International Business Introduction While business has long been contingent on a firm’s ability to expand internationally, such processes are even more prominent in the contemporary world environment. The current world is such that global integration is a highly prominent aspect of all businesses through both expansion as well as supply processes. With the increasingly globalized business environment, concerns regarding the challenges of international business have become even more pronounced. From issues as diverse as conflicting business culture to the difficulty of dealing with regional economic recessions, conducting international business has proved at times a highly challenging venture.
This essay examines difficulties experienced in the international business market. Analysis One of the most prominent challenges of the international business market is dealing with the political and legal regulatory environment. As regulatory environments are greatly divergent throughout the world it’s oftentimes a challenge for businesses operating internationally to understand the oftentimes-diverse aspects of these political challenges. Some of the most prominent examples in the current world environment can be linked to American businesses gaining a foothold into the emerging Chinese market. A number of prominent American businesses, including Internet search engine Google, and social networking giant Facebook, have both been restricted entry into this rapidly emerging region for a variety of Chinese political reasons (Walker).
While these examples are the most prominent there are a number of specific regulatory concerns that make developing a uniform production model next to impossible. In these regards, there is great diversity in terms of consumer protection between countries. This poses a challenge as oftentimes manufacturers are required to alter product design or packaging as a means of meeting the regulations of countries with more stringent consumer protection laws (Walker).
Another concern within this area of understanding is the nature of advertising and marketing. Many countries restrict advertising of specific products. A number of European regions restrict the use of children in advertisements (Walker). Many countries necessitate that specific warnings be adhered to certain products; one considers that in the United States advertisers must attach warnings to cigarette promotions. In Libya advertising is restricted all-together (Hill). The culmination of these challenges is such that for businesses seeking international expansion considerable attention and change must be given to regional laws and regulations.
Another major challenge of conducting business in international markets is differences in terms of culture. Even while some cultures may experience a number of similar values, there is oftentimes diversity of opinions on everything from personnel policies to tastes. One considers that such issues have often faced American businesses operating with the Japanese cultural climate. While these two nations share many similar perspectives on supply chain efficiency and quality product design there are a number of divergent cultural concerns regarding personnel policies (Ferraro).
For instance, the American business environment largely implements a meritocratic system. Conversely, Japanese organizations assume responsibility for an employees continued career, such that American entities operating in Japan have frequently experienced challenges when attempting to terminate unproductive employees (Ferraro). While this is a single example, cultural differences present a challenge in business dealings between nearly all countries. Indeed, for a business to be successful in a specific cultural environment considerable attention to detail must be given to the socio-cultural aspects surrounding tastes and perspectives in this region.
Such differences pervade nearly all aspects of business, from marketing to consumption patterns (Ferraro). Even when products are the same in the different cultural environment, it’s possible that consumption patterns differ. For instance, when entering the Asian marketplace Starbucks noticed that rather than buying the coffee and sitting around in the coffee shop, consumers quickly left the store; such cultural differences necessitated that the organization scale-down the size of their stores, while increasing production efficiency as a means of meeting these differing cultural demands (Ferraro). Similarly, McDonalds had to change the specific products they offer in different cultural regions as a means of meeting the diverse variety of tastes.
Ultimately, conducting international business in international markets necessitates a thorough understanding of differing cultural modes of understanding. Still, another prominent challenge of conducting business in international markets is diversities in terms of the economic environment. While there are a great number of political and regulatory considerations in terms of differing economic environments, an organization must also consider the specific economic climate. One of the most prominent such considerations in the contemporary world environment is international businesses conducting business throughout Europe.
Currently this region is embroiled in the European Sovereign Debt Crisis, an economic challenge that influences and drives many businesses decisions. For international businesses operating in this business climate or similarly economic environments with stressed conditions, considerable attention must be given to exposure risks. Oftentimes the currency in these regions is subject to significant inflation or value fluctuations (Salvatore). As such it’s necessary for organization to participate in vigilant hedging procedures, including derivative and currency exchange, as a means of guarding against such market challenges (Salvatore).
Another prominent economic challenge is differences in the competitive environment. While the globalized economy has given consumers diverse access to international products, oftentimes businesses face regional economic competitive challenges. Consumers in specific regions are oftentimes more willing to purchase products that are native to their specific country or homeland. This poses challenges as international organizations must develop in-ways within these regions as a means of establishing international market share (Salvatore). Similarly international businesses face competition from regional competitors that are able to achieve greater degrees of product specialization through appealing to the specific cultural region; as such the outside business faces direct challenges to a model of mass production (Hill).
Conclusion In conclusion, this essay has examined challenges to conducting business in international markets. Within this context of understanding, prominent challenges of political and legal regulations, cultural differences, and the economic environment have been considered as they function as largest difficulties for conducting international businesses. Considering universal characteristic of these categories one notes that perhaps the most pervasive understanding is that it’s impossible for organizations to institute a single business model through all business environments.
Ultimately, the organizations most successful in conducting business abroad will do so through increasing degrees of regional differentiation. References Ferraro, Gary. Cultural Dimensions of International Business. Pennsylvania: Prentice Hall, 2009. Hill, Charles. International Business. New York: McGraw Hill, 2010. Salvatore, Dominick. Introduction to International Economics. New York: Wiley, 2009. Walker, Danielle. Doing Business Internationally. New York: McGraw Hill, 2002.