Factors of international business

business essentials -- part 4

Several factors enter into the decision to go international. One overriding factor is the business climate and other nations. Even experienced firms have encountered cultural, legal, and economic roadblocks. A company should also consider at least two other issues: (1) is their demand for its products abroad? (2) if so, it must be adapted those products for international consumption?

After deciding to go international, a firm must decide on its level of involvement. Several levels are possible: (1) exporters and importers; (2) international firms; and (3) multinational firms. Different levels of involvement require different kinds of organizational structure. The spectrum of international organizational strategies includes the following: (1) independent agents; (2) licensing arrangements; (3) branch offices; (4) strategic alliances (or joint venturers); and (5) foreign direct investment (FDI).

Some social and cultural differences, like language, are obvious but a wide range of subtle value differences can also affect operations. Economic differences can be fairly pronounced. In dealing with mixed economies, firms must be aware of land -- and to what extent -- the government is involved in a given industry. The impact of economic differences can be even greater in planned economies. Governments can set conditions were doing business and even prohibit it altogether. They can control the flow of capital in use taxes to influence activity in a given industry. They can even confiscate foreign owned property. Common legal and political issues and international business include quotas, tariffs, subsidies, local content laws, and business practice laws.