changes – the emergence of a multi-facetted and volatile global economy and the flexible companies within. We therefore only call upon publications after 1992 – except for four older articles, which are either classics in global strategies or which already describe the network in a detailed way.
The articles do not only offer conceptual ideas for global strategies but also actively address the practice. Board Chairmen of global companies are consulted and there are several empirical studies included in the newer articles, which broaden the experience which aspects of globalization are more successful than others.
The general idea which is so important for entrepreneurs and managers and which runs like a thread through the collection of essays is the control of worldwide networking coordination processes in which international managers find themselves. The role of the individual is a central realization – it can have a larger effect than the abstract word “network” might convey. Globalization is nothing alien which imposes itself upon us from above and which we can only react to, it is – exaggeratedly – organizational thinking and behavior which allows us to obtain advantages and new growth strategies in a world which is growing together.
Bolko von Oetinger
Internationalisierung des Mittelstandes
„We live in a time which is controlled by increasing globalization and internationalization. We cannot and may not shut ourselves off from this”. Dr Werner Müller, German Federal Minister of Economics and Technology implored this in his speech for the opening of the International Fair of Crafts in Munich on March 15 2000.
He further indicated that the industrial society was rapidly transforming into an information and knowledge society. The shortening innovation cycles and the liberalization of the telecommunications markets were leading to an almost explosive expansion of new multimedia online services. All areas of the new information and communication technologies showed important growth.
It is important to use the potential of this market, especially considering the employment possibilities. The transformation to an information society is not self-propelling. Germany, as a nation of high technology and export orientation, must face globalization in a challenging and positive way so as to secure its chances in future.
At least since the creation of the European internal market, the question of the necessary qualifications for international commercial activity has come more and more into focus. Diverse studies have shown the importance of the extensive international qualifications necessary in the foreign business of companies – and these do not only include the knowledge of foreign languages. Furthermore, it has been demonstrated that neglecting these qualifications can signify a serious obstacle to the internationalization process.
The Federal Institute for Vocational Training (Bundesinstitut für Berufsbildung, BIBB), Bonn, has taken the initiative with a research project which develops methodological guidance for SMEs to develop strategies for international qualification. 20 million people are active in SMEs in Germany. They offer apprenticeship training to 1.2 million adolescents and generate around half of gross national product.
Over 30 companies were interviewed for this publication and the applied methods and mechanisms were analyzed as to their transferability. This is the first systematic publication on the application of information and communication technologies in the internationalization process of SMEs. These can use the results of the analysis to reflect on their own situation and to choose instruments which could increase their commercial success on an international level.
The publication was prepared by Dipl- Wirt.-Ing. (FH) Frank Lorenz and the students Nicole Günther, Stefanie Kraus, Thomas Ortlieb, Markus Stoiber and Hakan Yüksel of the degree program International Business at the University of Applied Sciences Aachen. We would like to thank them and all companies which offered their assistance in the survey.
Aalen, Villingen-Schwenningen, Bonn,
Waldemar A. Pförtsch