How Businesses Operate Internationally

Methods of International Business Operations

Businesses may choose to export goods to foreign markets, which simply entails producing goods domestically and selling them overseas.
Global firms may get involved in importing goods, where they buy foreign goods and sell them in their home market.
Some businesses opt for a licensing agreement which involves giving a foreign organisation the right to manufacture a product or use a trademark in exchange for a fee.
A franchise is when businesses grant a foreign company the right to use its brand and business model in return for a franchise fee.
Companies often establish strategic alliances or create joint ventures with foreign firms to share resources, knowledge and risk.
Larger businesses might explore foreign direct investment, where they own and control assets in another country, such as factories or offices.

International Market Entry Strategies

Indirect exporting involve using intermediaries in the home country to handle all export activities.
In direct exporting, the company handles all export activities itself, taking on more risk but also potentially reaping greater rewards.
In a turnkey project, a company designs and constructs a facility abroad, trains local staff, and hands it over to a foreign company for a fee.
Through contract manufacturing and outsourcing, a business hires a foreign company to produce its product and can focus on other business aspects itself.
A wholly owned subsidiary is a local business entirely owned and controlled by a foreign company - this strategy carries the highest risk, but also the potential for the highest return.

Global Marketing

Adapting to different cultures and buyer behaviours is vital - some businesses adopt a standardised approach, keeping their marketing strategy the same across all markets.
Others use a customised approach, adapting their products and marketing strategy to suit local tastes and preferences.
The Digital Marketing plays a key role, with businesses harnessing social media, email marketing, and other online platforms to reach customers worldwide.

Challenges of International Business

Economic differences such as varying income levels and economic conditions can have an impact on the profitability of international operations.
There are political risks involved in dealing with foreign governments and navigating international law and regulations.
Firms must understand and adapt to the cultural differences between their home country and the foreign market.
The logistical challenges of shipping products or setting up operations in a foreign country can be significant.
Companies may face ethical dilemmas when business practices that are acceptable in their home country are frowned upon or illegal in other countries.
Fluctuation in currency exchange rates can impact the costs and profits of international operations.