Why Business Should Engage in International Business?

Hout, Porter & Rudden’s (1982) explain in their article how three companies were successful in taking part in global business with different approaches. Caterpillar utilizes both its worldwide sales and its existing market for parts revenues. Ericsson developed a modular software packages to use in various combinations to satisfy the needs of diverse telephone systems at an acceptable cost. The company absorbed development costs and enjoyed economies of scale that steepened as the number of software systems sold increased. Honda used marketing to unite worldwide demand and unlock the potential for economies of scale in production, marketing, and distribution.

Like the business environment becomes competitive, businesses need to be more enterprising, creative and extend more to the realities of the globalization. Companies like to cut costs as low as possible and maximize profit in all operations and transactions. Consequently, to attain business objectives while delivering great values to customers, companies must plan strategically to manage the business challenges and keep an important part of the target market. Going international is a practical way to expand business and reach more goals. 

International Trade

International trade has allowed countries to expand their markets for both goods and services that otherwise may not have been available domestically. As a result, the market contains greater competition and therefore, more competitive prices, bringing in more affordable products home to the customer(us). There are many opinions out there about the pros and cons of international trade. However, for business to stay competitive and provide the best products on a global scale, global trade is sometimes necessary (Gourani, 2019). Businesses are important to the economies of all nations, they provide jobs, economic growths, and the best innovations. More and more, businesses must face the challenges of becoming multinational companies and entering the international marketplace. However, businesses run into problems and prospects when entering global competition. A global culture occurs when an organization has managerial and worker values that view strategic opportunities as global and not just domestic.

Why international business

In recent years, the WTO has shown that, with the support of the private sector and others, it can achieve major, economically significant trade agreements. Strengthening this partnership will ensure that the WTO ‘s record is maintained and that it keeps delivering for growth, development and job creation around the world (Azevedo & Mittal, 2016). International trade is complex, it needs corporations across national borders and between governments and businesses. However, global trade delivers jobs and higher living standards for the citizens.

Companies are dependent on global supply chains to be competitive in the world economy. International capital markets provide an important source of finance. A welcoming immigration policy provides both vital sources of entrepreneurial talent as well as skills that are in short supply in the U.S. workforce. That is why many companies have loudly rejected protectionist rhetoric and policies (Clausing, 2019). Trade obstacles constrain people to pay more than they need to for goods and services and make it harder for companies to compete. 

According to the U.S. Department of commerce, more than 70 percent of the world’s purchasing power is located outside of the United States. That is why many businesses are jumping on the global bandwagon to capitalize on the potential of tremendous growth (Delaney, 2014).

Exploring the impacts of global business

Not all counties are made equal. There are many products and services that are not possible to source domestically due to foreign competitive efficiency. In other words, manufactures in countries many be able to produce certain goods faster, more cheaply and of possibly better quality than others (Gourani, 2019). This impact is bigger than if every remaining tariff in the world were reduced to zero. Full implementation could create more than 20 million jobs and lift global gross-domestic-product growth by up to 0.5 percentage points. Businesses around the world will get a significant boost (Azevedo & Mittal, 2016). Organizations engage in international business for a multiplicity of reasons, but the goal is generally for company growing and expansion. An international strategy can help to diversify and enlarge a company. Companies with international operations can gain from remunerative investment opportunities that overseas markets can provide and that may not exist in their home country. 

While building a cross-border business might seem daunting, it is now an essential component to a brand’s longevity. But if you plan accordingly, understand the logistic of fulfilling customer needs and comprehend the cultural and behavioral differences between countries, you can ensure nothing gets lost in translation (Blachman, 2018). In the end, it is important to recognize that the interest of society and business often coincide. An open economy with an economically healthy middle class and strong and stable institutions can benefit everyone (Clausing, 2019). International business can reinforce companies perceived image, as global operations can help build brand recognition to support future contract negotiations, new marketing campaigns, or further enlargement etc.

Delaney (2014) presents different reasons to go global: increase sale and profitability, enter new markets, create jobs, offset slow growth in your home market, outmaneuver competitors, enlarge the customer base, create economies of scale in production, explore untapped markets with the power of the internet, make use of excess capacity oof season and travel to new countries.

Examples of companies in global business

Walmart, the US based international retailer states, “By realigning our resources, leveraging our scale, and restructuring our relationship with suppliers, we can offer even more competitive pricing on merchandise and provide our customers a clear and compelling assortment of better quality products at lower prices ( Gourani,2019). Jack Ma, co-founder of Alibaba, expects many U.S. companies to export good to China in the coming years, thus creating a more equitable and active cross border relationship between two of the world’s biggest economies (Blachman, 2018). These companies do not use the same strategy as Hout, Porter & Rudden (1982) article. There are many reasons and different strategies to use to be successful when companies engage international business.

*Fregens DONATIEN*

MScM, Master of science Management, Eastern Nazarene College, Massachusetts USA   

Doctoral Student, Doctoral Business Administration (DBA), Liberty University, USA.

References

Gourani S. (2019). Should Business Be Open to International Trade? Forbes. www.forbes.com

Clausing, k. (2019). Building a Better Globalization. Harvard Business Review.www.hbr.org.

Azevedo, R. and Mittal, S.B. (2016). Business Can Help Shape the Future of Global Trade.              www.WSJ.com

Blachman, A. (2018). Cross-Border Is Becoming a Non-Negotiable. Are you ready? www.entrepreneur.com.

Delaney, L. (2014). Ten Reasons to Go Global. www.linkedin.com

Hout T., Porter, M. & Rudden, E. (1982, September). How global companies win out. Harvard Business Review.