Barriers to International Business

International Business

International business refers to any form of business transactions that involves crossing national borders. This could range from exporting, importing, foreign investment or production in foreign countries.
Companies get involved in international business for reasons such as access to raw materials, new markets, and lower production costs.
Multinational Corporation (MNC) is a company that has operations (including manufacturing, sales and service, and research and development) in more than one country.

Political Environment: Laws, regulations, and political stability of a country can greatly affect the ease of doing business in that country.
Economic Environment: The economy of a country affects consumer spending and demand, exchange rates, inflation, interest rates, and unemployment rates.
Social Environment: The cultural practises, social behaviours, and consumer tendencies, and the level of education in a country can affect a business’s operations.
Technological Environment: The technological advancement of the country, infrastructure and internet penetration can affect business operations.
Environmental Factors: Natural disasters, climate change, and sustainability issues can affect businesses that rely heavily on natural resources.

Exporting: A popular method of entering international markets. It is low risk and companies do not need to invest in new facilities or adapt their products much.
Licensing: An arrangement where a company allows another company in the foreign market to use its brand, product specifications, or other Intellectual Property rights.
Franchising: A company (the franchisor) allows another business (the franchisee) to use its brand name, products and processes to produce and market the same goods/services.
Joint Ventures: Two or more companies from different countries agree to pool resources for a specific business operation, usually as a separate legal entity.
Foreign Direct Investment (FDI): When a company establishes business operations or acquires tangible assets in a foreign country, usually by setting up factories and production units.

Commercial Risk: The risk of a business venture being unsuccessful.
Country Risk: The risk arising out of a country’s political, economic or social instability.
Currency Risk (also known as Foreign Exchange Risk): The risk of fluctuations in the foreign currency exchange rate.
Cross-cultural Risk: These are challenges to effective communication, forming relationships and negotiating caused by cultural differences.

Globalisation is a process where businesses or other organisations develop influence internationally, especially by expanding into different countries worldwide.
An important driver of globalisation has been the technological advancements which have resulted in easier and faster communication, transport and financial flows.
Globalisation has numerous impacts on international business, including the need for businesses to understand various cultural and business norms to do well globally.

International trading blocs are agreements between two or more countries to remove trade barriers between them.
Some of the significant trading blocs include EU (European Union), NAFTA (North American Free Trade Agreement), ASEAN (Association of South East Asian Nations) and MERCOSUR (Southern Common Market in South America).
The existence of these trading blocs can significantly influence the opportunities for a business to expand its operations.