If you're a business student, you might ask, why would I need to take a class in international business?
Isn't doing business pretty much the same regardless of where it is conducted?
Sure I may have to get someone to translate for me or change money at the bank,
but a transaction is a transaction and people have been transacting across borders for centuries.
Moreover, you may have vacationed, done volunteer work, or even been an exchange student in another country.
You recognize that there are differences, but how does that really hinder me from doing business?
After all we are all human and for the most part, we all must produce and consume to stay alive.
Besides how different can international business be from domestic business? Well, it turns out that
international business is often quite different from doing business in your home country.
International business is technically defined as all commercial transactions, including sales,
investments, and transportation, that take place between two or more countries.
In other words, it is the act of doing business across national borders.
The reality is that when you cross national borders, many of the taken-for-granted assumptions
about the way the business world works need to be re-examined.
Take opening up a restaurant in the United States for example.
When you do business in the U.S. there are many external factors that are fairly consistent
across companies and even industries. You assume that you can pay your employees what you want,
as long as you don't go below the minimum wage, and meet other basic work requirements,
all of which are readily available. You can assume that these requirements will not change much over time.
You can also assume that the government will not mind if you open up another restaurant,
as long as you get a business permit and a food license, you're good to go.
You also correctly assume that you will be able to either buy or rent a building for your restaurant and
that you can choose the location. You can search on your own or through a realtor and you'll be
able to negotiate the price. You are also fairly familiar with the local tastes and preferences so
you have an idea of what foods people will like. Essentially, they like what you like.
You assume that the U.S. dollar will hold its value and that people will be able to pay with cash or credit cards.
You assume that you will not be asked for bribes to open or continue with your business and
that you will not need to pay protection money to organized crime leaders in your area.
Finally, you assume that you will be able to use social media and the Internet to advertise and offer online reservations.
Most of these assumptions may sound pretty silly. Of course I'll be able to choose the location of my restaurant.
Of course the U.S. dollar will be an acceptable form of currency.
But when you do business internationally, all of these assumptions need to be questioned and
modified to address the realities of a global environment. In an international setting,
things that were just assumptions can no longer be taken for granted and become paramount to your success.
These differences across nations could be as stark as the differences one might find
in doing business across planets. While you may have thought about international business before,
you've probably never thought about interplanetary business. Yet believe it or not some people have
and they are not all Jedi or Trekkies. PayPal for example has a galactic initiative to figure out
what future space travelers would use as cash. They admit that this would not be a reality any
time soon, but nonetheless they want to be ready when space tourism and other out of this world
opportunities begin to take off. While we still haven't found intelligent life on other planets,
you can imagine that if we did there would be plenty of people wanting to do business with them.
These foreign planets would represent untapped markets for your products and services.
For instance let's say you are a successful watchmaker and that your watches are sold all over planet Earth.
If it were a possibility, there are three main reasons why you might want to start selling beyond Earth.
First, you have been doing well, but because there are no new areas to expand, your business is not growing.
However, one day in your intergalactic, travels you find a planet whose inhabitant life forms or,
as you like to call them, aliens, they tell time using pocket watches, but no one uses wristwatches.
Part of the reason could be that they don't really have wrists that are smaller than their hands.
The idea of putting something on their wrists only to fall off every time they put their arm down seems rather absurd.
However, you see a potential growth opportunity.
While the exact watches you produce may not be suitable for this population,
you realize that with some slight modifications using the incredibly advanced technology of spandex
that you already use in some of your watches on Earth, the watches could stay attached to aliens wrists.
If you are successful in entering this planet's market, as well as atmosphere, then you might be able to grow your cells.
This would be much easier than trying to getthe humans on Earth to switch from their existing watch brands to yours.
So increased cells is a major motive for expanding into interplanetary markets.
Second, while spandex is super cool and super advanced you may find that the foreign planet in
which you are trying to expand has technological advances that not only allow them to make spandex
much more cheaply, but to do so in a way that creates less environmental waste.
This is good news to you for two reasons. One, you will now be less of a contributor to depleting your own
planet's ozone layer and subject to lower carbon taxes. Two, you will now be able to decrease the
overall cost of producing watches both for the new planet and for the planet Earth.
In addition, you may find that by interacting and working with the aliens, you are able to glean some new insights on
spandex bands for the earth market. So the ability to acquire resources and knowledge from the
foreign planet would act as a second major motive for expanding into interplanetary markets.
Third, you may feel that by selling your wristwatches in a foreign planet, it reduces risks that you
are facing by limiting yourselves to Earth. For example it is no secret that the Klingons,
aliens from the planet Klingon, have had their eyes on capturing and taking over planet Earth for quite some time.
As far as you can tell from viewing the many episodes of Star Trek, the Klingons are not wristwatch people.
They seem to care less about telling time and more about telling civilizations what to do.
While people have made effort to learn their language and understand their culture,
relations are indeed strained. So by setting up manufacturing operations and selling your product
on a separate planet, if your sales decline on earth, then you can always count on your
sales on the other planet to help you pay your bills and absorb the Klingon attacks.
Everyone, at least everyone in your galaxy, knows that if you hadn't started selling to your selected
foreign planet first it would be difficult for you to compete against Rolex at an intergalactic level.
Like Switzerland, Rolex never seems to get involved in any of the intergalactic turmoil that
goes around and they seem to be well respected by most planets. Once you've decided that
you want to sell your watches to this foreign planet, you need to consider how you will set up shop.
First, consider what you will need to do business across planets. You probably need a spaceship to take
your goods back and forth. If the planet you are doing business on is billions of light-years away,
do you use Federation X or do you purchase the spaceships yourself? Will the watches handle going
through a wormhole or do you have to risk going the slow way by traveling at the speed of light,
risking that your customers will be dead by the time the product reaches them?
Do you have to be concerned about intergalactic pirates? Will you sell directly to retail shops on the alien planet
or will you have a local partner who has your best interest at heart and understands the alien market and culture?
Better yet, will you set up your own operations there so you have a local presence and
can control more of the production and sales process? If you do set up your own operations,
how do you go about doing this? Will you buy facilities from someone else or will you build your own?
There are many factors to consider in making this decision. These factors relate to the alien planet's economy.
Do you think aliens are more likely to follow a socialistic system where
government exerts more control over the major factors of production? Or do you think
they would prefer a more capitalistic system where private owners decide on the terms of the transaction?
Will their laws be the same as the laws you see on Earth? What if they are at war with another
planet, will their language, culture, and norms be the same? Will you need to make modifications
based on these socio-cultural factors? And finally, will they have similar technologies
and processes to the ones you use? Is there something you can learn from their technological environment?
All of these factors influence the form your company takes and how you will manage your operations.
Like interplanetary business, international business must similarly consider these factors.
The differences require you to modify existing business principles and practices,
making international business something quite different from domestic business.
Those who recognize that these potential differences exist are more likely to ask the right questions,
allowing them to find the right answers and out-compete their rivals.
Those who ignore differences won't even be aware that they should be asking questions at all.
Given the increasing degree of international trade and business,
the question is are you going to engage in international business with your eyes open or with them closed?
Are you willing to understand and adapt, or are you likely to be left wishing the world would adapt for you?