With the advent of globalization, global business practices and international business have become common phenomena. Large companies and MNCs often operate in more than one country. Managing such cross-border operations requires a thorough understanding of local cultures, practices, laws and business environments. International managers, thus, have to play several important roles in their businesses.
Global Business Practice/International Business
International business basically means commercial transactions that involve two or more countries. These transactions can occur between private entities as well as government agencies. The only prerequisite of such transactions is that they should involve multiple nations.
For example, a lot of big companies import their products from one country and sell them in another. Even governments do so in many cases. These transactions can also include an exchange of finance, technology, people, services, etc.
International management refers to the practice of managing these kinds of international businesses and global practices. This field of management has gained a lot of prominence after globalization. Even small and medium-sized companies these days transact with foreign entities.
Features of International Business
A cross-border business is very different from one that involves a single country. The main feature of such businesses is that they operate on very large scales and involve multiple jurisdictions.
Another feature of international businesses is that they integrate the economies of multiple countries. Functions like importing, exporting, financing, hiring, selling and managing may all happen in separate nations.
Thirdly, international businesses and MNCs also have the distinction of emerging from only a few developed countries. Companies from large economies like the USA, UK, Japan, China, Germany, India, etc. dominate international trade.
Another feature of cross-border businesses is that they face fierce competition. Smaller companies from developing nations often have to compete with MNCs that have no shortage of resources.
Importance of International Business
International business offers the following benefits to the economies and organizations it involves in its transactions:
- Since import and export are common functions of cross-border business, they involve the use of foreign exchange. The country exporting goods and services, thus, can earn foreign exchange from the country importing them.
- Cross-border operations offer businesses the opportunity to earn higher profits. This is because they can sell their products to a large customer base from multiple countries.
- Since international business helps a nation’s economy, governments often provide benefits to attract foreign business. Such government benefits may be in the form of tax sops, subsidized resources, financial incentives, etc.
- International businesses also facilitate optimum utilization of resources. Companies use natural and human resources from various countries in their operations.
- It is very easy for international businesses to diversify and expand their activities. This is because they earn very high profits and receive many governments benefits.
Remote work systems
Remote work systems play a very important role in international business these days. These systems allow people to deal with business in other countries without being physically present there. This has become possible with the advent of technology these days as communication has become easier. Remote work systems save a lot of expenses for international businesses.
Retail and workplace flexibility
Technology has played a big role in revolutionizing retailing as well. E-commerce companies can sell their products in every country by operating from a single location. Even traditional brick-and-mortar businesses can transact in multiple jurisdictions these days.
Even workplace flexibility has become simpler under international business due to technology. IT companies hire employees from many countries who operate and communicate seamlessly. Hence, companies no longer need to procure expensive office spaces locally.
Solved examples on Global Practices
Question: Find the missing word in the following statements.
(1) Exporting countries can earn __________ from importing countries.
(2) MNCs from __________ countries dominate international business.
(3) Tax sops and financial incentives are examples of __________ to attract foreign capital and business.
(4) __________ companies can function remotely and sell their products worldwide.
Answers: (1) foreign exchange (2) developed (3) government benefits (4) E-commerce