Posts Tagged international business

International Business Finance

May 4, 2009 at 6:41 am · Filed under business tips ·Tagged , , , , , ,

Many firms are interested in investing and seeking finance from foreign sources and exporting goods and services to foreign countries. Overseas involvement of firms is increasing, and this trend is expected to continue. This has been stimulated by a variety of forces. First is the change in the international monetary system from a fairly predictable system of exchange to a flexible and volatile system of exchange. Second is, emergence of new institutions and markets, particularly the Eurocurrency markets, and a greater need for international financial intermediation.

In 1971, the US dollar was unlinked from gold or allowed to “float”. This brought about a dramatic change in the international monetary system. The system of fixed exchange rates where devaluations and revaluations occurred only very rarely, gave way to a system of floating exchange rates.

The distinguishing characteristics of international business finance are multiple currencies, differential taxation and barriers to financial flows. Of these, the multiple currency factor and the attendant issue of exchange rates has received considerable attention, particularly in recent years. An exchange rate represents the relationship between two currencies.

The procedure for evaluating a foreign investment in international business finance consists of identification of cash flows, choice of an appropriate discount rate and determination of net present value. Foreign investments generally involve higher risk, which arises from factor like changes in currency value, discriminatory treatment of a foreign company and threat of expropriation. Risk stemming from fluctuations in exchange rate looms constantly on the horizon of foreign investment. In addition, a foreign investment is subject to discriminatory treatment and selective control in various forms motivated mainly by political considerations. Finally, the threat of expropriation without adequate compensation may exist, particularly in countries where radical nationalistic sentiments are strong. In view of the higher risk associated with foreign investment, a firm contemplating foreign investment would naturally expect a higher rate of return.

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Risks in International Business

August 6, 2008 at 10:28 am · Filed under business tips ·Tagged , , , , , , , , , , , , , , , , , , , , ,

Just as there are reasons to get into global markets, and benefits from global markets, there are also risks involved in locating companies in certain countries. Each country may have its potentials; it also has its woes that are associated with doing business with major companies. Some of the rogue countries may have all the natural minerals but the risks involved in doing business in those countries exceed the benefits. Some of the risks in international business are:

(1) Strategic Risk
(2) Operational Risk
(3) Political Risk
(4) Country Risk
(5) Technological Risk
(6) Environmental Risk
(7) Economic Risk
(8) Financial Risk
(9) Terrorism Risk

Strategic Risk: The ability of a firm to make a strategic decision in order to respond to the forces that are a source of risk. These forces also impact the competiveness of a firm. Porter defines them as: threat of new entrants in the industry, threat of substitute goods and services, intensity of competition within the industry, bargaining power of suppliers, and bargaining power of consumers.

Operational Risk: This is caused by the assets and financial capital that aid in the day-to-day business operations. The breakdown of machineries, supply and demand of the resources and products, shortfall of the goods and services, lack of perfect logistic and inventory will lead to inefficiency of production. By controlling costs, unnecessary waste will be reduced, and the process improvement may enhance the lead-time, reduce variance and contribute to efficiency in globalization.

Political Risk: The political actions and instability may make it difficult for companies to operate efficiently in these countries due to negative publicity and impact created by individuals in the top government. A firm cannot effectively operate to its full capacity in order to maximize profit in such an unstable country’s political turbulence. A new and hostile government may replace the friendly one, and hence expropriate foreign assets.

Country Risk: The culture or the instability of a country may create risks that may make it difficult for multinational companies to operate safely, effectively, and efficiently. Some of the country risks come from the governments’ policies, economic conditions, security factors, and political conditions. Solving one of these problems without all of the problems (aggregate) together will not be enough in mitigating the country risk.

Technological Risk: Lack of security in electronic transactions, the cost of developing new technology, and the fact that these new technology may fail, and when all of these are coupled with the outdated existing technology, the result may create a dangerous effect in doing business in the international arena.

Environmental Risk: Air, water, and environmental pollution may affect the health of the citizens, and lead to public outcry of the citizens. These problems may also lead to damaging the reputation of the companies that do business in that area.

Economic Risk: This comes from the inability of a country to meet its financial obligations. The changing of foreign-investment or/and domestic fiscal or monetary policies. The effect of exchange-rate and interest rate make it difficult to conduct international business.

Financial Risk: This area is affected by the currency exchange rate, government flexibility in allowing the firms to repatriate profits or funds outside the country. The devaluation and inflation will also impact the firm’s ability to operate at an efficient capacity and still be stable. Most countries make it difficult for foreign firms to repatriate funds thus forcing these firms to invest its funds at a less optimal level. Sometimes, firms’ assets are confiscated and that contributes to financial losses.

Terrorism Risk: These are attacks that may stem from lack of hope; confidence; differences in culture and religious philosophy, and/or merely hate of companies by citizens of host countries. It leads to potential hostile attitudes, sabotage of foreign companies and/or kidnapping of the employers and employees. Such frustrating situations make it difficult to operate in these countries.

Although the benefits in international business exceed the risks, firms should take a risk assessment of each country and to also include intellectual property, red tape and corruption, human resource restrictions, and ownership restrictions in the analysis, in order to consider all risks involved before venturing into any of the countries.

Dr. Sidney Okolo is a professor, consultant, strategist, and Africa expert. He is affiliated to several universities, the Managing Director of International Business Associates, a management consulting firm, and also the CEO of Global Education Support, an education assistance program.

Among other things, he engages in all aspects of learning, knowledge, organization and human change. His focus is on leadership, management, entrepreneurship, profit engineering, human potential, excellence, achievement, business strategy, research and development. Product management, change management, conflict management, athlete management, marketing, business development and operations. He works with clients to adapt to change due to change in factors of production, technology, goods and services. He engages clients in training, retraining, development, skills enhancement, association, behavior modification, ways of thinking, and attitude adjustment. In addition to his work in the United States, his focus is also on developing countries in the continent of Africa, their leadership, culture, economic and market structure, community planning and development, and his created four letter word, “PIES”, which stands for: poverty, instability, ethnicity, and sectarianism.

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Understanding the Importance of International Business

July 9, 2008 at 12:12 pm · Filed under business tips ·Tagged , , , , ,

International business is all business transactions-private and governmental-that involve two or more countries. Why should one be interested in studying international business? The simplest answer is that international business comprises a large and growing portion of the world’s total business. Today, almost all companies, large or small, are affected by global events and competition because most sell output to and/or secure suppliers from foreign countries and/or compete against products and services that come from abroad.

More companies that engage in some form of international business are involved in exporting and importing than in any other type of business transaction. Many of the international business experts argue that exporting is a logical process with a natural structure, which can be viewed primarily as a method of understanding the target country’s environment, using the appropriate marketing mix, developing a marketing plan based upon the use of the mix, implementing a plan through a strategy and finally, using a control method to ensure the strategy is adhered to. This exporting process is reviewed and evaluated regularly and modifications are made to the use of the mix, to take account of market changes impacting upon competitiveness. This view seems to suggest that much of the international business theory related to enterprises, which are internationally based and have global ambitions, does often change depending on the special requirements of each country.

Another core issue is the company’s growth and the importance of networking and interaction. This view looks at the way in which companies and organisations interact and consequently network with each other to gain commercial advantage in world markets. The network can be using similar subcontractors or components, sharing research and development costs or operating within the same governmental framework. Clearly, when businesses formulate a trading block with no internal barriers they are actually creating their own networks. Collaborations in aerospace, vehicle manufactures and engineering have all sponsored the development of a country’s or a group of countries’ outlook based on their own internal market network. This network and interaction approach to internationalisation shows the substance of being able to influence decisions when knowing how the global network players work or interact.

For example, a crucial market network is that of the Middle East. Middle East countries are rich, diverse markets, with a vibrant and varied cultural heritage. This means that although there has been a harmonisation process during the past few years, differences still exist. Rather than business being simpler as a result, it should be recognised that because of regulations and the need those countries have to restructure as they enter the global market, performing any kind of business can be highly complex. It should be remembered though that the Middle-Eastern countries have a low-income average and like to have their cultural differences recognised. Those firms that will or have recognised these facts have a good chance of developing a successful marketing strategy to meet their needs. Fortunately some firms have realised these important differences and reacted adequately when strategic decisions had to be made regarding their penetration to this kind of markets.  Bankruptcy Records – Lookup bankruptcy records online with a free search and obtain instant access to court records.

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How Quickly Do You Need To Get A Globalized Website?

May 29, 2008 at 11:55 am · Filed under business tips ·Tagged , , , , , , , , , , ,

I’ve had quite a few questions lately on how to move towards a globalized website.

And the marketer in me responds my looking at the clients current business and what the client is marketing.

Save Through Knowledge

It is important for any online business with a desire for international expansion to know what is involved in website globalization.

Why?

There are things you can do today, no matter how many international sales you have already made or how many you have in the channel that will save you time and money later when you actually need to move towards website localization and website globalization.

This is the key reason why website globalization is such a buzz word.

But, remember, the internet is mainly a medium to communicate with your clients and prospects. Of course, it does have other major roles in your international business expansion. But it is first and foremost a means to communicate.

Know Your Current Business Needs

You need to clearly identify where your company is in the realm of international business before looking at the other functions of the internet for your international expansion.

If internet is a way to communicate with your clients and prospects, what will you be saying to them? Where is your current internet marketing?

Here are the basic types of international marketing with a short definition:

Domestic Marketing = selling your domestic product to your domestic market

Export Marketing = selling your domestic product to your foreign markets

International Marketing = adapting your product and selling it to one country

Multinational Marketing = selling your foreign product to a small group of countries

Global Marketing = selling one product to the whole world

Most online businesses are basically in the Export Marketing phase.

They may say or think they are in Global Marketing phase but international and multinational marketing are between the two phases.

A Global Marketing company has all of the market knowledge to be able to position their product well throughout the world. They have gone through the other stages of international marketing to have the knowledge, experience and power. These are generally very large companies.

Plan Your Next Step

Once you know where your company is on this simple scale, you will find it easy to see where your company needs to go to. It is generally one step up.

Trying to move more than one step up at one time needs mega investment, and is not easy.

Let’s say you are currently in the Domestic Marketing phase and want to jump straight to the International Marketing phase.

This jump is possible. You will just pass over Export Marketing but will require a lot more investment in market research. It is possible and has been done by countless other organizations..

Take Action Towards Your Next Step

If you were to spend a little time actively doing Export Marketing you will gain foreign market knowledge that may surprise you.

During the time you were active in Export Marketing you could use internet marketing practices to actively incite foreign customer feedback and adapt your product to one foreign country.

Define Your Website Needs

So how does this help you in developing your globalized website? Your website needs to communicate with your market.

Your website is your most powerful means of communication during each of your marketing steps towards a global market. But it is your medium for your current marketing needs.

  • Look at where your current business revenue comes from.
  • Identify what you need to do to move towards more international business.
  • Be realistic in your international expansion goals.
  • Take things one step at a time.
  • Plan for your internationalized websites, your localized websites and your globalized websites in a time frame that corresponds with your business objectives as they progress towards further international development.

Adapt Your Website Globalization To Your Plan

By looking at your current international business and knowing what you need to do next, it is fairly easy to see when you will need an internationalized website, a localized website and a global website.

Internationalize your website as soon as you are marketing your domestic products to foreign markets.

Move towards website localization as soon as you are marketing to specific countries.

Plan for your website globalization by implementing the internationalization and localization processes with good internet marketing practices and you will be ready when your international markets need it.

Internet’s Second Major Role In Your International Business Development

While planning for your website globalization do not forget the second biggest advantage internet brings towards your international business development.

International Market Research

Plan for your internationalization, localization and globalization with your international market research in mind. The more client research you can do online the more successful your business will be. Internet makes your research cheaper, faster and easier to carry out. But you need to plan on testing methods to get feedback.

Internet is much more than a medium to communicate, it also gives you the means to find out all about your international markets. Keep your marketing in mind as you plan for your international websites.

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