How In The World?
Globe (Photo credit: apbeatty)
Today more than ever businesses are conducting business on an international level. Due to technology, advancements in the shipping industry and the speed of the internet, businesses can sell their products all over the world. Many large corporations have opened plants, factories, and headquarters in foreign lands. While some businesses import and/or export products to and from other countries, by plane, train, barge, and automobile. In more recent years organizations have begun to outsource which is a practice of paying suppliers and distributors to perform certain business processes. There are four areas to investigate when considering entering the international market and they are politics’, economics’, culture and the legal system.
The first step in considering going global is finding out what the country’s political status is. Does this country operate under a planned economy or a market economy? If the country has a planned economy this can be bad for your business. A centralized government limits the amount of goods that come into a country, how much they should cost, and the amount of money that can be taken out of a country. Equally important one should investigate the country’s political issues. As we see on the news all the time many countries have civil wars, political protest, and guerilla warfare. In some country’s citizens don’t have the same civil liberties we have here in America and this should be kept in mind.
There are many important factors that need to be considered when deciding to enter any new market or territory but entering the international markets can seem intimidating. In order to be prepared every business leader should do an analysis of the country they intend to operate in. This analysis includes finding out information about the country’s economic standing. Also how developed is the country what is the countries per- capita income-the average income per household. Countries with lower per-capita tend to have poor transportation infrastructures in place. If you are going to operate in a planned economy you may struggle to find suppliers and distributors. Also anyone venturing out should have a disposable income because an American business in a foreign land may have a slow start. It is also very important to be aware of the exchange rates. What will you sell your product for in the host country and will that cover operating cost.
Culture is very important when it comes to international business. We can see some of the cultural differences just from looking at our host country, they may speak a different language or wear different clothing, and they may have different customs and traditions. The most important cultural aspects are the things that are intangible or unseen. Business leaders should take language, religion, attitudes toward work and leisure, and numerous other cultural values into consideration when thinking of going abroad. In some Islamic cultures women are prevented from playing a major role in business because of strict interpretations of the law. Women who do work in these cultures are required to have positions that keep them away from men. Business leaders must decide if they will be able to work within that culture.
There is also the aspect of social responsibility. Is moving to another country to do business going to be seen by your American customers as an attempt to take jobs away from American’s at a time when millions are unemployed? Will going international affect the American economy and if it does in what way will this help America. Is this a chance to pay less taxes, and hire cheaper labor or is this for a strategic global partnership. Business leaders should also analyze their motives when considering going global. Another question that is very important is; will your product still offer the same benefits and features abroad as they offer your American customers? Or will you decide to modify the product for your international customers? A seller of an electronic product might modify the power plugs on their product for their European customers. Otherwise the customer want to buy a product and have to purchase a Power Converter (or transformer) – converts the European 220v to 110 volts so that American appliances will operate on European Current.
The Legal System
When a business leader decides to go into International lands to do business she is bound by the national legal system of her own country and that of the host country and also by international law. According to The Legal Environment of Business there are five major families of law “(1) Common law, (2) Romano-Germanic/ Civil law, (3) Islamic Law, (4) socialist law, and (5) Hindu law” (234). The common law family is used here in the U.S., England, and 26 other British Colonies. Romano-Germanic is practiced in France, Germany and Sweden. Islamic law was encoded from the Shari’ which is the religious law or moral code and is practiced in Saudi Arabia and 30 other countries. This brings up a very important question; what is the source of law is used to decide cases in the host country. The American legal system is based on case law or precedents. Precedents means the legal system changes in America and you can change the law. Jurors in America don’t have to do what a book says. Some country’s the source of law is civil law. Civil law focuses on private law that is to say law suits between an individual and a business or between two individuals. While on the other hand these courts are not experienced enough for public law cases. Public law cases are cases between individuals and the state. Any legal system is complex add to that a language barrier and religious or social ideas and we realize how much investigating should go into going global.
There are two types of international law public and private. Public International law governs the relationships between nations. Private International law governs the relationships between private parties engaging in transactions across national borders. The organizations that govern the laws in the international business community are (NAFTA) the North American Free Trade Agreement, (WTO) the World Trade Organization the (EU) European Union and (ASEAN) Association of Southeast Asian Nations. These organizations are involved in International business law and this includes exit visas and work permits, taxes and contracts, patents, trademarks and copyrights, and bilateral and multilateral treaties.
Being aware of any quotas which are restrictions on the number of items that can be allowed into a country is very important. Another import law is embargos these are government orders prohibiting import and export of certain products or even all products from a certain place. Then there are tariffs which are fees charged to discourage the import and export of certain items. Tariffs are sometimes imposed to protect domestic business. Tariffs can also be lifted to allow an abundance of a product into a country.
I support protective tariffs and according to the International Trade Commissions website Harmonized Tariff Schedule there are many tariffs in place. I can say I am glad there is a tariff on, live animals, and animal products although in my opinion it is not expensive enough, with a turkey only costing 4₵ each and a chicken is 17.6₵/kg. I am aware of the dangers and bacteria’s that birds can carry so I believe that these types of animals should not be allowed in this country at all and if the tariff was higher we would not have to worry about that. In my opinion there should be a higher tariff on anything made for human consumption, which is imported: this includes vegetable products, foodstuffs, and anything edible. Americans are struggling and purchasing American made products helps America’s economy. I also feel that many of the things on the International Trade Commissions list are things that should not be allowed into America at all. This includes Arms and Ammunition, ironically the tariff on a rocket launcher; flame-throwers; grenade launchers; torpedo tubes and similar projectors is 27.5% multiplied by the value of said arms. Whereas a rifle with a telescopic sight is 65% of the price of the weapon. (United States International Trade Comission) Under this tariff it’s less expensive to ship a grenade launcher than a rifle.
Data retrieved from (United States International Trade Comission)http://hts.usitc.gov/
I believe company’s operating in the international business market should try to find a balance between their own morals and values and what is acceptable in the host nation. The United Nations makes an effort to prevent misconduct among international businesses by putting in place objectives that promote respect among nations.
Because some nations are less stable, and are in the developmental stages, it is easy for business leaders to run into corruption. Bribery may be necessary to do business in host nations. When faced with this decision a business leader should remain steadfast and stick to her values. On the other hand when it comes to social or cultural values its best to adapt to those of the host country. Respecting the morals and values of the host country’s citizens is important form product design to advertising, after all this is your target market.
Another important issue is human and animal rights, and natural resources. Regardless where your business is operating it is important to be socially responsible. Business leaders should be aware of the value cultures place on a human life, wildlife, and the natural resources it possesses. This can be difficult because some country’s place less value on some things, like a woman or a child’s life, and more value on other things like diamonds, gold, and oils The 21st century consumer is very savvy and social responsibility has become one of the more prevalent reasons to do business with certain company’s. Buyers investigate before they do business with an organization. Customers can Google anything and receive millions of responses within seconds. Many consumers have become obsessed with the social responsibility of businesses. As protesters unite to fight corporate greed and government bailouts, business leaders need to display ethical behavior. Business leaders should be proactive in building a business on international waters that is socially responsible
Interested in The Global Market let Stanton Adams Consulting introduce you to diverse consumer’s, suppliers and partners Learn More.
#Smallandmediumenterprises #CeciliaStanton #internationalbusinesscommunity #httpwwwstantonadamscom #UnitedStates #BusinessTrainingConsultants #Law #InternationalBusinessandTrade #Businessdevelopment #ChangeManagement #Globalization #globalbusinesses #globalmarketing #Businesspartner #Politics #DiscouragedWorkers #Business #PowerConverter #Services #RaceandethnicityintheUnitedStatesCensus #BusinessConsultants #BusinessTrends #Internationalbusiness #Miscellaneous